Cashing In at the Bitcoin Casino
"Cryptocurrencies can go down as well as up."
You have to scroll to the very bottom of the latest hot new cryptocurrency venture's website to find this statement of the obvious.
The London Block Exchange -- because no regulated public market is safe from crypto puns -- offers fans of bitcoin, ethereum and the like a chance to trade crypto on an app and then convert any winnings into pounds anywhere that accepts Visa. The app's payment card handles the conversion instantly.
It isn't the only venture hoping to make it easier for speculators to spend their winnings in the real economy. Payments firm Square is letting some users buy bitcoin on its Square Cash app, which recently rolled out its own payment card. Currency app Revolut is reportedly working on a solution that may have involve a payment card, according to Business Insider.
Rather than do the heavy lifting of persuading merchants to accept bitcoin or convert it through an intermediary, the effort is now entirely on wooing consumers.
How could they resist? Slick marketing, the tease of technological innovation and the lure of uncapped gains are democratizing a very human urge to gamble. Then there are the alluring historical price charts showing you could get richer faster than suckers who just keep their money in the bank or on, you know, the real London Stock Exchange.
At best, assuming everyone gets involved in the fun and cryto prices keep churning higher, they risk importing the kind of price inflation seen in crypto-land into a weak British economy. Bitcoin's price has risen more than 600 percent this year; Britain's more humdrum consumer-price inflation measure is more like 3 percent. The U.K. would be swapping a "British disease" of economic malaise and low productivity for a "Dutch disease" of volatile prices and wages, similar to when a country strikes oil.
At worst, if the price gains turn to losses, those crypto spending cards will look less like Visa and more like Pokemon. Losing money is perfectly fine if you can afford it, and trading bitcoin is far from a leveraged bet on contracts for difference. But do consumers really need an easier way to be parted from their money?
There's little sign cryptocurrencies are much more predictable or less volatile than they were a year ago: in the past week bitcoin has gyrated between $7,532 and $5,605.
Perhaps the likeliest outcome, if such payment methods take off, is that the bitcoin payments network will be exposed as a poor way for people to spend on a daily basis. As Gadfly has pointed out before, it suffers from network congestion and wincingly high transaction fees, a by-product of bitcoin's hard-wired rules, which vested interests seem unwilling to change.
But all that may do is send the speculators elsewhere. About the only sure thing you can say about these ventures is tucked away at the bottom of their websites.
To contact the editor responsible for this story:
Edward Evans at firstname.lastname@example.org