Volatility, the frequency with which you experience big wins and losses, is one of the hallmarks of gambling. One day you win big, the next, you could lose your shirt. It’s what makes gambling so attractive to addicts.
It’s why you see people in Las Vegas sitting next to slot machines, zoned out, feeding their coins in one by one. They are waiting for that jackpot. It doesn’t matter if the game is rigged or if most people lose most of the time. Someone wins big sometimes, and it could be them.
At least with slot machines, you’re only putting in one coin at a time.
Cash App, a mobile payment service, just introduced a new feature that will allow you to funnel your entire paycheck directly into bitcoin. It’s called “Get Paid in Bitcoin.”
If you receive your paycheck through Cash App’s direct deposit feature, you can opt to receive all or a portion of your salary in bitcoin.
In other words, you can send 100% of your hard-earned cash directly into a naturally occurring Ponzi scheme.
Instead of paying rent, or tucking money away into your 401K, you can gamble on the erratic price movements of bitcoin. When you can’t pay your rent because the crypto markets took a tumble, you can tell your landlady you lost everything in the decentralized casino.
Over 8 million people, many of whom recently learned they were victims of a data breach, use Cash App’s investing product to buy stock and bitcoin.
Cash App isn’t breaking new ground. Crypto exchange Coinbase has a direct deposit feature that allows you to have your paycheck deposited into Coinbase and get paid in crypto. Other companies, including Strike and BitPay, also offer some form of crypto payroll, invoicing, or benefits.
What it is doing is contributing to a dangerous trend that has been developing over the past few years, where companies are making it increasingly easy for people to gamble their livelihoods on crypto.
Play to lose
Bitcoin is a negative-sum game. Stocks pay dividends and have buybacks. In contrast, money is continually taken out of bitcoin by miners, who generate 900 new bitcoins per day. They sell these coins for cash — or borrow against them — to pay their monstrous power bills. That money will never come back to investors.
The only money that comes out of bitcoin is from new traders putting money into the system. Bitcoin’s price is completely fictitious and wildly unpredictable.
After setting a record of $69,000 in November, bitcoin lost half its value by the end of January. It’s now trading at $43,000, meaning anyone who bought at the high, believing that bitcoin was headed for the moon, lost the better part of their investment.
After converting a $750,000 paycheck into bitcoin in November, NFL player Odell Beckham Jr. suffered a major loss in salary when the price fell months later. At least, he could afford the loss. Not everybody can.
Meet the missionary
Cash App is operated by Block, the company founded and headed by Jack Dorsey, who stepped down as CEO of Twitter last year to focus on his growing crypto obsession.
Dorsey is a missionary who preaches the gospel of bitcoin to his six million Twitter followers. He is known for bizarre tweets like: “#Bitcoin will unite a deeply divided country. (and eventually: world).” In March 2021, he sold an NFT of his first tweet for $2.9 million, in crypto. Proceeds went to a charity.
It’s hard to know if Dorsey, whose net worth is $7.5 billion, according to Forbes, believes his own sermons or if he is a grifter, looking for suckers whose pockets he can purge to feed his own hubris.
Dorsey’s company is sitting on a large stash of bitcoin. In October 2020, Block bought 4,709 bitcoin. Four months later, the company purchased another 3,318 BTC, for a total spend of $220 million.
In early 2021, Block announced that it was going to start a bitcoin mining system.
Dorsey is deep into crypto, so naturally, he wants you to become deep into crypto too, whether or not you can afford the risk.
Low on cash
Cash App’s new feature is timely. There are signs that the cryptoverse is running desperately low on real money.
Bitcoin miners are stockpiling bitcoin — while companies like investment management firm Galaxy Digital and VC firm Digital Currency Group lend them cash, so they can pay their power bills and keep their businesses afloat.
A Mt Gox settlement is about to hit the market soon. When those creditors get their 141,686 bitcoin after waiting for eight long years, a good guess is many will be anxious to sell. Where will the cash come from to buy their $6 billion worth of BTC?
The Grayscale Bitcoin Trust (GBTC), which owns 3.5% of the world’s bitcoin, is trading 25% below the value of its underlying asset.
Luring fresh cash into the system is a priority for crypto boosters, which is why Grayscale is pushing so desperately for the Securities and Exchange Commission to approve its application for a spot bitcoin ETF.
Unlike cash-settled bitcoin futures, spot bitcoin ETFs are designed to buy and hold bitcoin directly, injecting much-needed U.S. dollars into the crypto universe.
Bitcoin doesn’t work as a payment system. Nobody uses bitcoin to buy anything other than drugs or pay for ransomware. The market has long been manipulated by tethers, a dubiously backed stablecoin, but cash is the lifeblood of crypto. Insiders need real money, so they can dump their coins. And miners need it to pay their electric bills.
Preying on the vulnerable
Bitcoin has gotten progressively easier for people to buy, which means a larger share of the public is exposed when the market goes south.
In November 2020, payment giant PayPal announced that all account holders in the U.S. would be able to buy and sell crypto including bitcoin through its platform. PayPal has 400 million users.
In April 2021, Venmo (owned by PayPal) announced that its customers will be able to buy, sell, and trade as little as $1 worth of crypto. Venmo has more than 70 million customers.
It’s worth noting that PayPal and Venmo don’t actually allow users to buy bitcoin. You can’t make deposits or withdrawals on the platform. You can only “buy” bitcoin from the company, sell it to the company, or trade it with other users within the app.
In other words, these companies have become online casinos, where people can bet real money on the future price of bitcoin.
Stock trading app Robinhood allows users to buy and trade cryptocurrency, a feature it started adding in early 2018.
If you don’t want to purchase bitcoin on an app on your smartphone, there are 33,000 bitcoin ATMs and tellers throughout the U.S. that will gladly accept your cash for BTC, as long as you don’t mind paying the high fees.
You can also go on Coinbase and buy crypto with money taken directly out of your bank account. Or you can pay with a debit card, PayPal, Apple Pay, or Google Pay.
If you are a compulsive gambler, addicted to bigger and bigger risks, you can mainline bitcoin by signing up for Cash Apps’ Get Paid in Bitcoin.
Systems that make it easy to buy bitcoin prey upon society’s most vulnerable — those who can least afford the risk and those who don’t understand that the game is rigged.
When the crypto markets crash — and it is no longer an “if” but a “when” — people are going to get hurt. Features that allow people to invest their paychecks in crypto are an irresponsible abomination.
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