Bitcoin, Debt Relief and FOMO

What's really going on with Crypto adoption

Publisher’s Note: I wrote this post back in December 2017 and I think it’s probably more relevant now.


I spent the last five days in southwest Virginia/Northeast Tennessee, an area that many affectionately call “coal country.” Ironically, coal has not been a major employer here for decades. That honor goes to paper mills and chemical factories. My wife was born and raised in this part of the country, so we typically spend Christmas with her father and his side of the family here.

My father-in-law is intellectually curious about many things, especially my career in tech and the tech companies I’ve worked for. When my wife and I are in town for the holidays, he occasionally asks my opinion on certain stocks and their performance in the market.

My Crypto Christmas

This Christmas, my father-in-law asked for my thoughts on Bitcoin and the run it has been on as of late. My answer was a bit cliched – “I think bitcoin and blockchains are interesting and real technologies, but most people don’t understand cryptocurrencies and their potential uses (or that most uses haven’t been created yet), so most of the current investment is speculative and opportunistic.” Not a profound answer, but one I feel is directionally correct.

If I’m honest, I think there is more going on with the latest bitcoin rush than I led on in my answer. I have plenty of thoughts on cryptocurrencies in general, like here, but most recently I’ve started to ruminate on the idea that the most recent bitcoin run in cryptocurrency exchanges is being powered by not only greed (a huge factor obviously), not only tech enthusiasm (I think “true believers” are the foundation of the crypto movement), but also a burning need for some sort of relief from that growing personal debt that has left many in the U.S. anxious and reeling.

Real Problems and Unlikely Solutions

New technologies go mainstream when the masses find a use for products or services that 1) meets their needs or solves a problem and 2) has no easily identifiable substitute. The student loan debt crisis falls clearly into the need/problem category and, more importantly, the solution that bitcoin (and other cryptocurrencies) could “provide” has no substitute in other asset classes or investment vehicles.

44 million Americans are saddled with student loan debt, totaling $1.3 trillion per the Federal Reserve. Beyond student debt, other personal debt such as credit card debt and unpaid medical bills have skyrocketed in recent years. According to a recent NerdWallet study, the average American household owes $15,654 in credit card debt or $905 billion collectively. 33% of Americans hold debt that is in collections. Nearly 1 in 5 U.S. households has medical debt in collections with a median amount of $681. These are some of the most pressing challenges of our time and they have no major solutions in sight.

Simple and Unsatisfying Answers

In all honesty, there may be no connection between the personal debt crisis and cryptocurrencies going mainstream as investment vehicles, but the idea continues to nag me. The simple answer may be the correct one – that millions of retail investors wanted to buy Bitcoin before being priced out, inevitably driving up the price of bitcoin and other cryptocurrencies that were cheaper.

The simple answer may also be the correct answer to the wrong question. The answer above explains the “how” of cryptocurrency pricing and its effect on crypto investment activity and incentives. However, it doesn’t explain the “why” – why regular folks without a basic understanding of crypto want to catch this wave and cash out big. With stories of people taking out mortgages to buy bitcoin or buying bitcoin with credit cards emerging, the crypto boom and subsequent bust is being driven by more than greed or being priced out. Consumer behavior suggests it’s being driven by a need for economic relief, or stability at the very least.

This growing need for economic relief and the fact that it may be pushing millions of mainstream retail investors to leverage very early and raw tools without a sound understanding of crypto technology is an opportunity that crypto entrepreneurs should delve deeper into. The brightest minds in crypto have proclaimed that these technologies have the power to change the world for the better. Clearly, there are many people ready for crypto to do just that.