While the stock market booms, bolstered by the Federal Reserve’s low interest rate policies and bundles of cash provided under various stimulus and Covid relief measures doled out by Congress as if Christmas comes every day, are you afraid of missing out on the next big thing? Do you still regret passing on the tulip bulb craze of the 17th century, the South Sea Bubble of 1720, the Japanese real estate mania of the 1980s, the dot-com frenzy of the 90s and the real estate boom of the early 2000s? Of course, all of those fiascos ended in financial disaster, but that shouldn’t stop you from getting into the latest financial delirium, the cryptocurrency hysteria that is upending the traditional world of finance.
Once dismissed as a “fraud” by JP Morgan head Jamie Dimon, Bitcoin and other iterations of its 1300 other crypto brethren are now being hawked by Dimon’s own bank and almost every other mainstream financial firm. While still being regarded sceptically by investing legend Warren Buffet, seen by Black Swan author and economist Nassim Nicholas Taleb as a “failure” that has been “taken over by Covid denying-sociopaths with the sophistication of amoebas” and viewed by former Fed chief and current Treasury Secretary Janet Yellen “as something that is a highly speculative asset, and I think people should beware,” others see it as the currency of the future which is, like it or not, here to stay.
But, what the hell is it? I admit to be among the ignorant Luddites who can’t explain it. I only know that you can buy a Tesla with Bitcoin, but you can’t do a damn thing with Dogecoin, a crypto that was started as a joke, but that has risen 26,000% in the last six months. And, like all investment fads, if you are not already in, you probably missed the boat. However, if, despite all the warnings, you still want in, you should at least be able to understand the basics of crypto so that, to paraphrase Buffet, you are not revealed as naked when the tide goes out.
So before you cash in your gains from your Robinhood account and jump in with both feet, you should test your basic understanding of crypto by taking the following quiz. If you can’t pass this one, stick to index funds, park your assets in gold or, better yet, keep your money in your mattress.
- The basic technology underlying cryptocurrencies is called:
d. Jenny From the Block
- A fractional share of Bitcoin is called a:
- The fictional inventor of Bitcoin goes by the nom de guerre:
a. Hideki Matsui
b. Satoshi Nakamoto
c. Naomi Osaka
d. Yoko Ono
- Dogecoin features the face of:
a. Elon Musk
b. a Shiba Inu dog
c. a Medieval leader of Venice
d. Bernie Madoff
- Cryptocurrencies are backed by:
a. Donald Trump’s personal guarantee
b. The Federal Reserve
- Cryptocurrency transactions are verified, and the blockchain regularly enlarged, to account for new transactions and payments by a process called:
- The first and, so far, only country to create its own cryptocurrency is:
- The Securities and Exchange Commission regards an initial coin offering (ICO) as a:
b. Plan to increase the amount of pennies in circulation
c. Ponzi scheme
d. Tax on slot machine winnings
- Who said: “We have elected to put our money and faith in a mathematical framework that is free of politics and human error?”
a. Jeff Bezos
b. Albert Einstein
c. Tyler Winklevoss
d. Kenye West
Well, that’s it. Are you ready to take the plunge? Or do you want to stay in safe investments like GameStop? Or maybe you just want to watch your tulips grow. At least they are colorful, but their beauty is fleeting.