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May 13, 2022

False economy

Thumbnail image for coyote-roadrunner-cliff.pngThis week, every cryptocurrency was unhappy in its own way. It has not been a good year for cryptocurrency speculators in general, but Wednesday was a disaster: almost all "major" cryptocurrencies crashed by about 25%, and even venerable bitcoin dropped by 14% (although it still is twice its 2017 peakl. Which sounds great until you realize that on November 10, 2021 people *bought* bitcoin for $68,789 and ">El Salvador has been "buying the dip" all year.

Especially notable were the losses among cryptocurrencies intended to stay pegged to the US dollar - "stablecoins" - which fell off a cliff, pricewise. One previously unfamiliar "stablecoin", Luna, dropped 99.7%, leading some posters in the Terraluna subReddit to post suicide helpline numbers.

Do not gloat. Heed Hamilton Nolan's warning at In These Times about the dangers when a class of young (mostly) men who hate government become angry, bitter, and hopeless.

First: what happened? You can value a company, as Warren Buffett does, by studying it: its business, market sector, competitors, financial stability, and prospects. There's always some element of uncertainty. New managers could derail the company (Boeing), new, well-funded competitors could enter the field (Netflix), new technology could overrun its business model, or it could be lying about its revenues - er, painting a rosier picture than is actually merited by the facts. If you have the mad skillz of Buffett (and his professor, Benjamin Graham), thinking through all that should lead you to a reasonable purchase price, and not overpaying allows you to profit from your investment at relatively modest risk.

However, a cryptocurrency is not a business, and it has no real-world usefulness. Like gold, which Buffett has never liked, it costs money to hold, it produces nothing, and, "You can fondle it, but it will not respond". But at least gold has some industrial uses. Cryptocurrencies have none; they are the currency equivalent of being famous for being famous, held aloft only through fear, greed, and mythology. In any crisis, toilet paper, chocolate, cigarettes, booze, or toothpaste are all more useful currencies.

Luna is the most interesting. Here's how Coindesk describes its collapse: "A change in market dynamics caused Luna prices to snap at a breakneck pace. Luna plummeted through several support levels as terraUSD (UST), a Terra-issued stablecoin that's meant to be priced 1:1 to the U.S. dollar, lost its peg."

Let's pick this apart. "Market dynamics" could simply mean "interest rates are going up", which drives money away from the riskiest assets, which sets off a cycle of selling.

"Support levels" is a term for a tealeaves-reading approach to stock market pricing called technical analysis. Proponents believe that the shapes of price charts over time have significance in and of themselves. It has nothing to do with underlying value, Effectively, the fundamental claim is that past performance predicts future results, the exact opposite of what every financial product is required to tell prospective buyers. It would be complete nonsense, *except* that so many people believe in it that those patterns really do move markets, at least short-term. So "breaking support levels" becomes "let's panic and sell, ferchrissake!"

HowToGeek tells us that UST is the stablecoin on the Terra blockchain. Terra is a company providing "programmable money for the Internet", and its blockchain "brings DeFi to the masses". DeFi is short for decentralized finance, and its appearance means we're entering web3 territory - the folks who want to reclaim the Internet through redecentralization. Let's leave that part aside for today.

Traditionally (!) what makes a stablecoin stable is that for every coin (for example, Tether, which also slipped, to $0.95) its issuer holds an actual $1 in its reserves. However, it turns out there is a *second* type of stablecoin, which is backed by an algorithm rather than an asset representing some government's full faith and credit.

So the UST "stablecoin" is pegged to Terra's Luna stablecoin, and the idea is that an algorithm - a smart contract - keeps them pegged to each other by buying, selling, and converting them so they both reliably stay at a value of about $1. This is the theory.

It *sounds* like a folie à deux - that is, a shared delusion in which the partners reinforce each other's belief but neither leads the other closer to any form of outside reality. Apparently enough people distrust governments so much that algorithm! seems appealing and five weeks ago Luna's market cap was $39 billion more than it is now. Yes, money is flowing away from stock market risk, too, but more slowly for the reasons outlined above. A chart at the Motley Fool shows clearly that cryptocurrencies aren't a useful hedge against this.

Bottom line: algorithms do not make a coin stable, and if you don't understand what you're buying, don't buy it.

None of this means cryptocurrencies are finished. It doesn't make them good "investments" to "buy on the dip", either. It's just one more piece of mess in an ongoing expanding experiment that has been highly profitable for a few people, and rife with fraud and market manipulation for many more. Just say no.

Illustrations: Wile E. Coyote makes the mistake of looking down as he runs off the edge of a cliff.

Wendy M. Grossman is the 2013 winner of the Enigma Award. Her Web site has an extensive archive of her books, articles, and music, and an archive of earlier columns in this series. Stories about the border wars between cyberspace and real life are posted occasionally during the week at the net.wars Pinboard - or follow on Twitter.

May 6, 2022


Trigger_law_states.svg.pngThree months ago, for a book Cybersalon is producing, called Twenty-Two Ideas About the Future, I wrote a provocation about a woman living in Heartbeat Act Texas who discovers she's pregnant. When she forgets to disable its chip, the "smart" home pregnancy test uploads the news to the state's health agency, which promptly shares it far and wide. Under the 2021 law's sanctions on intermediaries, payment services, travel companies, supermarkets all fear being sued as intermediaries, and so they block her from doing anything that might lead to liability, like buying alcohol, cigarettes, or a bus ticket to the state line, or paying a website for abortion pills.

It wasn't supposed to come true, and certainly not so soon.

As anyone who's seen any form of news this week will know, in a leaked draft of the US Supreme Court's decision in Dobbs v. Jackson Women's Health Organization, author Justice Samuel Alito argues that its 1973 decision in Roe v. Wade was "wrongly decided". This is not the place to defend the right to choose or deplore the dangers of of valuing the potential life of a fetus over the actual life of the person carrying it (Louisiana legislators have advanced a bill classifying abortion as homicide). But it is the place to consider the privacy loss if the decision proceeds as indicated, and not just in the approximately half of US states predicted to jump at the opportunity to adopt forced-childbirth policies.

On my shelf is Alan E. Nourse's 1965 book Intern, by Doctor X, an extraordinarily frank diary Nourse kept throughout his 1956 internship. Here he is during his OB/GYN rotation: "I don't know who the OB men have to answer to around here when they get back suspicious pathology reports...somebody must be watching them." In an update, he says the hospital's Tissue Committee reviewed pathology reports on all dilation and curettage procedures; first "suspicious" report attracted a private warning, second a censure, and third permanent expulsion from the hospital staff.

I first read that when I was 12, and I did not understand that he was talking about abortion - although D&Cs were and are routine, necessary procedures, in that time and place each one was also suspected, like travelers today boarding a plane. Every miscarriage had to be cleared of suspicion, a process unlikely to help any of the estimated 1 million per year who grieve pregnancy loss. Elsewhere, he notes the number of patients labeled "NO INFORMATION"; they were giving their babies up for adoption. Then, it was sufficient to criminalize the doctors.

Part of Alito's argument is that abortion is not mentioned in either the Constitution or the First, Fourth, Fifth, Ninth, or Fourteenth Amendments Roe cited. Neither, he says, is privacy; that casual little aside is the Easter egg pointing to future human rights rollbacks.

The US has insufficient privacy law, even in the health sector. Worse, the data collected by period trackers, fitness gizmos, sleep monitoring apps, and the rest is not classed as health data to be protected under HIPAA. In 2015, employers' access to such data through "wellness" programs began raising privacy concerns; all types of employee monitoring have expanded since the pandemic began. Finally, as Johana Bhuiyan reported at the Guardian last month, US law enforcement has easy access to the consumer data we trustingly provide to companies like Apple and Meta. And even when don't provide it, others do: in 2016, anti-choice activists were caught snapping pictures of women entering clinics, noting license plate numbers, and surveiling their smarphones via geofencing to target those deemed to be "abortion-minded".

"Leaving it to the states" - Alito writes of states' rights, not of women's rights - means any woman of child-bearing age at risk of living under a prohibitive regime dare not confide in any of these technologies. Also dangerous: insurance companies, support groups for pregnancy loss or for cancer patients whose treatment is incompatible with continuing a pregnancy, centers for health information, GPS-enabled smartphones, even search engines. Heterosexual men can look forward to diminished sex lives dominated by fear of pregnancy (although note that no one's threatening to criminalize ejaculating inside a vagina) and women may struggle to find doctors willing to treat them at all.

My character struggled to travel out of state. This was based on 1980s Ireland, where ending a pregnancy required a trip to England; in 1992 courts famously barred a raped 14-year-old from traveling. At New York Magazine, Irin Carman finds that some Republican politicians are indeed thinking about this.

Encryption, VPNs, Tor - women will need the same tools that aid dissidents in authoritarian countries. The company SafeGraph, Joseph Cox reports at Vice, sells location data showing who has visited abortion clinics. In response, SafeGraph promised to stop. By then Cox had found another one.

At Gizmodo, Shoshona Wodinsky has the advice on privacy protection my fictional character needed. She dares not confide in anyone she knows lest she put them at risk of becoming an attackable intermediary, yet everyone she *doesn't* know has already been informed.

This is the exact near-future Parmy Olson outlines at Bloomberg, quoting US senator Ron Wyden (D-OR): "...every digital record - from web searches, to phone records and app data - will be weaponized in Republican states as a way to control women's bodies."

Illustrations: Map of the US states with "trigger laws" waiting to come into force if Roe v. Wade is overturned (via M. Bitton at Wikimedia.

Wendy M. Grossman is the 2013 winner of the Enigma Award. Her Web site has an extensive archive of her books, articles, and music, and an archive of earlier columns in this series. Stories about the border wars between cyberspace and real life are posted occasionally during the week at the net.wars Pinboard - or follow on Twitter.