Lowrey: But the mania is the same?
Borg: You just go do a Google search for “make money on bitcoin.” It’s page after page of it, hyping it to the whole retail market. Bitcoin’s making new millionaires! Get in before it’s too late!
The thing is that the market has done well, but the average Main Street–type person hasn’t participated in it. They got burned by the micro-cap stocks in the 2000s, then burned by foreclosures and the real-estate collapse. They’re concerned about Washington deregulating everything, and Social Security going broke, and health-care costs going up. And they haven’t had a salary increase in years.
You’ve got a family making $60,000, $100,000 a year. They don’t have a lot of money for retirement. Then, someone comes along and says, “Make $13,000 in 24 hours, guaranteed!”—got to get the “guaranteed” part in there. It’s like you’ve got a fuel pump at a pump station, where the pump is stuck and the fuel is spilling out all over the street. And there’s people lighting matches. And someone says, well, let’s pour more fuel on it!
At some point, there’s going to be a huge correction, when the bubble breaks. I can’t tell you when that would be. It could go on for a while. There’s a lag time between when people invest and when they realized they got duped. We’re in the middle of the frenzy. It’s going to be 24 months, maybe longer, before we know. Sometimes it’s 8 or 10 years.
Lowrey: Are there people you’re especially worried about, in terms of getting ripped off?
Borg: Well, if these folks are seniors, often we don’t even hear about it because they’re embarrassed. They figure if they let people know, the family will figure that they cannot handle their affairs anymore. Seniors will tell us, “I lost the money. I got taken. But my kids would say I cannot manage things anymore if I told them that.” They don’t want to lose their way of life. However, I don’t think there are a whole lot of seniors invested in this.
Lowrey: Who is, then? Because that matters a lot for who would get hurt by a collapse.
Borg: The way I hear about it is that we do 80 to 90 public events a year. We talk a lot about protecting people from fraud, and I’ll ask people if they’ve heard of bitcoin or invested in bitcoin. If I ask, “Do you know what a bitcoin is?,” four or five hands out of 60 go up. And maybe two or four are invested. I’ll follow up during a break, when we’re serving lunch or breakfast. I’ll say, “This is risky stuff!” That’s a good way to hear about the exposure.
Most folks are doing it out of savings, maybe by selling off part of a mutual fund. They aren’t betting everything on it. A few said they took $10,000 out on credit cards to buy bitcoin. Some took out $10,000 in a home equity line of credit. That’s like a credit card on steroids, a second mortgage.
Lowrey: Right, your home is at risk if you can’t pay it back. I guess the question is whether these people can be said to know what they’re doing, and if they’re being exposed to fraud.