If you were among the thousands of viewers to scan the bouncing QR code during one of the Super Bowl commercials last month, then perhaps you are $15 richer than you were before. Richer in cryptocurrency, that is. Anyone who signed up for a new Coinbase account was given $15 in currency. The surge of traffic caused the promo website to collapse. The Coinbase ad was but one of several different Super Bowl ad spots for crypto, leaving no doubt as to its ascendance to the status of cultural mainstream.
The digital revolution of the last three decades has had a tremendous impact on modern finance. Technology has fundamentally reshaped how human beings think and act in myriad ways. Our whole social world is now technologically mediated. Work, communication, leisure, citizenship, and many other elements of human life have been cast in new molds. That is because we share a reciprocal relationship with technology — it forms us as we form it. This tectonic shift in social self-understanding has also upended long-standing assumptions about currency and investment.
Two narrower features of modern financial innovation that have risen into common practice are day trading and cryptocurrency. The two are distinct but often related phenomena. Many norms of day trading apply also to crypto, and of course, crypto can be day traded. How are Christians to understand these innovations? What should guide Christian conduct in commerce?
In response to these questions we need first to clarify what both day trading and crypto involve. We need, in other words, a sketch of reality, which will help us better understand the shape of our moral responsibility as people called to lead wise and simple lives in devotion to Christ Jesus (1 Thess 4:11; Rom. 12:18; Matt 10:16).
The moral parameters of investing
The capitalist insight that money can beget money is quite established. Someone invests in a startup and the company is profitable. She sells shares at more than five times their value and invests in two new startups. These too enjoy profits, and the enrichment cycle continues. Otherwise, all things being equal, investments profit because of the inherent growth in capital markets.
We need to think carefully about what counts as investment. At its heart, investment is placing value in something else of value. It needn’t even be strictly financial. I might say that I’m “investing” in my kids by taking them hiking in the mountains, by which I mean I’m affording them something of value because they’re inherently valuable. Or a teacher may invest in her students by staying after class to tutor. Or a volunteer might invest in his community by helping with litter collection at a local park. For all such examples the controlling idea is contributing something of value to something else possessing a value exceeding the thing contributed.
The idea of investment imposes real moral constraints. It matters what exactly we put our resources toward. The assisted living facility differs from the local restaurant, which differs from Disney, which differs from Penthouse magazine. Justifying investment in evil or corrupt entities is a sign of moral bankruptcy. We should invest only in what deserves investment.
Typically we also consider duration a key determinant of investment. Conventional wisdom among experienced financial advisors is to invest in worthwhile companies and allow valuations to appreciate gradually. Let money stay put, and over time it will weather market volatility. Buying stock and selling within a short period of time, either within several days or on the same day, doesn’t constitute investment in the strict sense of the term.
What are day trading and cryptocurrency?
Day trading is a speculative trading practice in which a trader purchases a security — a financial instrument representing value — and sells it on the same day. A trader buys anticipating some market eventuality that will create profit off the sale. Profit is dictated entirely by whether the eventuality occurs. It is an informed gamble that often requires taking a large position in the market in order to achieve profits warranting the risk. As such it is a practice of specialty investors and firms.
Around 50-70% of day trades are not conducted by human beings as a result of human decision but by algorithms trading upwards of 1,000 transactions a minute.1For an accessible explainer of algorithmic trading, I recommend Radiolab’s podcast episode, “Speed.” Trades occur in explosive bursts as algorithms test the market and manipulate advantageous conditions for transactions. Some algorithms are designed simply to counter other algorithms. The primary explanation for algorithmic domination of day trading appears to be the seasoned platitude — “fastest always wins.” Transactional speed becomes self-justifying, and the integral feature of investment, duration, is jettisoned.
Construing the meaning of “investment” so as to encompass any allocation of capital that promises a return is mistaken. It is mistaken for several obvious reasons; not least its consequentialist presumption of the ends justifying the means, which makes even crass gambling commendable. The simple prospect of a return is not itself enough to justify allocation of capital. Nor should one misapply “stewardship” in an effort to redeem the practice. To steward a resource, including capital, involves respecting the goods internal to that resource and the just allocation of that resource.
Cryptocurrency emerged as a digital response to perceived weaknesses in modern monetary theory and as a strategy for securing transactions. Many countries, like the United States, have a “fiat” currency (i.e., currency issued by a government but not backed by another commodity) printed and backed by the government. Cryptocurrencies, as the name suggests, are encrypted virtual currencies, and there are many different kinds. Because crypto is decentralized, no formal authority enforces trust or regulates transactions. So, for example, although it doesn’t have the backing of a central bank on its deposits, neither is it subject to the bank’s runs or crises. Still, despite incredible growth, the large majority of consumers do not yet view it as the easiest or most reliable form of transaction.
Ethics of investing in new digital currencies
The anonymity of cryptocurrency has naturally attracted criminal laundering and ransomware enterprises. Just how anonymous crypto transactions truly are is a matter of debate, as there is evidence that many leave a digital trail. Why must the transaction be secretive? Perhaps there are narrow parameters in which anonymity is warranted, but how can one be above reproach when anonymity becomes standard practice? Does it not matter who my partner in exchange is to me, or they to me? Scripture stipulates that it does.
The question of investment in cryptocurrency is relevant but somewhat tangential. The same principles articulated above to day trading apply equally here. Perhaps there is a narrow warrant in crypto holdings in expectation of inflationary periods. But we need also to inquire of the worth and purpose of the object receiving investment? What is that object — in this case crypto — doing for the tangible prosperity of people and the strengthening of society? Or to put the question directly: in what does crypto invest? If the answer to that question carries ambiguity, then investment is better directed elsewhere.
All of this only scratches the surface of moral complexity in modern commerce. Day trading and crypto are financial innovations we still struggle entirely to grasp. Still, the guide for Christian conduct is not new and furnishes the norms and wisdom needed to judge and act as responsible agents. Christians are called to lead temperate, peaceable lives, to put our resources toward goods to which God invites us. As citizens of his kingdom we invest in his kingdom as trustees of the promise to make all things new (Matt. 25:20-23; Rev. 21:5).
1For an accessible explainer of algorithmic trading, I recommend Radiolab’s podcast episode, “Speed.”