What's a Chimera?
The human desire for classification goes as far back as human memory. From prehistoric cave paintings to Darwin’s contributions to the science of evolution, finding patterns, associations and neat categories to pigeonhole the chaos of the world has brought comfort for generations.
Yet current conventions and cultural mores have helped to undercut the hitherto clarity with which the modern world has been classified, categorised, and dissected. Historical institutions such as the definition of marriage and even sexuality have given way to genderfluidity and same-sex unions.
To assume that the world is static outside of human invention is therefore more a function of our predisposition towards order, than it is a reflection of our reality.
So imagine the horror and fear that was struck in the minds of the ancients when faced with the Chimera, a Greek mythological monster that was described of as a fire-breathing hybrid creature. The Chimera was typically depicted as having the head of a lion, with the head of a goat protruding from its back and a tail that ended with the head of a snake and was often portrayed in Greek mythology as wildly imaginative, implausible or dazzling.The earliest literary reference to the Chimera can be found in Homer’s epic, Iliad, where the creature was described as:
So when Bitcoin started to enter into the consciousness of a wider investing population, outside of its more technocentric origins, regulators and investors alike struggled to grapple with this investment Chimera. Was Bitcoin a security or more akin to a currency? An asset in the digital image of gold? Or maybe a speculative instrument and therefore mere puffery?
In the early days of Bitcoin’s rise to prominence, no less than the U.S. Securities and Exchange Commission, the Commodities Futures Trading Commission (CFTC) and the U.S. Federal Reserve all simultaneously claimed and disavowed jurisdiction over Bitcoin and Bitcoin transactions.
Given its Chimera-like nature, it was no surprise then that both investors and regulators, struggled to grapple with the nature of the Bitcoin beast – too complex to categorise, but too dazzling to ignore.
But the difficulty with which to categorise Bitcoin and other cryptocurrencies has not been for want of trying. The CFTC for instance officially decreed cryptocurrencies like Bitcoin, as a commodity, just like crude oil or gold. The CFTC unilaterally declared that Bitcoin as a virtual currency is a digital representation of value, which functions as a medium of exchange, a unit of account and a store of value. And though lacking in legal tender status in any jurisdiction, Bitcoin and other cryptocurrencies are distinct from fiat currencies.
But simply labelling Bitcoin, or any other cryptocurrency for that matter a “commodity” does not in and of itself make it so – it just makes it easier for the labeler to order their universe.
Because ascribing a label such as “commodity” or “security” to a nascent asset class (for that matter, even the use of the label “asset”), brings along certain connotations and expectations with those who transact, store or trade in that asset class.
And that brings us to our current discussion, whether or not Bitcoin possess the quantitative qualities which we commonly ascribe to existing asset classes, only to find that Bitcoin may truly be a Chimera of an asset class – making it a thing altogether wildly imaginative, implausible and dazzling.
The value for investors especially is not so much the label of the asset class, but its function, quoting Chinese leader Deng Xiaoping:
