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FRA member of Japanese pop group 'Virtual Currency Girls', wearing a Bitcoin mask (Noriko Hayashi/Bloomberg via Getty Images(
Is Bitcoin back from the dead? A year ago, Bitcoin — and “crypto” in general — was in a parlous state. A series of major scandals, including the FTX collapse, had investors running scared and regulators on a warpath. The Securities and Exchange Commission (SEC) launched numerous full-bore attacks on crypto companies, and even blamed crypto for a short-lived banking crisis last summer. The public perception of digital assets was also in the toilet, and politicians, fearing reputational contagion, wanted nothing to do with them (this was in stark contrast to early 2022, when a third of the US Congress took money from a certain Sam Bankman-Fried).
Critics, not unreasonably, said crypto had failed to offer compelling use-cases, beyond speculation. They said it was a cesspit of money laundering and terrorism (its involvement in the latter tends to be vastly overstated). They said it was dangerous for the environment. They said it could never become part of the financial system, because key financial players on Wall Street would never accept it. Some even dared to bid a valedictory “Sayonara”, as they have hundreds of times before now.
Yet today, Bitcoin is trading at around $70,000, above its previous all-time-high of about $69,000. The world’s premier cryptocurrency now has a market cap greater than silver, and many expect it to reach parity with gold within a few months. Meanwhile, the rest of the crypto market, which slumped along lifelessly for much of 2023, isn’t far behind.
So, what’s going on here? What sparked Bitcoin’s resurrection? The truth is there are five principal reasons behind its revival, the first of which may seem rather obvious…
1. You can’t kill Bitcoin
It’s awfully difficult to eradicate something like Bitcoin. Its network is peer-to-peer and decentralised, with roughly 18,000 public nodes working to validate and maintain the network daily, and they work independently. There isn’t a central point of failure or vulnerability for someone or something to stop. It’s a self-perpetuating system. And, more importantly, Bitcoin has tremendous latent support in the world: there are more than 100 million Bitcoin holders globally and, characteristically, they do not respond to political pressure. Since its emergence 13 years ago, Bitcoin has purred along efficiently, steadily growing, even in the face of massive competition and numerous hacks (particularly to exchanges and individual wallets).
This resilience isn’t directly connected to price; Bitcoin can be resistant without the price going up. But the price is based on this sense of permanence. It’s a function of everyone knowing with certainty that the Bitcoin code can’t be changed and that the issuance of new Bitcoin isn’t a political matter. Unlike fiat currencies, which are subject to central bank issuing more or less of a currency depending on the economic circumstances, the issuance of Bitcoin is predictable. That’s a unique selling point in a world where everything, even money, is increasingly politicised.
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Subscribe“There’s no need to own the underlying asset or to store it oneself“.
That is true. You can give it to some crook (like SBF) to hold for you, who will promptly plunder it for his own ends.
I don’t know much about Bitcoin, but headlines like the above read rather like “Five Reasons the Titanic is Unsinkable”: one taunts the Fates at one’s peril.
If you are right, and if Bitcoin does sink, I will buy everyone beer!
What with?
Um, fiat currency. I’ve found to to be remarkably useful in purchasing goods.
Thank You Mr Shiller for that (presumably) unpaid advertisement on behalf of crypto currency speculators and associated criminal organisations.
I would have thought there was a large overlap between those two groups.
How do you know it was unpaid?
I hold Bitcoin myself and seeing articles like this appearing in relatively mainstream news sites like Unherd is a signal for me to sell it all. It should not be worshipped, merely viewed as speculation and essentially gambling with a good rate of return so long as you hold for long enough.
Is UnHerd “relatively mainstream”?
Yes.
Well it’s not exactly underground is it?
The owner is co-founder and chairman of one of Europe’s biggest hedge funds. How much more mainstream and neo-liberal can you get?
The Murdoch press?
I was recently in Windhoek, Namibia and surprised to see ATM like machines in the shopping malls apparently selling bitcoin.
It may remain speculative but I don’t think it’s going to die.
6: Greater fool theory.
7. Money laundering.
I’ll stick with the barbarous relic.
There’s another aspect, of course, which won’t trouble most UnHerd commentators, but anyway:
The Hidden Environmental Cost of Cryptocurrency: How Bitcoin Mining Impacts Climate, Water and Land, United Nations University Institute for Water, Environment and Health (UNU-INWEH), Hamilton, Ontario, Canada, https://inweh.unu.edu/.
Do you realise how much energy AI consumes?
Some crypto Currency mining now uses sustainable energy generation.
AI doing the wrong thing doesn’t make crypto mining any less harmful. And I am 110% sceptical of any eco claims made by the crypto community.
As far as temperature checks go, this room’s cold.
“something that isn’t controlled by a few dozen middle-aged white men in suits”
Please stop the lazy stereotyping;
Janet Yellen
Christine Lagarde
Kristalina Georgieva
Says more about the writer’s mindset than the facts on the ground.
Not to say bigoted. I was in a meeting and a white woman my age complained about the type face on some of our branding. She said it looked like it was designed by an “old white guy”. And this was at a table filled with old white guys.
I’d be interested to know what makes a typeface ‘look old and white’ ? Please enlighten me.
Or was it just her ‘inner anti-rascist’ that detected the smell?
Well, Baskerville was introduced in 1757; that’s pretty old. And if you had white ink on dark paper…
Wow, I didn’t realise UnHerd commissions crypto adverts now.
Bitcoin is “disaster insurance” in a world where traditional monetary mechanisms break down
Really-I’d like to see that tested in a real life situation-I’m not convinced that a self supplied digital currency would last any longer than a fiat currency in the face of economic Armageddon-we’ll see.
Exactly! How does one get their bitcoin back when Armageddon just took out the global internet for an undetermined amount of time?
The second truly idiotic article this week.
The sheer volume of crooks and shysters in the cryptocurrency space tells you all you need to know about it.
I sincerely hope we aren’t paying the author for this article.
People buy it because they don’t trust central banks.
That probably encapsulates the biggest reason for Bitcoin’s existence and popularity. And it’s not just banks and bankers who are untrustworthy, it’s also the politicians who are in bed with them and the elites who depend on them.
Someone who had put $100 into crypto just ten years ago would be a millionaire several times over today. Meanwhile, warnings about the inevitable stock market bubble popping, the plummeting value of commercial real estate, palace intrigue over interest rates, and the dollar’s tenuous status as the global reserve currency. And that’s without the periodic cyber issues with banks.
“People buy it because they don’t trust central banks.” Or central governments. Too many critics view Bitcoin as an alternative payment system of sorts, including Donald Trump. We don’t need alternative payment systems, at least not in the U.S.
Bitcoin is more like a decentralized central bank. It has all the core characteristics of a central bank with ‘custody’ being the big one. As such, it’s an alternative form of custody for cash.
I also think Ethereum provides the more practical applications that many critics bemoan about crypto. It plays a similar role that Microsoft played in the early days of the personal computer. In almost every blockchain project, Ethereum makes the project executable just as Microsoft provided an operating system for personal computers.
If the world is going to end, then there isn’t going to be any electricity to power computers or phones or anything, and the 1s and 0s which constitute bitcoin will be going up in smoke. At which point the only thing of any value will be physical assets like gold etc.
….and guns and ammunition.
Part of the fantasy of cryptocurrency is that you can escape from state regulation. The reality is that absence of regulation opens up crypto to widespread fraud. In fact we all depend on the modern state in the West (for all its faults) for our prosperity and security.
….and however good an “investment” crypto is, we have to exchange it for fiat currency in order to buy most things.
The problem is that during a real global disaster, there won’t be any Internet access to Bitcoins! The only safe currency during such a time will be food bartering. So, what type of disaster is Bitcoin good for? Central bank printing? In that case, just convert all your assets into the least printed currency or buy gold. What real-world problem, apart from money laundering and tax avoidance, Bitcoin solves is still beyond me.
It certainly solves the “how do I trade illegal things on the internet” problem. The first big boost Bitcoin got was from the now defunct drug site Silk Road.
The article states “Recently, daily inflows to 10 approved ETFs averaged more than $1 billion” what needs to be added is that the $1 billion goes out of the ETF to the seller of the bitcoins. All the funds hold is a collection of numbers. They cannot be destroyed but they have no intrinsic value. If there are no buyers they are worth nothing. They move wealth from new investors to the sellers. So did pyramid selling until it was banned. The Financial Regulators have taken leave of their senses, in their ignorance they admire the Emperor’s new clothes. Watch the treasury bill holdings of stable coins like Tether rise as its investors, a thousand or so early owners of bitcoins, add the proceeds of more bitcoin sales to the $100 billion they have already amassed. With a fixed supply of numbers greed makes a rising price keep rising until fear makes a falling price keep falling. You will have a friend who gets in and out and makes a lot of real money but only because you will have friends who have paid more, think they are getting richer because the price keeps going up but lose the lot when reality eventually dawns as it did with pyramid selling and tulip mania. It is an exercise in greed and ignorance.
The approval for ETF’s of BitCoin was accompanied by the USA govt spokes person saying “wow, it’s probably going to like $200,000 or something!”
That was maybe the most shameless pump and dump everrrrr…and Bitcoin dragged the other cryptos up – Dogecoin 25%? – for no reason at all.
Dogecoin is the only crypto with credibility, because it never pretended to be anything other than a piss-take (as we say in Australia).
Jesus, these comments arent great. There is wall of etf money coming in to bitcoin. Best to get some exposure. Btc actually is backed by the nodes and mining infrastructure. Your fiat on the other hand.. fix it again tomorrow. As for crypto , mostly scams, stay away.
I was invited to ‘join the discussion’ but whenever the subject is Crypto there never seems to be much discussion. Just spectacularly entrenched positions on both sides.
I cannot get past the thought of something “digital” having value. True… One could say the same thing about a fiat paper currency. But how does one “spend” a digital asset in a power grid failure? Also true… I’m quite sure that paper fiat currencies will make good fire kindling during such a crisis. What am I doing wrong here????
You are not doing anything wrong. Fiat currency is backed by a government, it’s value is measured accordingly, which is why the US dollar is still worth something, and the Zimbabwe dollar isn’t (I actually think it is now defunct). Bitcoin is “backed” by “smoke and mirrors”.
Bitcoin isn’t fungible- the requirement that a unit of money is indistinguishable from another. Essentially it is far easier to trace than cash. Bitcoins become digitally ‘tainted’ by their transaction history. The USA financial overlords have finally realised this. Which is why it has now been allowed to flourish as ETF’s and the like. This doesn’t mean it will become worthless in the short term. Probably the complete opposite as it will now be hawked by mainstream financial institutions given the ‘wink and nod’ by the Fed. However, if you are buying Bitcoin to protect yourself from government intrusion, you’d be better of sticking with Cash, Monero https://www.getmonero.org/ or Gold. All truly fungible. Money that isn’t fungible is always doomed to fail in the long run.