Just when you thought it was safe to consign cryptocurrencies to the corner of your mind inhabited by video cassettes and sub-2% mortgage rates, Bitcoin has come bouncing back.
The granddaddy of digital currencies had been on the floor and seemed out for the count as 2022 ended.
Its price had crashed from $65,000 in November 2021 to less than $16,000 a year later.
And with crypto exchanges going bust left and right and the industry (allegedly) getting its own Bernie Madoff in the shape of a certain Sam Bankman-Fried – the fallen founder of cryptocurrency mega-exchange FTX, currently residing at his parents’ home on pain of a $250m bail bond after being arrested for various flavours of fraud – all the excited talk of going ‘to the moon’ was over.
Heading for a doughnut – a big fat ‘0’ – looked equally as likely.
Nobody but the diehards had a good word to say about Bitcoin.
Which, not for the first time, appears to have been the signal to buy.
Thrills, spills, and bellyaches
As I write, Bitcoin’s price has just breached $23,000.
Which – while still being nearly two-thirds below its all-time high of $65,000 – is also up nearly 50% in a month.
Suddenly, the great crash of 2022 looks like just another Big Dipper on a rollercoaster that has taken Bitcoin from costing pennies to minting billionaires, in barely 14 years.
All of which puts the bold predictions made by Bitcoin’s biggest fans back on the table.
You know the sort of thing.
Famed US fund manager Cathie Wood’s forecast that Bitcoin will hit $1m by 2030.
Talk that Bitcoin could displace gold in the (virtual) vaults of central banks.
The asset eventually being woven into the fabric of the financial system.
Or, alternatively, that it will in parallel provide a vast ‘permission-less’ payments network, unfettered by the shackles of government.
Just typing it out again makes me exhausted anew about all the hype to come.
Don’t misunderstand me! I’ve had exposure to Bitcoin one way or another for years – and I do now.
True, I don’t see the slam-dunk reshaping of the financial system that its evangelists consider inevitable. But I do see plenty of potential – and mostly only surmountable obstacles.
However, I’m weary – and wary – about what Bitcoin has come to represent, whatever that theoretical vision.
Which is, in short, a giant, technology-enabled Get Rich Quick scheme.
Now many Bitcoin supporters would say that is not so much a feature as a bug of their revolution.
Sure, they’d concede, Bitcoin’s limited supply means its price will inevitably rise as ever more of the world catches on to its place in the future of humanity’s financial infrastructure – and ultimately our economic salvation.
(Seriously, that’s how they’d say it. Bitcoin maximalists are nothing if not messianic.)
But no, they’d add, making millions isn’t the point of owning Bitcoin. It’s only a byproduct. If anything, a distraction.
Fair enough, but that’s orthogonal to how the other 99.9% of the world understands the Bitcoin story – or even why they’ve heard of it.
To nearly everyone else, Bitcoin is about bedroom-based ‘bros’ who made out like bandits by getting involved in the early days. And who ever since have proclaimed things like “have fun staying poor!” while fighting turf battles with a thousand other digital contenders vying for what Bitcoin offers.
Which again, for them, is the fastest way to turn a hundred bucks into two.
Not to mention all that stuff with JPEGs of rocks and monkeys worth millions at the height of the last bubble that we all had to pretend we had an opinion about…
The truth is there are tens of thousands of interesting computer science projects going on right now. And most people don’t care less any about any of them. At all.
We care about Bitcoin because of what the price has done in the past and what it might do again.
And it’s that hunger and hype and hysteria that I dread making a comeback.
Not even so much because the huge losses sustained by the greedy and/or gullible in the last round are still so fresh – whether they lost their wealth through cratering prices or seeing their savings stranded on failed crypto platforms.
It’s unfortunate, and on a human level I’m sympathetic. But if somebody wants to gamble on getting rich quick, then for me they implicitly sign up to the possibility of getting poor fast, too.
No, it’s the distraction that crypto mania represents versus what I consider to be real-world investing that most bothers me.
Proper investing is about trying to find good – or at least undervalued – companies and backing them with our hard-earned money.
Watching these companies grow. Reinvesting the dividends…
Read More: Bitcoin is back. Too soon?