Bitcoin is back, and on Thursday, the Godfather cryptocurrency broke through the USD$100,000 level for the first time.
Cue a slew of articles from the financial commentariat whose bread and butter is reporting on arbitrary modifications to price points and thus cover those movements to fill content quotas.
Cue also cries of “I told you so!” from the true believers who insist cryptocurrency will change the world somehow, and who have long declared Bitcoin would one day hit US$100,000.
And there’s some obvious chatter, too, from those who perceive Bitcoin as part of the “Trump trade.”
Except, on that last point, its rise hasn’t particularly got anything to do with Trump. Bitcoin’s 2024 revival has far, far more to do with the US market regulator, SEC.
Trump trade a troubled take
That’s because earlier this year – and if you’re a cryptohead, you’ll already know this – the US allowed Bitcoin ETFs to trade on the regular stock market.
And borne from that move is the real catalyst behind the Bitcoin bounceback.
To be fair, Trump definitely helps, but a huge chunk of all of the gains we’ve seen were clocked well before it became clear he could win the election. And, a Republican being laissez faire about the finance sector isn’t exactly unusual.
Don’t forget, not long ago, Trump wasn’t too fond of crypto. His second Presidency really just says to traders that there won’t be any red tape. Clearly there’s people buying because Donald is back, but that isn’t the full story.
Or much of it at all.
Just consider that around June, Bitcoin was already above the record highs it hit during the lockdown years.
But it isn’t really retail bedroom traders or young tech-heads buying up all those ETFs – it’s investment banks.
Goldman, JP, the entire American equity ecosystem. So what about that stellar rise after Trump won the election? How can I possibly try and claim it isn’t related to Donald?
Because it isn’t.
What actually happened is Wall Street started trading options on those same listed Bitcoin ETFs just last month.
Curious for something that’s meant to be a “decentralised” currency alternative.
Decentralised? Get real
And in this way, Bitcoin has turned into what its most fierce and ‘OG’ believers always hated.
Bitcoin was meant to be a “democratised” and “de-centralised” currency that will see “fiat” money collapse. Now it’s just another SEC-regulated experimental asset class the joy of algorithm-based trading networks.
(Many true believers also appear to not realise cryptocurrency has been taxed in America since 2014, as well as Australia, and pretty much everywhere else.)
So, Bitcoin has clearly been a pretty good way to make money – but that we got a digital currency not long after the household computer had saturated developed societies isn’t really surprising.
Bitcoin was inevitable
We are, if you zoom out, in the middle of a third grand industrial revolution. The first was agriculture; the second was the printing press; the third is the household computer.
Now we work from home; shop from home; communicate from home; interact from home; bank from home. And, as has been true throughout human history, there’s always more than one way to bank money.
Younger readers may be under the impression that the smartphone was the revolutionary element, but hark your mind back to the early days when iPhones were described as ‘like having a computer in your pocket.’
It was the household computer that changed our world, and in developed nations at least, we all slept soundly before silent grey monitor screens watching over us with loving grace.
Only in that world could Bitcoin exist – much like the internet, its value proposition relies on a vast network of people using it, each individual a node in an infinitely complex web.
Except, now, investment bankers could just get together in an airgapped room and coordinate a trade that could push the price up or down at will. The everyman can’t do that – and that’s why Bitcoin has, in my view, officially lost all grounds on which to argue for ‘democratisation.’
But really: despite the fact it’s made a lot of people a lot of money, was Bitcoin ever really that promising?
The first IPO is a similar story
To underscore my point here – if you’re still reading, I assume you’re probably not a cryptohead and that I may be preaching to a choir so I’ll keep it quick – let’s look at the first ever public IPO.
On the 20th of March, 1602, a Dutch merchant part of the The Dutch East India Co issued a charter stating that all residents of the Netherlands were liable to buy shares in the company.
(That the funds would be subject to a 21 year escrow probably wasn’t as widely advertised.)
Perhaps the most interesting part of that whole endeavour is that two housemaids actually took part in the offering – so, it’s actually two women who were very possibly the world’s first true retail traders.
And that’s what I’m getting at here.
Imagine, at that time, what the novel premise of public-facing investments must have promised – new access to wealth hitherto unimaginable; financial mobility (especially for two housemaids,) and in that way, a ‘democratisation’ of finance and capitalism.
Except, 400 years later, look where we are: nobody’s gonna tell you that the ‘everyman’ has any leverage when it comes to Wall Street.
And that’s going to become the case for Bitcoin, too.
How would Bitcoin change anything, exactly?
At this point I’m just being a hater, but this is a particular (and admittedly personal) gripe I have for any crypto loyalists.
Namely, nobody can explain how, exactly, Bitcoin would revolutionise any financial system. Hear me out.
It’s already taxed, so, there’s that.
Next we get to blockchain – the tech behind the experimental asset that makes it all work.
True believers espouse the accountability and transparency that the blockchain brings, and that this would stop large institutions from rigging markets and hoarding wealth, except, we’re seeing exactly that happen.
And think about the billions that have been lost over the years which nobody can find despite the blockchain, and the crime investigations implicating bitcoin that have gone nowhere despite an apparent ‘public ledger’ that in the minds of believers would never permit that reality.
Blockchain hasn’t particularly proven itself as any more useful than what monitoring systems are already in place.
Finally, that we’re teetering on the verge of some collapse of ‘fiat currency’ – another favoured argument of loyalists – is too stupid to go into. If anybody can rationally explain why ‘normal’ currency is going to collapse without relying on misunderstandings of currency markets, and how Bitcoin would be any different in that reality, my email is at the top of this article.
The internet isn’t bulletproof
Finally, there’s one big elephant in the room.
Bitcoin requires the internet to work. So does modern banking. Except if we only had crypto, there’d be no tangibles.
We’re overdue for an X-class solar flare event as is, let alone facing increasingly severe natural disasters; subsea internet cable sabotage; other types of power grid failures; nuclear war; a worse pandemic – what good would Bitcoin be in a world where you can’t actually get into your account?
In that instance, people would need to rely on some kind of tangible thing of value that could be relied upon in times of difficulty. Cash is one example, but that looks like it’s on the way out. So what if there was no cash?
If only such a thing existed, we could truly dismiss Bitcoi – oh wait, it does.
Starts with “G,” rhymes with “old.”
All of this said – for those who’ve made ten bags or more, it doesn’t matter whether Bitcoin can change the world or not.
As long as it’s expensive, that’s fine – and for that, this finance journalist can still find some respect for it.
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