Bitcoin is Not A Bubble

Hello readers. As discussed at the beginning of this week, there are a lot of exciting things coming out of Notes on the Crises quite soon. At least a couple of them are coming this coming week. In the meantime however, I thought it was a good time to start running premium pieces from the Notes on the Crises archive on the weekends that newer readers might not be familiar with. This piece, published almost exactly four years ago, is an important one that I think has stood the test of time. Of course, we now know that the major players in Bitcoin are seeking to sustain it with the support of public money- a major inversion of Bitcoin's original raison d'être. I wrote about that in my piece near the end of February "A Scam Built Atop an Accounting Gimmick Wrapped in Bullshit: Why Visiting Fort Knox Is Not About Selling Gold but is About Buying Bitcoin".

It may seem like a silly time to write a piece entitled “Bitcoin is not a Bubble”. As I write these words, Bitcoin’s price is down almost 29 percent over the past month, and more than 20 percent in the past week. Nevertheless, I think it's a great time to talk about how I think about Bitcoin (and many “pure” cryptocurrencies more broadly). Cryptocurrency bears are a little too gleeful right now. These sceptics could use the reminder that Bitcoin, along with other cryptocurrencies, are not going away. After all, another way to present Bitcoin’s current price is that it's 320% higher than it was a year ago.

At the same time, cryptocurrency enthusiasts and investors I think can benefit from thinking more deeply about what they are participating in and building. More specifically: why they think cryptocurrencies are valuable — and in what senses.

I think many cryptocurrency readers assume that because of my focus on how “fiat” money works that I must be a cryptocurrency “bear”. I’ve not hidden my tendency to criticize claims of galloping inflation, currency crashes and Federal Reserve generated “bubbles”. In fact, I’m agnostic about the future price of Bitcoin, or any other “pure” cryptocurrency (i.e. cryptocurrencies that don’t promise redemption in either a good, service or state monies.)