Bitcoin and its smaller crypto cousins are not going to disappearby Andy Davis / March 22, 2018 / Leave a comment
Published in April 2018 issue of Prospect Magazine
Back before Christmas, Bitcoin was setting the world alight. News stories about it popped up wherever you looked and the line on its price chart was vertical—heading to infinity and beyond, as Buzz Lightyear might have observed.
In fact, Bitcoin rose to $20,000 before the price tumbled. Although I’ve never owned cryptocurrency, I can’t help wondering what happens next.
It’s tempting, especially after such a spectacular bubble, to write off Bitcoin as a speculative fad. The frenzy may have subsided, but I suspect that Bitcoin and its smaller cryptocurrency cousins are not going to disappear.
I say this, even though there are obvious problems with them, including the whiff of criminality and tax evasion that surrounds Bitcoin itself and the somewhat discouraging fact that hackers seem to steal large quantities of them every so often from online trading venues.
Those quibbles aside, the striking thing about cryptocurrencies is the sheer range of players who feel obliged to engage with it. Its early libertarian promoters cling to digital currencies as a global form of money beyond the control of central authorities.
Techno-evangelists see them as an improved means of payment. Regulators worry that they represent an efficient way to transfer illicit and untaxed wealth across borders—one of the biggest threats to Bitcoin owners is probably that they make serious efforts to stamp out trading in it.
But how hard will they try? The cryptocurrency boom represents a global experiment in digitised financial innovation. Central banks are fascinated by the possibilities of state-controlled digital currencies as successors to cash and are watching events closely.
Despite the bubble, officials seem comfortable with the fact that cryptocurrencies are still too small to pose a meaningful threat to the financial system—so let the experiment continue.
For those with a yen for speculation, meanwhile, cryptocurrencies are a godsend, confirming once again their most cherished belief: that if you are in the right place at the right time it is possible to make life-changing gains overnight.