Topical Minds

Bitcoin will be worth nothing in 5-years. Discuss.

Before beginning to discuss the longevity of Bitcoin, it would be worthwhile to discuss what Bitcoin is and what it represents.

• Bitcoin is a cryptocurrency and worldwide payment system. The initial release was 9th January 2009. It is the first decentralized digital currency, where peer-to-peer transactions can take place between users directly, without an intermediary.
  Perhaps most importantly, the supply of Bitcoin is strictly finite. There will never be more than 21 million bitcoins. Enforcing a monetary policy based on artificial scarcity.

Impressively, Bitcoin is within reach of it’s ten-year anniversary, quite the milestone for a payment system that has been mostly beset by government rejection, and a level of volatility (in the past 18 or so months) comparable only to the lawless nature of the wild-west.

So, what is fuelling Bitcoin’s momentum, and is it sustainable?

Historically, I have felt very strongly that Bitcoin will end disastrously for all those loosely connected or foolishly exposed to Cryptocurrencies. That the only mechanism fuelling it’s (artificial) growth was the speculation of an indefinite increase in its value by retail investors (tulips, anyone?). In fact, I have closed most of my social media accounts and blocked a number of media/ news outlets for their nauseating publications of articles such as ‘Bitcoin set to surge to USD100,000 per bitcoin before January 2018’, soon followed by articles such as ‘Buy the dip! Bitcoin set to surge to USD100,000 per bitcoin by February 2018’,….. Etc.

The attitude that people most commonly have towards Bitcoin reminds of the saying ‘There ain’t no such thing as a free lunch’, or perhaps a more logical abbreviation in this case would be ‘there ain’t no such thing as a fast buck’. Unless you happened to buy a few hundred dollars worth of bitcoin back at pre-stupidity prices, your chances of making that bitcoin fortune are less than realistic.

However, what I’d like to think Bitcoin has the potential to represent is the God awful sober awakening to the impending collapse of fiat-money, and the global shift away from the free-reign plague that it represents, famously embodied by American Economist and former Chairman of the Federal Reserve of the United States of America, Alan Greenspan, who when asked if there was any possibility of the US defaulting on it’s debt obligations, responded “The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.”

By creation, Bitcoin is absolutely limited to 21 million unique coins, which (whilst it is highly unlikely that any government would ever adopt bitcoin as its national currency) would dissuade running at a deficit, something that was only allowed to happen in the USA when the gold standard was abolished.

But, what of Bitcoin? Whilst I appreciate the potential for fiscal responsibility, due to it being finite by nature, I lack confidence in its longevity. It is simply up against too big of an adversary- governments and central banks. I just don’t believe they will sit idly by and allow this deregulated newcomer to take over. More so, I just don’t think Bitcoin would be the solution. Right now, with its wildly out-of-control price fluctuations, it just cannot hope to responsibly operate as a currency, as a seller accepting payment by bitcoin cannot take confidence in its value as a means for exchange.

I will not begin to speculate as to whether Bitcoin will be worth US$0, or US$1,000,000, as I prefer to leave speculation to fools. Instead, Bitcoin at best represents a growing desire to move away from overly aggressive regulation and interference from governments and the banking industry. Perhaps Bitcoins failing, as much as its possible success, will pave the way for a new form of currency in this ever-changing, technology fuelled world- after all, driverless cars have somehow become a very near reality, it could almost seem appropriate for currencies to receive a technological overhaul.

– Seth Wilkinson