Bitcoin has once again been through a bit of a bumpy ride. At the end of last week, we saw a drop in price from about 130 at the high to 90 at the low.
This, of course, speaks to the volatility of bitcoin. That bitcoin will see wild swings is expected. The only thing we don’t know about it is when those swings will come and how high, or low, they will go. That is what makes day trading in bitcoin, like in any market, so dangerous. It is what makes a buy and hold strategy the boring, but safe option.
But what precipitated the drop? It seems the revelations by hero to some, traitor to others, Edward Snowden that the NSA is indiscriminately “hovering” up phone and internet data caused an anonymity panic in the bitsphere. It is no secret that bitcoin is not really anonymous in the absolute sense. Personal names are not tied to specific bitcoin transactions unless you go through a service that intentionally records the transaction. When bitcoin was brand new, anonymity was a relative certainly because nobody was really looking.
But as the value of tracking specific bitcoins, and seeing the pattern of what addresses they go to, it seems that it will be common place to backtrack the path of a bitcoin and figure out where it came from and where it went. And then, names can start to be placed on those transactions. And there goes the anonymity ballgame.
This shouldn’t be a big surprise to anyone, though, given the nature of bitcoin. That we would reach this point was built into the system itself.
So, why be afraid of the NSA monster? In reality, there are a lot of reasons to be afraid of the NSA, but I don’t think that bitcoin is part of that equation. There are techniques to use to keep things hush hush, and as time goes by, those techniques will become more sophisticated. For most of us, though, just like as we accept that if someone really wanted they could (and do) find out how we spend by accessing our credit history, we’ll accept that bitcoin has some of those same features.
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The anonymity of bitcoin was never its real selling point, and the NSA’s hovering up of internet data will not be the death of bitcoin.
Bitcoin is building momentum. Perhaps we’ll know it has hit critical mass when we see an episode of CSI where they track someone down via blockhain.