The progressive website Daily Kos, which focuses mainly on political issues rather than financial, took time out of their 24-7 coverage of the slow-moving train wreck that is the impending Trump presidency to weigh in on the viability of Bitcoin.
The article, The Rise (and probable fall) of Bitcoin, is an interesting read if for no other reason than it’s entirely derivative. The author, Stephen Andrew but who published the article under his pen name DarkSyde, makes the point that the concept of digital money has its roots in the in-game currencies of games like World of Warcraft. He then further points out that Bitcoin is volatile, which will make it naturally a difficult currency for vendors to take since they won’t be able to anticipate their income if the income can skyrocket, or more important, plummet. He ends by implying that Bitcoin isn’t worth taking a chance on as it isn’t accepted or useful enough yet.
Now, he’s certainly right in his observation that Bitcoin with its market cap of merely 14 billion and active user base of perhaps a million or two people world wide is really barely even on the radar as a currency. Where he misses, and where so many of the other 119 people who have declared Bitcoin dead have missed, is that Bitcoin is an underdog currency and that observations that it hasn’t hit a tipping point yet always miss the ‘yet’ part.
Here are a few things to keep in mind about Bitcoin:
- It has been rising steadily in price for more than a year.
- Its user base continues to grow.
- Despite loud squeaking as Bitcoin tries to scale, development of the Bitcoin it self and scores of side and second tier innovations continue apace.
What’s more, Bitcoin is specifically a currency designed to thrive when the current financial and political systems begin to fall apart. When the value of national currencies fall, look to Bitcoin. When the government comes to track and take your money (and I don’t mean taxes which in theory are used for the benefit of all, I mean things like civil forfeiture which is direct governmental theft of property), look to Bitcoin. When fear and uncertainty run rampant and people realize that they want to rely on math rather than institutions, look to Bitcoin.
Bitcoin’s value as a currency right now is little more than a side show to its current role as a huge speculative instrument. This term, speculative instrument, is often used as a slam against it, but is in fact the feature that will provide Bitcoin with its boost to world usage – and it’s something that anyone can take part in for as little as a single dollar. There is certainly risk of losing that dollar, and also certainly massive potential gain.
When institutions begin to fail and the smart money panics and tries to find a safe hedge for their wealth, you will see Bitcoin soar. Only then will you really see people start to get paid in Bitcoin, buy groceries with Bitcoin, and pay taxes with Bitcoin.
So, when I read articles like Mr. Andrew’s saying Bitcoin can succeed because it can’t be easily used to buy coffee, I shake my head and say ‘yet.’ I cannot predict the future, and it may not be Bitcoin itself that becomes the digital currency we all rely on, but I feel confident that we will all be using a currency like Bitcoin before long, and right now my money is on it being Bitcoin.