Don't Believe The Obits For Bitcoin

"Reports of cryptocurrency's death have been exaggerated. For those who've followed bitcoin since the beginning, the fall from $64,000 to $20,000 is simply another of bitcoin's "many deaths" (one website has tracked 455 obituaries). Those who bought at the top are asking why bitcoin is only $20,000. This question would have been unfathomable a few years ago. We should ask the opposite question: Why is this internet-created money, started by an unknown programmer on an obscure web forum, trading so high?

With millions of dollars in speculation in nonfungible tokens, initial coin offerings and obvious get-rich-quick schemes, it's easy to forget that bitcoin wasn't created by people looking to get rich. It was designed by a pseudonymous programmer known as Satoshi Nakamoto, who wanted a money not controlled by government-run central banks. Like gold, the bitcoin network is outside the control of any political entity. There is a predictable rate of money creation, and the number of bitcoins in existence will never exceed 21 million.

Mr. Nakamoto, who disappeared from public view in 2011, owns billions of dollars worth of bitcoin and has never spent any of it. He once wrote that bitcoin was "very attractive to the libertarian viewpoint" if it could be explained, but that he was "better with code than words." Others who bought and evangelized bitcoin in the early days were ideologically driven by skepticism of the loose monetary policy in the wake of the 2008 financial crisis. Some went to prison for operating unlicensed money-transmitting businesses, motivated by these antigovernment beliefs.

Bitcoin isn't going away because the ideology underlying it isn't going away. There has always existed a strand in the American political tradition that is skeptical of the government's ability to manage the money supply -- think gold bugs. With the Federal Reserve increasingly guiding monetary policy according to political concerns such as climate change and "diversity," the intensity of the desire for apolitical money can only grow.

This desire for a private digital money is what undergirds bitcoin as an entrepreneurial project. Entrepreneurship isn't for everyone, and modern portfolio theory is right to value diversification and stability for the average investor. People focus too much on the riches amassed by early crypto investors without remembering that this month's decline is a fairly regular occurrence.

It may seem paradoxical to invest in a "predictable" money that loses 70% of its value, but early investors believe that in the long run the predictability of supply will be more important than demand-driven booms and busts. Bitcoin ownership is highly centralized in the hands of individuals who seldom move their coins. If you weathered the 2011 crash from $30 to $2 or the 2018 plummet from $19,000 to $5,000, this latest crash won't shatter your belief in this project.

As a financial investment, bitcoin is highly speculative, more like venture capital than foreign exchange. If you have no beliefs about monetary theory, you might find these drops extremely unsettling. But strong beliefs are what allow people to ignore the market's short-term signals and profit when the collective wisdom turns out in the long run to be wrong.

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Mr. Raskin is director of research at Qvidtvm Inc. and an adjunct professor at New York University School of Law." [1]

1. Don't Believe The Obits For Bitcoin
Raskin, Max. 
Wall Street Journal, Eastern edition; New York, N.Y. [New York, N.Y]. 23 June 2022: A.17.