Last year I wrote a series of blog posts about what Christians should know about Bitcoin. In response, one astute reader pointed out an odd juxtaposition: my conclusion seemed to imply that Christians should avoid Bitcoin “at all cost” and yet the Acton Institute accepts donations in Bitcoin. “I really want to know the rationale behind this,” he said.
Well, the rationale is easy enough to explain: Not everyone at Acton agrees with me. Like other nerds who have an interest in the intersection of economics, liberty, and technology, many of us at Acton disagree about the merits of Bitcoin. (I’d offer to place a gentleman’s wager on the future of the crypto-currency, but they’d want to bet using Bitcoin. Either way – whether it increased in value or went defunct – I’d end up the loser.)
Opinions are still divided, but the evidence that Bitcoin is doomed to failure piles up almost every day. Over the 8 month span from October 2010 to June 2011, the market value of Bitcoins skyrocketed 9667-fold from a value of $0.06 to $29. Later, when I wrote my series last April, a single Bitcoin was worth less than $100. Today, it is worth $660, and that’s after falling from a high of $1,100 in November 2013. A currency that can fluctuate from $0.06 to $1,110 in a three-year period is not a currency – it’s a speculative bubble.
Of course, we Bitcoin doomsayers have been waiting for the bubble to pop for some time now. We also tend to think that every new drop is a sign of it’s impending doom. Fellow naysayer Jonathan Last is sure, this time, that the end of Bitcoin is near:
As of last week, bitcoin is probably functionally finished as a serious hope of ever achieving mass acceptance as a currency.
Because last week, someone stole half a billion dollars worth of bitcoins from Mt. Gox, the world’s oldest bitcoin exchange.
Last says the Mt. Gox implosion (the exchange went bankrupt after the theft) blows the lid off of the idea of bitcoin security:
If the mass audience of consumers can’t believe that their bitcoins are secure, then they won’t buy them. And if the mass audience doesn’t buy bitcoins, then mainstream businesses won’t move to accept them.
. . . Banks are robbed every day. But people don’t think twice about bank theft because whatever money of theirs is sitting in the bank is insured by the federal government. If a guy sticks up the Wells Fargo and steals the $1,000 you just deposited, the FDIC makes everyone whole—and then armed agents of the state attempt to track down the robber and bring him to justice.
But there ain’t no law in Deadwood. Which is to say, the Mt. Gox heist makes it plain that there’s no FDIC for bitcoin. If your bitcoins get stolen, you’re out of luck. What’s more, if your bitcoins get stolen, the cops aren’t going to go after the bad guys. In fact, it’s not even clear that, if the bad guys confessed to the theft the next day that it would be possible to prosecute them.
And here’s the thing: These downside risks aren’t just a quirk of bitcoin being in its infancy—they’re design features that will always be with the currency.
Indeed, that is the catch-22 I pointed out last year: For Bitcoin to succeed it has to adopt mainstream monetary policies—which would negate the very reason for Bitcoin’s existence.
Right now only a fool would actually spend their Bitcoins. Currency is supposed to be a rule that measures the value of a good or service. But the value (or at least price) of a Bitcoin can change rapidly, much more rapidly than the burger you could buy at lunch with your crypto-currency. Of course, only an even greater fool would save their money in Bitcoins. Even those bullish on the fad are smart enough (at least most of them are) not to convert their life savings into a currency that can rise and fall so rapidly. Their actions show, even if they refuse to admit, that Bitcoins act more like a hot tech stock than a legitimate currency.
So what happens next? Who, besides speculators trying to drive the price higher, is still willing to argue that Bitcoin can survive as an unregulated, anonymity friendly, alternative currency for the masses?
Anyone still willing to bet a Bitcoin on the future of Bitcoin?