If Bitcoin were an adolescent human being it would find itself in therapy, for life. In the space of a month it’s been ridiculed by the likes of Goldman Sachs, Warren Buffett, and the Who’s Who of hedge fund managers. Bitcoin has been alternately called a Ponzi scheme and the digital equivalent of tulip bulbs. If the ridicule by the financial entertainment industry wasn’t bad enough, Bitcoin was denied by its own father, who claimed he had nothing to do with the upstart digital currency, a statement bold enough to prompt journalists to start questioning Newsweek’s motivations and see the first hints of potential lawsuits.
If all that wasn’t bad enough, Bitcoin has gotten to watch its younger sibling, Dogecoin, surge in both market capitalization and popularity as supporters, fueled by Red Bull and boundless enthusiasm, take to social media to gush over the new arrival. It’s probably fortunate that Bitcoin lacks the ability to start drinking.
Yet, despite the tide of woe and steady stream of bad news, Bitcoin has managed to maintain prices around $600, and trade in a range over the last month that is, for the most part, normal.
Graph courtesy of bitcoincharts.com
The normality of trading stands in bizarre juxtaposition to MtGox reopening after filing for bankruptcy, to allow users to see how much they’ve lost — with no way to reclaim the funds.
The strangely inconsistent normality of the Bitcoin market is further proof of a point that I’ve made repeatedly on the subject of digital currency, and that is the people at the core of the new wave of exchange don’t give a fig about the financial industry, government regulators, or popular opinion, all of which are backward-facing institutions that operate in favor of the status quo. These people, and they are real people, don’t care what anyone in the financial industry thinks and they never will. They won’t recognize the seemingly obvious fundamentals of how business gets done, or seek out the advice of the old sages of financial wisdom.
The mistake the financial media and finance industry make is thinking that Bitcoin represents some new type of currency. Bitcoin will never make sense thinking about it as a monetary tool; that is completely peripheral to understanding the whole system of exchange. Digital currency is a disruptive technology and doesn’t really make sense anywhere outside that context.
Consequently, when an organization like Goldman Sachs says Bitcoin will never be a serious player in the financial system, the Bitcoin faithful are just fine with that. In fact, the core of the Bitcoin system may actually like large financial institutions mocking Bitcoin, because that will tend to diminish digital currencies as a threat in the eyes of regulators.
Bitcoin was perfectly happy being the obscure plaything of a relative handful of techno-geeks scattered around the world, just like the early days of the Internet when it was used by a relative handful of government and educational institutions to exchange cryptic text messages. Even after privatization, it wasn’t until AOL came on the scene, with its unwashed and unruly masses intruding on the relative sanctity of the technical community, that the full potential of the Internet as a disruptive communication tool really became apparent.
So it is with Bitcoin and digital currency in general; the great unwashed masses have discovered Bitcoin and, like newbies on the early Internet, many have gotten chewed up by the Wild West nature of the technology. Just like we tamed the West, and the Internet evolved to include the larger public, digital currency will also evolve, and find a place in our financial lives.