Bitcoin, which pushed past $66,000 last week, setting all-time price highs, has come a long way since January 2009, when a programmer with the pseudonym Satoshi Nakamoto introduced the cryptocurrency that would become a religion for some, a nuisance for others, and a looming threat to both the environmentand the financial markets. It’s always a bit of a fool’s errand to try to explain why cryptocurrency prices go up or down, but last week’s rally coincided with the stock market debut of the first Bitcoin-related exchange-traded fund available to American investors.
The push for a Bitcoin ETF has been going on for years. Most notably, Tyler and Cameron Winklevoss, the twins who were memorialized in “The Social Network,” tried to launch a cryptocurrency ETF in 2018 and were denied by the Securities and Exchange Commission. The Winklevosses, who own the Gemini exchange, one of the most popular places where investors can buy and sell cryptocurrencies, believed that an ETF would legitimize Bitcoin and open up the opportunity for big money investors to boost the price.
The ETF was supposed to be Bitcoin’s debutante ball. The suitors, in this case, would be pension funds, investment banks and even retail investors who wanted a safer, friendlier way to cash in on cryptocurrency. Now that Bitcoin is finally taking the stage as a member of society, it’s worth asking whether this gambit will pay off and how it might change how we think about big, bad Bitcoin.
I started dabbling in Bitcoin in 2017, back when prices were somewhere around $3,000 a coin. (Disclosure: I own about 5 percent of one Bitcoin — each coin can be broken down infinitely.) The spirit around cryptocurrencies back then was far more anarchic and apocalyptic than it is today, which interested me because my own politics tend to run in the opposite direction. And I’m generally drawn to people with big, if sometimes stupid, ideas.
There were plans for Bitcoin utopias in the deserts of Nevada, sovereignty movements by groups calling themselves “The United States of Bitcoin,” and pages and pages of speculation on how the blockchain, the ledger-like technology that powers cryptocurrency,would quickly change every industry on the planet. As with so many nascent communities, Bitcoin had evangelists and detractors. The book “The Bitcoin Standard,” by Saifedean Ammous, took on sacred properties, like a Talmudic text. At the same time, the economist Nouriel Roubini repeatedly proclaimed that Bitcoin would go to zero and told Congress that it was the “mother or father of all scams.”
In those years, there was also a growing divide between believers. The so-called Bitcoin maximalists supported the extreme libertarian principles of the Austrian School of Economics, full decentralization of economies and the end of what they called “fiat currency.” More pragmatic Bitcoin assimilationists, such as the Winklevosses, wanted to clean up cryptocurrencies and weed out the crazies, to get it in front of wealthy investors.
The maximalists would charge the assimilationists with selling out the entire point of the project, which I agree was a fair critique. Bitcoin started as a way to maintain anonymity from central banks and blossomed into a project to create a separate world free from any government intervention such as, say, taxes. If you simply made it into another security that could be bought and traded like Apple stock, what would be the point?
The assimilationists won, as they usually do in these battles between ideology and economic expediency. Bitcoin maximalism still exists, but it’s already seen as an unfortunate and ultimately divisive relic by many in the cryptocurrency space. Most of the talk about blockchaining the world has gone away.
The last time cryptocurrency felt actually threatening or destabilizing to the world order came in 2019, when Facebookannounced plans to launch Libra, a coin that could be used across its multinational platform. The implications for this on international finance — think of the currency disruption that could take place if wealthy people in developing countries suddenly converted their fortunes into a Facebook coin — were clear from the start. Libra was rejected by the Group of 7, the coalition of the seven most powerful countries in the world.
Since then, things have been pretty tame. In an earlier edition of this newsletter, I wrote about non-fungible tokens and how we should think of them as online communes and not only as get-rich-quick schemes. The mix of shared purpose and alienation in NFT online communities came, in part, from earlier iterations of Bitcoiners, who, aside from spreading their gospel, would proselytize about everything from food choices (for a while, a whole bunch of Bitcoin maximalists I know ate only meat) to politics. None of this was particularly pretty, but it did cohere into something of a vision for the world.
The underlying question back then was whether the ideology of Bitcoin was central to its economic viability. Did trying to overthrow the existing order make the price go up or down?
That question, at least for now, seems to have been answered. Bitcoin’s market cap now weighs in at over $1 trillion, and while it’s hard to tell how this ETF will continue to affect the market, it’s also become increasingly unclear what Bitcoin is supposed to do. Newer projects such as “decentralized finance” and NFTs have tenuously taken over Bitcoin’s role as chief disrupter, faintly echoing the call to leave the central banks and the traditional ways of life. (They do not, however, ask people to move to a lawless patch of the Nevada desert.) This is ultimately a good thing, but it does inspire the question: If Bitcoin isn’t about taking power away from central banks and governments, then what, exactly, is it?