“Is Bitcoin a bubble?” I said. “Come back this time next week to read about why investing in bitcoin is a terrible idea,” I said.
Well, here’s why: between then and now, it collapsed. This has left me looking silly but has left everyone who invested in it looking sillier. So, why has bitcoin’s brief success been snuffed out? And was it even truly a success?
Let’s start by saying something nice. Bitcoin has a strong ideological appeal to it: wouldn’t it be nice to live in a world where no one group has control over our money? Wouldn’t it be great if all monetary transactions existed on a ledger which was difficult to manipulate, making corruption unlikely?
Bitcoin is a step in the right direction and its creators clearly had their hearts in the right place. But, that doesn’t change the fact that it’s crashed after a Tokyo-based exchange unexpectedly halted all withdrawals.
Coincheck, an exchange founded in 2012, halted all fiat (‘normal’) currency and cryptocurrency withdrawals after allegedly being hacked. NEM.io Foundation behind the NEM cryptocurrency president Lon Wong said on Twitter that “it’s unfortunate that coincheck got hacked” and that they were assisting in the process.
Markets reacted negatively to the news. Bitcoin dropped 5% over the 24-hour period to the value of €8,590. At the time of writing, one bitcoin is worth €9,210. When I wrote my article last week, one bitcoin was worth close to €10,000. This is obviously a lot of fluctuation. Investors will have lost a lot of money here.
So, it seems that bitcoin’s day in the sun is over. What’s more, that day in the sun wasn’t even a moment of true success. Almost everyone who uses bitcoin seemed to be doing so with the intention of transferring it back into a huge amount of fiat currency later, including bitcoin’s most enthusiastic supporters.
it seems unreasonable to suggest that a currency that people only use as a vehicle in a get-rich-quick scheme can become a useful currency or replace the US dollar. This doesn’t mean that bitcoin’s recent demise was totally obvious. After all, people put money into businesses like Google all the time in the hopes of getting rich. It’s not like Google has failed because of that. But still, here we are.
Bitcoin was conceived of as a currency, not a vehicle to make a lot of fiat currency. While bitcoin was ahead, most people only put money in to get money out. Bitcoin never truly succeeded, not even for a little while.