We all remember the great Bitcoin crash of 2018, and the volatility that followed, but now it seems that the cryptocurrency is finding its niche, with investors at least. Bitcoin has been to the peak of inflated expectations, and through the troughs of disillusion and despair; the hype is finally (almost) over, and it’s emerging onto the plateau of acceptance.
As the poster child of blockchain tokens of value, Bitcoin has weathered the storm of extreme volatility better than most of the junkcoins that sought to emulate its success. Many of those have now disappeared, along with the hype.
Perhaps the reason for Bitcoin’s earlier instability lies in the fact that no one really understood it; that and FOMO drove it to ridiculous heights, more than once. And like any new digital technology, there’s always the opportunity for fraudsters and hackers to make a quick buck, before systems are secure and stable.
Which brings us to gold; I remember how, in the 1980s, gold peaked at US$ 800 per ounce and everyone said it was going to hit $1000. They were right, but it took almost 25 years to get there. Gold has intrinsic value, for jewelry and electronics, but is held by investors and fund managers mainly for its stability, in the face of uncertainty, even in 2021. In real terms, gold is unmoved by Brexit, Trump tweets or the vagaries of the Yuan vs the Yen.
Could Bitcoin be ‘digital gold’? On the face of it, Bitcoin has no intrinsic value, only the fact that it can be transmuted into almost any currency, in any country, at near zero transaction cost – a lot like gold. Like gold, Bitcoin is beholden to no government or arbitrary authority, and is far easier to transport, in quantity and safety. Unlike gold, it’s infinitely divisible.
And now, like gold, it’s also a stable store of value in the face of uncertainty – it’s the global fiat currencies that look decidedly wobbly!