I Was Wrong About Bitcoin. Bitcoin roller coaster gift Was I So Wrong?
Our columnist predicted in 2013 that Bitcoin, then a new digital currency, would soon die. He points to five assumptions he got wrong. People using a Bitcoin ATM in Hong Kong. Bitcoin has soared in value, but more as an investable security like gold than as a currency for everyday purchases. Internet Explorer 9 or earlier. Go to the home page to see the latest top stories.
Several years ago, tech enthusiasts in San Francisco began buzzing about a new and mysterious thing called Bitcoin. There were rumors that the virtual money, invented by a pseudonymous math genius named Satoshi Nakamoto, would revolutionize modern finance and render government-backed currency obsolete. Or maybe it was just a passing fad. I wanted to understand the phenomenon for myself. 140 at the time — to a cryptocurrency exchange. I sold my Bitcoin a week later for a small loss, thoroughly unimpressed with the experience and pessimistic about the virtual money’s prospects. The offices of Coinbase, the largest consumer trading platform for Bitcoin, in San Francisco.
Hoo boy, did I blow it. Bitcoin is a classic sign of a bubble, few think it will disappear altogether even in the event of a crash. Why did so many people — myself included — get Bitcoin so spectacularly wrong? After a couple of weeks of thinking about it, I can point to at least five bad assumptions I made. I assumed that Bitcoin’s future depended on its everyday use.
In the early days of Bitcoin, its proponents envisioned people using cryptocurrencies to buy food, pay their rent and make other day-to-day purchases. A Bitcoin ATM at a grocery in midtown Manhattan. Bitcoin advocates once imagined using cryptocurrencies to buy food and pay the rent. Today, though, hardly anyone is spending Bitcoin on actual goods and services. Why would you, if the value could jump 40 percent in two days, as it did last week?
And few merchants have gone through the hassle of updating their systems to accept cryptocurrency. As it turns out, while few people want to use Bitcoin as a currency, plenty want to treat it as an investable security, similar to gold or silver, especially while the price keeps rising. I assumed that the blockchain would eclipse Bitcoin itself. One of the earliest predictions among Bitcoin skeptics and boosters alike was that Bitcoin itself would be just a predecessor technology to the real, lasting innovation: the blockchain — the peer-to-peer ledger system that records cryptocurrency transactions and allows them to operate without a central authority. I agreed, thinking that the blockchain had real promise, but that Bitcoin would ultimately fade away.
Four years later, there has, in fact, been enormous hype around blockchain projects. But that frenzy hasn’t detracted from investor enthusiasm for Bitcoin itself — in fact, it has amplified it. I assumed that regulators would crack down faster. In the frontier days of cryptocurrency, it seemed that every other story was about how criminals and tax-evaders were using Bitcoin to buy and sell illegal goods and services. It was easy to think that these problems would lead regulators to take swift action against Bitcoin. 500 million of customer money to hackers.