What’s the truth about Bitcoin? Critics couldn’t be clearer: it’s a fad that can’t decide whether it’s a currency or a speculative investment. ‘You’re betting, essentially, on being the last person holding the bomb before it goes off,’ wrote Sam Leith on Coffee House. Many others agree. But Bitcoin’s critics are wrong: there’s nothing faddish about it. Bitcoin is a monetary revolution and is here to stay.
Perhaps it’s no surprise that Bitcoin has attracted its sceptics. Understanding what it’s about isn’t easy. In short, Bitcoin is a monetary network, an incorruptible ledger, with the money supply fixed by code (there will only ever be 21 million Bitcoin). It allows anyone with an internet connection to engage in a transaction that cannot be altered or stopped, with currency that cannot be seized, all without requiring a middleman such as a bank. The good news is that this means it can’t be manipulated by governments or central banks.
The typical journey for someone describing themselves as a ‘Bitcoiner’ is that they ‘came for the price action, but stayed for the revolution’. After this, defending Bitcoin becomes akin to defending the invention of the wheel. When they understand the benefits of sound money it shifts their outlook on capital accumulation and protection.
The best evidence that Bitcoin captures people’s imaginations can be seen in how widely it’s been adopted. Around 1.5 per cent of the world’s population are estimated to own some amount of Bitcoin, and a lot of those people have held (referred to as ‘hodled’) Bitcoin for a good period of time. The result is that this asset, which was worthless 12 years ago, has a current market cap in excess of $1.2 trillion (£900 billion). Bitcoin is currently jockeying for position as the 13th biggest currency behind the Swiss Franc, which has long been considered to be the most stable currency in the global economy.