Piece of computer code that became ‘digital gold’
Ten years ago the world was very different place. Governments were still trying to figure out the 2008 meltdown and how it all went so wrong. Quantitative easing was well under way and interest rates started to tumble. Put simply, how we did economics was coming under fire from all sides of the globe. But, nestling in computers wrapped in a comfortable blanket of code was a new kid on the block. It had been born and was taking shape as a consequence of “old economics” and power. Enter Bitcoin.
By 12 July 2010, this nerdy, tech-led currency – if that is what it truly is and was – was valued at $0.08 dollars, or simply eight cents. This new currency was emerging from the darkness amid lots of buzz and excitement in an effort to circumvent traditional fiat currencies. Of course, it
would come with bumps along the road. But that is the way of innovation.
Fast-forward to today and Bitcoin is trading at around $12,000. Despite all the criticism and negativity, the currency is still around and looks to be growing. Growing not just in value against the dollar, but in the number of people around the globe who are investing in it.
As I sat with my bank financial advisor this week, he pointed out that August is always a bad month in the markets and that he expected a big correction as all the bank’s analysis was pointing towards glo - bal recession. We chatted about China, the US, Mike Ashley and Warren Buffet. It was a good discussion with no real answers.
But, when I mentioned Bitcoin, the tone changed. He asked if I had any Bitcoin. The simple answer was yes. Why would I invest in a piece of code, he enquired. Why would I put money into such a volatile and untested asset class? Of course, I thought this a little funny as shares were tumbling around the world and he had no real control over any of it. It must be a mindset thing or self preservation as banks worry about how crypto will put them out of business. Spudulike has hit the buffers, but no one will bail them out. Banks are too important to fail in this global world of finance. But, these are the reasons why the likes of Bitcoin exists.
Ten years ago, financial pioneers started a change that is now the catalyst for ‘new money’. A different kind of money that is not controlled by a third party with a promise to pay, but is logged on a blockchain instead. This new money cannot be printed every time a central bank feels the need to shoulder its currency and manage its existence. No, Bitcoin is forged in secure code that is what it is and cannot be altered to suit political or fiscal expediency. And that is the scary bit.
With the maximum number of Bitcoins that can ever exist sitting at 21 million, it is finite. As a side note, buying 21 million Bitcoin ten years ago would have cost a little more than $1.6 million. Today it would be $252 billion. The value has indeed risen, but that is not exactly what Satoshi Nakamo - to, its pioneering founder, had in mind. He or she (the founder uses a pseudonym) simply wanted a decentralised currency that the state could not tamper with. Unfortunately, or fortunately from where one sits, the value and speculation of future value has caused Bitcoin to rise in price, thus making it not just a currency. It is now classed by many of its advocates as “digital gold”, where investors can stick their cash in times of market crises or indeed for the long-term. But, will it have a long-term?
As the current bull market in Bitcoin takes hold, the usual suspects pop up on CNBC and Bloomberg. Some are now saying “we told you so”, smug that they have championed the rise of Bitcoin for years and now it is unfolding as they predicted. Some are forecasting $100,000 pricing of Bitcoin within the next two years. Who knows? One thing is for sure. Ten years after it was brought onto this planet, this limited supply piece of code on the blockchain called Bitcoin is still around and making more noise than ever.
Jim Duffy MBE, Create Special.
Bitcoin cannot be printed every time a central bank needs to shoulder its currency