Crypto enters a new year with the same shadow looming
Everyone likes to start the year with predictions and we are already reading about the imminent collapse of Bitcoin. “A solution in search of a problem,” said one analyst last week. “A pyramid scheme” that demands new investors to pay off early believers.
Some of those early investors have done exceptionally well. According to one large bank, Bitcoin was the best investment of the 2010s.
While 2019 was a good year, with one Bitcoin nearly doubling in value from a January low, it is well off its 2018 mountain peak and for most of the year gave no specific signal of where investors think it will go. That lack of direction is probably a result of pessimistic assessments like the analysts who dismissed its utility, and certainly a signal the market is struggling to find new buyers.
Will digital currencies finally become viable?
But there may be a significant disconnect in the notion that Bitcoin increasing in value requires a use case. The opposite might be true. Bitcoin’s price heading south decisively, and staying there, or its replacement with something similar and stable, might be what is needed to finally make alternative currencies viable.
Bitcoin speculators want to have their cake and eat it too. Many jumped on the bandwagon decrying the stranglehold of governments, regulators, and central banks. They championed the power of Bitcoin and other currencies to help us break free of controls and take finances into our own hands. Yet, many of those people are sitting on their investments and hoping to profit from them, instead of putting into action the power they claimed for themselves. They aren’t using Bitcoin or other currencies to actually buy things.
Quite possibly we will need to see digital currencies level off at valuations far lower than investors were hoping for us to begin to realize we should actually use this stuff.
Use cases are everywhere
Digital currencies can play a significant role in making money more accessible. If you can send funds to a relative oceans away, without the delays and fees common today, that money becomes more valuable. If you are an aid organization and can get funds into the hands of people who need it desperately, without the risk of fraud, theft, waste, or unexplained loss, you can do far more good with it.
Digital currencies can also save money for merchants and consumers. With no middlemen to pay, merchants will save on every transaction they process. With better digital data, they can plan and analyze sales, project future receipts, and report income. They can pass savings to consumers and begin to claw their way back from the retail apocalypse that has ravaged Main Street.
If you believe that wealth is a product of money in circulation, doing good things, there is nothing but promise in a system that makes moving money easier, less expensive, and with fewer unnecessary hurdles.
Sorry, analysts — there is a need
Well-heeled bankers and financial professionals who have done well in a fiat world might ask, from their limited perspective, “Where’s the problem?” The 1.7 billion people in the world who have no access to banks, no way to establish credit, limited opportunities to create businesses, and are forced to pay enormous fees to those banks in account charges, check charges, penalties, and charge processing fees might disagree.
But as long as we are Googling “Where is Bitcoin today,” we aren’t using it. As long as the focus is on the value of Bitcoin as an asset, we are ignoring the good digital currencies can do as instruments of trade or the backbone of a tokenized economy.
No 2020 predictions here. But 12 months from now, our 20–20 hindsight might be that this was the year we started calming down about where Bitcoin could go, and started realizing what it’s for.
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