Behind the Bitcoin Surge
A Financial Futurist’s Perspective
The past couple weeks has seen a media saturation on Bitcoin reminiscent of a similar hype peaking in June 2011. Change a few numbers in this MIT Tech Review article reporting about the 2011 bubble and it’s déjà vu. Here’s what causing the boom in Bitcoin from the perspective of a financial futurist.
Paradigm shifts take time. Often we don’t realize one is happening when we’re in the middle of it. This is because the full shift can only be seen clearly in hindsight. It takes system thinking, which trained futurists deploy to connect seemingly unconnected subjects, to call out a paradigm shift in real time. Topics and trends are mostly explored and understood in their own context — but for futurists, they become exponentially more powerful when seen through a broader lens.
Bitcoin bridges two paradigms: the traditional financial paradigm, focused on clearly defined 1:1 financial transactions, and a new paradigm, in which non-financial data is layered on top of financial transactions. Bitcoin transactions include shared social values layered on top of the financial transaction mechanism. The social values encoded in the DNA of Bitcoin are DIY, peer-to-peer, distrust in government and central banking systems, technology elitism, and anonymity. Buying something with Bitcoin can be construed as an act of financial activism —not just a purchase.
Rewarding the Early Adopters
Bitcoin early adopters are rewarded today for holding the currency long term. You might call some people lucky because they bought Bitcoin and then forgot about it. But they bought it for a reason, and based on my Bitcoin research survey in 2011, most early Bitcoin purchasers were believers in the social values the currency represents.
Momentum Versus Speculation
The use of Bitcoin for speculation and market manipulation is an unfortunate side effect of its capabilities for real-time beta testing. Because Bitcoin is a smaller system, those with the resources to purchase large amounts can manipulate it. This has attracted speculators looking for short-term gain, which resulted in the 2011 Bitcoin bubble and crash. Consider this part of Bitcoin’s growing pains.
Economic Growth Outside the Mainstream
Despite the rising bar in the stock market; inequality between the rich and the poor has never been greater in the history of human civilization. This is why people are willing to experiment making money in new ways. Retailers can now accept Bitcoin because the transactions are easier to process than in the history of the currency, more people are using it, and its gained mainstream credibility, especially through the positive reception at the Senate Congressional hearings. In addition to increased sales, Bitcoin-friendly retailers garner media attention as well as community goodwill as reported by Kasmir Hill in this Forbes article.
“[T]he real worth of taking [Bitcoin] may be the publicity Cups and Cakes has gotten as one of the first stores to accept the currency. Her little shop has been featured in international news: on the BBC, in the Financial Times, on NPR Marketplace, and beyond.”
From a financial futurist’s perspective it appears as if Bitcoin is going to keep increasing in value, so there’s little downside if you have steady regular currency sales. The Bitcoin sales are gravy.
The future looks like this: a diversification of currencies. I don’t believe we will see our traditional economic system disappear. Most people will need dollars for daily needs. But you’ll be able to use other currencies for certain things. You might need dollars to pay your rent or car payment or internet bill, For your local farmer’s market or coffee shop, you might use a community currency like Bernal Bucks or Brixton Pounds. And you might use Bitcoins to transact online or when traveling to regions like Berlin with robust Bitcoin economies.
Is It Too Late?
You might ask, is it too late to get in on Bitcoin? It depends on your reasons. If you wanted to get in at the beginning, well, you’re four years late. However, if you believe in DIY and peer-to-peer sharing, distrust government and central banking systems, consider yourself a technology elitist and prefer anonymity, what other currency options align with those values? Are you willing to put your money where your values are? No one can predict whether you will make money, but with each Bitcoin transaction, you are actively creating the future. For many, this ability to influence the future is a worthwhile investment.