Bitcoin Price, Bithumb Hack, Gresham’s Law, (I Read The News Today, Oh Boy)
The Bitcoin Price
Ever since it sped up to $20,000, kissed it goodbye and fell to earth, speculators, optimists, and enthusiasts have been vying with each other to declare that the Bitcoin bottom has been reached, it’s about to head for the stratosphere again. Here’s one from today: Bitcoin Price Near Bottom As “Selling Has Become Exhausted,” Says Market Strategist.
This strategist is arguing that the last dip (to about $6118) is as low as she will go. I am not convinced, but neither am I unconvinced. In previous times, Bitcoin’s value has collapsed further in percentage terms than it currently did when it hit $6118) The thing is, I really hope it’s finished falling, because I hold a bit of crypto, and when Bitcoin is in the dumps, all of it is, as far as I can tell. I have now spent six months watching my coins shrink in value. So yeah, let’s hope it’s gonna rise.
Regarding technology I think this way: the blockchain has not got anywhere close to fulfilling its potential, so don’t believe in all the tulip bulb bubble talk, it will come through in the end — but I doubt if that’s going to happen fast. Should take a couple of years before that reality kicks in.
The Bithumb Hack
Another day another exchange hack. This time it was South Korea’s Bithumb, the biggest in the country. Reportedly, over $30 million worth of crypto evaporated from the hot wallet. When the exchange discovered the hack, it froze deposit and withdrawal services, hoping I guess to close the barn door before the horse has bolted. Good luck with that — and I mean it.
But sadly, this is not the first time that Bithumb has been compromised by a hacker — in fact, we’re close to the anniversary of the last hack which was in July 2017, but the hackers never got at the hot wallet, they only managed to steal customer data which was used to scam customers.
When the notorious bank robber, Willie Sutton, was asked why he robbed banks he replied, famously, “because that’s where the money is.” If you ask hackers why they keep on hacking exchanges the answer is going to be the same,” because that’s where the money is.”
For me, the most disturbing thing about crypto exchange hacks is that they happen too often. It’s a deterrent to those who might otherwise be inclined to enter the cryptoworld. It’s a trust issue.
Gresham’s Law And Bitcoin
Gresham’s Law states that “Bad money drives out good money.” Sounds odd if you’ve never met it, but what it means is that if one currency holds its value and another doesn’t, then unless you’re stupid, you spend with the depreciating currency, and thus it circulates while the good money does not. It’s a self-evident truth — although various academics have made hay with it, by adding constraints to the basic law.
I happened on this post: Gresham’s Law And Bitcoin, perused it and pondered a little. It never lit me up.
Yes, there are several recent examples of horribly mismanaged fiat currencies: Zimbabwe and Venezuela come to mind. In those countries, Bitcoin has been popular, as a store of value. But actually, in Venezuela (I have a friend who lives there) the preferred currency is the dollar.
The bad money, the Venezuelan Bolivar, is spent as soon as it can be, while the dollar is used as a store of value, which you spend only if you must.
Some commentators argue that Bitcoin is not real money, but the reality is that in some economies and Venezuela is one, it is used as a store of value.
But let’s sweep all that away and move in this direction:
In any economy, there is money of some kind that is used practically to buy and sell things. What is accepted as money is the most exchangeable (the most fungible) thing around, which is usually locally produced notes and coins. If they become useless, something else takes their place. People have to trade, or they don’t eat. It’s an imperative.
But in any economy, there is a wide range of things that get bought and sold. They are all fungible to some degree — some are less fungible than others. When a currency fails, the second most fungible thing in the economy becomes the currency.
So the question is whether Bitcoin will become a dominant currency (as opposed to a good store of value). It will not do so any time soon for the simple reason that it’s not easy enough to use as a currency in many contexts because it is not yet convenient enough and its value fluctuates too much (at the moment).
Its time may come, but from where I’m sitting Ether looks like a better bet.
Robin Bloor Ph D. is the Technology Evangelist for Permission.io, author of The “Common Sense” of Crypto Currency, cofounder of The Bloor Group and webmaster of TheDataRightsofMan.com.
