Every time the market value of Bitcoin drops as measured by its exchange value against government fiat currencies, the same people who declared it dead last time, and the time before that, come out of the woodwork to declare it dead again.
The world’s most popular cryptocurrency, which just celebrated its eighth birthday, once again finds itself surrounded by priests offering it last rites and callers asking the Make-a-Wish Foundation to offer it a trip to Disney. Its price took a precipitous 10% fall after the Chinese central bank announced “inspections” of the country’s “Bitcoin-related businesses.”
As usual, Bitcoin naysayers are missing the forest for the trees. Why is the Chinese regime attacking Bitcoin? Because they’re afraid of it. And they should be. Chinese investors are moving capital out of the country’s fiat currency, the renminbi/yuan, and out of sight of — which means beyond the control of — the People’s Bank of China.
Governments aren’t going after Bitcoin because it’s bad. They’re going after it because it’s good. It threatens their monopoly on money, not to mention their ability to tax.
Yes, Bitcoin prices remain volatile. That’s unsurprising. As I write this, all the Bitcoin in the world, if sold at once at the current price, would bring in about $12.5 billion. That may sound like a lot, but it really isn’t.
One single corporation, Apple, is about 50 times the size of the Bitcoin marketplace, with a current market capitalization of $633 billion. When Apple’s market cap fell, quickly and by more than 10%, at the end of 2015 and again last April, I don’t remember anyone declaring Apple dead.
When the Dow Jones Industrial Average fell by nearly 30% in October and November of 2008 people were certainly worried, but not many considered it a sign that America’s economy was on its deathbed.
As with the Dow and as with Apple, a few big players can certainly rock the Bitcoin boat. But rocking that boat and sinking it aren’t the same thing.
One way in which Bitcoin and other cryptocurrencies can reduce their own volatility while increasing their exchange value is by reducing the ability of nation-states to be among those big boat-rocking players.
Over the last few years there’s been ongoing and often fiery debate among cryptocurrency creators, users and advocates as to whether or not they should willingly subject themselves to government regulation and oversight.
As entities like the US Internal Revenue Service and the People’s Bank of China take increased interest in Bitcoin, those debates will presumably settle on the correct answer and the technology will follow suit.
That correct answer, in case you hadn’t guessed, is “no.” The more quickly and completely we separate money and state, the better off humanity will be.
Thomas L. Knapp
William Lloyd Garrison Center for Libertarian Advocacy Journalism
William Lloyd Garrison Center for Libertarian Advocacy Journalism
