The Day Bitcoin Died Its 1000th Death

If you watch the crypto space closely, you surely noticed the last couple of days price action. Although I doubt “price action” would be an accurate description of what happened. “Blood on the streets” would probably paint a more accurate picture. All crypto assets lost more than 35% of their value in a matter of days. A full size crash.

But as frightening and depressing as this “blood on the streets” situation may feel, it’s just something that happens. It can’t be avoided. Just as fiercely as the price goes up, the correction will match its trip down with equal velocity. What goes up must go down.

And, if you take a step back and look at the evolution of Bitcoin, you’ll realize this happened a lot of times before. It wasn’t unusual for the crypto markets to go down as much as 85% during their recent history. And it’s just normal for an asset class that young, which is still striving for adoption. It’s just what it is.

And yet, people will panic sell, spread FUD and pretend “Bitcoin is dead”. Yes, it is. It just died its 1000th death. And there’s an innumerable amount of deaths it will still die in the future. The last sentence is sarcasm, in case you didn’t realize. I know you probably realized, but I just felt the need to make it clear. People tend to lose their rational minds when it comes to money.

Truth is, devaluing Bitcoin as a currency (and, by extension, the entire crypto market), based on its price fluctuations is just wrong. It’s like saying Macs are bad, technologically, because people can’t afford to buy them. Many people can’t afford to buy Macs, that’s a fact, but just because they can’t, doesn’t make Macs less useful and performant.

A currency is a token of trust, and if the trust invested in it varies greatly during short period of times, so does its perceived value. A currency value is not strongly coupled with its technology, but with the amount of trust invested in it. Technology counts, but only after trust has been locked in. Once people agree on the tokenization process, technology will just confirm and enforce it. Continuing the comparison, rejecting Bitcoin would be equivalent to saying people trust traditional currencies because they trust the money printing machines technology.

99.999999% of the population has no idea how money is printed or what security marks are embedded in their bills. What they really trust is governments capability to ensure predictability.

Governments control money because people entrusted them with that. And people delegated their trust based on governments capacity to provide a stable context. As this capacity fades away, so will the trust, and people will turn towards tokens of trust with a higher degree of predictability.

Traditional currencies have a more stable value not because they’re intrinsically safer or “better” than Bitcoin, but because trust deposited in them is, at least for now, bigger and more inertial. People trust countries and governments because they provide a certain degree of safety and predictability.

But this trust faded during the last few decades. And it still goes down.

What used to be a gang of punks playing money with their computers is now a group of highly trustable people, who can ensure predictability of their tokens using cryptography and Turing machines.

That’s way more predictable than 4 years election cycles.

Initially published on my blog.

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