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Bitcoin may be small compared to other global currencies but it is the God of small things and its value represents hope which is priceless.
The end of 2016 and the beginning of 2017 was a cause for celebration for Bitcoin users. In January the price went as far as $1,161 surpassing the highs seen in 2013. The euphoria in the Bitcoin community is obvious. However, does this level of $1000 matter?
Does the price of Bitcoin itself have any relevance in the grand scheme of things? Is the rising value of Bitcoin something that can be assigned labels of good or bad?
Recently Jamie Condliffe published an article titled “Why Bitcoin’s $1000 Value Doesn’t Matter?” in the MIT Technology Review. Well, frankly it is time we asked some questions of our own.
Jamie quotes the Financial Times in his article:
“For context, the Central Intelligence Agency put the planet’s stock of broad money—notes, coins, and various forms of bank account—at $82tn as of the end of 2014. On the CIA figures, the value of Bitcoins hashed into existence is similar to the broad money total for Uzbekistani soms. With apologies to Tashkent, the value of soms and Bitcoins, and the number of people for whom they are relevant pieces of information in the world of modern finance, both round to zero.”
Whether you choose to use Tashkent’s money, Bitcoin or the Saudi Riyal, the fact that Bitcoin even exists is amazing in itself. Bitcoin is an independent currency that has thrived when many had written it off. It has its own following albeit a small number of people who believe in this form of money as fiercely as most people do in any national coin.
Bitcoin offers hope for an alternative economic future in which a new kind of monetary system can exist. So yes, it is a relevant piece of information in the world of modern finance even though Jamie may not think of it as having any relevance above zero.
Sure Bitcoin mining is controlled largely by the Chinese and Mr. Condliffe puts it:
“But such centralization is unwelcome for many users of the currency outside of China. The structure of Bitcoin means that if a single user mines the majority of the currency, then it is able to rewrite the Blockchain if it sees fit and even vetoes changes to the underlying technology.”
Okay let us assume Jamie is right here. However, the Chinese did put their trust in Bitcoin, invested in setting up massive mining operations and as luck would have it had access to cheaper hardware and a good source of hydroelectric power in Tibet. They worked hard at getting this foothold in Bitcoin and what is wrong if they gain a controlling stake? Would Jamie be happier if instead of the Chinese, this leadership role was with the Americans instead?
The New York Times ran an article last summer that discussed this China bogeyman issue and as Bobby Lee, the Chief Executive of BTCC, a Bitcoin Company told the newspaper there was no Chinese united front on issues of Bitcoin network expansion or software changes.
Bobby said in that interview:
“It was almost like imperialistic Westerners coming to China and telling us what to do here has been a history on this. The Chinese people have long memories.”
Yes, if you look at it from the point of view of the value that Bitcoin has created for its believers. I wrote an article not so long ago describing how Bitcoin millionaires are created. From the angle of the novice Bitcoin user that just started using the currency about a year ago, his wealth has doubled.
Has the dollar, euro, yen or any other of the $82 tln worth of currencies that Jamie mentioned done that for its users? I think the answer is sort of obvious. No. If you chose to hold your money in Bitcoin, the risk is volatility. If you choose to do so in Dollar, you have inflation, political risk, vagaries of global trade and countless other issues.
At the end of the day, use any currency or even gold, the value is bound to fluctuate. Bitcoin may go up or down more than most other currencies but that is a risk that many Bitcoin users are okay with.
Will the rising value of Bitcoin lead to more control by the Chinese central government? We have not yet seen anything of that kind happen but it is not an undeniable possibility. The good thing is that even if that were to happen, Bitcoin will emerge and miners will just move elsewhere.
As for Chinese Capital controls, Bitcoin may not be the only possible means to move money out of the country. In fact, illegal money transfers are possibly the thing that the government would be more concerned about.
As Bitquant’s Joseph Wang wrote on Quora:
“There are about a dozen different ways of getting money out of China that work a lot better than Bitcoin, and no one uses Bitcoin to get around currency controls. The best rate we could get is 5 percent transaction fees, and it turns out that you can do things at 0.1 percent with using the hot money brokers.”
Sorry Jamie but I think that you are off the mark on Bitcoin, China and money overall. Bitcoin may be small but it is to borrow from Arundhati Roy, the God of small things and its value whether $1000 or $1 matters as it represents hope. Hope as we know is priceless.
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