The real demand for bitcoin will not be known until a global financial crisis guts confidence in central banks and politicized capital controls.
I’ve been writing about cryptocurrencies and bitcoin for many years. For example: Could Bitcoin Become a Global Reserve Currency? (November 7, 2013)
I am an interested observer, not an expert. As an observer, it seems to me that the mainstream–media, financial punditry, etc.–as a generality don’t really grasp the dynamics driving bitcoin and the other cryptocurrencies.
What the mainstream does get is speculative frenzy. New technologies tend to spark speculative manias once the adoption rate exceeds the Pareto Distribution’s critical threshold of 4%, and opportunities to buy into the new technology become available to the general public.
Just as radio and the Internet sparked speculative manias in their boost phase, cryptocurrencies have sparked their own speculative frenzy.
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Where the mainstream goes wrong is assuming that’s all there is to bitcoin: a speculative mania. The Establishment often dismisses transformative technologies as fads or gimmicks; thus the infamous rejection of photocopy technology as only of interest to a dozen large corporations, personal computers belittled as being of limited utility (storing kitchen recipes), and so on.
New transformative technologies develop in an unpredictable fashion, and early-phase critics and prognosticators often end up looking foolish on both ends of the spectrum: by dismissing the transformative potential of the new technology (Paul Krugman’s famous obituary for the Internet in the late 1990s) or by making fantastic claims that exceed the reach of the current technology.
The mainstream also misses the core driver of bitcoin and cryptocurrencies: the current financial system is doomed, and some other arrangements will emerge. Those who get on board alternative arrangements early will likely preserve more of their wealth than those who believe the current system is permanent, and some may earn great wealth as capital flees the sinking ship of central banking/credit for more secure climes.
The inevitable collapse of the fully financialized exploitive Empire of Debt is verboten in the mainstream, for obvious reasons. The herd is already restless, as it intuits the present faux “prosperity” is fragile, and so the mainstream’s job, as it were, is to maintain the delusion that the exploitive Empire of Debt is permanent and the only possible financial system.
The herd also intuits that an Elite that lies when it gets serious cannot be trusted. As all the internal contradictions and excesses of the present financial system weaken its foundations, financial and political Elites must obfuscate, lie and manipulate via gamed statistics, false narratives and media spin lest the increasing instability panic the unsettled herd.
The third dynamic the mainstream misses is the potential role of bitcoin in preserving the wealth of the very Elites who best understand the weaknesses of the present financial system. A number of very smart people assure me the U.S. government can (and will) shut down bitcoin overnight by restricting or outlawing exchanges’ access to the banking systems’ payment platforms that enable people to exchange bitcoin/ fiat currencies.
My response is this question: what will best serve the interests of the wealthy and super-wealthy? If this sucker’s going down, to quote former President G.W. Bush, those with wealth and political power are not going to allow regulators to seal an escape hatch that might serve their goal of wealth preservation.
