I am waiting in a virtual queue. There are about 9,000 people ahead of me with similar hopes for exchanging their dollars for something wonderful. I confess that I feel as if I am standing in a line simply because the line exists and so I am compelled to stand in it. I look ahead but cannot see the beginning of the line before me. It is beyond my visual horizon. But I am confident that whatever I am waiting for must be worth it.
As it turns out, I am not waiting for fresh croissants or tickets to the Stones. I am waiting for the mere ability to purchase Bitcoins. Apparently, Bitcoins are precious. They are artificially rare strings of data that are unique. A Bitcoin can be registered (unique existence) and thereby safely and discretely (anonymously) possessed, owned and transferred. I can’t see Bitcoin or touch Bitcoin yet I know it exists. Well, I’m suspending a lot of disbelief in presuming to know this because, as said, I can’t see it or touch it. But I can’t see or touch air, right?
It is said that Bitcoin can be used to make internet payments for some goods and services. In this way, Bitcoin is a form of currency. Bitcoin is not fiat currency because Bitcoin is neither printed, issued, traded nor supported by a government. Bitcoin – as merely a string of data – is the product of a highly sophisticated mathematical algorithm and – understatement alert! – nothing more. The Bitcoin algorithmic production is managed and maintained by some altruistic folks who have an interest in a medium of exchange that is independent of government fiat. It is suggested that this washes the Bitcoin of cynical elements like the shifting winds of central bank policymakers and government manipulation. Initially, this aspect gave the Bitcoin a reputation as being associated with anti-government survivalist types (read: crackpots) but with the problematic nature of geopolitical finances these days Bitcoin is suddenly the fashionable alternative to gold and financial armaggedon.
Unfortunately, the current Bitcoin purchase price reflects the heightened emotions of the moment. Bitcoin that traded for less than $10 last May has gone parabolic and traded north of $260 before “correcting” below $150 today. The implication is that there’s a lot of ridiculously rich crackpots out there. The more relevant reality is that Bitcoin has a market value. The market may be relatively frothy, inaccessible and illiquid, but it’s there. Somewhere. I am left to wonder, as I continue to protect my place in line against all who might try to cut in ahead of me, how did I miss out on this?
As I read the sudden volumes of media reports on Bitcoin, I am giddy with fascination over my naïveté.
There are the Bitcoiners, a rabid bunch who are quick to defend the remarkable genius of the Bitcoin. They note its chief merits are its independence, transactional efficiency and anonymity, thus rendering it invisible to the prying eyes of governments’ taxing and policing efforts. Fair play to you, Bitcoin. But governments are kinda sorta satisfied with the status quo of the international monetary system and, notwithstanding the obvious imperfections inherent in the current fiat currencies, the force and interests of governments are not to be idly dismissed. After all, they make a bit of self-perpetuating income by issuing fiat currencies. For Bitcoin to succeed, it must evolve beyond mere curiosity and gnat status, which requires overcoming an extremely adversarial group of nation states. Bon chance.
Then there are those who dismiss Bitcoin as a novelty interloper that, like tulips or Icarus, is having its fatalistic day in the sun. These folks readily acknowledge the genius behind Bitcoin, but suggest it is all for naught on various seemingly pragmatic grounds. (History has not been kind to alternative currencies.) Then there’s its anti-government (fiat) currency existentialism. Bitcoin is the Ayn Rand of currencies. It is devised and described in ways that seem logical and appealing enough, yet somehow fatally flawed. To the anti-Bitcoinsters I point out that Ayn Rand sold a lot of books and had some pretty serious acolytes, like Greenspan and Paul Ryan, and…I really don’t know where I’m going with this.
But, damnit, I am a betting person. And I watch Bitcoin’s inexorable rise to media stardom and stratospheric market price and I cannot ignore its chutzpah and charm. After all, where there’s a market – two people on opposite sides of a trade – there’s money to be made (and lost). It doesn’t really matter if Bitcoin has or doesn’t have actual value; what matters is that there are enough people out there perceiving value (real or imagined) who are ready, willing and able to realize a meeting of the minds with someone on the other side of a trade. I may not be able to use Bitcoin to buy a Slurpee at my 7-Eleven, but that doesn’t mean Bitcoin doesn’t have value. The market for trading Bitcoin for fiat currency ($US) says so. Maybe I’m buying rarified air, but I hope to sell it to someone for more than I bought it. In $US dollars.
What is it that fetches Bitcoin such a high price? I think it’s the most precious commodity of all right now – anonymity. I may have outed every iota of my personal life on the Internet, but what I really crave is the freedom that anonymity brings. Bitcoins are created to be in limited supply, which means that the opportunity to be anonymous is in limited supply. What evil lurks in the hearts of men? Bitcoin insures those who can afford it that we’ll never know. And that freedom is worth far more than the current market price. There is no comparable asset class. Bitcoin is the stuff of dreams. When I get to the front of this line, I’m all in. If I’m last to the bubble party and left holding a bag filled with nothing more than the worthless output of Bernanke’s printing press and a dog-eared copy of 1984…well, I still had the dream.
I love you, Bitcoin. Please be mine.