Did Bitcoin’s Bears Have It Right All Along?

2020 was a terrible year for a lot of things. Yet Bitcoin boomed, rising from less than $5,000 in March to about $29,000. Despite the growing chorus of caution warning that the bubble was about to burst, there has been no shortage of fearless investors happy to take on the risk: On Friday, the price of the cryptocurrency almost reached $42,000, before beginning a stunning slide that pushed Bitcoin down as much as 21% to around $30,000. Signs of a bust, however, have hardly been scarce. Is Bitcoin unsustainable? Or is it inevitable?

  • It Has a Scarcity Problem: “The success of cryptocurrencies tends to eat itself. As the value of the asset class rises, the shifts away from more conventional investments needed to provoke price spikes get larger and larger.” — David Fickling
  • Unrealistic Expectations Abound: “The more utopian scenarios for crypto, whether proponents realize it or not, rely on the notion that crypto remains simultaneously fringe and mainstream.” — Tyler Cowen
  • Hedge Fund Boomers Are Behind the Boom: “What lures the ‘smart’ money to Bitcoin as a trade is the very thing that makes it such a poor currency and an unreliable store of value in times of panic: It’s an illiquid, artificially scarce and volatile commodity whose price is driven by extreme sentiments of greed and fear.” — Lionel Laurent and Mark Gilbert
  • But It Still Doesn’t Have Any Intrinsic Value: “Amid ridiculous volatility, some patterns are emerging. Bitcoin continues to make money for those with the gall and timing to take advantage.” — John Authers

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

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