By Jason Abbruzzese -
NBC News
Why is a bitcoin, after all the disasters in the cryptocurrency industry, trading at around $27,000?
Your guess is as good as Mark Cuban's.
“I wish I knew the real reason,” the tech entrepreneur and investor wrote in an email when asked about bitcoin's resurgence, adding that supporters of the cryptocurrency would say it is a safe haven at a time of global financial turmoil.
"Honestly, I don't know," he said.
It is a reasonable answer.
In the midst of the smoking crater that is the cryptocurrency market, bitcoin has somehow managed, perhaps not a comeback, but at least to hold its own.
Despite all the tokens, coins, forks, chains, and NFTs, bitcoin is still the gold standard of cryptocurrency.
[First Citizens Bank will buy Silicon Valley Bank's deposits and loans]
The collapse of the cryptocurrency industry is ongoing and has been going on for almost exactly one year.
Market losses are measured in trillions of dollars.
Most of the cryptocurrency headlines these days are about a high-level arrest, new indictments, or impending attempts at regulation.
Investment in cryptocurrencies has plummeted.
The attention of the tech world, previously captivated by Web3 startups, has shifted to artificial intelligence.
The judge who handled the complaint against the founder of FTX, Sam Bankman-Fried, leaves the case
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And, of course, bitcoin plummeted too, after peaking at around $65,500 at the end of 2021. Yet it's still trading much higher than it was a few years ago.
It remains volatile, falling below $16,000 in November, but a recent rally coincided with concerns about the global banking system and expectations of an end to interest rate hikes.
In mid-March, a bitcoin cost about $27,000.
For its defenders, who are many, all this is further proof that bitcoin is different.
As the cryptocurrency industry expanded into finance, art, video games, and fruit juice, bitcoin was still bitcoin.
Cuban has been something of a pragmatic defender of bitcoin and cryptocurrencies, and in recent months he has said that he plans to buy more, but also that he sees problems in the industry as a whole.
“I would say it vindicates a thesis,” Alex Gladstein, director of strategy at the nonprofit Human Rights Foundation, said of bitcoin's staying power.
“Web3,
blockchain
, all these buzzwords over the years…and yet bitcoin continues to grow and continues to help people,” he opined.
[The Federal Reserve raised interest rates again. This is how expensive it will be]
Gladstein, who has written and spoken extensively in support of bitcoin as a way to support human rights, talks about the benefits of bitcoin in the same way that the early '90s cypherpunk movement did
about cryptography — as a means
to
empower people and guarantee their freedom and privacy.
From the cypherpunk
movement
came the first forms of digital money and eventually bitcoin.
That mix of technology and philosophy gave rise to bitcoin maximalists, sometimes called maxis, who defend bitcoin so vehemently that they are sometimes likened to a cult.
Lindsay Lohan fined for fraudulently promoting cryptocurrencies
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But it's those followers that help set bitcoin apart.
Molly White, a software
engineer
who has also become one of the world's most potent skeptics of cryptocurrencies in recent years, said in a phone interview that she still views bitcoin as a speculative asset, but that it exists in somewhat of an air. rarefied thanks to his fervent fan base.
“There are some things about him that are, I think, objectively different.
It has that mystique of being the original cryptocurrency,” he explained.
[Goodbye to the Chevrolet Camaro? GM announces that it will stop producing the popular car in 2024]
It is worth repeating what bitcoin really is.
Bennet Tomlin, a data scientist who also hosts a podcast dedicated to critical cryptocurrency discussions, puts it succinctly: “The framework I tend to use is this: bitcoin is an Internet currency maintained by a network of computers, which is the most suitable for payments that the government or society would like to stop".
Tomlin said he remains skeptical of bitcoin for many reasons, including whether miners -- the people who run the computers that make up bitcoin's distributed computing system -- will remain incentivized to pour power into the system.
Others remain unconvinced.
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Nicholas Weaver, a security expert who teaches in the Department of Electrical Engineering and Computer Science at UC Berkeley and who has been a staunch skeptic of all things cryptocurrency, believes that the use of bitcoin by criminals it is the main reason why it can last longer than other forms of digital currency.
“I think bitcoin is going to last the longest, but it has no inherent value if no crime is committed,” he says.
“And if you want to bet on whether or not a number goes up, go to Las Vegas – the restaurants are better,” she added.
[This was the ninth increase in interest rates that the Federal Reserve has decreed in just one year]
There's a boring answer to why something is worth the price it's listed at: because that's what the market says it's worth.
There are enough buyers and sellers at that price to support it.
This is valid for bitcoin.
But market psychology matters.
What people think of bitcoin matters.
And right now, it seems hard to deny that there are enough people who see value in bitcoin to sustain it for the foreseeable future.
Proponents of the cryptocurrency continue to push for it to become an alternative banking system in other parts of the world, such as Block CEO Jack Dorsey's recent efforts in Africa.
Fadi Elsalameen, an adjunct fellow at the nonprofit Bitcoin Policy Institute, said the growing use of bitcoin in the human rights world as a way for activists to facilitate the transfer of money out of the banking system has become into something very valuable.
“For us, having to use bitcoin has become not just a last resort.
It has become the only option because you don't want to be at the mercy of a dictator,” Elsalameen said.
[With "callo y teson" Latino investors take flight and change which technology projects receive funding]
He said bitcoin adoption continues to grow among people in parts of the world where the banking system is inconsistent or at the mercy of an authoritarian.
He pointed out that the price of bitcoin is not particularly important in his line of work.
“When we explain it to them in their language, they adopt it,” Elsalameen says of the Middle Easterners he has introduced to bitcoin.
“They say this is exactly what they need,” she added.
That need may not keep the price of bitcoin high, but it increases the number of people who see it as something different from the rest of the cryptocurrency world.
And for now, that seems to be enough to keep it around $27,000.