Throughout its brief but exciting existence, bitcoin has had its detractors. For every enthusiast predicting soaring values or a shift in the very concept of money, there has always been a critic suggesting that bitcoin is fundamentally worthless, or that we can’t trust blockchain technology. For the most part, the breadth of the spectrum between proponents and detractors has always been understandable, because bitcoin is still new and it has always been volatile. This year has painted a different picture though. All of a sudden, bitcoin is beginning to look more legitimate than ever.
This is largely thanks to how the asset has responded to the coronavirus pandemic and ensuing financial crises around the world. Early on, there were quick-trigger takes suggesting that bitcoin had actually failed this test — that its long-hoped-for potential as a safe haven had fallen flat, and it had simply crashed alongside other assets and markets around the world. It didn’t take long, though, for bitcoin to reverse this narrative. While it did indeed experience a sharp and troubling crash, it followed with a far more rapid recovery than most other valuable assets or commodities. Bitcoin was over $10,000 in the blink of an eye, relatively speaking — after falling down around $5,000 in March. At least in this instance, it was a safe haven for those patient enough to withstand the dip.
There is also a feeling of growing legitimacy connected to bitcoin’s sudden stabilization. As noted, bitcoin is historically volatile, and this is partly responsible for the polarized opinions and outlooks it inspires. Since the “halvening” event in late May though (during which the amount of bitcoin acquired in each mining block is reduced by half), bitcoin price movements have been almost minute. There were no sharp gains or losses throughout the month of June, and in that same span, the price was kept almost entirely above $9,000. In recent days, bitcoin has actually spiked upward again, making for its most dramatic movement since early May — but that’s not exactly a bad thing, and the key takeaway from the summer has been a reduction in volatility. This is reassuring for a lot of traders and analysts.
Beyond the positive and stable response to events this past spring, bitcoin may be enjoying a further boost in legitimacy as a result of governments’ and financial institutions’ increasing willingness to explore digital payments. To be clear, most of these governments and institutions are not explicitly working with bitcoin. However, when people hear about major banks adopting blockchain transactions, or the People’s Bank of China launching a digital currency, it supports the idea that bitcoin works, and that digital currency is the future. Even if these changes are ultimately producing competitors, they’re helping to validate its core concept.
We’ll note in closing that there are still plenty of negatives people will ascribe to cryptocurrency. Bitcoin’s pros and cons are fairly baked in at this point; some will always dismiss it because it’s expensive or complicated, or because an alternative is more appealing. But the idea that bitcoin is worthless or illegitimate may finally be fading as a result of what we’ve seen this year.
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