Bitcoin fever has returned. On March 5, the price of the cryptocurrency swelled to a record high—and has continued its upward march. In 2024 it has provided investors with a greater return than almost any other asset. But as enthusiasm for bitcoin spreads anew, so do myths and confusion around the forces moving the price.
In the last month alone, the price of bitcoin has risen by almost 70 percent. The surge has been celebrated in crypto circles as an inevitable return to form—the fun part of a predictable boom-and-bust cycle.
The phrases “number go up” and “it’s just math” have long been adopted as tongue-in-cheek mantras by crypto believers and ironic insults by its skeptics. Yet they capture a belief among hardliners that the economic architecture of the Bitcoin system—whereby a fixed supply of 21 million coins and predetermined schedule of release is hardcoded into the software—will inevitably propel the price upwards over time. They see scarcity as an antidote to runaway inflation of traditional currencies, which deteriorate in value, and unsustainable levels of debt taken on by governments across the globe.
Bitcoin is currently trading at over $72,000 per coin; proponents like Samson Mow, CEO of bitcoin-centric technology firm JAN3, have said they expect that value to reach as high as $1 million in the immediate future. “Money is fundamentally broken,” he told WIRED in November.
The jubilation and told-you-sos, however, drown out difficult questions around what it means to place a price on cryptocurrency. The proposition is deceptively tricky, says James Angel, an economist at Georgetown University specializing in financial markets, because bitcoin defies conventional valuation methods. There is no company behind Bitcoin whose performance can be analyzed. It does not generate revenue. It is not widely used to make payments or for any secondary purpose. It is not issued by any government. It resists easy comparisons. But one thing is certain, says Angel: “A limited supply does not equate to infinite value.”
Bitcoin emerged in 2008, in the wake of a global financial crisis. It was born of a frustration with the stewards of the world economy and the behavior of large banks and financial institutions, whose reckless financial engineering set the stage for the meltdown.
The new form of “electronic cash” was designed in such a way as to take control over monetary policy—the way money enters and is removed from circulation—away from central banks, imposing hard limits on supply and the schedule by which new coins were released.
“The root problem with conventional currency is all the trust that’s required to make it work,” wrote Satoshi Nakamoto, the elusive creator of Bitcoin, in a 2009 forum post. “The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.” If bitcoin could gain a foothold as a globally recognized money, Satoshi and their early collaborators hoped, nobody’s savings could be devalued by the policy of any bank or government.
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