Opinion The Public Allure of Bitcoin is Fading but Not for All

The Public Allure of Bitcoin is Fading but Not for All

March 21, 2020

Once, especially around 2017, bitcoin was seen as basically the magical money of the internet. The start of 2020 shattered that image, even if much of it already cracked under the weight of the crypto winter that followed the slump of 2018. Today, much of the same magic is gone if not for good, then for a solid upcoming period. Presently, any dark force that was once seen as something that makes the price of BTC behave unlike the rest of the market was nowhere to be seen in the last couple of weeks.

At the same time, it was desperately needed by all those who hold the same cryptocurrency, but also other brands of digital money as well. Instead, with the slaughter that took place on the traditional market, the crypto ones followed suit and caved in quickly. All the talk of bitcoin being a safe haven vanished over a course of a day as BTC token price lost 50 percent of its value.

With bitcoin leading the drop, ETH and other cryptocurrencies did not take long to form up behind it and dive down. Now, the allure bitcoin had in the mass media – even if it was mixed in with the faulty idea that it is a dangerous and even sometimes criminal undertaking – is fading away. With that facade being washed away by the cruel realities of an ongoing economic recession and a likely depression, analysts and users are wondering what will be left behind when the waves of financial history quiet down.

Foolish Flattery

The birth of the bitcoin network was a momentous thing when it happened a decade ago. Back then, it was first adopted by computing enthusiasts who were mesmerized by the blockchain and its technical characteristics. However, quickly after, the run-of-the-mill freaks and weirdos began emerging and getting their stake in the cryptocurrency network.

They were a motley crew of disenfranchised idealists, tech anarchists, libertarian hard-liners and many other people who only shared a deep-rooted distrust towards central banks or any kind of central authority. As a group, they began doing what traditional investors would basically see as insane and the same reflected on numerous phases. Firstly, they started not just investing energy into the crypto network by mining it, but also investing their money into getting the tokens.

The money in the network – what would become its market capitalization – grew. As it amassed, so did the attention of the wider public and the media. In the world of the present day, where other digital ventures like esports and social media live and die based on the amount of hype they can muster, cryptocurrencies and bitcoin, in particular, were winning the game. The flatter inside of the ecosystem was ever-present as the price of the token began to shoot up.

External Affirmation

The bitcoin story had its ups and downs, naturally. Things like the Mt. Gox crash of 2014 was seen by many analysts as the final end of this silly cryptocurrency story. But, it did not end there. On the contrary, in the coming years, the idea of bitcoin being something extremely powerful was slowly ramping up. The repeated devaluation of yuan in China forced many to change their local currency holdings into bitcoin to try and protect its value.

As they did this, the market cap rose and so did the prices for BTC, but also ETH and other cryptocurrencies. Similar events across the globe fed into this narrative. The banks in Cyprus collapsed and the price of bitcoin shot up. Even local turbulent times like the mass civil disorder in Hong Kong saw people flocking to bitcoin and elevating its value. Simply, bitcoin did not correlate with the traditional markets. Until it did enter a pretty precise and clear correlation in 2020.

The Big Crash

Beginning with March 11, the world of finance began sliding down towards what the history books will clearly label the big crash. The concerns around the coronavirus began rising unstoppably and soon shook the markets just enough to get them to crash. This was followed by closures of businesses of all sizes, starting from tiny bars and restaurants and going all the way up to multinationals like Apple and Volkswagen.

The S&P 500 also collapsed, like many other markets around the world and they took cryptocurrencies, starting with the price of BTC, with them in a very correlated fashion. For many, this was the signal they had been waiting for: pronouncing cryptocurrencies as nothing like an uncorrelated asset and determining that it is and will never be a safe haven for any traditional wealth.

Faulty Narrative

There is a problem with this wider new narrative, however. The proponents of this idea state that the reason bitcoin got the money it did was because it convinced the investors that it is a non-correlating asset. So, at the moment bitcoin correlated with the traditional assets and these began to fall, why would its slide ever stop? Instead, if the magic was finally and utterly broken, the drop in price should have gone towards the absolute zero.

But, the price of bitcoin began to recover just as the traditional markets did. Furthermore, for the people who are not correlation-obsessed investors, bitcoin is simply a tool used for selling and buying. It became a part of their daily routines for whatever reason and they are not a handful of freaks and weirdos. Presently, bitcoin is worth around 6,200 USD and the trend is a recovering one. So, yes, the allure of bitcoin to those who believed it to be a completely uncorrelated asset might be gone.

However, like the weekend traders who ran away in 2018 seeing that their $1,000 in bitcoin will not buy them a Lamborghini, these investors will move away from cryptocurrencies, likely disappointed in them. But, all those other participants in the network will stay there, just like the miners and developers. For them, the allure of the bitcoin network, like other digital currencies, was always beyond the ideas that during turmoil, this crypto thing would be able to save their precious fiat holdings.