(Bloomberg Opinion) -- Bitcoin turns 10 this year, but there’s not much to celebrate. Its price has tumbled to near $4,000, down 30 percent in a month, 50 percent in six months and almost 80 percent since December.
The cryptocurrency experts, who clearly didn’t see this coming, are blaming all sorts of temporary culprits — from jittery markets to “hard forks” (blockchain jargon for radical technical changes in a digital currency). But they’re kidding themselves. This is a long-term unraveling of all of the lies, exaggeration and populist fantasies that drove last year’s market mania.
Bitcoin was meant to make all of its investors rich, something that held particular appeal to a millennial generation hungry for a financial boost in a world of crushing student debt, income inequality and low-quality jobs. It was meant to be free of Wall Street’s corruption and the U.S. government’s meddling technocrats. It was meant to be secure, with a price that would go ever higher. For the hardcore evangelists, it would reward its acolytes when the inevitable financial apocalypse arrived. The dollar was destined for scrap.
And it was meant to show that we should all stop listening to fuddy-duddy “experts” like Jamie Dimon, Warren Buffett and Jack Bogle. The old, closed ways of investing would be usurped by the buying power of the masses.
Unsurprisingly, none of this has come to pass. The Bitcoin bubble of 2017 — mercifully short and economically contained — has enriched only insiders such as mining companies and crypto-exchanges, and the early birds and tech elites who cashed in at the right time.
For the patsies who arrived late to the party, it has been a tool of financial impoverishment. About $700 billion has been wiped from the value of digital money since January. One Korean teacher told the New York Times in August: “I thought that cryptocurrencies would be the one and only breakthrough for ordinary hard-working people like us.”
Nothing on the Bitcoin label turned out to be in the bottle. As a means of payment, it is cumbersome, volatile and expensive. It has destroyed value rather than storing it. Its decentralized technology was sold to investors as being unique. It has been anything but.
Those “hard forks” have created numerous Bitcoin spin-offs over the past year, and the vested interests of those who make money from doing this — by shifting their own coin to the new spin-off, bringing the miners along, and effectively taking control of the new currency — have triumphed over the dreams of a neutral blockchain system that would treat everybody equally.
Even the hedge fund folk, who thought they could use sophisticated options to bet on the boom while covering their downside, have been proven wrong in a market where prices and information flow are not transparent — and are often manipulated.
Of course, bubbles and crashes are a part of history. If regulators and journalists do their job of warning consumers of the risks — and they did with Bitcoin — then why shouldn’t people be free to do what they like with their cash?
But while Bitcoin is on the ropes, it certainly hasn’t gone away, and global regulators still need to find an effective way to rein in the cowboys. And while this hasn’t been a systemic risk this time, the eventual spread of digital currencies will mean that isn’t always the case. Finally, if the frustrations that drove people to chuck their savings at a virtual Ponzi scheme aren’t resolved, we’re only setting ourselves up for bigger political trouble down the line.
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Lionel Laurent is a Bloomberg Opinion columnist covering finance and markets. He previously worked at Reuters and Forbes.
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