The week of January 11, 2015

The highs and lows of Bitcoin

By Kevin Collier

Strictly as a numbers game, 2014 was clearly the worst of Bitcoin’s almost six years of existence.

Save for 2012, when the value of Bitcoin merely tripled, the worth of the world’s overwhelmingly dominant cryptocurrency has increased by orders of magnitude every year since its inception in 2009. Last year things came crashing down. On Jan. 1, 2015, Bitcoin was worth half of what it was the previous New Year’s Day, its first negative New Year’s. As I write this, it’s worth barely a third what it was at the best parts of last year.

I can’t help but think it’s not solely the fault of the hackers, charlatans, and the possibly criminally incompetents who squandered hundreds of millions of dollars’ worth of digital money that belonged to tens of thousands of users in 2014. Bitcoin’s one-time $1,200 price tag was a bubble, and it burst—as it has twice previously. The luster of Bitcoin, which finally truly caught investors’ eyes in 2014, may be gone. It was Bloomberg’s worst-performing currency of 2014, just below the Ukrainian Hryvnia, which collapsed with the country’s economy when Ukrainians overthrew their government and the country was invaded by Russia.

So maybe now, finally, we can start taking this thing seriously.

That’s what was going through my mind when I flew to St. Petersburg, Fla., to watch the first-ever Bitcoin-themed bowl game. Some likened this game, sponsored by Bitcoin-processing company Bitpay and a handful of smaller Bitcoin companies, to when Dogecoin company Moolah sponsored a minor-league NASCAR car in May. But past the surface, it’s a facile comparison. The Dogecar was a hastily assembled, disingenuous marketing attempt by a company that went bankrupt six months later. The Bitcoin Bowl is a multiyear contract in a surging spectator sport. Armed with its new playoff system, the college football postseason is now a $7.3 billion industry, and TV viewership is up throughout bowl games; 3.3 million people watched the Bitcoin Bowl.

More importantly, Bitpay has a lot of big investors behind it, having raised more than $32 million, much of that from PayPal founders. Even if it wasn’t processing $1 million a day in transactions, as it claims, it may be too big to fail.

That’s probably the best example you’ll find as to why it’s silly to pigeonhole Bitcoin as merely a way to buy things from online black markets—though the currency sure can’t seem to shake that association.

This issue of the Kernel is neither a celebration of Bitcoin nor an outright criticism. It’s an acknowledgement and examination of how it’s awkwardly but legitimately branching out into the real world. We investigate how easy it is to launder bitcoins, and explore how the concept behind Bitcoin’s blockchain can, maybe, save democracy. And we branch out to look at all of the other wonderfully weird cryptocurrencies out there, and in the case of Auroracoin, which started as a possible national solution to Icelandic bankruptcy, examine what happens when one fails spectacularly.

Photo by ivan T/Flickr (CC BY 2.0) | Remix by Jason Reed