Bitcoin’s big challenge: Building value after the hype
The cryptocurrency is trying to survive after scandals and busts
By Blair Hanley Frank
Two years ago, it seemed nothing could go wrong for bitcoin. The value of the digital currency was surging past $1,000, making sudden fortunes for cryptocurrency die-hards and drawing huge investments for companies working with the new “digital gold.”
Today, the market has cooled significantly. A single bitcoin hasn’t been worth more than $300 since January, according to Coindesk. That destabilization resulted from a number of factors, including waning interest, and scandals like the one that hit Mt. Gox, a popular exchange that lost its users’ money.
True believers still think the currency will go mainstream, in part because the underlying technology remains solid. The drop in price is a result of bitcoin’s hype bubble popping, according to Wences Casares, CEO of bitcoin wallet developer Xapo. In his view, many people expected bitcoin to explode in popularity in a short space of time, and that didn’t happen. Now bitcoin is paying for the hype.
Nathaniel Popper, a New York Times reporter who wrote a book about bitcoin’s rise, said that while the cryptocurrency is a significant technological step, he’s unconvinced bitcoin itself will be the platform that will be used going forward.
“Is it the predecessor to the thing that matters, or is it the thing that matters?” Popper asked.
And that, ultimately, is the question: even now that the greatest hype period has passed, is it still worth investing? Casares, despite owning a company that relies on storing users’ bitcoins, said that people should only put money into the currency that they can afford to lose. In what he considers an optimistic view, he figures that there’s a 20 percent chance the cryptocurrency will lose all value in the future.
While bitcoin is built so that the parties to a transaction don’t have to trust one another in order to make a successful deal, Popper said the overall success of bitcoin will still require people to trust in the currency itself. And that could be a tall order, given its tumultuous short history and the booms and busts in its price.