Why is one bitcoin, after all the disasters in the crypto industry, trading for around $27,000?
Your guess is as good as Mark Cuban’s.
“I wish I knew the real reason,” the tech entrepreneur and investor wrote in an email when asked about bitcoin’s resurgence, adding that the cryptocurrency’s supporters would say it is a safe haven in a time of global financial turmoil. “I honestly don’t know.”
That’s a reasonable answer. In the midst of the smoldering crater that is the crypto market, bitcoin has somehow made maybe not a comeback, but at least a stand. For all tokens, coins, forks, chains and NFTs, bitcoin remains the gold standard in cryptocurrency.
The collapse of the crypto industry is ongoing and has been playing out for almost exactly one year. The market’s losses are measured in trillions of dollars. Most crypto headlines these days are either about a high-profile arrest, new charges, or impending attempts at regulation. Investments in crypto startups have plunged. The tech world’s attention, once captivated by Web3 startups, has moved on to artificial intelligence.
And of course, bitcoin crashed too, hitting a peak of around $65,500 in late 2021. And yet it’s still trading far, far higher than it was just a few years ago. It remains volatile, falling below $16,000 in November, but a recent rally coincided with concerns about the global banking system and expectations of an end to interest rate hikes. In mid-March, one bitcoin traded for around $27,000.
For its proponents – and there are many – this is more proof that bitcoin is different. While the crypto industry expanded into finance, art, video games and slurp juice, bitcoin remained bitcoin. Cuban has been somewhat of a pragmatic supporter of bitcoin and crypto, saying in recent months that he plans to buy more, but also that he sees problems in the industry at large.
“I would say it justifies a thesis,” Alex Gladstein, chief strategy officer for the nonprofit Human Rights Foundation, said of bitcoin’s staying power. “Web3, blockchain, all these buzzwords over the years … and yet bitcoin just keeps growing and it keeps helping people.”
Gladstein, who has written and spoken extensively in support of bitcoin as a way to support human rights, talks about the benefits of bitcoin in much the same way that the cypherpunk movement of the early 1990s did about cryptography – as a means of empowering individuals and ensure their freedom and privacy. It is out of the cypherpunk movement that early forms of digital cash, and eventually bitcoin, were first conceived.
This blend of technology and philosophy led to the rise of bitcoin maximalists, sometimes called maxis, who defend bitcoin so vociferously that they are sometimes compared to a cult.
But it is the following that helps set bitcoin apart. Molly White, a software engineer who has also emerged in recent years as one of the crypto world’s most potent skeptics, said in a phone interview that she still considers bitcoin a speculative asset, but that it exists in a somewhat rarefied air thanks to its fervent fan base.
“There are some things about it that are, I think, objectively different,” she said. “It has this mystique about being the original cryptocurrency.”
It bears repeating what bitcoin actually is. Bennet Tomlin, a computer scientist who also hosts a podcast dedicated to critical discussions of crypto, put it succinctly: “The framework I usually put around it is: Bitcoin is an internet currency maintained by a network of computers, which is best suited for payments that the government or society wants to stop.”
Tomlin said he remains skeptical of bitcoin for many reasons, including whether miners (the people who run the computers that make up bitcoin’s distributed computing system) will remain incentivized to pour energy into the system. Others remain completely unconvinced.
Nicholas Weaver, a security expert who lectures at Berkeley University’s Department of Electrical Engineering and Computer Science and has been a staunch skeptic of all things crypto, said he believes bitcoin’s use by criminals is the main reason it can last longer than other forms for digital currency.
“I see bitcoin as the one that hangs around the longest, but there’s no intrinsic value if you’re not doing crime,” he said. “And if you want to bet on whether a number will add up or not, go to Vegas – the restaurants are better.”
It’s a boring answer to why something is worth the price it’s trading at – because that’s what the market says it’s worth. There are enough buyers and sellers at that price to keep it there. That goes for bitcoin.
But market psychology is important. What people think about bitcoin matters. And at this point, it feels hard to deny that there are enough people who see the value in bitcoin to keep it around for the foreseeable future. The cryptocurrency’s advocates continue to push for it to become an alternative banking system in other parts of the world, such as Block CEO Jack Dorsey’s recent efforts in Africa.
Fadi Elsalameen, an adjunct senior fellow at the nonprofit Bitcoin Policy Institute, said bitcoin’s growing use in the human rights world as a way for activists to facilitate the transfer of money outside the banking system has become invaluable.
“For us, having to use bitcoin has not only become a last resort. It has become the only option because you don’t want to be at the mercy of a dictator,” Elsalameen said.
He said the use of bitcoin continues to grow among people in parts of the world where the banking system is either inconsistent or at the whim of an authoritarian. He noted that the price of bitcoin is not of particular importance in his industry.
“When we explain it in their language, they adopt it,” Elsalameen said of Middle Eastern people he has introduced to bitcoin. “They say this is exactly what they need.”
This need may not keep the price of bitcoin high, but it does increase the number of people who see bitcoin as different from the rest of the crypto world.
And for now, that seems to be enough to keep it around $27,000.
