The brief but spectacular life of Bitcoin can be described in one word: defiant. Bitcoin as a concept defies the popular belief that currencies are issued by nations and contradicts the notion that barter tokens are inflationary and have to pay interest. Most importantly, it has defied its critics and doubters and has moved into the mainstream.
Bitcoin has come under pressure for the past week. China began its attack on Bitcoin, and the crackdown peaked over the weekend when around 90 percent of the country’s mining capacity, which accounts for around 75 percent of global capacity, was shut down.
However, this is not the Communist Party’s first crackdown on Bitcoin. This time around, however, China appears determined to beat the crypto crowd and do whatever it can. The question that remains now is whether or not others will follow suit. This will be crucial in deciding the future of Bitcoin and other cryptocurrencies.
Will the US, EU and other big countries give up their principles and prohibit and condemn something that threatens no one but themselves? Will they openly commit to dictating where people can invest and speculate? Will they raid and / or attack private property to protect their financial interests?
There are many in the bitcoin community who say this could happen. However, I am more of an idealist and optimist. I believe that there is another path open to these governments, which is to do nothing.
Bitcoin is defiant, but also resilient. There have been attacks in the past, but Satoshi Nakamoto, the original writer of the Bitcoin whitepaper, must have recognized from the start that if you offer enough financial incentives for people to get involved, it can quickly become an indomitable force. Now Bitcoin’s reach is far too great to be monitored and its presence will simply show up elsewhere if suppressed. In fact, this has already started. Eunice Yoon from CNBC tweeted this morning that a logistics company in Guangzhou is transporting 3,000 kg of mining equipment to the USA
Now the American government has a choice. Are you on the side of China or do you welcome the investment with open arms? I would like to think that the potential long-term geopolitical benefits will force them to do the latter.
All in all, this recent Chinese raid may not be a reason to sell Bitcoin – at least from a price point of view. The reason for the sell-off we’re seeing this week assumes that China’s mining capacity will be lost forever or that other countries will follow China’s measures. However, I think China’s actions, while temporarily suspending supply, will ultimately make the price higher, not lower.
I would certainly not bet on the death of Bitcoin yet. It has proven time and again that it is inherently resistant to government attack and can recover.
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