Legal tender: a business accepting Bitcoin as payment, San Salvador, June 2021
Camilo Freedman · SOPA · LightRocket · Getty
Cryptocurrencies (also known as cryptoassets or digital currencies) were long treated as novelties. Not any longer. In recent years they have, for good reason, made headlines beyond the financial pages: the value of the best known, Bitcoin, quadrupled between December 2020 and May 2021, then plummeted, losing more than a third. By November 2021 it was back up to a historic high, only to fall again several times during the winter. The peaks and troughs of Bitcoin’s price plot a course that’s both fascinating and worrying.
Several big names in Silicon Valley and US finance have helped give Bitcoin credibility with the public. In January 2021, global asset management giant BlackRock authorised two of its funds to buy Bitcoin-based derivatives. In March, online payment platform PayPal launched a service allowing users to ‘checkout with crypto’. Two months later, investment bank Goldman Sachs dedicated a team to Bitcoin trading, giving its clients the opportunity to bet on its value, and its competitor, Morgan Stanley, also announced the launch of three cryptocurrency investment funds for its wealthy clients.
At first glance, Bitcoin looked set to conquer the financial world. Some even imagined it becoming a major store of value (like gold, which retains its value long-term). However, it is still far from a full-fledged currency — and we’re a long way from paying with Bitcoin at the grocery store. This is probably good news, given the problems its development has raised.
Bitcoin was created in the wake of the global financial crisis of the late 2000s. On 31 October 2008, Satoshi Nakamoto (a pseudonym) distributed a ‘white paper’ to a small group of cryptography enthusiasts and subsequently posted it online. This document set out a blueprint for a decentralised system for a digital currency, which was distinctive in dispensing with a centralised issuer and having no trusted third party to validate transactions. In other words, it proposed (…)
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(3) See Ron Paul, End the Fed, Grand Central Publishing, New York, 2009.
(6) ‘Venezuela: avec un prix de l’électricité bas, le minage de cryptomonnaies a le vent en poupe’ (Venezuela: with electricity prices low, cryptocurrency mining is on the rise), Capital, Paris, 15 September 2021.
(7) ‘Bitcoin: qui est qui dans la guerre des crypto-monnaies (et comment cela peut vous affecter)’, (Bitcoin: Who’s who in the cryptocurrency war, and how it may affect you), BBC News Mundo, London, 13 June 2021.
(9) ‘Tesla annonce un bénéfice de 101M$ en bitcoins suite à son investissement massif dans la cryptomonnaie’, (Tesla announces $101m Bitcoin profit from massive cryptocurrency investment), Business Insider France, Paris, 27 April 2021.
(10) Bitinfocharts.com/.
(11) Cambridge Bitcoin Energy Consumption Index (CBECI), cbeci.org/.
(12) ‘Cleaning Crypto’, International Monetary Fund, Washington DC, autumn 2021.
