The More Bitcoin Struggles, the More Bullish You Should Be About the Price of Bitcoin

Megan thinks the collapse of Mt. Gox means Bitcoin will fail. I am on the team that says this was bound to happen sometime, thank you Mt. Gox for your service, but it is long past time to turn Bitcoin exchanging over to the professionals. But Megan is having none of it.

The more I think about it, the more I think that the failure of Mt. Gox should make us bullish about the price of Bitcoin. Now, the price of Bitcoin isn’t everything—what matters is the survival of the technology. But price and survival are somewhat linked, at least in the limit, so let’s go ahead and talk about the price.

Start with Tyler’s argument, that a big threat to the price of Bitcoin is simple competition from alternative cryptocurrencies. Now it turns out that getting a cryptocurrency ecosystem to grow up is really, really hard—harder than maybe we thought. It follows directly that Bitcoin faces less competition from other cryptocurrencies than we thought. After all, they too will have growing pains. They too will encounter unexpected behaviors and have to manage the professionalization transition.

If it were a piece of cake to succeed as a cryptocurrency, there would be hundreds of successful cryptocurrencies, and a bitcoin wouldn’t be worth anything. But since it is hard to succeed, if Bitcoin succeeds, then it may be worth quite a lot.

4 replies to “The More Bitcoin Struggles, the More Bullish You Should Be About the Price of Bitcoin

  1. Sir Barken Hyena

    I have a suggestion here as to why economists don’t seem to get it: they don’t understand, really truly understand the innovation that’s at the core of this marvel.

    I mean, they’re saying: hey some other epochal world shaking genius innovation can come along AT ANY TIME and knock it of it’s seat! But Bitcoin is of a depth that happens very rarely. And the other applications of the blockchain that will have the most success will not be currencies at all, but things like Ethereum and Twister.

    How about we digest just what this new power is before we go banging around the woods begging more miracles?

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  4. Jordan

    Interesting thought.

    If alternative currencies can grow organically (user base, transaction volume, distribution) then bitcoin and its struggles are not just a cautionary informative tale, but the bitcoin infrastructure can me much more easily leveraged for the other crypto winners. That is, exchanges shouldn’t have much trouble capitalizing on prior investments and rolling out new services for new coins growing in popularity. Businesses and websites who have been accepting bitcoin are familiarized with the process and accustomed to such digital transactions should have low incremental issues in adapting those processes for new coins, given the attraction in doing so.

    This strikes me as a chicken-and-egg problem, and it is difficult to know which alternative cryptos may gain steam out of a sea of contenders and therefore spark the virtuous circle of available services. But bitcoin’s struggles may be a reason to get bullish on BTC price in the short-term, and bearish in the long-term.

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