A Bitcoin Bubble? Not a Chance – A Rebuttal

There are still Bitcoin skeptics out there. They are wrong. It has just begun.

(image: ideogram.ai)

It was with some surprise that I read a column written last week by a colleague and co-columnist on these pages, in which he commented that "Bitcoin and other cryptocurrencies are long into bubble territory... as with all bubbles, eventually it will burst." Nothing could be further from the truth; Bitcoin's ascendancy has only just begun.

I will explain, but first an aside:

The "Bitcoin-as-bubble" idea has been around for about 14 years but, in fact, Bitcoin has been the best-performing asset during that same period. It has made every other asset - stocks, bonds, real estate, commodities and collectibles - appear positively flaccid by comparison. Not a bubble, by any definition. My colleague, an economist by trade, is a clear thinker (as well as a fine writer) so I take his opinion seriously. I suspect he may have been talking about the recent run-up in the Bitcoin price rather than making a general statement about its (startling) long-term resilience and buoyancy.

It seems redundant to restate the original Bitcoin proposition after so much has been written about it, both in the popular press and in various techno-covens, so I'll go super-reductive and just say that a bunch of very smart developers and mathematicians decided that central bank–distributed money was inefficient, inflatable, easily corruptible and generally sucky on numerous axes. They used cryptographic wizardry to invent another sort of money - efficient, inflation-proof, incorruptible and definitely not sucky.

After much laughter and derision, followed by years of vicious state pushback, Bitcoin seems to have won the day, if not the century (if not the future). It's no longer speculative or risky. It is currently in the process of being crowned the world's newest safe asset from the US to Bhutan.

The first big win for the cryptocurrency's legitimacy was the approval by the SEC late last year of a BTC ETF (Exchange Traded Fund, publicly traded) after more than 5 years of stonewalling. One of the applicants was BlackRock, the biggest asset manager in the world, with assets under management greater than the GDP of most countries. This was huge news. If BlackRock wanted in on Bitcoin, then surely this was not a flash in the pan? The January 2024 launch of BlackRock's ETF was the most successful in ETF history, by any and every measure.

A flurry of activity followed. From corporations to financial institutions to lawmakers, to regulators to media - everyone sat up and took notice. And some took action. ETFs were launched in multiple jurisdictions, pro-crypto bills were written, regulators softened, lawmakers got the message. Most importantly, the cash-flush crypto industry (supported by their powerful investors) started pouring money into relentlessly lobbying everyone in politics.

Their argument ran…There are 50 million people with crypto wallets in the US and 500 million globally. Either you support us, or we will give our money to those who do. Trump heard them, loud and clear. Harris did not. Outside of the US, similar arguments are being made. Moreover, it has gone way beyond the grubby business of political funding now.

Which brings us to the point of this column and my fervent rebuttal of my colleague's position. The crux is the matter of a national "strategic reserve asset" which is defined as a collection of assets held by governments to promote (even, some would say, ensure) "economic stability, currency stabilization, confidence in the economy".

These assets are typically securities (like government bonds), blue-chip foreign currencies and gold.

Soon to be joined by Bitcoin? Really?

Yes.

Here is where the matter stands (remembering that this has all happened in the last few months):

● Donald Trump and his economic cabinet cluster have expressed enthusiastic support for Bitcoin as a strategic reserve asset (SRA)

● Senator Cynthia Lummis has a Bitcoin SRA bill in front of Congress

● President Javier Milei of Argentina has expressed his support of Bitcoin as an SRA

● Brazil has just introduced a Bitcoin SRA

● Joana Cotar, a member of the German Bundestag, is championing the use of Bitcoin as an SRA

● Sławomir Mentzen, a presidential candidate in Poland, has pledged to adopt legislation to establish Bitcoin as an SRA for his country

● There are well-sourced rumours of a similar initiative in Slovenia

● Texas is exploring the idea of establishing a strategic Bitcoin reserve

● Bitcoin is already an SRA in Bhutan and El Salvador

I could go on and list the extraordinary collapse of anti-crypto sentiment across the globe - from Morocco to China to Portugal to Russia, but it is entirely unnecessary because it is the US that matters. If the Lummis bill passes, as it is expected to do, the rest of the global skittles will quickly fall and Bitcoin will move onto the podium with gold-standard national assets. Its price will continue to rise to some figure not yet predictable but certainly dramatically higher than the piddling $100,000 per Bitcoin currently being tickled.

The word "bubble" will quickly disappear from the Bitcoin narrative.

As a postscript, had I the inclination, I would challenge my worthy colleague to a public bet about Bitcoin and bubbles and price but, as a long-term Bitcoin holder, it should be clear to all that I am not a gambler.

Steven Boykey Sidley is a professor of practice at JBS, University of Johannesburg. His new book It’s Mine: How the Crypto Industry is Redefining Ownership is published by Maverick451 in SA and Legend Times Group in UK/EU, available now. Copy edited by Bryony Mortimer.