The media hasn’t been kind to bitcoin lately. The digital currency is mostly in the news when it’s used by criminals- the owners of bitcoin exchange Mt. Gox collapsed after its managers stole 750,000 units of its own product.
Most recently, Ross Ulbricht was sentenced to life in prison last week for running bitcoin-based crime ring Silk Road- the judge compared Mr. Ulbricht to a Bronx drug dealer (he’s also quite the lover, as our writer found out by looking at his OkCupid profile). The U.S. Marshals Service has been auctioning off Mr. Ulbricht’s bitcoin fortune.
There has also been a lot of hand wringing about the dropping financial value of bitcoin- though it traded at a high of $1,150 per unit in December 2013, it ended last week trading at only $237 per unit, largely thanks to bitcoin’s criminal connotations. (Many bitcoin alternatives have sprung up as well).
But a growing number of investors wants to help bitcoin shed its bad reputation. The most high-profile bitcoin backers are Tyler and Cameron Winklevoss- they may be best-known for suing Mark Zuckerberg, but in recent years they have been two of bitcoin’s most ardent defenders. (In fact, they own one percent of all the bitcoin in the world).
The twins are preparing to launch Gemini, an FDIC-insured bitcoin exchange working exclusively with American banks. They consider the site a well-regulated “on-ramp” for bitcoin because it was developed in consultation with security experts and follows consumer protection laws.
While comparing current bitcoin technology to “‘surfing the web’ in 1995,” Gemini’s website touts that it uses “fewer intermediaries,” so as to prepare consumers for the fast “new world of money.” On one level this sounds like PR double-speak, but it’s worth giving Gemini a chance- the “Winklevi” have shown their drive before, so they’re not a bad weapon to have in the fight for bitcoin legitimacy.
Government figures are also seeing bitcoin’s potential to do good. Ben Lawsky, New York’s superintendent of financial services, recently announced that he will step down at the end of June to start a consulting firm for cryptocurrency users. Mr. Lawsky was a vocal proponent of digital security during his time as a financial watchdog.
Individual testimonials are all well and good, but what about people who say “Show me the money?” Isn’t bitcoin’s declining value cause for concern?
Bitcoin is a lot like gold—its production is limited (to 21 million units), so its value depends strictly on how much people want to use it. Contrast this to fiat currency, like the dollar and the ruble, which depends on how much their regulators want to create.
Mountains of bad press have obscured the fact that despite bitcoin’s precipitous price drop in late 2013, it has retained its value since that time. The stock value may be lower, but it’s stable- and a stable price makes bitcoin a reliable medium of exchange.
If investors stop worrying about stock prices and follow the Winklevoss twins’ lead, they can all get past Silk Road and instead be on the road to profitability.