Bitcoin Isn't Working

A discussion of why bitcoin's incorrect categorisation as "digital gold" is turning out to be highly problematic

The recent, sudden and unexpected underperformance of bitcoin, not just relative to the broad world of other financial assets but also against other crypto assets, demands examination.

There have always been some aspects of how bitcoin works that have given cause for discomfort. There are aspects of just about everything that give cause for discomfort, but if they are minor enough and nothing seems amiss, we dismiss them. The problem is that it might be a single loose screw that causes the aeroplane to crash.

A small problem now could be a much bigger problem later.

Digital Gold Is A Category Error

So what’s the small problem with bitcoin? It started with a category error. It’s something mentioned in these pages many times before, which is the depiction of bitcoin as “digital gold”. I’ve always written about it as something that has been irritating rather than problematic, but on reflection I wonder whether in fact it will turn out to be deeply damaging.