All eyes in the bitcoin world and beyond were on Coinbase on April 14 when the firm became the first cryptocurrency platform to go public.
It was a pretty good day. The shares opened at $381, soared as high as $429.54 before settling down to $328.28. They were valued at the close of Monday’s trading at $304.54 as the frenzy abated, but that still valued the company at a healthy $60.6 billion.
Financial pundits declared this a dawn of a new day. “Coinbase’s direct listing is a watershed moment for the crypto industry,” declared one securities analyst.
Any two people, anywhere in the world, can send bitcoin to each other without the involvement of a bank, government, or other institution.
Another called the firm’s Nasdaq listing a sign of “the growing mainstream adoption of bitcoin and crypto for the coming years.”
Or maybe not. The Coinbase IPO could be the signpost of just another market craze, of investors buying because they figure others are buying, so why not? Evidence that bitcoin is becoming anything like a “mainstream” financial asset is still scarce.
Sure, some banks have begun to facilitate bitcoin investments: JP Morgan Chase is preparing to roll out a bitcoin mutual fund, for instance. But whether that’s an indication of its desire to offer something some customers want rather than an endorsement of the asset in principle is unclear.
Elon Musk says his Tesla electric vehicle company will accept payment in bitcoin, but as Coindesk, a crypto news service, observed recently, “It ain’t easy.”
Customers have to make their payments within 30 minutes of making a deal or the bitcoin price expires and they have to start over. Tesla warns that if you make a mistake — say by entering the wrong recipient code in your bitcoin account and Tesla never gets the money, that’s your problem.
The terms recognize that bitcoin’s value can change dramatically in the blink of an eye and that bitcoin transactions can’t be reversed, even if they’re erroneous. In other words, why not just pay in dollars, dude?
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Bitcoin’s fans say it’s an alternative to traditional currencies, which can be manipulated by national central banks to manage (or mismanage, if you prefer) their economies. Bitcoin — a financial instrument created by computer algorithm and valued essentially at what anyone is willing to pay for it — is arguably immune from that sort of tinkering.
As an investment, bitcoin has been wildly oversold by its fan base. Every so often someone, often on reddit, dredges up one of the columns I’ve written about bitcoin over the years, invariably counseling readers to be wary of investing in the thing. They’ll point to the latest surge in price and chortle at the folly of advising people to shun bitcoin at $600 when it’s now $20,000, $30,000 or (as it has been recently) $50,000.
Sure. If you hung in with bitcoin from, say, 2013, when the cryptocurrency first swam into public consciousness and was priced at a few hundred dollars per coin, until today (current quote on Coinbase: $53,924.99), you made a mint.
But how many people did that? To have stayed in the market for those eight or nine years, or even for a sizable fraction of the period, you would have had to survive not one, not three, but countless bull and bear waves.
From Dec. 18, 2017, to Feb. 10, 2018, bitcoin’s value fell by 55%. This year alone there have been three downdrafts of 20% or more over the course of a week or two,…