Oof. What a week.
It began with Elon Musk bashing Bitcoin, and ended with a renewed crypto crackdown in China. Those came as book-ends to a spate of other bad news in cryptoland, including a stomach-churning market crash and anger over Bitcoin’s role in facilitating a massive cyber attack on an east coast oil pipeline. All of this saw Bitcoin limp into the weekend well below the $40,000 mark as the entire crypto industry licked its wounds.
What to make of all this?
First, after six months of crypto markets heading to the moon, a price correction was overdue—nothing, even Bitcoin, goes up forever. Also, market crashes rarely have just one cause. And that was the case this week when series of events, from Musk’s antics to over-leveraged traders, combined to wallop crypto prices.
Here are five key takeaways from Bitcoin’s latest week from hell.
1. Crypto is still prone to crashes. Since its inception, Bitcoin and the broader crypto market has been prone to wild run-ups in price followed by spectacular crashes. It happened in 2013 when Bitcoin first hit $1,000; it happened in early 2018 following the ICO frenzy of 2017, when the price dropped from $20,000 to $3,000; and it happened again this week. But each crash has been less severe than the previous one. To be sure, a 40% tumble—where Bitcoin now stands from its recent all-time high—is still ugly, but it’s not like the 80% or 90% drops that marked previous cycles. Volatility is part of the ride, crypto kids, so get used to it.
2. Much of the mainstream media is (still) hostile to crypto. The mainstream press ignored Bitcoin for years and, when they did write about it, it was typically to ridicule the crypto community. It looked like those days had largely faded until this week, when some of the usual suspects re-emerged with knives out, including the prominent New York Times columnist Paul Krugman, who declared Bitcoin to be worthless, the Wall Street Journal‘s star finance writer Greg Ip, who likened crypto to Fentanyl, and The New Republic, which screamed that Elon Musk’s “betrayal” could finally “expose the grift of cryptocurrency.” Meanwhile, Reuters and other major media outlets blew it by misrepresenting the news out of China (reporting it as a new ban, rather than a reiteration of an existing ban), sowing panic in an already jittery crypto market.
3. Bitcoin has a reputation problem: The Bitcoin ransomware payment to the cyber attackers who shut down the Colonial Pipeline provided even more fodder for those who view all of crypto as little more than a tool for criminals. Meanwhile, the chorus of critics who say Bitcoin is an environmental menace has grown louder.
Both claims are exaggerated, but the fact that they get so much traction shows how crypto, twelve years in, still has a reputation problem. Part of this is borne of ignorance and entrenched attitudes, but part of it is due to the rhetoric of the crypto community itself. Instead of offering thoughtful rebuttals, too many in crypto are inclined to engage in tribal tantrums against anyone who criticizes their pet projects. Meanwhile, many of the most prominent influencers in crypto are posting laser eyes and hyping the hell out of everything rather than helping the industry mature. Crypto needs better ambassadors. Speaking of which…
4. Coinbase let everybody down: Amid the crypto crash, Coinbase—the industry’s flagship company—suffered widespread outages that left customers fuming. How is this still happening? There’s no excuse for these tech failings anymore, given how surges in trading volume are a regular part of the industry, and Coinbase and others have had ample time to prepare. The only conclusion by now is that this is a deliberate calculation wherein Coinbase has elected to tolerate outages rather than spend on extra infrastructure and servers to avoid them. This might save the company money in the short term, but it’s hard to see how the longer-term damage to its reputation won’t prove more costly. (Binance went down amid the crash too, and Robinhood goes down almost every time Dogecoin is surging.)
5. Crypto fundamentals are still sound: Let’s end the rough week on a high note. Even as crypto prices are in the toilet and the media is beating up on Bitcoin, there is plenty of room for optimism. Unlike the 2017 ICO boom that saw companies raise hundreds of millions through flimsy whitepaper promises, this year has been marked by a dazzling array of projects—from Dfinity to Uniswap—taking giant leaps forward. Crypto is no longer an abstract bet on the future, but a growing reality all around us. The technology is real and more exciting than ever, and this week’s horrors are only a temporary blip.
A final note to drive this home: Last night, I went down a YouTube rabbit hole and watched recordings of then-MIT professor Gary Gensler teaching crypto to a room of undergraduates. How many of you, he asked, own Bitcoin? Every single one of them said yes. That was in 2018. Today, those students from one of the country’s most prestigious universities are heading into the broader financial world while Gensler, their professor, is now chair of the SEC. After a week like this, let’s not forget how far we’ve come.
This is Roberts on Crypto, a weekend column from Decrypt Editor-in-Chief Daniel Roberts and Decrypt Executive Editor Jeff John Roberts. Sign up for the Decrypt email newsletter to receive it in your inbox in the future. And read last weekend’s column: Elon Musk and Bitcoin: No One Man Should Have All That Power.
