Another Disingenuous Bitcoin Critic.

It’s recommended that you read the following two posts for context.

Bitcoin is Extremely Volatile. And that’s Completely Normal.

What is the significance of Central Bank Digital Currencies?

This is a response to John Authers, writing for Bloomberg.

It’s Too Soon to Say Bitcoin’s Bubble Has Burst

Cognitive dissonance is the perception of contradictory information. Relevant items of information include a person’s actions, feelings, ideas, beliefs, values, and things in the environment. Cognitive dissonance is typically experienced as psychological stress when they participate in an action that goes against one or more of them.

When two actions or ideas are not psychologically consistent with each other, people do all in their power to change them until they become consistent. The discomfort is triggered by the person’s belief clashing with new information perceived, wherein they try to find a way to resolve the contradiction to reduce their discomfort.

Human beings strive for internal psychological consistency to function mentally in the real world. A person who experiences internal inconsistency tends to become psychologically uncomfortable and is motivated to reduce the cognitive dissonance. They tend to make changes to justify the stressful behavior, either by adding new parts to the cognition causing the psychological dissonance (rationalization) or by avoiding circumstances and contradictory information likely to increase the magnitude of the cognitive dissonance (confirmation bias).

Coping with the nuances of contradictory ideas or experiences is mentally stressful. It requires energy and effort to sit with those seemingly opposite things that all seem true. People will typically resolve dissonance by blindly believing whatever they want to believe.

John Authers writes:

“… and that nobody in their right mind would denominate a transaction in bitcoin while it was this volatile … “

The argument that Bitcoin is too volatile, or the insinuation that it’s volatility is somehow a negative or a draw back, is a tired argument.

It’s sort of like looking at an airplane in 1915, less than 12 years after the world’s first powered flight and, upon witnessing it crash, complaining that planes are too unreliable to ever transport people. It reveals more about the author (and their personal reservations about Bitcoin’s wider societal implications) than it does about Bitcoin.

But do yourself a favour and take a step back.

Bitcoin, a world first that was invented just over a decade ago, is being priced in a currency with more than a century of governance behind it. And not just any governance, but governance by the largest and most powerful government the world has ever seen.

Which one of those currencies would you expect to be more volatile?

The US Dollar is controlled by a central bank, which is specifically tasked with one primary mandate. Dampen the volatility. And they’re constantly pulling levers. While the Bitcoin price is determined by supply and demand only. There are no manipulative devices built in to dampen volatility. It’s to be expected that it’ll be extremely volatile in the early phases as it’s being adopted in successive waves of euphoria and panic, while comprehension of the protocol’s basic mechanics, and thus underlying value proposition, steadily spreads.

Yet Bitcoin’s volatility critics insinuate the ludicrous expectation that the world’s first cryptographically created and completely decentralized currency, with no leadership or central control system, should somehow have emerged from its creator’s hard-drive perfectly formed and completely stable.

Not only that, but there are people (who are very much in their right mind) who understand the mechanics of the Bitcoin network and trust it’s mathematical certainty more than what they’re bothered by its short term price fluctuations. And they regularly denominate transactions in Bitcoin.

If the author had but reached out to one of them maybe they would have gained some new appreciation for that perspective which they so defiantly declare doesn’t even exist. Sadly, the author seemed not to have made that effort.

“While it inspires cultish devotion, however, it is difficult to analyze as an investable asset.”

The cultish devotion referred to here is what’s also known as Bitcoin Toxicity, and Bitcoiners wear it as a badge of honour precisely because authors (such as John Authers) seem unwilling to make the effort to at least try and adjust their perspective, to better understand the subject matter they’re dealing with.

How would a quantum physicist react if a Newtonian physicist writes an article about quantum mechanics and, upon their mistakes being corrected by the quantum physicist, the Newtonian falls back onto Newton’s laws to argue that it’s the quantum physicist who is mistaken?

I doubt anyone would react very well in that situation. Especially if it happens again and again, and, no matter how many times it’s pointed out, the Newtonian stubbornly keeps applying his old ideas to new inventions.

The result is what John Authers describes as cultish devotion. Otherwise known as toxicity. And I have little sympathy for people who fall ‘victim’ to it, because, more likely than not, they’ve repeatedly refused to accept that there’s something left for them to learn.

Case in point: Bitcoin is not an “investable asset” as the author writes. But don’t take my word for it. Read what the inventor of Bitcoin had to say about his own invention:

Bitcoin: A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
Satoshi Nakamoto
The Bitcoin White paper, Oct 2008.

“A purely peer-to-peer version of electronic cash” is literally the first sentence in the paper that first introduced Bitcoin to the world. Has the author read it? If so, why call Bitcoin an investable asset if its creator described it as a currency, both in the white paper and on multiple other occasions in the following years? Satoshi was very clear in his writings. They created Bitcoin to be a global currency that could replace centrally controlled fiat alternatives.

Does the Bloomberg author consider himself more qualified to categorize Bitcoin?

And isn’t it disingenuous to first proclaim that Bitcoin is too volatile to be a currency and then, having classified it as something that it’s not, declare that it’s difficult to analyze when viewed through an inappropriate lens?

Talk about a straw-man.

No doubt the author is a very intelligent person seeing as they’re writing for Bloomberg. Can one then blame Bitcoiners for reacting the way they do, with ‘cultish devotion’, when faced with this overt lack of willingness from people who should otherwise be able to understand what Satoshi accomplished.

“Whether it really establishes itself as a part, or even an essential part, of the global financial system will depend on how many people use it, and how tolerant central bankers are of that.”

Central bankers’ tolerance has nothing to do with it.

People might choose not to use it, in which case it won’t become an essential part of the global financial system, but as far as Bitcoin adoption goes there is nothing central bankers can do about it. Bitcoin is entirely decentralized, the entire system exists as fractal of itself in thousands of different locations all around the world, on the hard drives of every single computer running a full node. I have one running in my office 24/7.

Bitcoin was invented precisely for that purpose.

The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”
Satoshi Nakamoto

Satoshi knew that if his system did not have the capacity to withstand the most overt, well orchestrated, well funded and far reaching attacks against it imaginable, then there was no hope for its survival. With Bitcoin they were taking on the largest and powerful institutions in the world: central banks.

Which is also precisely why node operators and the leaderless group of developers, who succeeded Satoshi, made it very clear with the block-size debate and subsequent chain-split in 2017 that their top priority was making it as easy as possible for anyone to run a full node, anywhere, regardless of computational and / or bandwidth limitations.

At its bare minimum you need only a semi-descent laptop, with average capacity, and at least 144 megabytes of download data per day, to secure a copy of the entire system’s transactional history.

Bitcoin is not about functionality. It’s not about transaction capacity, not yet anyway, and not on the base layer. It’s about simplifying the operation of running a full node, for the purpose of decentralization. Bitcoin is, by far, the most decentralized network ever created. Not even switching off the internet will do more than temporarily interrupt it. In order to kill Bitcoin you would have to physically destroy anything between 100 000 and 200 000 computers, located in every single country imaginable. And you would have to do it simultaneously. And keep the internet switched off, indefinitely. And even then, there are work arounds.

And Central Banks know this.

This is well illustrated when digging into the phenomenon of Central Bank Digital Currencies. Central bankers already understand that their last real line of defense is the faint possibility that they might out-compete Bitcoin. If they can create something that looks like Bitcoin, but which remains under their control, and they can manage to convince people to use their CBDC rather than Bitcoin, then Bitcoin might be rendered impotent. But this outcome cannot be forced. Fiat on and off-ramps can be shut down, making movement in and out of Bitcoin difficult, but the decentralized nature of Bitcoin makes it so that anyone can download the required software to send and receive Bitcoin directly.

Nothing short of a total global catastrophe, like a permanent planetary power-outage, can stop that. In which case we would have far worse problems to worry about.

Other than that, all that matters is whether or not people choose to use it.

I suspect that the reason why authors like John Authers do not adjust their perspective and see the reality of Bitcoin, as it already is, is because Bitcoin challenges some of our most basic assumptions.

Can human beings govern themselves, if given the right tools?

Or are we by nature manipulative and evil, full of sin, forever doomed to fight wars and kill one another for personal gain? Barely capable of surviving, unless controlled by powerful authoritarian forces that dictate our every behaviour?

Or are we born free and adaptable?

Can we, under the right circumstances, cooperate and live in peace without the need to submit ourselves to arbitrary rules?

Depending on your answer to those questions you may or not (knowingly or unknowingly) choose to ignore the reality of Bitcoin so as to preserve the integrity of your existing belief system.

Because Bitcoin’s continued existence as a self-governing, global, borderless and completely leaderless network of voluntarily cooperating individuals poses a serious challenge to what traditional thinking dictates we believe about the nature of humankind.

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