Bitcoin’s identity crisis
Remember when cryptocurrency was supposed to disrupt and replace finance? Well, history had other plans. As bitcoin surges past $85,000, doubling in price over the past year, we find ourselves in what might be called an “institutional legitimacy paradox”.
Consider the historical irony: bitcoin, conceived as a peer-to-peer electronic cash system that would eliminate the need for financial intermediaries, is now primarily traded through funds managed by the very intermediaries it was meant to circumvent.
Two years ago, the collapse in crypto prices seemed to confirm what sceptics like myself had long maintained: crypto assets were a speculative bubble inflated by easy money and pandemic-era exuberance. The implosion of Sam Bankman-Fried’s crypto exchange FTX, coupled with rising interest rates, appeared to sound the death knell for crypto’s mainstream aspirations.
This recovery is different from the last bitcoin high. It is fuelled by both individual investors and institutional money, with UK pension funds and City asset managers increasingly experimenting with exposure. BlackRock’s spot bitcoin exchange traded fund is accumulating billions of dollars in assets. The shift towards “respectability” should concern us all.
