What's bitcoin's future?

A lot of booms and busts until it dies for good.

In the course of a little under seven hours, the price of Bitcoin in US dollars fell by over sixty per cent on Wednesday, to $106 a coin. Since then, it's fallen further, and is currently trading at $85 $80 $78 $80 a coin on a downward trend.

If the price doesn't recover, it seems like the beginning of the end for the speculator's bubble. The nature of such a bubble is that it can't hold steady for particularly long, since speculators must sell to realise their gains. Selling depresses the price, which sparks more selling, and so on.

But as bitcoins trend back to a low price, conversation is turning to their future. If the era of the bitcoin millionaires is over, does that mean that the era of bitcion being actually useful is upon us?

That's what I suggest in my piece in this week's magazine (a 180-page centenary spectacular, available in all good newsagents (the magazine, not the piece)), but there's more difficulties standing between there and here. The big one is that, even if bitcoin plunges further and the speculators market is destroyed, the deflationary problem will never go away.

The very nature of bitcoin is designed to encourage hoarding. That's what deflation means: if you hold currency, that currency will be more valuable next year than this year. For the last month, its not just been in deflation but hyperdeflation, a symptom of its meteoric rise.

But suppose bitcoin falls back to $10 a coin, and the absence of speculators returns a degree of stability to the market. A few online traders might decide that it makes sense to offer the currency as an alternative to Paypal, and find that, freed from the hyped-up claims that it is the future of all currency, it actually works quite well for cheap and easy transfers of money online.

But.

The minute bitcoin starts to be useful, the deflation problem rears its head again. If a sizeable number of online retailers are taking bitcoin, then it makes sense to buy a lot now and hoard them until you need them, because both the deflationary underpinnings and the expectation of an increase in the USD/BTC exchange rate mean that they'll be worth more in the future.

But once you start hoarding them, the supply goes down, and other people who need them for transactions have to pay more for them. That increases the exchange rate; and so there's more incentive to hoard; and so the exchange rate rises further – and suddenly it's back in another bubble, which eventually pops, and people again lose money.

This volatility, in other words, is inherent to the platform. That's a major barrier to widespread uptake, and a reason why I'm bearish on the future of bitcoin full stop. Once it's dead, I fear it's dead for good.

BOOM and bust.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Jess Phillips's Diary: Lazy attacks on “lazy MPs”, and how to tackle the trolls

The Labour MP for Birmingham Yardley takes us through her week.

As parliament kicked us out for the conference recess season on 14 September, several tabloids run the predictable story: “MPs go back on holiday today only NINE days after returning to parliament from a six-week summer break.” I imagine the journalist who churns it out hates doing the same tired “all MPs are lazy baddies” shtick as much as we hate having to rebut the nonsense idea that we are on holiday when we are working full-time in our constituencies.

Legislation is on holiday, not legislators. I have still yet to find an MP who thinks it reasonable that parliament shuts for three weeks for conference season. Why can we not have these conferences at the weekend? Or during the summer recess? Hell, why do we have to have them so regularly at all?

Is the nation screaming out for the politically minded to spend hundreds of pounds sleeping on the floor of an overcrowded Airbnb in a seaside town after a heavy night on warm wine and small food? I’ll wager that you cannot find me a person on the Clapham omnibus – or frankly any omnibus, whatever an omnibus even is – who thinks we should have a week off making laws so that the Lib Dems can do karaoke.

Her Maj

As well as time off for conference, it seems that the Tories will be scurrying home early every Wednesday as well. They appear to be on strike from voting on any opposition day motions as their governing partners, Northern Ireland’s Democratic Unionist Party, play fast and loose with their allegiances. (The DUP backed a Labour motion against raising tuition fees, which the government says is non-binding.)

I and other Labour MPs sat in parliament and watched ministerial cars speed off on 13 September as the whips told the great and good to go home. Her Majesty’s Most Loyal Opposition is a pretty important part of our democracy. If I were Her Maj I might be more than a little peeved that Mrs May cannot be arsed to turn up to fight for what she believes in, whatever that is. Presumably whatever Boris Johnson and his gang say it is this week.

Leave the kids alone

I spent the weekend at a local Labour Party fundraiser, at my surgery, and handing out certificates to hundreds of young people graduating from the National Citizen Service. I sat in front of a lively, wildly diverse group of young people and thought we should hand over managing geopolitics to them for a while. Even the naughty kid at the back (whom I had to scold) gave me more faith than what I see on the news.

Family life

At a debate about the abuse of MPs, the traditional Tory colonel Bob Stewart told the house that his son had been targeted and isolated by his schoolteacher because his father was a Conservative MP.

Now, I’ve had my run-in ins with the colonel in the past, but I was horrified by this – one of my sons is the same age as his. As a parent and an MP I dread the idea that my choices will cause my sons’ grief. I’ve got enough guilt about leaving them half the week without their being targeted and bullied. I once found my son and his mates watching videos about me on YouTube that had been made by men’s rights activists. The vicious content was unsettling enough, but the thought of his teacher joining in the hate is harrowing (and, I’m pleased to say, completely unthinkable at his school). Our families are conscripts to this life – some are conscientious objectors.

Troll detection

So, should we ban internet trolls who abuse MPs online from voting? This is the suggestion floated by the Electoral Commission. I can see the argument for trying to make people treat the electoral system with respect. I also think we have got to have a hard line and a punishment. I’m just not sure how we will decide what is abuse. People say sexist stuff to me all the time. Would a negative comment about my appearance count, or are we talking rape and death threats? (What a time to be alive, when I can give a traffic light system to my sexist online abuse.) To some, the idea of having your vote taken away would only provoke a shrug; but to me it seems too much.

Climb every mountain

I have nearly finished More in Common by my friend Brendan Cox. It is about his late wife, my friend Jo, and is brilliant, but I dip in and out because I want it to last. Reading it makes me feel so tired: maybe because I read it in bed, but also because Jo’s energy and adventures seem exhausting. I like mountains on a screen saver, but I wouldn’t climb one, especially not with a tropical disease or a baby in my belly.

I’m also exhausted because of the ridiculous late nights we seem to be adopting in parliament. Jo’s distaste for the silly hours is covered in the book. She couldn’t understand why we couldn’t start earlier than 11.30am and finish in time for people to see their kids. As I put down the story of her life (and, my god, what a life) I’ll gladly trek for her to the seemingly impassable peak of reforming the voting hours in parliament. 

This article first appeared in the 21 September 2017 issue of the New Statesman, The revenge of the left