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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I am special and I am worthless: inside the mind of a narcissist

There's been a lot of discussion about narcissists this week. But what does the term actually mean?

Since the rise of Donald Trump, the term “narcissistic” has been cropping up with great regularity in certain sections of the media, including the pages of this journal. I wouldn’t want to comment about an individual I’ve never met, but I thought it would be interesting to look at the troubling psychological health problem of narcissistic personality disorder (NPD).

People with NPD (which is estimated to affect about 1 per cent of the population) have a characteristic set of personality traits. First, they have a deeply held sense of specialness and entitlement. Male NPD sufferers frequently present as highly egotistical, with an unshakeable sense of their superiority and importance; female sufferers commonly present as eternal victims on whom the world repeatedly inflicts terrible injustices. In both cases, the affected person believes he or she is deserving of privileged treatment, and expects it as a right from those around them.

Second, NPD sufferers have little or no capacity for empathy, and usually relate to other people as objects (as opposed to thinking, feeling beings) whose sole function is to meet the narcissist’s need for special treatment and admiration – known as “supply”. In order to recruit supply, NPD sufferers become highly skilled at manipulating people’s perceptions of them, acting out what is called a “false self” – the glittering high achiever, the indefatigable do-gooder, the pitiable victim.

The third characteristic is termed “splitting”, where the world is experienced in terms of two rigid categories – either Good or Bad – with no areas of grey. As long as others are meeting the narcissist’s need for supply, they are Good, and they find themselves idealised and showered with reciprocal positive affirmation – a process called “love-bombing”. However, if someone criticises or questions the narcissist’s false self, that person becomes Bad, and is subjected to implacable hostility.

It is not known for certain what triggers the disorder. There is likely to be a genetic component, but in many cases early life experiences are the primary cause. Narcissism is a natural phase of child development (as the parents of many teenagers will testify) and its persistence as adult NPD frequently reflects chronic trauma during childhood. Paradoxically for a condition that often manifests as apparent egotism, all NPD sufferers have virtually non-existent self-esteem. This may arise from ongoing emotional neglect on the part of parents or caregivers, or from sustained psychological or sexual abuse.

The common factor is a failure in the development of a healthy sense of self-worth. It is likely that narcissism becomes entrenched as a defence against the deep-seated shame associated with these experiences of being unworthy and valueless.

When surrounded by supply, the NPD sufferer can anaesthetise this horrible sense of shame with the waves of positive regard washing over them. Equally, when another person destabilises that supply (by criticising or questioning the narcissist’s false self) this is highly threatening, and the NPD sufferer will go to practically any lengths to prevent a destabiliser adversely influencing other people’s perceptions of the narcissist.

One of the many tragic aspects of NPD is the invariable lack of insight. A narcissist’s experience of the world is essentially: “I am special; some people love me for this, and are Good; some people hate me for it, and are Bad.” If people with NPD do present to health services, it is usually because of the negative impacts Bad people are having on their life, rather than because they are able to recognise that they have a psychological health problem.

Far more commonly, health professionals end up helping those who have had the misfortune to enter into a supply relationship with an NPD sufferer. Narcissism is one of the most frequent factors in intimate partner and child abuse, as well as workplace bullying. The narcissist depends on the positive affirmation of others to neutralise their own sense of unworthiness. They use others to shore themselves up, and lash out at those who threaten this precarious balance. And they leave a trail of damaged people in their wake. 

This article first appeared in the 16 February 2017 issue of the New Statesman, The New Times