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Bitcoin is proving why it can't be called 'money' - yet

Bitcoin is incredible, but the power of a currency is its credit - and Bitcoin hasn't got there yet.

It’s a big week for Bitcoin. In the last forty-eight hours alone the value of one Bitcoin (1 BTC) rocketed from £328 to £511 and, as many predicted, in the past twelve it crashed back down again to a low of £322, a rise and fall of over 50%. It is currently fluctuating fairly madly around the £350 mark. But it is fair to say these look more like growing pains than death throes. 

It is worth remembering that just a week ago Bitcoin was only worth £227, and seven months ago people were pulling out their hair because the market crashed from £169 to £84. It is still approximately forty times more valuable than this time last year, so there is one outcome of this latest spasm perhaps more significant than the price itself: now it’s got everyone’s attention.

Bitcoin is being trumpeted as a paradigm shift by firebrand market analysts like Max Keiser and tech gurus like John McAfee. Both are urging everyone to clean up now before it’s ubiquitous. Speaking to Canadian television, McAfee said: “Bitcoins will be everywhere and the world will have to readjust. World governments will have to readjust.” And perhaps not coincidentally, Bitcoin prices rose nearly £20 in the three days after Keiser championed Bitcoin on Have I Got News For You a fortnight ago.

So, if the buzz is to be believed, one of two things can happen from this point:

  1. Obviously such rampant growth is unsustainable. Bitcoin is a classic flash in the pan, will-o’-the-wisp, dotcom-style bubble, and it will lead a few early sellers to riches and thousands of others to ruin and/or disappointment.
  2. Governments will attempt but fail to control the burgeoning cryptocurrency, which will undermine the increasingly exploitative and crisis-prone finance industry hegemons, peacefully ushering in a new era of decentralised democratic money unburdened by unfair fees and the dangers of things like toxic mortgages.

It’s undoubtedly exciting, and bombast is tempting, but there is little point pretending to be Nostradamus when investors are still so flighty. All we can do is diagnose what’s going on right now.

So what was behind the latest boom? A lot of Bitcoin’s growth has come on the tail of some huge media coverage this last month. Aside from the latest drama, two particular news stories last month boosted the currency’s profile. The first was the fairytale story of a Norwegian man who bought 5,000BTC when they were invented in 2009, at £14, and promptly forgot about them. When he remembered them this year, they were worth £550,000. Quite an advert.

The second, somewhat ironically, was the FBI’s dramatic closure of Silk Road last month. As well as hearing about Bitcoin for the first time, people found out you could order pretty much any illegal substance from the comfort of your living room, anonymously - which is not something any other currency will offer any time soon. When the FBI arrested Ulbricht, the alleged head of Silk Road, they seized his ‘wallet’ containing 144,336BTC. (At the time, that was worth £17.3m, but just over a month later it is already worth over £50m.) As time goes on, this big-ticket arrest is looking more and more like a Pyrrhic victory for the FBI, because as even mainstream news sources acknowledge, the Silk Road is now thoroughly back online – along with a range of other competing black market sites (and now even more people know about them too).

What’s more, the danger that bitcoins will somehow leach away the world’s tax revenues and lead to anarchy is rapidly dissolving, as governments decide how to cope with them. Yesterday, in an act that clearly knocked many off the fence and into the Bitcoin market, the US Department of Justice told the US Senate committee for Homeland Security and Governmental Affairs that Bitcoins are "legitimate financial instruments" – a statement at once bold and vague, but certainly the first step on the road to regulation and a huge boost to buyer confidence.

The German government has already categorized Bitcoin as a ‘unit of account’, that is, officially recognizing it as money taxable under capital gains, which has lead many to speculate that others in the Eurozone may soon follow suit. However, not all governments have been so welcoming: in July, Thailand banned Bitcoin outright.

Our own HMRC is suggesting bitcoins will soon be taxable in their own right as ‘single use vouchers’ – a clumsy definition, as ‘vouchers’ have a relatively stable face value and bitcoins are repeatedly proving to have anything but.

But, as it stands, it’s difficult to argue the boom is motivated by anything more than the desire to make a quick buck. The largest Bitcoin exchange, BTC China, led today’s selling spree, in a rather blunt demonstration that Bitcoin has not proven its worth as a social investment just yet. Whatever its increasingly extreme price swings may eventually portend, it hasn’t earned the right to be called ‘money’. As the Washington Post’s Neil Irwin quipped back after the last Bitcoin crash, in April:

"If a currency can lose 75 percent of its buying power in two days, it may not be the best store of value. . .

What makes money money is what you can do with it. If you can purchase the goods and services that you want and need with it, it is money; if you can’t, it isn’t."

Bitcoin can be used in some shops around the States, a whole street in Berlin, thousands of online stores, and there is even a Bitcoin ATM in Vancouver. Some people have experimented living exclusively using Bitcoin – one successfully managed a Bitcoin roadtrip as early as 2011 (though he mostly paid other Bitcoiners to pay in US dollars…).

But clearly to the vast majority of its buyers, Bitcoin remains a surreally lucrative, volatile asset; it has a hefty price, but does it have value? Its proponents call these wild swings ‘price corrections’ as the market realizes the currency’s true value, but the element of faith still outweighs the evidence.

Bitcoin is, in many ways, incredible; but the entire power - indeed the entire point - of a currency is its ‘credit’. Time will tell if this week’s conversations in the Senate have changed all that. But for now, it looks like the main force behind the Bitcoin boom is indistinguishable from that which has been behind every other boom: buy low, sell high.

N.B.: figures correct at time of publishing, but probably not for long.

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Overlooking the effect of Brexit on Northern Ireland is dangerous for the whole UK

We voted to remain in the European Union. The tensions caused by the referendum outcome, and ignoring its effect on us, will cause utter carnage in Northern Ireland.

I’ve been from Northern Ireland all my life. Having spent many years living in Dublin, and now London, I’m quite used to that very fact making people uncomfortable. I get it. From a glance at the news, it would seem we fight each other about flags and anthems and are inexcusably proud of throwing glass at people in bowler hats, or daubing on our own homes the worst paintings ever committed to brickwork. Our tiny little protectorate has generated such disproportionate levels of confusing violence, most people are terrified of saying the wrong thing about any of it. We’re the celiac vegans of nationalities; the worry is that almost anything you offer will offend.

Most people avoid such worries by – whisper it – simply never acknowledging that we exist. This reflexive forgetfulness is, of course, a happy state of affairs compared to what went before. I refer, of course, to the period named, with that Ulster-tinged strain of sardonic understatement, the Troubles, when some 3,600 people were killed and ten times that injured. By some estimates, as many as 115,000 people lost a close relative to violence in this time, and many more a good friend, a colleague or an old school pal. Taken as a portion of 1.5m people, this means a startlingly high percentage of Northern Irish citizens have been directly affected by the conflict, certainly a higher percentage than that of, say, the English electorate who have ever voted for Ukip.

Northern Ireland also contains Britain’s only fully open border with the EU. I know because I grew up on it, specifically between Derry and Donegal, where my dad's back fence demarked an invisible boundary, a small hop from the UK to the Republic, and back. From a migration point of view, this poses a problem, so when Brexit was being deliberated, it did seem odd that Northern Ireland was barely mentioned at all, that the one border that exists in the entire country was given such scant reference during the campaign’s interminable duration. A dreaded EU migrant, travelling freely through Ireland toward my father’s house will not be subject to border checks once he has passed it quietly behind him. No machine guns, no "papers please", none of the fortified rigour mandated by the Leave campaign. Implementing such fortifications would, of course, be a practical nightmare, since so many live in Ireland but work in the UK, and vice versa. But the psychological effect of such a move would be infinitely worse.


Much of the Good Friday Agreement was predicated on free movement between north and south, and cross-border bodies that reinforced a soft-union of the two states; just enough to ameliorate nationalists, but nothing so resembling a united Ireland as to antagonise unionists. Making Irish-identifying Northern Irish citizens undergo any form of border checkpoint between the two countries would not just be a bureaucratic hassle, it would massively inhibit the self-determination nearly half of Northern Ireland's population takes from both countries’ status within a wider European state.

The peace that exists rests largely on this status quo, the acceptance of people who reject violent means and see little injustice in being allowed to live their lives within a British state that dignifies their close connection to their southern neighbours. It is hard to overstate how different this situation would be were armed checkpoints to re-emerge. I remember checkpoints as a child. I remember machine guns and dogs and my dad making sure we weren't nervous while he was being interrogated by armed men inspecting his driving license and checking under our car for explosives. This was every day. Rather than some novel development, this will be a direct, unbidden return to something we worked very, very hard to get away from, something we were promised was over, and something for which thousands of very stubborn, dangerous people struck what many considered a highly improbable truce.

It is this effort to which thousands of Northern Irish people now owe their lives, to which tens, perhaps hundreds, of thousands more can count among the living and healthy their siblings, their friends, their colleagues. This may not be at the forefront of minds in Carlisle or Cornwall or aboard the statesmanlike grandeur of a battlebus, but it is the lived reality of Northern Irish people. To stoke up these tensions risks sleepwalking out of a peace that was hard-fought and long considered unthinkable. To do so as a side effect of what appears to be, on its face, little more than a tussle for the leadership of a single political party with little-to-no presence in Northern Ireland seems distasteful in the extreme.

Having stating these facts to friends here in London, I’ve been touched by their sorrow for our plight but, for all their sympathy, it might still not have registered that our problems have a tradition of travelling to people in London and Dublin, in Birmingham and in Monaghan. If greater care is not given to the thoughts, aspirations and fears of Northern Irish people, and those still-present agents of chaos who would seek to use such discontent to their own violent ends, we risk losing a lot more than free use of bagpipes or pleasingly bendy bananas.

Westminster must listen to those who would bear the burden of Fortress Britain’s turrets near their homes or else, to borrow a phrase, Brexit will be a threat to our national security, our economic security and your family's security.

Séamas O'Reilly is a writer and musician. He tweets @shockproofbeats. His website is shocko.info.