What its history reveals about its future

On Sunday, Bitcoin hit a new record high of $58,000. By Tuesday morning, the price had fallen to just above $46,000. The drop followed a weekend in which Tesla CEO and Bitcoin fan Elon Musk tweeted skepticism at the coin’s seemingly unstoppable rally, saying he thought the cryptocurrency could be overvalued. The buzz was enough to draw criticism from US Treasury Secretary Janet Yellen as well as billionaire and Microsoft co-founder Bill Gates.

“My general thought would be that, if you have less money than Elon, you should probably watch out,” Gates told Bloomberg. But Bitcoin believers have remained bullish. On Wednesday the coin had climbed again and was trading near $50,000. The latest activity has forecasters on both sides of the Bitcoin debate claiming their predictions are coming true. To find out whether we’re looking at the gold of the future or the next big bubble, DW spoke to experts on both about what the past can tell us.

Bitcoin and gold “aren’t comparable,” or only are in the sense that they are both mediums of exchange, says Bernd-Stefan Grewe, professor of history didactics at the University of Tübingen in Germany.

Grewe is an expert on the gold product chain and the author of the book “Gold: eine Weltgeschichte” (“Gold: A world history”). Gold is universally accepted around the globe and can easily be converted into the local currency regardless of where you are, Grewe tells DW.

Bitcoin, he says, is not like that. The digital coin requires finding someone who can convert it into the local currency. The main problem, and the point where it gets risky, is the question of at what point it is converted. “If things get tight and I want to quickly convert Bitcoin, exchange it for another currency, assuming the rate drops, who guarantees I can convert it at the price I wanted to sell it at?” Grewe ask.

Converting bitcoin into cash has been known to take days, he adds.

These so-called “points of transaction” will play a significant role in determining Bitcoin’s success going forward. Much of the hype around Bitcoin is derived from the fact that its exchanges are anonymous. Every Bitcoin exchange is recorded publicly on the blockchain ledger, a feature that secures each transaction. The identities behind the wallets sending and receiving the bitcoin, however, remain anonymous, a quality that is attractive to criminals. But authorities can still glean information at these points of transaction.

“The original idea behind Bitcoin, that you have nothing traceable, and an alternative currency that is free from central bank influence, is I think a bit naive,” says Grewe. “Naturally, it is in the vital interest of our entire economic system to gain control at certain points. And I believe that it is at the point where it is converted into traditional money.”

With Bitcoin gaining greater public interest and acceptance, legal and regulatory interest is bound to increase as well. “As soon as Bitcoin leaves its closed system and is fed into other economic cycles, that’s the point where it becomes a risk to those using it for criminal activity,” says Grewe. “It seems to be inflation-proof at the moment, but I think if there is collapse, then there will also be inflation there,” Grewe speculates.