3 March 2021

Bitcoin isn’t an alternative currency, it’s an alternative religion


You will have heard of Bitcoin. That global financial craze that has already made millions or even billions for a few, a little bit for many, and mega losses for some. Most people still don’t really know what it is. What they do know is that not long ago you could get one of these whatsits for pennies but now they are valued at many thousands. Inviting the question: so why haven’t I got any?

But before we buy let’s stop and ask: what is this, really? The answer is not hard to find. Bitcoin is not primarily a financial entity. Rather the cryptocurrency craze is a sub-species of religious mania. 

That may seem odd given that Bitcoin is just a mathematical construct, albeit one that has become a capacious vehicle for hopes and fears and fantasies played out on a global scale. Yet the religious language and attendant mythos are there for anyone to see. 

So it is that Bitcoin has a historic messiah figure who appeared, spoke scripture, and then disappeared. It has many schisms and heresies. It has a strong death-and-resurrection theme, and a powerful end-time eschatology. 

The Gospel of Bitcoin promises if not eternal life, then at least perpetual wealth. It is a post-meltdown religion for the age of the internet pirate, the day trader and the digital huckster. 

As such Bitcoin is emblematic of the age. We are in a period of great technological change and heightened uncertainty, a period when old systems and established rules seem to be evaporating before our eyes. These are exactly the conditions in which alternative belief systems and manias thrive. 

Of course that is not what the believers will tell you. Bitcoin boosters have several lines of ‘rational’ secular arguments in favour of the thing: the main three are that Bitcoin is a new kind of currency, that it is a new ‘store of value’, and that it is an alternative investment. 

All three of these propositions suffer from the same flaw: they are not true. Bitcoin is not a currency because it is not ‘current’ in the sense of being accepted and flowing readily from person to person. It is not a store of value because it is as unstable as plutonium and prone to self-destruction. And it is not an investment because both underlying asset value and income are absent.

The fact that Bitcoin is useful only as a vehicle for financial speculation is obvious, but the prospect of fast money will always make converts. Yet in the real world most people get little or nothing from Bitcoin. ‘Investors’ will timidly buy in and sell out, mistiming the dizzying volatility as well as losing money through high trading costs. The Bitcoin winners exist but there just aren’t that many of them. 

So the real draw is something above and beyond pure profit. The real draw is the religious communion.

To put it in recent historical context, back in 2008 when the financial economy collapsed and the world was placed on a new and chaotic footing, Bitcoin did not exist. But that same year a short technical paper proposing a new sort of non-bank non-national digital exchange appeared on an obscure discussion board. This was the foundational scripture of what would become Bitcoin, and it was signed with the name Satoshi Nakamoto. 

Nakamoto has never been identified either as a real person or a composite, and if he ever existed he has since disappeared – although not before creating around a million Bitcoins. The question of who or what or where Nakamoto is or was is a fruitless one, although one powerful clue suggestive of an individual no longer active in the world is that the original Nakamoto Bitcoins – now worth around $50 billion – have never been moved or spent. 

What Nakamoto could not have known is that he or they had created a weird hybrid religion, where technology and dislocations of history and dreams of alchemy all combine to bedazzle millions of believers – with the uniquely persuasive twist that a handful of randomly lucky individuals really have become unimaginably rich in the Church of Bitcoin.

The lost Nakamoto coins remain in deep and perhaps perpetual sleep in cyberspace, a kind of collective Holy Grail around which Bitcoiners weave fantasies of quest and redemption. Meanwhile the active world of Bitcoin is rent with daily conspiracies and schisms as new versions of Bitcoin or ‘alt-coins’ are constantly created and routinely denounced as heretical or not, depending on which sect you adhere to. 

All the while Bitcoin is supposed to be hurtling towards an end-time when the money changers are finally driven out of the temple, when the system of central banking and ‘fiat’ money (dollars, pounds, euros, that sort of thing) collapses and burns in a crypto-induced Day of Judgement. Inevitably the day this will happen is repeatedly postponed (sound familiar?) which is hardly surprising since fiat money is simpler, cheaper and less risky to use than its digital challengers. 

It’s also somewhat ironic given that the boom in Bitcoin and all its lookalikes is really the unintended creation of central banks. Monetary authorities have been pumping high-pressure liquidity into the world economy ever since the global financial crisis, and the Covid pandemic has just necessitated an additional extra-strong dose of easy money. And since money has to go somewhere the fact that a lot of it has gone into Bitcoin and other speculative adventures is pretty much inevitable.

And that brings us back to speculation. All the talk inside the Church of Bitcoin about a new form of money and a new means of exchange is nonsense. It is just old money being risked (and frequently manipulated in opaque markets) in new ways. 

If speculation is your thing then you might think that Bitcoin is a way to get it in very pure form. But it may also pay to remember that when you let the Gospel of Bitcoin into your heart you are not actually investing in Bitcoin (because there is nothing to ‘invest’ in), but rather speculating on the speculations of other speculators. 

If that definition sounds like an apocalyptic piece of financial theology, it’s probably because it is. And, as they say, this only ends one way.

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Richard Walker is a journalist and communications adviser to financial companies.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.