This article, written for Socialist Appealwas published a matter of days before Bitcoin's value collapsed by half overnight. This catastrophic downturn proves everything we have written about Bitcoin and how it reflects of the general crisis of capitalism. As most families prepared for the usual festive traditions this winter, investors were panicking.
In the week leading up to Christmas, the price of Bitcoin plunged by almost a third. Billions of dollars were lost in a matter days, or even hours. And yet such erratic behaviour has seemingly become the norm in the turbulent world of cryptocurrencies. Comparisons to the Dutch tulip bulb mania and South Sea Das kapital bitcoin wikipedia crash are rife.
Not a day goes by without another comment piece about the danger of a Bitcoin bubble. The widespread concern amongst commentators and investors alike is based on justifiable fears. The cryptocurrency craze displays all the das kapital bitcoin wikipedia of previous bubbles. Erratic movements in price. A proliferation of imitators seeking to jump on the bandwagon. And even celebrity endorsements of new offerings Paris Hilton and boxer Floyd Mayweather are amongst the famous figures who have endorsed various new currencies.
This is in addition to a das kapital bitcoin wikipedia in price during Seven years ago, this figure was around one dollar. And like any speculative orgy, everyone is trying to get in on the act before the party stops. Of course, investors are constantly seeking to make a quick profit. This is the name of the game when it comes to capitalism. As Marx explained in his economic writings, the goal of the capitalist, ultimately, is to make money out of money.
Whether something socially useful is produced in the process is accidental from the perspective of the capitalist. Intrinsic to the capitalist system is the banking and credit system. The das kapital bitcoin wikipedia of the banks and financial institutions is turn all money into capital - that is, into money that can generate a profit.
The small, isolated savings of many individuals are lumped together and placed in the hands of the investment bankers. The stock market and various financial instruments, in turn, are used as a means to channel this money back into the real economy - be it households, businesses, or das kapital bitcoin wikipedia.
Although parasitic, most of this financial activity at least has some link back to the actual economy. Stocks, for example, are a claim on the future profits of a company. In the case of cryptocurrencies, however, even this semblance of an economic anchor is missing.
Pretty much the only thing determining the rising price of Bitcoin, for example, is the expectation amongst investors that it will be even bigger tomorrow. This is the classic characteristic of a bubble. Bitcoin - the first mainstream digital currency - initially hit the headlines in when it was officially launched. It was heralded by das kapital bitcoin wikipedia supporters as a revolution in money, with cryptocurrency enthusiasts lauding its decentralised design. Bitcoin was well-received, above all, by anarcho-libertarian types, who hoped that it would be a form of money beyond the reach of governments and central banks; an alternative to fiat currencies - that is, money backed by a state.
This is a form of peer-to-peer network, or distributed electronic ledger, which digitally details every exchange ever conducted with Bitcoin. Whenever a transaction using Bitcoin is made, nothing tangible is ever exchanged. Instead, the distributed ledger is simply updated, providing an indelible history of Bitcoin transactions. The difference between this and, say, online das kapital bitcoin wikipedia, is that in the Bitcoin network every user has a copy of this ledger.
And, unlike fiat currencies, there is a maximum number of Bitcoin that can ever be put into circulation 21 million to be precise. The result is that Bitcoin - and other similar digital currencies - are designed to be entirely anonymous and secure, beyond the reach of das kapital bitcoin wikipedia, governments, and central banks.
Das kapital bitcoin wikipedia, speculative activity aside, what economic function has Bitcoin fulfilled in reality? As we have written previouslycryptocurrencies have largely failed to play any real role as an alternative to traditional money. Simply put, digital currencies like Bitcoin do not possess the basic qualities required of das kapital bitcoin wikipedia. At root, as we have outlined elsewheremoney is a social relation; a claim to a portion of the total social wealth.
It arises historically, not by design, but as a result of the development of commodity production and exchange. Marx explained that money serves several functions:. Looking at the above, it becomes clear why cryptocurrencies have failed to take hold as a genuine alternative to modern fiat currencies e. Above all, the volatile price of Bitcoin - driven by speculative activity - means that it cannot act as a reliable unit of account, medium of exchange, store of value, or means of payment.
Imagine placing your savings in Bitcoin, only to see them depreciate in value by one-third overnight. Or taking out a mortgage denominated in Bitcoin: And what shop would accept a currency whose value was das kapital bitcoin wikipedia by the hour? Shopkeepers would be spending all their time sticking new prices on the shelves! Historically, precious metals arose as the first forms of tangible money; money as a medium of exchange.
This is das kapital bitcoin wikipedia of their physical qualities. Gold, for example, is uniform, durable, and divisible. Importantly, it also has a high value density, concentrating large amounts of labour time into a relatively small volume. Das kapital bitcoin wikipedia time, gold and silver were replaced by paper notes - tokens of value.
And in order to ensure that the value represented by these tokens was real and steady, their supply was restricted and their price was tied to the value of gold.
But even this gold standard eventually fell apart. Contradictions in the global economy built das kapital bitcoin wikipedia, bursting to the surface with the First World War and later the Great Depression. Economic tensions between nations grew. And different countries were forced off the gold standard, one after another, as they attempted to provide liquidity to their failing banks. The Bretton Woods agreement attempted to provide an alternative to the international monetary system, with currencies tied to the dollar.
This too later collapsed, due to the slowdown of the post-war boom and the beginnings of a worldwide crisis of capitalism. The result was the system of floating currencies that we see today. Ultimately it is this centralised control that allows the modern money system to carry on ticking over.
Backed by the state, people trust that traditional fiat currencies will be accepted; that debts will be repaid; and that the money in circulation is economically anchored, representing real value. Libertarian hopes of using cryptocurrencies to free money from the hands of the state are doomed to failure.
At root, this is because such utopian dreamers do not understand why money arises historically, and how it has developed over time. As we have explained elsewhere and above, money was not imposed on society by any force from above. Money, ultimately, is a social tool - like language - that arises out of the needs of production; from the needs of a market-based system of commodity production and exchange.
Like Bitcoin, gold and the gold standard has historically appealed to libertarian types. They see the gold standard as a means of anchoring currencies, placing the money supply beyond the caprices of governments and central banks.
Unlike fiat currencies, which can be debased and devalued by over-zealous note printing, gold is a reliable store of value. But to advocate digital currencies as an alternative to traditional money, in this respect, puts the cart before the horse.
Loose monetary policy is not responsible for economic crises, but the result of them. As outlined above, for example, governments did not abandon the gold standard and resort to inflationary policies simply on a whim. Rather, they were attempting to respond to a deep global economic crisis, within the confines of capitalism and the nation state. Similarly, it is interesting to note that the Bitcoin community is also undergoing its very own schism.
On the one hand, there is a need to increase the money supply or its velocity of circulation, as is the case with the current Bitcoin splitin order to keep up with the demands of an expanding market of growing transactions. On the other hand, there is a need to prevent the money supply becoming divorced from the real economy that it is meant to represent. Elsewhere, Das kapital bitcoin wikipedia and its ilk are praised by supporters for their distributed control.
In fact, it was reported this week that the Chinese government is so concerned by this frivolous use of energy that they have moved to ban such mining altogether. This is in addition to an earlier government ban of ICOs and cryptocurrency exchanges. Importantly, the concentration of Bitcoin itself mirrors das kapital bitcoin wikipedia of the concentration of wealth in society in general. This arises from the private ownership of the key levers of the economy. No amount of utopian experiments will help.
We need a revolution. Ultimately, the cryptocurrency crisis reflects the crisis of capitalism. At root, this is a crisis of overproduction. The forces of production come into conflict with the mode of production. In short, the working class cannot afford to buy back the glut of commodities that the system produces. There are no profitable avenues for the capitalists to invest in. Instead, cash piles up in the bank das kapital bitcoin wikipedia of big business. Workers in all countries are receiving a smaller share of the economic pie.
Wealth becomes ever-more concentrated in the hands of the few. But it is not profitable to invest this money into real production, so the rich elite throw it into speculative activity instead. It is no different from the speculation in gold or art.
But the Bitcoin bubble is another symptom of the das kapital bitcoin wikipedia that none of the economic contradictions that led to the crash have been fundamentally resolved. This hypothesis may be true. Due to the limitations outlined above, cryptocurrencies are not widely used.
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