As bitcoin trades at US$40,000 levels, it continues to divide opinion
Tug of war between bulls and bears could influence market
EVERY speculative asset opens up a divide between the bulls and the bears, but few have become as bitter as that over bitcoin.
Bitcoin bears such as Warren Buffett have used terms like "rat poison squared" to express contempt for what they see as inordinate risks for losses and fraud in the intangible, unregulated currency.
Sceptics such as economist Nouriel Roubini say cryptocurrencies like bitcoin adhere to the "greater fool theory" of financial scams, where holders seek out gullible newcomers to sell on overvalued assets.
The bulls think even less of the bears.
At an event in Miami last week, bitcoin bull, multi-billionaire venture capital investor and former Facebook board member Peter Thiel attacked Buffett and other critics of bitcoin in the financial establishment as a "gerentocracy" - a slightly less rude way of calling them geriatric fools.
These bitcoin bulls argue that the digital currency is nothing less than the future of money - the most transformative and democratising technology since the Internet.
The price action in bitcoin during the last year has given plenty of fodder to both sides of the debate. After a volatile 12 months, the price has stalled at around US$40,000 in recent weeks.
At this level, bulls can point out that bitcoin is worth thousands of percentage points higher than at its humble beginnings back in 2009.
The bears, on the other hand, will note that the price has plunged 40 per cent from an all-time high last year.
It is unlikely that either side will be vindicated in the short term, according to some market observers.
The tug of war between the bulls and the bears could influence the market, however, keeping it in the US$40,000 zone for the foreseeable future.
"Right now, bitcoin remains the ultimate risky asset. It is battling exhaustion right now," said Edward Moya, senior market analyst at foreign-exchange brokerage Oanda Group, noting that the digital currency has recently tracked - at magnified scale - moves in big tech stocks.
Eloisa Marchesoni, a long-time crypto investor and a self-described "tokenomics" expert, is convinced that bitcoin bears and "HODLers" are in control of the market.
"No bulls," said Marchesoni, in a WhatsApp message. "I think it will be going sideways like this for a long time, apart from sporadic uptrends."
Long-term bitcoin holders - or HODLers, as insiders refer to cryptocurrency investors who refuse to sell no matter what financial pain is inflicted - are buying at key levels like US$40,000 to "help the support lines," Marchesoni said.
Still, in a worst-case scenario, she said bitcoin could drop to around US$27,000, echoing the 80 per cent selloff in the "crypto winter" of 2018.
Long-time followers of bitcoin will remember Satoshi Nakamoto as the publisher of the white paper that started a financial craze that would eventually be worth trillions of dollars.
His bitcoin invention is almost like the Esperanto of money - an international, decentralised convention with simple rules, more accessible than national-based banking systems.
Dedicated computers known as bitcoin miners, crack the maths problems cryptographically hidden inside the number strings that bitcoin owners use for their keys and are rewarded with new bitcoins.
The miners act as both the mint and the fraud-proof watermark for bitcoin.
Bitcoin has served financial purposes that nobody in 2009 could have imagined, including as a means of donating millions of dollars to the Ukrainian war effort and as the official currency of El Salvador.
One of the innovations most celebrated upon the appearance of the white paper is the one that's become most divisive for bulls and bears: the artificial scarcity.
All but 2 million of the 21 million bitcoins that can ever exist have already been minted. This design means that, as adoption grows, the price is squeezed higher.
Existing holders love that their stakes cannot be diluted, but sceptics are put off by what appears to be an in-built speculative, get-them-while-supplies-last feature.
Bitcoin hype in general is wearing thin for some people, with advertising for cryptocurrency popping up everywhere, even at the Superbowl.
"If you can't explain to me, in a way an 8-year old would understand, why something is worth exploring, then that's a red flag to me," said Karl Gossot, an accountant in Texas.
Many institutional investors bought in last year around US$40,000 and will have seen little incentive to double down at that level during the recent volatility, said Moya.
"It would have to hold for quite some time before that big money is convinced that this is the bottom," he said. "Bitcoin can have a bear market move out of nowhere."
