On Tuesday 28 November 2017, the Financial Times ran its first print headline story about bitcoin: “Bitcoin record triggers unease among traditional marketplaces”. The record increase referred to was an 850 percent rise in the price of bitcoin since the start of the year, and on 28 November, the bitcoin price was rising fast and approaching $10,000.
By the ‘traditional marketplaces’, the paper meant electronic trading platforms: the world’s largest is the IG Group, a London-based business that provides trading in financial derivatives and contracts-for-difference, the types of sophisticated but complex financial products that landed banks in such trouble in the run up to the global financial crisis ten years earlier.
But something about about the coverage suggested the paper couldn’t really wrap its head around the story. Bitcoin was not designed to replace or undermine these types of complex financial instruments, but the FT, like many commercial and central banks, seemed affronted by the very idea. The FT’s in-house commentary team Lex called bitcoin a ‘poxy currency’.
The media found themselves in an unenviable position. Interest from readers and viewers meant they couldn’t avoid covering bitcoin but in the last months of 2017 every additional bit of media coverage seemed to push cryptocurrency prices higher. As coverage spilled from the financial pages into the news pages and TV and cable new shows, the surge attracted more curious investors and during the first days in December the price continued to moved rapidly upwards, gaining up to five percent in value daily and spiking to $20,000, before declining back to half that price in the early months of 2018.
Since the bitcoin price had passed the $5,000 price mark in mid-2017, journalists and investors were putting questions to banking executives about the potential impact of bitcoin on banking business, and the executives typically dismissed bitcoin as irrelevant. Jamie Dimon, chief executive of JPMorgan Chase, told investors on a conference call in early September 2017 that bitcoin was “a fraud,” worse than the 17th century tulip bulb mania.
These remarks, however, were for public consumption, and behind the scenes the banks were not so confident about bitcoin’s demise. Bank analyst privately admitted that bitcoin was indeed a threat to the bank business model. Banks in fact are required to alert investors to any major risk to their business models. Bank analysts preparing their 10-K reports knew they would have to admit that bitcoin could not be ignored and their bosses wouldn’t have to wait to read the published reports before admitting the risk.
In early 2018 major US banks including JPMorgan, Bank of America and Goldman Sachs. JPMorgan, in a 10-K filing, told investors that it faced “a risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation”. Showing unusual - and some would say unprecedented - levels of concern for their customers, the big US banks began moving to prevent their customers from buying bitcoin with debit or credit cards.
For the general public, the media talk of bitcoin’s disruptive potential in financial markets was a new development. Previously, mention of bitcoin in the mainstream media was generally accompanied by stories about scams, fraud, the dangers of anonymous transactions, online drug marketplaces, market bubbles and ponzi schemes. Bank CEO pronouncements about bitcoin tended to mention one or all of these dangers. But they knew that wasn’t the whole story. It wasn’t the true story either.
Outside an enclave of websites and Reddit threads, not many people had heard about bitcoin prior before 2017, but those who had could easily recall how it was described. It was anonymous, allegedly, and therefore the perfect way to hide money from tax authorities, buy drugs or guns online, or even hire an assassin. Moreover the bitcoin world seemed rife with failure. Early attempts to organise the bitcoin world had ended disastrously, and for the curious, the bitcoin arena seemed full of self-promoters whose efforts to promote the cryptocurrency seemed unusually aligned with their own schemes.
The lifespan of bitcoin matches the realm of what is called fintech, or financial technology, a term that came into widespread use in the early years following the near-collapse of the global financial system. After the financial crisis, the fintech world, populated by bright young entrepreneurs, along with many savvy former investment bankers who saw the need to re-invent themselves after the financial crisis, began building new software products designed to replace various parts of the established but flailing financial ecosystem. Automated lending software could replace clunky manual processes for underwriting loans. Slick mobile phone-based apps could take care of payments on the go. Fintech businesses tended to focused on one small task out of thousands of tasks handled daily by banks, and offered to do that one task faster, cheaper and better.
As such, fintech drew equally on the worlds of finance and technology, two areas greatly dominated by men. Merge the bro culture of Silicon Valley and the established financial businesses of Wall Street, and the percentage of women drops to about five percent, at a guess. Go to a major fintech event and you’ll find this percentage seems completely reasonable. Fintech appears to be a man’s world, and bitcoin is no different. Add in a dose of hardcore and anarcho-capitalist politics, and you’ve got a special blend of combustible paranoid machismo. If there are few women appearing in this story, it’s not an oversight.
In her short book on the rise of the alt-right, the author Angie Nagle noted that the online world of 4chan forums was rife with young men threatened by and seething at the rise of feminism and identity politics. Nagle included bitcoin-loving libertarians in wider milieu around the alt-right: while bitcoin supporters are far from dominated by libertarians, they do make up a fair share of its promotors. Its fair to say that the ideas behind bitcoin seemed to emerge from the far fringes of mainstream financial thinking.
Its supporters would argue that bitcoin didn’t simply emerge as a new type of fintech business. Bitcoin rather can be read as another evolution of a project with its roots in 1960s West Coast America, in the area south of San Francisco. There, freaks and hippies first dreamed of putting computers in the hands of ordinary people, and were major figures in the internet revolution. The military budget of the United States dwarfs all others but frequently the results of military research are turned over to the public domain, turning a military project into a public good: consider the internet itself, or GPS systems, or the TOR browser for the darknet. An early concept of decentralised technology, the internet was that designed to be under the control of no single entity. It can’t simply be shut down, like a radio station or newspaper.
So when millennial coders in the Bay Area started talking about a new type of digital money that could not be shut down, or controlled by a government, many dismissed this talk as libertarian dream-weaving. Others were intrigued. When the first wave of stories about bitcoin started appearing in 2013, its notoriety appeared inextricably linked with its function as the currency of a new technologically-enabled black market: the darknet.