Cryptocurrency author and influencer Jimmy Song has a theory on why Bitcoin has been spiking this past week.
In a Cryptopotato story updated this morning, Benjamin Pirus reports catching up with Song at the Consensus convention, one of the biggest annual events for cryptocurrency buffs, where Song was autographing his book, “Programming Bitcoin.”
According to the story, Song believes that the current explosion in Bitcoin value may have happened this way – arbitrage traders started taking short positions, for example, on Bitfinex. Then, the larger investors or “whales” who hold massive amounts of Bitcoin decided to push back and counter the shorts.
However, Song made it clear that he doesn’t really know where the additional investment in Bitcoin came from.
“That’s the real question,” Song reportedly told Pirus. “No one really knows where the new money is coming from. If it’s whales playing games to wreck all the shorts, then that money just comes back out, but it seems like there’s genuinely new money entering the scene, and that almost always means that price is increasing.”
Song’s comments are notable partly because of his track record talking about fintech.
Earlier this month, for example, Song published a Medium piece with a very interesting premise – that those who rejected Bitcoin in past years while praising blockchain may have had it slightly switched around.
“There’s a persistent myth that blockchain tech is brand new and that if only given enough time, somebody will make something that’s useful for something other than money,” he begins. “This is what I call the ‘blockchain, not Bitcoin’ syndrome and in this article, I’m going to dispel the myth that uses for blockchain are just around the corner, that they’re going to add decentralization to all the things, and that it’s some revolutionary new tech.”
Remarking on the popularity of blockchain over the past half decade or so, Song suggests that a lot of the “hype” was driven simply by the professional’s need to look smart – that with the “unsavory” reputation of BTC as a haven for pirates, smugglers and the like on the dark web, backing blockchain as an idea seemed safer.
“The life that the word ‘blockchain’ took on around 2015 was incredible,” Song writes. “Tons of people, especially people that weren’t technical, often with only a vague sense of how Bitcoin worked, were saying things like ‘I believe in the technology, but I don’t believe in Bitcoin’. … Their ignorance led to mediocre engineers with very little understanding of incentive systems, game theory or even public key cryptography to masquerade as blockchain experts. These ‘experts’ bamboozled business-types into believing that the solution to the biggest problem for a particular industry could be built with a blockchain, some developers and some money.”
Discussing blockchain’s subsequent adoration as a “panacea for all ills,” Song tempers his criticism by noting that there are good use cases for blockchain, but then shows how many companies found their engineers working against big problems inherent in the technology.
“What most of these startups discovered is that blockchain is not a panacea,” he writes. “They ran head first into problems that we’ve known for a long time like the oracle problem, or the consensus problem, or the analyzability of Turing-complete contracts, or the free rider problem. It turns out blockchain, far from being a panacea is actually a hindrance to creating these solutions because of the requirement, at least nominally, of decentralization.”
Song ends with an appeal that will likely get a good reception at a time when BTC values are going up – way up.
“Blockchain is a solution looking for a problem,” Song writes. “Too many people have been taken in by ‘blockchain’ and pretend to see clothes on a naked emperor. The imaginary clothes may seem like perfect solutions to the biggest problems of their industry. Unfortunately, wishful thinking is not reality. Sorry to be the bearer of bad news, but the emperor has no clothes. Blockchain without Bitcoin is a big nothing burger.”
Again, these kinds of compelling analysis are really interesting in the context of a market where Bitcoin values are largely pushed up or down over the utility of the coin and its future in a digital marketplace. Keep an eye out as we stay on top of institutional moves and more.