Bitcoin speculation is driven by capitalist economic crisis

By Terry Evans
January 22, 2018

For millions of working people forced to live paycheck to paycheck, the speculative mania gripping capitalist investors and middle-class wannabes scurrying to trade in bitcoins today is something out of another world.

Accelerating bitcoin sales, and the recent opening of bitcoin futures markets, drove a 17-fold price rise for the digital cryptocurrency in 2017, most coming in the last few months. In December alone its price doubled and then plunged 30 percent.

Created anonymously in 2008, bitcoin — an internet currency — was touted by its meritocratic inventors as a libertarian, transnational answer to the paper currencies printed by different capitalist ruling classes around the world. The owners of vastly expensive specialized computer hardware obtain bitcoins by contesting with each other to use programs that release the digital token into their accounts.

Like the parasitic layers involved in speculation on the stock market, or in other financial instruments, those engaged in the frenzied purchase of bitcoins share the delusion that while theyhave the digital tokens there will always be a greater fool willing to take them off their hands for more than they paid.

Paper currencies are made legal tender by government fiat. The dollar has not been exchangeable for a set amount of gold for decades. But the dollar’s value is backed by Washington’s predominant economic and military power. It is the world’s currency. Such paper currencies are the means the capitalist rulers use to exchange commodities that workers produce, in order to turn a profit.

That isn’t true for bitcoin. It is not a step towards an international currency, free of the conflicting national interests that mark the capitalist economic system. While some dabblers in bitcoin use them to “buy” things in cyberspace, its main use today is as an object of speculation.

Growing numbers of capitalist investors, desperate not to miss out, are flocking to the bitcoin casino. Markets in bitcoin futures were recently sanctioned, the first opening in Chicago Dec. 10. Previously you could only profit by buying bitcoins and hoping they keep going up. Now you can profit by betting they’re going bust.

“Bitcoin is better than gold,” Forbes proclaimed, intoxicated with the hype. But unlike digital currencies, gold embodies value as a result of the labor workers put into mining and processing the precious metal. The high current price of bitcoins is an expression of market relations — and bubble hysteria — not of any intrinsic value.

Speculation in stocks and currencies is nothing new. Frederick Engels, a founder of the communist movement, described how “all nations characterized by the capitalist mode of production are periodically seized by fits of giddiness in which they try to accomplish the money-making without the mediation of the production process.”

The results of such giddiness are explained in “Capitalism’s Long Hot Winter Has Begun,” in New International no. 12. Author, Socialist Workers Party National Secretary Jack Barnes, explains speculative bubbles are “a manifestation of what Marx called commodity fetishism, the illusion that commodities and capital somehow have a social meaning in their own right, independent of the social labor that went into creating them, a life of their own.”

For decades, as capitalist profit rates have tended to decline, the bosses have been plowing their cash into speculation — or hoarding — rather than investing in capacity-expanding plant equipment and employment. The bitcoin investment frenzy is just more of the same. And it sucks in those in the middle classes with a modicum of spare cash and a disregard for risk.

The speculative mania driving the soaring prices of the digital token is irrational. But so were past speculative bubbles blown up by capitalist investors, like the market in overvalued stocks today, financial instruments built on toxic subprime mortgage debt in 2007, and the Tulip Mania in the Netherlands in the early days of capitalist speculation in the mid-1630s.

The same stagnation in the rate of capitalist accumulation and profits that leads the propertied rich to chase after bitcoin also drives the rulers to go after the wages, dignity and rights of working people. They attack our jobs and pay, safety on the job and hard-won social benefits to boost their competitive edge and their profits.

Workers today are looking for ways to stand up to these assaults, and to cut across the divisions among working people the bosses impose. As struggles develop in coming years, workers will have a chance to build a revolutionary movement that can lead millions to put an end to the crisis-ridden capitalist system. That’s what the Socialist Workers Party is all about.