Is Bitcoin too big to fail? (opinion)

Peter Diamandis is the founder of X Prize and Singularity University, a high-tech startup incubator focused on how AI is shaping the future.

On Sunday, Diamandis posed the question to his 262K+ followers on X. Many of the responses were very enlightening.

One respondent noted that Bitcoin has never failed to deliver on its promises. That’s because it has never failed in 15 years running a new block of transactions every ten minutes on average. The base layer of the blockchain has also never been hacked.

“Bitcoin has never failed to do what it was designed to do. Price is just a measure of adoption. Period,” the commenter wrote. “It can’t fail because the world needs real money and there is no second best,” said another.

The origins of “Too Big to Fail”

The phrase “too big to fail” came into common use during the financial crisis of 2008. Finally, the government stepped in to bail out a number of US banks and financial companies with toxic balance sheets.

Congress originally allocated $700 billion to the Troubled Asset Relief Program (TARP). But when Washington finished bailing out Wall Street, the cost overruns reached the trillion-dollar threshold.

Back then, bailing out private banks with public money was a controversial issue. Opponents said true capitalism would let them fail and didn’t think it was fair to make taxpayers foot the bill for business mismanagement.

However, proponents of the TARP bailout argued that the banks were “too big to fail.” In other words, their importance to the economy was too great to allow for the disruptions that would entail letting them go out of business.

Is Bitcoin too big to fail?

So anything too big to fail used to mean I would get a government bailout if I needed one. In this case, Diamandis probably meant: Will Bitcoin even need a rescue?

Of course, there would be no way for the government to bail out Bitcoin, since cryptocurrency is not a company or an individual. It is a decentralized database of accounts and transactions managed by an open source peer-to-peer Internet network.

However, this question is a great starting point to explore the difference between Bitcoin and corporate banks.

Free markets use the Internet to “rescue” Bitcoin whenever the price drops so much that market participants can’t resist buying it for the profit incentive if it goes back up.

A huge community of long-term holders with high conviction in bitcoin’s value proposition buy BTC and hang on for dear life. It is a practice that has paid off. BTC realized capitalization of long-term holders recently surpassed $10 billion for the first time.

Cryptocurrency critics like to brag when the price of bitcoin periodically goes through a massive correction, but it never seemed to be in danger of going out of business altogether.

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