The bitcoin era may become to the end. And the death of the cryptocurrency wonder may come at the hands of government regulators.
During this week was reported that Chinese authorities plan to block domestic access to central cryptocurrency trading platforms and related services. The same stories suggested by officials in Russia and South Korea might pull similar steps.
In response, the price of a single bitcoin — the world's premier digital currency — has plummeted.
Is the bubble really bursting? Only time will show. But if China and other governments really do crack down on cryptocurrencies, it's hard to see a future for bitcoin.
China's government actually already banned official cryptocurrency exchanges late last year.
On Tuesday, Russian President Vladimir Putin said that "legislative regulation of digital currency will be definitely required in the future." And on Thursday, South Korean officials said they were considering following China's lead, and shut down the cryptocurrency trading via exchanges.
Something like 15 percent of all bitcoin trading reportedly occurs in South Korea. Meanwhile, around 58 percent of all bitcoin mining occurs in China. Snuffing out trading in either country, but in China especially, could be devastating to the bitcoin market and its investors.
All these actions that happened during last months make a question that has never really been answered well: What is really bitcoin for?
To really work as money, bitcoin needs to be widely used. There need to be lots of actors providing a wide array of goods and services who are all willing to take bitcoin as payment.
But why would anyone use it? Contrary to the libertarian romanticism that inspired bitcoin's creation, most Western fiat currencies work really well as money. There's no need for most businesses to saddle themselves with bitcoin's extra headaches. It doesn't offer the speed or convenience of standard mainstream payments systems like credit cards or PayPal. And bitcoin's volatility and the extreme run-up in its price have made transaction fees highly volatile and expensive.
The final use of bitcoin and other cryptocurrencies, of course, is to avoid government control and avoid law enforcement. Which brings us back to China, Russia, South Korea, and their possible crackdowns.
There are a lot of governments in the world that deserve to be evaded. But they generally do not like being evaded. Especially more authoritarian ones like China or Russia. Not only can they kill trading of a cryptocurrency within their borders, they can use their power over other payment systems — the legal and mainstream ones — to cut off all the access points where a cryptocurrency is converted into any other currency.
If that happened, bitcoin maybe still survive in the shadows. But only if it fixed all the problems that prevent it from functioning as money. That would require a cryptocurrency based on design philosophies unlike any we've seen so far.
As a boutique investment asset, bitcoin can really only survive as long as governments tolerate its presence. If governments cut them off, bitcoin and its fellow digital currencies have no other home to retreat to.
Of course, I can understand the bitcoin investors which are having a panic attack. So, to fall under panic attack or not in real time will show us.