Crypto Bottoming Signs? FT Drops Trifecta of Bitcoin Gloom on Wednesday

BTC-USD +0.07%

Battered bitcoin (BTC) bulls can take heart that the sector obituaries are rushing in from the usual suspects after the recent 35% price plunge.

The Financial Times (FT) on Wednesday, in fact, chose to put three of them "above the fold" on its website. The U.K.-based publication for a decade-plus has had a decided lack of enthusiasm, if not outright hostility, toward the sector. Said skepticism perhaps reached its denouement earlier this year, when one FT columnist compared bitcoin’s scarcity to her own teeth.

Wednesday's first article, titled “The fatal flaw in using bitcoin as a currency," claimed bitcoin effectively experienced a 900% annualized inflation rate during its 35% decline. It argued bitcoin can never function as a currency because its supply is fixed or can only increase, not contract, when demand collapses. The story contrasted this with central banks, which can reduce money supply, as seen in the post pandemic period, to contain inflation. For crypto, the article claimed, the structural flaw is downward supply inelasticity.

The second article, “Infinite money glitch, meet arithmetic," targeted Strategy (MSTR) and what it described as gravity meets mathematical certainty. The Michael Saylor model that relied on issuing shares or debt at a premium to buy bitcoin is now exposed and broken, argued the story. Spot bitcoin ETFs have eliminated the any premium for MSTR stock and potential index exclusion now looms. According to the story, this sets up a death spiral of forced bitcoin sales, something CoinDesk readers know is not accurate. The alchemy worked on the way up, but arithmetic rules on the way down, said the FT report.

“Crypto hoarders dump tokens as shares tumble," said the third story, which broadened the critique to other digital treasury companies that attempted to follow the same playbook as Strategy. Many now trade below the market value of their crypto holdings and are selling tokens to fund buybacks or service debt. The FT framed this as a one-way bet and warned that most of these firms will likely be wiped out. Many bitcoin bulls, though, would welcome this — meaning capital will once again flow to bitcoin itself, rather than the management teams, bankers, and boards backing these once-flashy start-ups.

Zooming out, the FT's victory lap Wednesday came even as bitcoin remains up more than 350% over the past five years. Ironically, the stories also hit as the U.K. government — attempting to shore up its own finances — has once again proposed higher taxes on its citizens.

"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks," was embedded in Bitcoin's first block by its creator Satoshi Nakamoto. Were he/it/they around now, might we see embedded in a block today: "Chancellor on brink of £26B in new taxes."