Bench & Bar

SEP 2018

The Bench & Bar magazine is published to provide members of the KBA with information that will increase their knowledge of the law, improve the practice of law, and assist in improving the quality of legal services for the citizenry.

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Page 16 of 67

15 BENCH & BAR | Fundamentally, if you are talking about cryptocurrency, then you must be talking about currency, then you must be talking about money. Let's start there. IS BITCOIN MONEY? Well, what is money? As Henry Miller noted: Money has no life of its own except as money. To the man in the street, unaccustomed to thinking of money in abstract terms, this obvious truism may smack of casuistry. Yet nothing could be more simple and consistent than this reduction to tautology, since money in any period what- ever of man's history has, like life itself, never been found to represent the absence of money. Money is, and what- ever form or shape it may assume it is never more nor less than money. To inquire therefore how it comes about that money has become what it now is is as idle as to inquire what makes evolution. 6 All of this applies to these new forms of "money." Or investment. Or whatever they are. Whatever Bitcoin is and however it came to be here, you may have to accept its presence for now in the same way some people accept television or a car engine—not being able to explain it fully, but understanding it enough to deal with it in everyday life. 7 Whether Bitcoin speculation will endure, or join tulipmania in history, 8 remains to be seen. WHAT IS BITCOIN WORTH? HOW DO YOU VALUE IT? Money is always about value. And, where value has been lost, about litigation. In what was described by Fortune magazine as "Bitcoin's darkest chapter since its creation nearly a decade ago," 9 the largest Bitcoin exchange in the world at that time, Mt. Gox, 10 collapsed in 2014 after its "850,000 Bitcoins valued at roughly $473 million at the time" were lost to hackers. Although the hack had occurred back in 2011, the theft was either undetected or unreported until February 2014, when Mt. Gox went into bankruptcy in Japan. Fast forward to March 2018, when Mt. Gox was reported to have "enough assets to pay off its claims with more than $1.4 billion worth of Bitcoins left over." 11 In June 2018, the Japanese court determined that creditors who want to recover the now-appreci- ated Bitcoins themselves (instead of the monetary equivalent at the time of Mt. Gox's collapse) can get paid in that form in February 2019. But in a seeming hall-of-mirrors, even that decision (and "the prospect of hoards of Mt. Gox Bitcoins flooding the market") may contribute to a drop in Bitcoin price once again. 12 e Mt. Gox swing is not just related to theft by hacking, but fun- damentally to the volatility in price. As e Verge reported, "e moment when Mt. Gox's bankruptcy flipped upside down came in 2017, as the price [per Bitcoin] started to climb past $2,000." e price as of this writing is closer to $6,500, but with predictions of an expected fall to $4,000. 13 As e Washington Post has reported: [W ]hen it comes to bitcoin, the price changes so quickly and so violently that it really matters what point you're comparing it to. Over the last year, bitcoin is up 91 percent, but over the last nine months, it's down 67 percent. Indeed, the author goes on to explain that while the volatility of Bit- coin is somewhat "designed that way" (with no centralized system), some of the "roller-coaster ride" is due to "plain old manipulation," and the "very lack of liquidity makes it pretty easy for a few fraud- sters to push the price up quite a bit." 14 ese same concerns have kept Warren Buffett scoffing at Bitcoin as "rat poison squared" and his vice chair at Berkshire Hathaway (1) VALUATION

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