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The latest surge in the price of bitcoin is increasing the clamor around it, says Dal Bianco, drawing in yet more speculators and creating a self-reinforcing cycle. Likewise, when collective confidence in the prospect of further price growth falters, she says, the resultant downturn can be equally sudden. Under these conditions, demand can vanish as rapidly as it forms.

On March 3, Michael Green, chief strategist at asset management firm Simplify, entered into a wager with Peter McCormack, host of the podcast What Bitcoin Did. They were betting on the price of bitcoin. Green wagered $20,000 that bitcoin would not reach a price of $100,000 per coin by the end of the year. McCormack wagered $100,000 that it would.

The bet, Green says, was in part motivated by a desire to highlight areas of weakness in the economic theory presented as dogma by bitcoin evangelists. He takes issue with the way bitcoin is being sold to the investing public as a store of value designed ultimately to be the currency of the future, he says. I think that is a bunch of economic nonsense. Because the supply of bitcoin will shrink steadily over time as people lose access to irrecoverable wallets, Green argues, it cannot support a system of credit, because the cost of borrowing will eventually rise to a point that almost no one can afford.

In January, US regulators approved the first batch of bitcoin exchange-traded funds, which give people a way to invest in the cryptocurrency through a brokerage, as they would a regular stock. The arrival of bitcoin ETFs is said to have catalyzed the latest surge in price, by unlocking a wave of pent-up demand among investorsboth institutions and regular peoplepreviously unable or unwilling to deal with a crypto exchange or risk storing crypto manually themselves. In approving the new bitcoin funds, says Green, regulators have incentivized financial institutions for whom the ETFs represent a new source of revenue to spend tons of money on marketing to drive demand, and in turn disincentivized any emphasis on deficiencies in the logic of bitcoinomics.

The belief in the future potential of bitcoin has become religious, says Green. That missionary zeal is more likely to influence the price, says Green, than any economic mechanism built into the system. Even if McCormack were to lose the wager, he says, it could be chalked up as a fruitful marketing expense. McCormack told WIRED the wager with Green was not a marketing stunt. I did the bet to prove him wrong, he says.

The influence of evangelism on the price of bitcoin limits the opportunity for good-faith debate about the prospects of the Bitcoin system, says Angel.Once you drink the Kool-Aid, you have a powerful financial incentive to preach to the world that bitcoin is the most wonderful thing, he says. If there were a Nobel prize in marketing, it should be given to Satoshi Nakamoto.

Bitcoins biggest boosters embrace that dynamic as well. Bitcoin price appreciation is an advertisement, says Mow. Investors buy in on the prospect of richesand then fall down the rabbit hole themselves, creating a new generation of believers to spread the Bitcoin gospel.

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What's Behind the Bitcoin Price Surge? Vibes, Mostly - WIRED