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WSJ Your Money Briefing — Episode Summary

Episode: Bitcoin: What Could Trigger Another Rally?
Date: December 17, 2019
Host: J.R. Whalen (B)
Guest: Paul Vigna (C), WSJ Cryptocurrency Reporter

Episode Overview

This episode explores the state of Bitcoin two years after its meteoric rise and historic high near $20,000 in December 2017. J.R. Whalen speaks with cryptocurrency reporter Paul Vigna about what drove the last rally, why Bitcoin (and other cryptocurrencies) have languished since, and what conditions might trigger a new surge in interest or valuation. The discussion candidly reviews the missed opportunities, the fallout of the ICO boom, and ongoing barriers like regulatory skepticism and industry scandals.

Key Discussion Points and Insights

1. The 2017 Surge: Momentum and Mania

Bitcoin soared to nearly $20,000 in December 2017, fueled by years of technical and social momentum.
- Paul Vigna characterizes Bitcoin not just as a technological phenomenon, but as a powerful social movement that "exploded" in 2017.
- The ICO (Initial Coin Offering) boom ran parallel, attempting to adapt the IPO model to tokens, but became riddled with fraud and bad projects.
- Quote:
  
  "Bitcoin, as much as it is a technology, it was also a social movement. And in 2017 that exploded." — Paul Vigna (02:37)

2. The Post-Bubble Hangover

After the frenzy, bad actors crowded out legitimate interest and left the market insular and stagnant.
- Many newcomers opened wallets during the 2017 rally, but most have become inactive; currently, only a small percentage of wallets are used.
- The remaining participants are largely old-timers and insiders, leading to low trading activity and little new money entering.
- Quote:
  
  "It's a lot of people that are inside bitcoin trading among themselves." — Paul Vigna (04:21)
Institutional and retail interest is lacking; the hoped-for Wall Street influx didn’t materialize.
- SEC hasn’t approved any Bitcoin ETFs due to concerns about market manipulation and lack of transparency.
- Quote:
  
  "The SEC has been very consistent about this. What they have said is that there is no transparency in this market. You do not know the level of manipulation of these prices because of that." — Paul Vigna (06:16)

3. The Fate of Bitcoin’s Competitors

Most cryptocurrencies are destined to fail; only a handful may have a real future.
- Vigna is skeptical about the prospects for thousands of coins, suggesting only two or three—even up to six—have real potential, while the vast majority are “outright scams.”
- Quote:
  
  "There might be six of these cryptocurrencies that have a future. Might might be six. It's really probably two or three." — Paul Vigna (06:53)

4. What Could Trigger the Next Rally?

A catalyst is needed, but it’s unclear what form it will take.
- Structural regulatory clarity (such as an SEC-approved ETF) could bring mainstream acceptance, but this hasn't materialized.
- The original appeal stemmed from disillusionment with the traditional financial system post-2008, but that window of opportunity was missed amid infighting and bad actors.
- Quote:
  
  "They had a window of opportunity where they had the technology, the momentum, and they had the lack of competition... and they did not do it." — Paul Vigna (08:06)
Adoption as a payment method has dwindled.
- Most companies that experimented with Bitcoin for payments (Dell, Microsoft, Expedia) have since dropped it due to low demand. A few, like CheapAir.com, still accept it, but it’s not significant for their business.
- Nevertheless, Vigna believes digital money will eventually succeed in some form, possibly engineered by a tech giant or a government.
- Quote:
  
  "Digital money dovetails with that. And eventually somebody is going to figure out and make it... The question is going to be who is that? Is it going to be the Bitcoin collective? Is it going to be a company like Facebook? Is it going to be a government?" — Paul Vigna (10:40)

Notable Quotes & Memorable Moments

On the 2017 mania:

"You had this very sort of thinly traded asset that suddenly becomes extremely popular. People jump into it and it drives the price up very, very high." — Paul Vigna (02:49)
On the aftermath:

"The problem now is that the good people that were interested and probably got burned have gone away... and a lot of what's left are the bad actors." — Paul Vigna (03:41)
On new investor interest:

"You don't have a lot of outside interest. You don't have a lot of new money coming in. You don't have a lot of new people coming in." — Paul Vigna (05:01)
On the lack of successful ETFs:

"If you build it, they will come—and they didn't come, but the SEC will not let them build it." — Paul Vigna (06:14)
On payment adoption:

"All of them have kind of quietly dropped it because it never took off for them... It's never become a large part of his business." — Paul Vigna, on companies accepting Bitcoin (09:50)
On digital money’s future:

"Eventually somebody is going to figure it out and make it work... Is it going to be the Bitcoin collective? Is it going to be a company like Facebook? Is it going to be a government?" — Paul Vigna (10:40)

Timestamps of Important Segments

[02:21] — Dissecting the 2017 rally and the ICO boom
[03:54] — Discussion on inactive wallets and insular trading activity
[05:09] — Lack of technical innovation and signs of growth since 2017
[06:01] — ETF hopes dashed by regulatory skepticism
[06:50] — The bleak future for most cryptocurrencies
[07:47] — On potential catalysts for the next rally, and reflections on Bitcoin’s missed opportunity
[09:44] — Decline of Bitcoin as a payment option among major retailers
[10:40] — Who might figure out the future of digital money?

Conclusion

Paul Vigna offers a sober, clear-eyed assessment of both the technical and social dynamics that fueled Bitcoin’s 2017 rally and caused its subsequent stagnation. He expresses skepticism about the majority of cryptocurrency projects and outlines persistent challenges: lack of fresh institutional and retail money, regulatory resistance, and reputational scars from scams and infighting. Yet, he remains convinced that some form of digital money will eventually succeed—if not Bitcoin, then possibly an innovation from a major corporation or government.

Summary prepared for listeners seeking the meat of the discussion, minus advertisements, intros, and outros.

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Transcript31 lines

[00:01]
A
Deal replaces fragmented Payroll vendors with one global system. No third parties hire, manage and pay teams in 150 countries. Operate like a local everywhere. Visit deel.com WSJ.
[00:20]
B
Here's your money briefing for Tuesday, December 17th. I'm J.R. whalen at the Wall Street Journal in New York. It's been two years since bitcoin hit its all time high of nearly 20,000 dol. Well since then, Bitcoin's value has fallen more than 50%. Wall Street Journal cryptocurrency reporter Paul Vigna will tell us what it'll probably take for bitcoin to ride high once again. First, some money and market news you should know Amazon has a message for its third party sellers. You are forbidden from using FedEx ground delivery to ship Amazon prime purchases. In a letter to merchants, Amazon says that FedEx ground and home on time performance has declined and the ban will remain in place until delivery performance improves. The shipping data analysis company Shipmatrix ran the numbers and it says that during the week of Black Friday, UPS deliveries were on time about 93% of the time. And deliveries that Amazon made itself saw about 94% on time. Accuracy but FedEx deliveries were only 90% on time. Now Amazon says its third party sellers can still use FedEx as speedier and and more expensive express service for prime orders or they can use FedEx ground for non prime shipments. For Bitcoin investors, December 17 is a dubious anniversary. In 2017, the cyber currency hit its highest level ever, $19,783. Investors from all walks of life entered the market and so did gravity. Since December 2017, Bitcoin has traded as low as around $3,000 and currently sits at a level about 50% off its high. So where does it go from here? Let's bring in Wall Street Journal cryptocurrency reporter Paul Vigna for some answers. So Paul, bitcoin has recovered somewhat from its low in December 2018, but there really hasn't been a lot of movement since then.
[02:21]
C
No, there hasn't been. And the problem is that in 2017 what you had was the culmination of several years worth of development in bitcoin. Not just technically, not just, you know, companies being formed and startups and businesses and but, but socially as a movement, I think it's really important to remember that bitcoin, as much as it is a technology, it was also a social movement. And in 2017 that exploded. So you had this very sort of thinly traded asset that suddenly becomes extremely popular. People jump into it and it drives the price up very, very high. While that was going on in 2017, you had this concurrent phenomenon called the ICO market exploding. The initial coin offering, they were basically trying to take the IPO model and transfer it over to digital tokens. Was not a bad idea. But the way it was carried out, it was extremely rife with fraud and just very, very bad practices. And while bitcoin was reaching this peak in popularity, you also had this peak in just bad projects, nefarious projects, a lot of fraud. I mean, look what happened was bitcoin became valuable and it attracted a lot of bad actors. The problem now is that the good people that were interested and probably got burned have gone away, and. And a lot of what's left are the bad actors.
[03:54]
B
So you have 44 million Bitcoin wallets out there or accounts out there, and not very many of them actually are holding bitcoin at this point.
[04:02]
C
A lot of those probably are people that opened a wallet, downloaded the software, or opened an account on Coinbase or Blockchain or one of these other ones.
[04:11]
B
Hey, my neighbor made a lot of money. Let me try this out.
[04:13]
C
Right, exactly. Made one or two trades and then just left the thing there. So what you end up with is there is a very small percentage of those wallets that are actually active, and that's a reflection of how much this cryptocurrency sector has become an insular product. In other words, it's a lot of people that are inside bitcoin trading among themselves.
[04:36]
B
So it's like institutional traders.
[04:38]
C
No, no, no. That's kind of different. There are some institutional traders. That's the big, like, white horse hope that they've been waiting for, is that Wall Street's going to come in. That's something a little different. This is literally just people within the industry, within the sector, Bitcoiners trading among themselves. That that's what's really left. You don't have a lot of outside interest. You don't have a lot of new money coming in. You don't have a lot of new people coming in. It's basically just all the people that were there two years ago, five years ago, eight years ago.
[05:07]
B
So there's really nothing coming into that market to move the needle.
[05:10]
C
No, and look, there hasn't been. Certainly in the last two years, I would say there has not been anything technically new. You have a lot of experimentation still. You have a lot people trying to figure out what the technology can do for them. And I think that's an important part of This, a lot of companies have started experimenting with it. Governments are starting to look at it. You have a lot of that going on, but there has not. Like Bitcoin itself was a technical achievement. Digital money, online money, electronic peer to peer cash. That was a technical achievement. There had been people trying for two decades at least to build that and nobody had been able to do it. You have not had anything new. You have not had any real signs of growth in this industry over the last two years.
[05:53]
B
So you had big banks gently entering the market, creating ETFs. The ICOs, as you mentioned, those were seen as the next big thing, but they didn't really make a splash.
[06:02]
C
Well, right. And look, the, the ETFs, the exchange traded funds were seen as a great avenue to get retail investors into Bitcoin. Not one of them has been approved yet by the securities and Exchange Commission.
[06:13]
B
If you build it, they will come,
[06:15]
C
and they didn't come, but the securities and Exchange Commission will not let them build it. And, and the SEC has been very consistent about this. What they have said is that there is no transparency in this market. You do not know the level of manipulation of these prices because of that. This is not something that should be sort of readily available to mainstream investors. That's, that's why the SEC has not allowed an ETF to launch.
[06:42]
B
So Bitcoin has had its fall from grace. And in the last two years, how about its competitors? Have they in large part seen. Had the same fate?
[06:51]
C
Yes. And the competitors, look at this point, my personal opinion, and I've thought this for a couple of years actually, is that there might be six of these cryptocurrencies that have a future. Might might be six. It's really probably two or three.
[07:06]
B
There's a lot of shaking out to happen.
[07:07]
C
Yeah. That have a chance at a future. It may not happen, but they at least have a legitimate team behind them. They have honest developers trying to build them out. They have a vision. There might be three or four of those that have a real chance. I think most of the rest of them are projects that are never going to reach any kind of critical mass or they're just outright scams. And they're probably. There's a couple thousand cryptocurrencies out there, 99% of them have no future.
[07:35]
B
It seems like that this flatlining cannot go on forever. What is it that could trigger interest? Would it start with the SEC setting up a structure of rules so that people think, okay, now it's safe to go into the water? Is that where it would start.
[07:48]
C
Bitcoin came at a time when people were open to the idea of alternatives to the existing financial infrastructure. Right. The system had crashed to the ground in 2008. Everyone was trying to rebuild it. The rot was there for everybody to see. People were very open to the idea of an alternative. Bitcoin comes along. People were open to it, so they adopted it. They start jumping into it. Bitcoin had a window of opportunity where the timing was right, the. The technology was right, and they had no competition to build something lasting. And I don't think they have done that. That's my opinion. And I know a lot of the bitcoiners that if any bitcoiners happen to listen to this podcast, I'm gonna get a lot of angry emails because they don't believe me. But whatever. They had a window of opportunity where they had the technology, the momentum, and they had the lack of competition. They had a field wide open to build a new type of money, and they did not do it. They fell into infighting. The scammers and the fraudsters came in. The whole thing kind of fell in on itself. And that is really what we're talking about here. The post2017 high. What happened? That is what happened. And bitcoin has not been able to regain the momentum it had earlier.
[08:58]
B
And the scams and the uncertainty and the muddy waters that would scare investors away from any other entity on Wall street or in the business world. Yeah.
[09:08]
C
I mean, look, you now have a situation where for a couple of years they've talked about ETFs, the SEC won't allow one. You have a situation where for a couple of years they've been talking about institutional money, Wall street money, big banks, family offices, investment advisors, financial advisors coming in, buying bitcoin on behalf of their clients. That has not happened. But on a large scale, that has not happened.
[09:32]
B
But you still go online to shop, whether you rent a car, rent a hotel room. And Bitcoin is an option for payment. So there is some still interest out there.
[09:40]
C
Very few places.
[09:41]
B
Okay. Very few places has that dwindled.
[09:44]
C
Yes. In 2014, 2015, you had a lot of companies experiment with accepting Bitcoin as a payment option. Dell computer did it, Microsoft did it, Expedia did it. I'm trying to think. There are a bunch of others. All of them have kind of quietly dropped it because it never took off for them. Were they too early? You can debate that. There's only a couple that have kind of kept up with it. There's A online travel service called cheapair.com and I've talked to the CEO a lot over the years. They accepted Bitcoin and he loves it because it is good for his company. He has no credit card fees. There's no give back, there's no chargeback. There's no danger of a chargeback. Every payment is final. So there are advantages for businesses. And this guy loves it but, and he kept accepting it, but it has never become a large part of his business. Now that being said, I do think digital money has a future. It really dovetails very smoothly with the way our lives are becoming. Our lives are much more now online. We spend a lot, all our time online. We buy things online. We do everything online. Digital money dovetails with that. And eventually somebody is going to figure out and make it figure it out and make it work. The question is going to be who is that? Who is going to figure it out and make it work? Is it, is it going to be the Bitcoin collective? Is it going to be a company like Facebook? Is it going to be a government that digitizes their currency? That's the really big question now in 2019 and going into the 2000s.
[11:12]
B
All right, that's Wall Street Journal of cryptocurrency reporter Paul Vigna with us. Paul, thanks for coming on the show.
[11:17]
C
Happy to come on the show, J.R.
[11:18]
B
and that's your money briefing. I'm J.R. whalen in New York for the Wall Street Journal.
[11:24]
A
Still running global payroll like a relay race. Deal replaces fragmented payroll vendors with one global system. No third parties. Hire, manage and pay teams in 150 countries with in house local experts and white glove delivery and deal plugs into what you already use. Workday, SAP, Netsuite, operate like a local everywhere. Visit deel.com WSJ that's D Eel.com WSJ.