[Inside Chodong] Bitcoin Plunge and UK Railway Union Strike

On the first day of the UK rail strike on the 21st (local time), a scene at Waterloo Station in central London. [Photo by Reuters Yonhap News]

[Asia Economy Reporter Park Byung-hee] The fluctuations in international oil prices during the 2008 global financial crisis were astonishing. In July of that year, the price of West Texas Intermediate (WTI) crude oil hit an all-time high of $147.27 per barrel. In September, the 160-year-old American investment bank Lehman Brothers went bankrupt, and by December, WTI had fallen to around $30 per barrel.

Recently, the decline in Bitcoin prices evokes memories of WTI at that time. According to cryptocurrency information site Coindesk, Bitcoin prices rose to $68,990.90 in November last year before plummeting to $17,601.58 on the 19th of this month, a drop of 74.5%. As of the 28th, Bitcoin prices have somewhat recovered, regaining the $20,000 level. However, the decline from the peak still stands at 70%.

The news that the UK railway union has launched its largest strike in 33 years suddenly brought to mind the movie Billy Elliot and Bitcoin. In a situation where the burden of living costs has increased due to inflation and they face restructuring crises, they appeared like Billy’s father in the film, who went on strike as the mining village collapsed. It also raised concerns about how many people, desperate after pooling their meager savings to buy Bitcoin in hopes of increasing their money, might be in a similar plight.

Looking at the price trends over the past six months, it is clear that Bitcoin has experienced an ‘irrational exuberance.’ The massive money printing by central banks such as the Federal Reserve (Fed) was likely one of the causes of Bitcoin’s irrational exuberance. The large-scale liquidity injections by central banks drove up the prices of almost all assets, and despite debates over its ‘value,’ Bitcoin’s ‘price’ rose excessively.

The term ‘irrational exuberance’ was mentioned by Alan Greenspan, the longest-serving Fed chairman, in a TV lecture in December 1996 during the dot-com bubble. It is also the title of a book published in 2000 by Yale professor Robert Shiller, who warned of the US housing market collapse that triggered the 2008 global financial crisis. According to Wikipedia, Professor Shiller explains irrational exuberance as a process where justifications for price increases spread, leading more and more people to invest despite doubts about the actual value. Investment driven by irrational exuberance ignores intrinsic value, takes on speculative characteristics, and ultimately causes price bubbles.

In an era of inflation where all prices rise, doubts inevitably grow about whether one’s labor value is being fairly priced (compensated). As seen in the case of the UK railway union, an increase in strikes is expected.

Recently, the UK conservative media outlet Daily Express quoted an interview with a citizen regarding the railway union strike, headlining it ‘Pity we don’t have Thatcher now.’ This implies a call for a tough response like that of Margaret Thatcher.

During her tenure, Thatcher forcefully restructured the coal industry, which had lost competitiveness, clashing fiercely with unions in the process. The movie Billy Elliot is set in a mining village during Thatcher’s administration in 1984.

Thatcher remains one of the most polarizing politicians in the UK. While she is credited with curing the ‘British disease,’ she is also criticized for weakening workers’ power and widening the wealth gap. Given that inequality has worsened today, the question remains whether Thatcher-style responses would be effective.