Earlier this year, Hacked published an article comparing bitcoin to the California gold rush, when the discovery of gold sparked a frenzied, greed-driven migration into California from 1848 to 1855.
It’s an interesting analogy because our folklore says the gold rush left everybody destitute except the frauds and scammers who ripped off speculators.
Something to keep in mind as we struggle to enter the next bitcoin bull run?
Yes. We should all hope cryptocurrency ends like the California gold rush.
Bringing wealth to barren lands
In popular history, people from all over the world came to the California hills in search of gold. They came with nothing, found no gold, and left with nothing. Merchants, lenders, and corporations made fortunes off of their foolish hopes.
But popular history is hogwash.
Yes, early miners suffered crazy-high costs for food and equipment. In 1849, a single egg could cost the equivalent of $25 in today’s money, coffee went for more than $100 per pound, and a pair of boots could set you back more than $2,500.
By the gold rush’s peak in 1852, prices had dropped a lot. Maybe the influx of supplies through San Francisco tamped down prices? Perhaps later miners made less money than those early prospectors, therefore wouldn’t shell out for luxuries like eggs and coffee? Could three years of investment in roads, ports, buildings, and laws have made it easier to get products to market?
Whatever the reason, by the time the gold rush ended in the mid-1850s, San Francisco had grown from a tiny outpost to a thriving commercial center. Crowded, for sure—but hardly poor.
Most people earned a decent living and some had made a lot of money. Tent-sheltered and ship-bound vagabonds moved into newly-built brick and stone houses. Once the gold rush ended, San Francisco was considered the largest and most important financial center in the Western United States.
Those early settlers arrived to lands that were mostly empty hills and rivers. They had no ports, roads, or depots, nor any formal system of property rights, land grants, or taxation.
By the time huge corporations took over the gold mines in the mid-1850s, California boasted steamboats, railroads, retail, and modern prosperity. Entrepreneurs had discovered new dredging techniques and invented modern hydraulic mining. Agriculture boomed. Businesses flourished.
In fact, some economic historians credit the gold rush for the longest recession-free period in U.S. history (1841-1856).
Can bitcoin do the same?
While bitcoin’s price has gone down since its all-time high of $20,000, activity hasn’t stopped.
We have more development than ever before. Crypto-specific trade organizations and new financial models. Clearer regulations and better infrastructure. Massive leaps forward in technology.
Like the “49ers” of the California gold rush, we’ve brought mainstream awareness, investment, and professionalism to an exciting new opportunity. We still have to solve some problems with government and infrastructure—a task well underway.
Will we get the same prosperity as those old miners?
Let’s hope so.
Mark Helfman is a top writer on Medium for cryptocurrency, finance, and bitcoin topics. His book, Consensusland, explores the social, cultural, and business challenges of a fictional country that runs on cryptocurrency. In a past life, he worked for U.S. House Speaker Nancy Pelosi.