I recently commented that it would not surprise me if bitcoin plunged to $1.00. That was not a prediction, it was a comment.
Still, I still feel a collapse in bitcoin is likely.
For discussion, please see Cash Dinosaur: France Limits Cash Transactions to €1,000, Puts Restrictions on Gold; Bitcoin End Coming?
In response, reader Creighton writes …
While I’m not going to argue the point about the possibility that Bitcoin drops to $1, or less, (that could happen yet, but not for the reasons you propose) I felt it necessary to point out something you seem to have overlooked.
While it’s likely that the US government watching Bitcoin in order to get some pointers about releasing it’s own version of the US$, they would also have noticed that Canada attempted to do that exact thing two years ago.
It went nowhere. And it went nowhere for the same reason that the US, or China, or any other nation, couldn’t expect to succeed in the same market.
Bitcoin was first to market in the, previously non-existent, field of non-state Internet currencies. Precious metals don’t work, because there has to be a vault somewhere. The Liberty Dollar & Egold both tried that, and both got raided. There is a real market for a working non-state currency, that can’t be screwed with by state actors. Bitcoin isn’t perfect, as I have stated before, but if it’s going to zero, it will be because one of the many start–up cryptocurrencies that have arrived since Bitcoin turns out to be substantially better at doing the same things.
I understand that you are not a crypto-geek like myself, and that I’m biased because I understand how Bitcoin actually does what it does, but I can honestly say that it does some things in completely novel ways; and has features that no fiat currency, digital or otherwise, has been able to do internally. There are entire financial institutions in the finance industry founded upon solving many transaction problems that Bitcoin handles just fine internally, for the cost of about a nickel per transaction. Bitcoin is actually capable of taking over all the functions of notary publics & most of the functions of county clerks, everywhere.
Western Union’s cash transfer business model is walking dead. Keep an open mind, because there is a fair chance that you will eventually use Bitcoin, or its successor, in some capacity within a decade. Perhaps only as a cash transfer method, with the intent of switching back to cash immediately, but that day shall come.
Governments can no longer just suppress these new crypto-currencies and expect them to go away. The last chance to crush Bitcoin was several years ago, before the hashing rate (the cryptographic support of its security model) shot past the capability of the largest non-classified supercomputer on Earth.
Today (I just checked bitcoinwatch.com) it is over 4 million petaflops. The largest (unclassified) supercomputer on Earth is only 33 petaflops. It would cost more than the market capitalization of all of Bitcoin to build a computer cluster capable of matching that, and it would take years; by which time it would take still much more.
Someday, you too will be a convert, if never a fan.
Mish Response to Creighton
Hello Creighton. I fully understand that bitcoin is innovative and disruptive. Yet, all it takes is government action to make it illegal.
It does not even take action by the US to do bitcoin in. China could do it in given that 80% of bitcoin transactions are from China, most likely fraudulent as I have pointed out.
Bitcoin vs. Uber
The car service Uber survives even though it has been banned nearly everywhere.
I started accumulating all sorts of links many months ago. I collected well over 20. Here are a few of them.
- Germany: Car sharing service Uber banned in Germany
- France: France Bans Uber As Taxi Drivers Stage Protest In Paris
- New York City: Uber faces limited suspension in NYC for noncompliance
- Belgium: Uber prospers in Belgian capital despite ban
- Everywhere: Uber Is Apparently Illegal Almost Everywhere
In spite of the fact Uber is banned nearly everywhere, the company survives!
Because Uber is what the masses want.
Uber Cars Outnumber Yellow Taxis in New York City
Please consider Uber Cars Outnumber Yellow Taxis in New York City.
For the first time, there are more black Uber cars on the streets of New York City than traditional yellow taxis, figures have revealed.
The New York Taxi and Limousine Commission said there were 14,088 registered Uber cars compared with 13,587 yellow cabs.
However, the number of trips taken in yellow cabs far outpaces Uber rides. That is because many Uber drivers work part-time, whereas taxis often operate all day.
Do the Masses Want Bitcoin?
I do not believe the masses want bitcoin. Heck, do the masses even know what bitcoin is?
Bitcoin has a legitimate model. Yet, it is not a model the masses care about. As such, it is heavily dependent on the graces of governments and alternative models.
Governments can easily create (and demand usage of their own digital currencies). Governments cannot easily disrupt Uber.
Question of Sentiment
If I am wrong, then bitcoin will survive (just as Uber has survived numerous bans everywhere). In the end, it all boils down to sentiment.
I question whether or not public sentiment on bitcoin will be sufficient to overcome government restrictions.
In contrast, Uber has fared phenomenally in spite of governmental attacks everywhere.
Mike “Mish” Shedlock