Over the past months or so I accumulated a number of articles regarding Bitcoin and ICO (initial Coin Offerings) myths and hype.
Let’s also take a look at what I consider to be fatal flaws, one I have not seen discussed yet in articles, but the idea is easily understood.
Myth #1: BitCoin is the Next Gold
September 5, Bloomberg: Could Bitcoin be the Next Gold?
The idea is preposterous. There is no “next gold”.
Gold is gold, nothing else.
Myth #2: The Institutional Herd is Coming
September 4, Charles Hugh Smith via Zerohedge: Bitcoin, Sour Grapes, And The Institutional Herd.
Smith: What’s the value proposition in declaring BTC is in a bubble?
Mish: The bubble proposition value is the same now as declaring the housing bubble before it happened in 2004 and again more recently
Curiously, on September 12, 2017, Smith proclaimed Housing Bubble Symmetry: Look Out Below. I guess it’s OK to talk about housing bubbles but not Bitcoin bubbles? What value proposition is that?
Smith: Declaring Bitcoin a bubble is starting to sound like sour grapes.
Mish: Just like declaring a housing bubble is sounding like sour grapes? Right?
Smith: The point is institutional ownership of Bitcoin is in the very early stages. As bitcoin continues to advance, institutional money managers will be forced to buy in, just to avoid the fate of those who failed to buy Apple. Money managers buying now at $4,500 will look like geniuses when it hits $10,000, and everybody who dismissed BTC as a bubble at $5,000 will face a bleak choice–either get some bitcoin in the portfolio or prepare for a pink slip. When the institutional herd starts running, it’s best not to get trampled.
Mish: Institutional investors will be forced in? Really?
They never embraced gold, silver, copper, the Euro on the way up, the Yen on the way up, or the dollar when it bottomed.
It could happen, but realistically there is no reason to believe institutions will embrace Bitcoin. If anything, there is every reason to believe institutional investors will leave Bitcoin alone.
Myth #3: Bitcoin Can Never Be a Bubble
June 11, Coinspeaker: Here’s Why Bitcoin & Ethereum Can Never Be In A Bubble (No, really: digital bubbles are impossible) by Daniel M. Harrison, Editor-in-chief of Coinspeaker and Chairman & CEO of global investment company DMH&CO.
“Yes, you heard that correctly. I am saying a bubble in digital asset valuations is completely practically impossible from any reasonable conceptual and logical – and especially, financial – standpoint. The reason? Market Bipolarity.”
The discussion is mostly incomprehensible non-logic that boils down to this amusing set of ideas.
1) the Theory of Reflexivity which belongs to George Soros;
2) my own observations of how different thinking participants act in capital market cycles;
3) annexing my understanding of the latter with my understanding of the function and affect of the Blockchain economically speaking.
Got that? Bitcoin can never be a bubble based on the author’s observations of a theory by George Soros.
He concludes “The innovation in and of itself has fundamentally radically altered the laws of economics, at least in its own sui-generic sense.”
The article sounds like year-2000 “Gorilla Game” logic that said no price is too high to pay for a “gorilla”. Cisco (CSCO) was one of the alleged “gorilla’s”.
Silliness
There’s Literally A ‘Token’ Called “F*ck” That’s Up 370% In The Last 24 Hours
August 31, Zerohedge: There’s Literally A ‘Token’ Called “F*ck” That’s Up 370% In The Last 24 Hours.
Just Like Apple
August 26, MarketWatch: ‘It’s like being in Apple at 10 cents’
39-year-old ironworker Greg Salerno from Hoboken put $1,600 in bitcoin, and it’s now worth $20,000, prompting others at his workplace to come to him for advice.
“It’s like being in Apple (AAPL) at 10 cents,” said Salerno.
No, it’s not.
Keeping Up With the Joneses
That wasn’t the top, but we may have seen the top now.
Enter the WhopperCoin
August 26, ZeroHedge: Burger King Russia Introduces The “Whoppercoin” – The Fast-Food Industry’s First Digital Currency
The Whoppercoin was officially introduced on Aug. 22. Its introduction followed reports earlier this summer that Burger King Russia was planning to start accepting payment in bitcoin.
Predictions Abound
August 27, Wall Street Journal: Faithful techies think in coming decades one digital coin will be worth $500,000.
“Early Snapchat investor Jeremy Liew thinks Bitcoin will reach $500,000 by 2030. Tech eccentric John McAfee believes it’ll take only three years. That’s $1 trillion of digital coins. Now companies with an idea for applications built on top of these currencies are raising hundreds of millions through initial coin offerings. Is Bitcoin the greatest rocket ship ever or will it end up a giant smoking hole in the ground? Maybe coin owners should appeal for tax-exempt status if the IRS would consider Bitcoin a faith-based organization.”
Ridiculous Cryptocurrencies
Recall that Coinspeaker author Daniel M. Harrison said Bitcoin can never be a bubble because it “Fundamentally altered the laws of economics”!
By the same logic, the following ridiculous currencies can never be in a bubble either.
August 30, Benzinga: 10 Most Ridiculous Cryptocurrencies
- Dentacoin: Dentacoin is the brand new cryptocurrency designed by the global dental industry and already accepted as a means of payment at partner dental clinics. Dentacoin currently has a market cap of more than $2.9 million.
- Titcoin: Titcon claims to be the most popular cryptocurrency intended to be used for the adult entertainment industry. It hasn’t exactly taken off, with a market cap of only about $228,000.
- Dogecoin: Dogecoin was created as a joke based on the popular “Doge” internet meme. Somehow, Dogecoin now has a market cap of more than $232 million.
- Monacoin: Of course, if there’s going to be a dog meme coin, it would be ridiculous not to have a cat meme coin. Right? The cat meme Monacoin is particularly popular in Japan and has a market cap of $26 million.
- Trumpcoin: If you’re tired of the direction bitcoin and Ethereum have taken the market and want to make cryptocurrency great again, Trumpcoin may be right for you. Trumpcoin hasn’t gotten many votes from investors so far, with only a $386,000 market cap.
- Potcoin: Of course the cannabis industry has its own cryptocurrency. And of course it sponsored Dennis Rodman’s trip to North Korea. Why not? Potcoin has a market cap of $26.5 million.
- Legends Room: The Legends Room in Las Vegas is the first gentleman’s club in the world to have its own digital currency. Five thousand coins buys you a lifetime membership to the club. The current market cap for Legends Room is $3.0 million.
- Insanecoin: Nothing inspires confidence in an investment quite like having the word “insane” right in the name of your currency. Yet Insanecoin currently has a market cap of more than $2.4 million.
- Unobtanium: Unobtanium’s claim to fame is that it was designed to be the rarest cryptocurrency in the world, inspired by the fictional mineral that was the basis of the movie “Avatar.” While Unobtanium may be exceptionally rare, you can pick up a coin for about $76 on today’s market. Current market cap stands at $15 million.
- Useless Ethereum Token: The most absurd currency of all appears to be a protest against cryptocurrencies gone awry. What is a Useless Ethereum Token? “No value, no security and no product. Just me, spending your money”
World’s First Honest Ethereum ICO
Let’s dive further into the Useless Ethereum Token.
Let’s be honest—everyone’s tired of ICOs. They get hyped up for weeks, and then they launch and clog up the Ethereum network for days, Coinbase goes down for a while, and then “investors” see the new tokens lose most of their “value”. This ICO is going to be different.
“Might be secure, definitely not audited”
“Guaranteed Token Value”
Unlike with every other token sale on the market, I can guarantee here and now that the value of UET will not (in fact, can not) reduce during or after the ICO. They’re called Useless Ethereum Tokens for a reason.
Wait… is this a joke? Is it a scam?
Neither! This is real—and it’s 100% transparent. You’re literally giving your money to someone on the internet and getting completely useless tokens in return.There are no “whitepapers,” no “products,” and no “experts.” It’s just you, me, your hard-earned Ether, and my shopping list.
Congratulations to the Useless Ethereum Token
Congratulations are in order. The Useless Token founder made $72,072 selling digital tokens guaranteed to be worthless.
As far as overall profit goes, that’s peanuts. On a percentage basis, however, the Useless Token founder made an infinite profit and everyone else lost 100%. Nicely done!
Magnificant Hype
Here is some of the most Amazing Bitcoin Hype to date. The article is lengthy so I will post some image clips.
Big News Big News
The big news on October 26 is pure speculative. Amazon may announce it will accept Bitcoin. Will it matter? I suppose it could matter, but what if it doesn’t.
Bitcoin Flaws
- Bitcoin does not scale. Other digital currencies claim to scale.
- There are no barriers to entry. Proof of the above is the sheer number of currencies. There are 800 over digital currencies. Most will eventually be worthless.
- Government crackdowns. I said long ago China would crack down on digital currencies. They did. Most of the trading volume is speculation or capital flight out of China. I strongly suspect the crackdowns have just begun.
Crash
Amid calls that Bitcoin cannot or will not crash, Bloomberg reported just today that Bitcoin Crashes After Chinese Exchange Says It Will Halt Trading.
Unlike earlier “crash” reports, this one has a feel that it’s the real deal. Here is a screen shot of Top Crypto Currencies.
There are numerous pages. I showed only the first one.
Not to fear, I have it on high authority there can never be a bubble based on a modified theory from George Soros.
Top Weekly Losers
- IFC: Infinitecoin down 79%
- CCRB: CryptoCarbon down 89%
- MAX: Maxcoin down 78%
- MEC: Megacoin down 84%
- MGC: Mergecoin down 87%
- ZET: Zetacoin down 80%
- XCN: Cryptonite down 82%
- Tag: Tagcoin down 84%
- ZCC: ZcCoin down 87%
- BUN: BunnyCoin down 92%
- AMIS: AMIS down 98% (87% today alone)
Down 50% or more in a week is a crash. Perhaps this will wake some people up. Perhaps not.
The big winner was COXST: CoExistCoin up 1000% (Market cap $0).
The more I look at this the more appropriate the “Gorilla Game” comparison seems.
Amazon, technically a “Godzilla” not a gorilla by Gorilla Game theory, survived a crash to $6 then recovered nicely, to say the least. The imitators did not fare so well.
Could it happen again? I suppose. Remind me to buy if Bitcoin goes back to $100.
If Wishes Were Fishes
If wishes were fishes the nets would be full. Do I wish I put $10,000 into Bitcoin or any of the other huge winners more recently?
Of course. But let’s be honest here. The odds that $100 has another chance of turning into $50,000 are very close to zero.
On that 1-2-3 chart are we at 2 or the top of 3?
Things typically do not blast 20,000 percent and then do it again. Is it possible? Yes. But more than likely, to make significant money from here, one has to risk significant money here.
Other Side of the Coin
James Altucher, crypto millionaire, is the author of the above ads. He turned $15 million into $0, then $0 into countless millions. He is a very bright guy. He was correct about Bitcoin and numerous other things.
But that ad smacks of investment seminars on how to flip a house right at the peak of the housing bubble.
Altucher also has a huge self-interest in getting people to buy digital currencies. He makes out huge time if the bubble continues. That is not an attack, it’s simply the truth. We all promote what we like.
Reflections on Hype and Top Calling
I cannot stand over-the-top hype. The constant barrage of hype on Bitcoin undoubtedly has some hoping for a crash.
However, hype sells (until it doesn’t).
Is this the top? I have no idea, but promotions of Bitcoin to $500,000 are more than absurd.
Blockchain Technology
Blockchain is an amazing technology with many practical uses, especially low-volume, high price transactions. Think mortgages, deeds, auto titles, and security transfers.
Digital currencies may facilitate things, but that is no reason to expect someone will pay $500,000 for a single Bitcoin.
Bitcoin vs Gold
I wrote about gold hype in Gold and Bitcoin Hype Hits Stratosphere (Part 1).
Consider this article, part 2.
By comparison purposes, Rickard’s target of $10,000 for gold is amazingly tame.
In my admittedly biased opinion, gold at $10,000 is far more likely than the equivalent move in Bitcoin.
Bitcoin is not the “next gold”. Gold is gold, nothing else.
Mike “Mish” Shedlock
Bitcoin aside, why is Amazon able to continue to run monopoly
now with Whole Foods but historically pay/charge/avoid limited tax.
OK now you know, Bitcoin, used significantly to avoid tax
and to launder money, and to remove money from countries
like china is now being ” tamped down”.
Sooner or later the Government will want their money.
That bitcoin made it this far is surprising.
they should have shut it down day one after it was the
primary vehicle for payment of the virus/shutting down computers.
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Asking to shut down bitcoin because people use it to ask ransoms is like asking to shut down the banks and AIG for causing the 2008 financial crash.This was the reason bitcoin came into being because people like Soros were making and breaking the market and robbing the general public. All this talk about money laundering is silly because even with cash it is possible. The bankers are pissed because they have no control over it that is why they want to ban it and deride it
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Bull sheet!
They want it off the market cause it phoney money and they do not want to get stuck with it. When there are so many other ways to Launder Money.
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Thanks for the sharing Mike.
Maybe one day the Crypto currency world will become normal like Stock trading or another currency for e-Commerce.
Definitely not in 2017.
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I see no reason why I would care if Bitcoin never crashes, or if it does crash.
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From the very beginning I said the fatal flaw was you need banks to get in and out. One day governments would forbid banks to buy/sell them for you. Since virtually no businesses accept them, this would be the end.
Before getting into any investment, you must be sure you can get out with your profits. If you can be trapped that easily, best to stay away.
The first light bulb and many other inventions didn’t work so well in their form. They were still important as is bitcoin. I predict major banks or perhaps visa/mastercard will come out with a crypto currency that will be accepted widely, because of their existing infrastructure. Most, if not all, of these early tries will be total failures in the end.
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I predict major banks or perhaps visa/mastercard will come out with a crypto currency that will be accepted widely, because of their existing infrastructure. Most, if not all, of these early tries will be total failures in the end.
They are already working on it.
Six Banking Giants Just Decided to Partner to Create a New Cryptocurrency
https://futurism.com/six-banking-giants-have-decided-to-partner-to-create-a-new-cryptocurrency/
There will be a big push alright
Mish
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The most frequent justification for bitcoins I hear is that Bennybux a.k.a printed dollars have the same real world value. Printed dollars made the rich richer. Now, the middle class wants to achieve the same with bitcoins. Makes total sense. The end can’t be that far away.
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I’m waiting for the Tulipcoin to come out.
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BTFD COIN.
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“Yes, you heard that correctly. I am saying a bubble in digital asset valuations is completely practically impossible from any reasonable conceptual and logical – and especially, financial – standpoint. The reason? Market Bipolarity.”
Market bipolarity = boom and bust. Bust is when bubbles burst. Saying a bubble in digital asset valuations is practically impossible, has already been proven wrong by previous bubbles in them already.
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None of the “flaws” of Bitcoin are “fatal.” Absent better anonymity guarantees, I doubt we’ll see truly widespread adoption, as it’s infinitely cheaper to operate a traditional ledger based payment system.
But I’m not aware of any fundamental reason why anonymity won’t be decisively solved for crypto currencies. At which point I can’t see why they won’t see use.
A nice price correction, even a 99% one, can only be good for the ecosystem. As it stands now, the serious and capable in the Crypto currency field, are being displaced by the same half literate hucksters that have ridden the wave of preferential Fed freshprint access to dominate, then decimate by sheer unbridled stupidity, most other fields.
But whether built on Bitcoin proper or not, an anonymous, cheaply transferable to anywhere, and durable currency existing in a fixed and verifiable number, is a major development in the direction of freedom. And in a world that is moving ever faster in the opposite direction, that can’t help but become attractive to many, at some point.
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Bitcoin has serious scalability issues and as it gets more expensive to mine it is in danger of centralization, which would mean it’s end.
Ethereum has similar issues, but also a lot more practical uses and has better chance at getting some of the issues resolved.
But most likely, both will be eventually replaced by a different technology that scales better than the blockchain.
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Centralization is a problem that can be solved by a richer verification function. One that stresses the entirety of a typical consumer computer, rather than just subsets.
Of course, that will come at the cost of settlement speed, hence scalability. I’ve never really been on board with the Bitcoin maintainers’ obsession with keeping every darned little day to day transaction on chain. As I see it, simple ledger based systems already handle those use cases perfectly well. What they lack is anonymity, and an underlying currency that is not open to debasement.
So Bitcoin, or it’s replacement, should focus narrowly on those two. Retaining just enough settlement speed, to be useful for filling traditional accounts with anonymous coins. And to handle large payments, where instantaneous settlement at “no” cost is less of an issue.
Then people could keep their savings on chain, while having a gaggle of completely unrelateable, and anonymously funded, “numbered” accounts for day to day transactions.
That way, freed from most scalability concerns, Bitcoin could do what it does best, anonymity and non debaseability, while ledger systems that are already highly optimized for cheap and fast settlement can do what they do best.
It’s not the Utopia some Bitcoin acolytes may be hoping for, since anyone operating a ledger can just take the coin and run (it’s all anonymous, after all, and no doubt violating all manners of “laws” against “numbered accounts” that the oppressors want to beat their underlings over the head with to make robbing them easier). But the ease and cheapness of operating one, will ensure enough of a supply to enable anyone to spread even their day-to-day-use funds out over a multiple of them. While keeping most funds safely tucked away on chain. And the ever increasing drag of combined sales and income taxes, reporting/compliance cost, traceability/harassability etc. of transacting in the officially sanctioned manner, looks plenty higher than the risk of an occasional rogue ledger operator to me.
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Don’t ever get caught trying to smuggle bitcoin in your luggage…
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LOL, I’m assuming MAXCoin is somehow connected to Max Keiser.
As for Altucher, he has made some nice calls to the bullish side in the past. I can’t rule him out on this.
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Mishcoin?Is it good?
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Guaranteed Token Value sounds a lot like paper money.
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So how do you cash out your Bitcon or other crypto “fortune” into fiat, i.e. to get a check or bank wire transfer? And I mean significant amounts to buy a car or condo or other high-price item for which payment in crypto is not accepted. Not the penny ante stuff people crow about when they make “1000% profit” without telling you it was on a $10 “investment”.
It is reported that the exchanges (which are all unregulated) will have a daily withdrawal limit, or they might even close your account for alleged security infringements or other pretext. Check the Coinbase complaint boards or other forums. In one forum it was stated that any withdrawal over $10000 will activate an IRS suspicious activity notice.
And if you keep your Bitcon in an off-line “wallet” as recommended to avoid being screwed over by an exchange, it appears the only other alternative is to find someone who is willing to exchange Bitcon for a suitcase full of cash in a dark alley.
The fanatics will say of course that you do not convert crypto into useless fiat but buy other cryptos with the “profits” or wait until Bitcon reaches $1000000.
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You could buy stuff while vacationing in Japan…..
Or, over time, other countries. Smaller, less wealthy countries has a lot to gain by not harassing Bitcoin holders spending money with their merchants, once there is a stable and verifiably large amount of money in the currency.
It’s easy for governments to harass and demonize small minorities. Once the minorities grow bigger, things get a lot more complicated.
Particularly with a minority defined by it’s holdings of an anonymous and durable currency, as anonymity makes accepting bribes largely risk free, for those who are tasked with enforcing bans, reporting requirements etc. And even a 10% bribe, is a big savings over a 10% sales tax on top of a 30% income tax and a 5% insurance fee against legal extortion and a 5% cost of compliance…….
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bitcoin will crash when the tax authorities get smart enough to de-annymize trading accounts and figure out how to tax bitcoin in dollars.
i for one would find it hard to justify paying out first for the bitcoin and then the tax in btcoin when priced in dollars – a lose/lose for any investor that first buys btc in dollars and is then taxed on “make believe” profits in dollars.
perhaps the IRS will never be smart enough to track BTC accounts and trading or even maybe take tax payments in bitcoin, but somehow i doubt it.
i remember when they saud that 256k encryption was unbreakable – turns out it wasn’t and neither are the worlds most sophisticated computers.
you need to hack the bitcoin algo to “mine” BTC – ironic huh?
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ponders whether thr IRS would allow losses in trading BTC to be used to offset profits in gold, shares etc
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The Elliott waves look complete for BitCon. The kleptocurrency bubble has popped.
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Mish you are smart man, but you should study more about cryptocurrency.\
Cryptocurrency is bigger then Internet. It will absorb all the gambling market ( include casino, horse racing) it is so huge so you cannot see the change.
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what’s that lincoln quote about remaining silent?
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I mention gold from time to time in trustee meetings, and the answer over many years is that it is too risky. Its the rare trustee or investment committee that actually will buy gold explicitly (some end up owning it through CTA or multi-asset investments). I doubt many will buy “x”-coins explicitly, but they will likely end up owning some indirectly.
Many years ago (2005) I got to sit on a roundtable at an investment conference I mentioned our fund had done fairly well in real estate, and a woman asked me if buying houses was a good personal investment. So, like an old prudent person, I said something to the effect of “You live in houses, you invest in risk” and was laughed at by more than a few people who were making pretty good money flipping houses and condos. Same crowd wasn’t laughing so hard in 2010.
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Currency is an exchange medium making it easier to trade goods and services. The reason the dollar is the current dominant trade currency is due to its relative stability and the size of the market for it, in other words it’s ability to absorb and disburse large demand and supply.Bitcoin achieves one of these because it is self created and can expand at the press of a button. It doesn’t have the relative stability to absorb a massive demand as we see with the ridiculous price run up. I suggest we name a crypto currency the Tulip Bulb because these things are a figment of its maniacal adherents. This will all end in tears.
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Man , there is stable cryptocurrencies out there and the beauty of it is stability.
It is pegged to qUSD, CNY, and so on. Seems you don’t understand crypto at all.
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Just lacks the depth of market for now, would be stable if it were used instead of existing currency, end to end. Now it is vulnerable to speculative value, bureacracy, some technical questions. Whether it could or will become a future widely accepted and accounted currency is another question. It is trying to though. Fiat is still the reference, btc in dollars not how much btc does a dollar buy nowadays.
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cryptocurrency will become widely used when the monied powers control it
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Adam Curry on Bitcoin:
http://naplay.it/892/1-33-29
All these currencies are just speculation. They aren’t investments any more than beanie babies or Lego kits. Sure, if you’re heavily tuned into the market and not depending on it for your sole income, sure, go for it. You might even make a few bucks. Yes, there are even a few people who can make a business out of collecting toys, even retail, but the sales per foot ain’t exactly Apple store levels. And they’d better not have a lot of capital invested in the business because when the market falls apart it will be brutal. Far better to start a weekly poker game or a football pool with your friends and neighbors. And probably more fun too.
The problem, as Adam points out, is that the worst thing for a currency is a lot of fluctuation. The fundamental treatise of the Austrian school is that the dollar should be a yardstick, not a rubber band. Unless these crypto currencies trade at a reasonably stable value they’re very dangerous.
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I love the thoughtless comparison of btc to the likes of beanie babies or legos…Come on. That type of example/argument is no different that the nonsense you see coming from crazed bitcoin acolytes. The polarization of the discussion causes each extreme side to lose credibility. And yes you can see it clearly in MISH’s original post- look at all the soundbite BS–equating or implying that bitcoin = potcoin and posting the obviously ridiculous hype ads (which exist for EVERY asset btw…so spare me).
The extremist advocates and the extremist naysayers are both FoS here. That should be obvious.
I cant stand sound bite Cryptocurrency discussions by o/w intelligent people. So Mish and commentators here try to put the same rational thought and effort into your bitcoin discussions as you do in other topics. Drop the dang ridiculous hyperboles. It’s knocks on your credibility and authority on the topic.
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Color me thoughtless. I’ve always thought it will end up being worth a few dollars less than a beenie baby.
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FWIW, I messed around in BTC last year. I doubled my money and got out and consider my experiment a disaster. Not because “I should have held” but because I specifically wanted to try to use it for day to day transactions, like I can with cash, credit cards, Apple Pay, and PayPal. What I found was a web page that showed locations that said they accept BTC but didn’t, Bitcoin kiosks that didn’t work and blank faces from people when I tried to explain it, although that’s probably because I really don’t get it either, especially when you see giant swings daily.
My brother in law trades antique toys on eBay. He is pretty good at it. But if he wanted to buy groceries with a toy he’d first have to convert it to cash -something I had to do to get rid of my bitcoin, btw. It isn’t a currency at all, any more than gold bars. Yes you might be able to find someone willing to take BTC directly but it is highly unlikely. And given the wild fluctuation in price how can you possibly say with a straght face that it somehow is the future? Or that any of these crypto-currencies are?
I guess I’m trying to say that I understand your enthusiasm. I really want to have a digital currency that doesn’t rely on 3rd parties for anything more than verification. But until the exchange rate settles down (which may take years, if ever) I don’t see where it is any more revolutionary than any other fad. Sorry.
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Say what you will about crypto currencies, but when governments move to suppress them, they are more real and possibly influential to world economies than anyone wants to admit. If it was a fad, it would simply fade away. Suppression and derision should make people consider what everyone is so afraid of happening. My mind is still open on the subject.
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There’s a reason they call it cryptocurrency and not cryptospecie.
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Does trade in ICO’s contribute to GDP? 😉
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And comparing Bitcoin to housing? Whatever.
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FLAWS (debunked)
#1 Bitcoin does not scale. Other digital currencies claim to scale.
This is not a flaw. it’s a feature, and it’s also not true. Scalability is a feature that is being addressed by the bitcoin community (see recent ‘fork’ discussion).
#2 There are no barriers to entry. Proof of the above is the sheer number of currencies. There are 800 over digital currencies. Most will eventually be worthless.
Again, this is not a flaw, it’s a feature. 800 digital currencies? Great. The more competition, the better. Mish complaining about low barriers to entry in any market is rather strange.
#3 Government crackdowns. I said long ago China would crack down on digital currencies. They did. Most of the trading volume is speculation or capital flight out of China. I strongly suspect the crackdowns have just begun.
Govt’s can’t stop cryptocurrencies, and the harder they “crackdown” the more valuable the cryptos will get. Govt’s will ALWAYS be MILES behind tech’s bleeding edge… govt. action can only strengthen cryptos, they CANNOT stop or even weaken them (long term).
Can cryptos be in a bubble? Of course. But we are no where near bubble territory for BC or crypto in general. Comparing RE/housing bubble w/ crypto at this point in time is rather pointless & non-constructive.
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But we are nowhere near bubble territory for BC or crypto in general.
How the hell do you know? You don’t.
I admit BC could get to $10,000 It could also go to $100
Why can’t it?
Oh, I know.
A theory based on something George Soros stated
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Since this is blog well-versed in Austrian economics, I encourage everyone to read this 2014 piece analyzing Bitcoin from the point of view of Mises’ “Theory of Money and Credit”:
https://fee.org/articles/what-gave-bitcoin-its-value/
Definitely a good read even for those that are bitcoin-skeptic.
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Agree
But what value does one attribute to the “payment system”?
Any number of similar payment systems (crypto currencies in general) have the same attribute
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In the words of Mises:
“Thus the requirements of the market have gradually led to the selection of certain commodities as common media of exchange. The group of commodities from which these were drawn was originally large, and differed from country to country; but it has more and more contracted. Whenever a direct exchange seemed out of the question, each of the parties to a transaction would naturally endeavor to exchange his superfluous commodities, not merely for more marketable commodities in general, but for the most marketable commodities; and among these again he would naturally prefer whichever particular commodity was the most marketable of all. The greater the marketability of the goods first acquired in indirect exchange, the greater would be the prospect of being able to reach the ultimate objective without further maneuvering. Thus there would be an inevitable tendency for the less marketable of the series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money.”
Bitcoin came first, so it is the most marketable…
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…but it ain’t a true commodity. Sugar, Oil, Coffee, Gold, Corn, Wheat…. these are real physical products you can use. Bitcoin is less real than a fart in a bottle.
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I tend to think bitcoin has a future.
Cash has been under attack for a while, because it allows anonymous transactions.
Bitcoin is only anonymous going in. Coming out it still needs to go to a bank account.
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Rational thinking, Mish – but what happens if the government passes an irrational law supporting cybercurrencies, or comes up with its own and requires people to use it? We have to remember we are not in a rational world, we are in a government-regulated world… and laws are just bits and paper like anything else.
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Cybercurrencies as ‘money’ have no practical use because they are unstable and probably always will be unstable. Who can define the value of a cybercurrency relative to all the goods and services that you wish to purchase except by conversion from fiat? Cybercurrencies are just a derivative of fiat currency.
Government-created cybercurrency would not be irrational, that is the definition of a fiat currency – money with no intrinsic value. The government could define its own cyber to be worth what the dollar is worth and cancel the physical dollar, or in fact they could still maintain the physical dollar and run the cyber in parallel. There would also not be any speculation of the cyber, just as there is no speculation of the physical USD within the United States.
If you think about it, the electronic dollar transactions we do today are cyber, and they overwhelmingly exceed physical currency transactions.
When you think about it more, it’s not even necessary for the government to create a cybercurrency – it already exists and most of us use it every day.
Instead of mysterious exchanges with no address and a phone number answered by a bot, that can (and have) just disappear with all your money just by flipping a switch, and that take sometimes days to transfer funds to our banks, we have cash machines and banks we can walk into and talk to people, and actually make physical withdrawals of cash in seconds.
This whole cybercurrency business is just part of the doomsday-survivalist-paranoia movement that coincidentally has become another speculative mania.
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There is lots of decentralized stable coin out there. They are not yet perfect, but it is rapidly evolve.
Check out these two:
https://coinmarketcap.com/currencies/steem-dollars/
https://coinmarketcap.com/assets/bitusd/
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