Is There a Cryptocurrency Bubble? Just Ask Doge
nytimes.com
nytimes.com
There is definite frothiness in the market. Some token sales are scams, some are overpromising, and some that look promising will probably blow up. Take a look at SEC Fraud statistics for 2016. Crypto scams are a small fraction of these crimes: https://www.sec.gov/news/pressrelease/2016-212.html
Reporters need to separate Bitcoin, Ethereum, Litecoin (and some of the other older cryptocurrencies) from token sales and other crypto assets. Bitcoin has existed for 9 years and has real users with real use cases (remittance & cross-border payments)
I can keep going, but reporters really need to make an effort to do more research and separate fact from fiction (I guess this can be said for many areas of journalism though).
The price of any asset increases substantially if you try to buy a significant stake.
If there is one way you really can't detect a bubble, it's relying on "people thinking X has value". Also people buying tulip bulbs for a house worth thought those bulbs had value, as in every other bubble in history.
Where do dollars or euro's get their value from? Let me give you the wikipedia definition:
"Fiat money is a currency without intrinsic value established as money by government regulation or law."
What do you think happens to fiat money when people stop believing it has value? Look back to 19th century France, were fiat money collapsed.
Bitcoins have no intrinsic value, which is bad. But the good part is that it only has to compete with fiat money, which also doesn't have intrinsic value. And if you ask me, I put more trust and faith into an algorithm distributed over lots of people, versus trust in banks and governments.
Lets say everyone declares USD is worthless, the government could 1) sell things of value demanding explicitly USD in return. 2) Impede movement or other activities, use of public goods using force and demand a toll explicitly in USD. I.e. this much $ is worth 100km of highway travel. Like calculating the value of a person's life to the government in free health coverage countries based on where they draw the line on spending to keep them alive, I think the value is the inverse of the cost the government would go to to prop it up.
You could argue without money how would they be able to enforce, however enforcement of a government order has not always required money, and that's one hypothetical too deep for me.
EDIT:
And people will happily pay for goods and tolls with worthless paper, but your demand to accept dollars and fix the prices has one outcome: empty shelves and lots of people in prison (because how else do you enforce dumb demands?). Both were tried in Venezuela and USSR with the same result.
Whether it is dollars to the IRS, colored beads to the local chieftains, or copper coins to the Lord of the manor, it doesn't make a difference. The ability to 'pay off' the state in power, with legal permission and ability to use violence, gives that currency value.
(Illegally obviously worth the picture on the front.)
Do you reasonably think that if those currencies collapse, you will be just fine with a stockpile of bitcoin? If bitcoin collapses though, the USD will not even notice a ripple.
I'm not saying that bitcoin or other cryptocurrencies are not currently a lucrative investment, but I am far from convinced that crypto offers more stability and is a safer bet that dollars or euros
So one would trust a novel currency over the collective interests that stand behind the USD or Euro if one expects a prolonged downturn in those economies or a divergence of the interests behind them.
Do you trust professional encyclopedia writers more than a bunch of anonymous volunteers collectively writing articles? But Wikipedia is a fact no? It works. Distributed things seem to work, in practice.
I agree that Bitcoin still has to prove itself. But if such a thing as Wikipedia can work, why not Bitcoin?
But I get your point. Although the world is bigger than US and Europe alone. What about current unstable states?
One thing will never happen to Bitoin: hyperinflation.
And I was under the (possibly incorrect?) impression that with the support of enough of the hashing power, core Bitcoin could hypothetically be forked in a way which massively increased the rate at which new BTC were emitted. (Something which would be highly unlikely as miners have strong incentives not to do this under normal circumstances, but the same applies to governments having no incentives to rapidly debase their currency under normal circumstances)
For one, with no state backing, what does a country risk in simply banning Bitcoin? China has already proven they are paying attention to crypto exchange, and their willingness to institute bans. Do you not fret the US could do the same at any moment? What options are there if the US put a ban on bitcoin exchange? Do you think it would still retain its value?
That's precisely the source of your misconception regarding the intrinsic value of fiat currency.
Fiat currency always has value as they are the basic unit used by the state to determine how much taxes you owe them, which is linked to a percentage of everyone's gross income.
How many people bullish for andor excited by cryptocurrencies know that?
any answer to that would leave you wondering: what are the implications?
If the majority answer: of course I know it could all be found to be worthless tomorrow
Or even if the majority answers: wait, it could potentially be mathematically proven to be useless?
Both leave me wondering what the motivations are for those who are promoting it
If someone were able to prove P=NP and come up with a practical exploit that made bitcoin valueless, it would also spell instant death for Ebay, Paypal, Amazon and a few hundred other small companies. Not to mention that all internet banking would have to be taken down very quickly.
In summary, it would be such a huge shock to the economies in all industrialised countries that it would make the 2012 financial crisis look like a minor inconvenience. Nobody would be concerned with "ah shit, my BTC is valueless", they'd be concerned with "ah shit, there's a run on the banks to get physical money and I will probably starve."
Not even actual crypto speculators seem to be able to do this. The second anything drastic happens on one of the crypto markets, all prices immediately peg to Bitcoin, and they all rise and fall in unison.
You can see Tom Lee, a financial strategist, talk about Bitcoin here: https://www.cnbc.com/2017/09/15/bitcoin-could-surge-another-...
He points out that there are only 300,000 Bitcoin wallets that hold $5,000 or more. In the grand scheme of things that is very small compared to the overall global economy. He also refers to Jamie Dimon’s comments that Bitcoin is a “fraud” (It is worth nothing that JP Morgan bought up millions of dollars worth of Bitcoin after the price crashed following that statement – on behalf of their clients).
ICOs, on the other hand, are absolutely in a bubble. Companies are raising hundreds of millions of dollars without even having a product. It doesn’t take a rocket scientist to understand how absurd that is. In my opinion, regulations in this area would actually do more of a service than disservice to crypto, and I welcome them with open arms. For one, it will legitimize token sales as a fundraising method, and for two it will remove most of the scams and illegitimate projects that seem to be popping up daily.
I think Blockchain technology is here to stay. Even if 99 out of 100 ICO projects fail (they will), that still leaves a few that will survive and may become quite valuable. While the recent explosion in crypto prices seems unsustainable, if it really does become the money of the future then the prices now are going to look like pennies in five or ten years time.
You can also compare Bitcoin’s current market cap (~$60 billion) to that of gold ($7 trillion) and see that it still has a ways to go (if it is going to become widely adopted).
In my opinion, Bitcoin has the first mover advantage in this space. It was the first real use of the blockchain, is still the gateway to pretty much every other crypto currency, there is a maximum supply of coins, and is one of the only coins that can be purchased/exchanged for US dollars (or other fiat currency). In order to purchase an altcoin such as BAT (the token behind the brave browser the article refers to), you have to first purchase Bitcoin. If you want to sell your BAT tokens, you will receive Bitcoin.
Also Bitcoins do cost real money to actually mine (electricity costs).
Other tokens such as Ethereum are gaining popularity as well and have some advantages over Bitcoin, but I don’t see Bitcoin being displaced anytime soon.
In the case of Ethereum, the value is that the token is used as “gas” on the Ethereum network. Any action you want to take or data you want to store will require that you send a certain amount of Ether in order to perform that task. Since Ethereum is a platform that many of these ICO companies are building apps on top of, it stands to reason that the value of the platform should be greater than the value of the company building on top of it.
As of right now, you are right. The entire crypto market is speculative. I think a platform like Ethereum has a better chance of being valuable than a random token that someone with no blockchain experience put together a whitepaper for in a few days and then launched an ICO for.
Bitcoin is a global cryptocurrency. Sure it has a first-mover advantage but so does Google. Today someone searches with google, tomorrow they may switch to Bing. Can't the same be said of Bitcoin and say Litecoin / Dogecoin / whatever? So why is Bitcoin worth more than Litecoin let's say? Both are accepted by Coinbase etc.
So one reason BTC is worth more (speaking of entire market cap here) than, say, LTC, is because it is accepted more places.
Another reason is that BTC is perceived (rightly or wrongly) as more stable than other crypto currencies.
But all those legitimate reasons are amplified dramatically right now by speculation.
Does the common man think of "cryptocurrency", or does he think of "bitcoin"? If in that persons head, "bitcoin" is the same as "cryptocurrency", then it will be really hard for a competitor.
Google is a nice example. "I will google it for you". Nobody says "I will bing that", or, sadly for other search engines, "I will search the web". We say "I will google it". In our head, google is the search engine, and the search engine is google. So if bitcoin is in that same ballpark, good luck to the competitors.
But I'm not saying other cryptocurrencies can't bring anything new to the table, such as Ethereum or Monero. But bitcoin definitely has the brand positioning advantage.
Most importantly, the Coin that has the highest expense to "mine" is the most secure. To attack Bitcoin by out pacing the current miners, it would require millions of dollars in hardware which could just as easily be used to legitimately acquire Bitcoin by mining.
However second place is easily attacked, as the case with BCH, the bitcoin attempted fork. Miners are using their hardware to primarily mine Bitcoin, paying for the hardware, then occasionally attacking BCH, to break it's adjustment algorithm.
BAT is an ERC20 token on Ethereum. In order to purchase it you buy Ether, and then go to a decentralized Ethereum exchange like 0x and purchase it. When you sell BAT, you receive Ether.
I am not trying trying to argue about if BTC or ETH is better.
CryptoCurrency is the base primitive of the blockchain, that is consumed to store transactions permanently, as well as to reward the block creators. CryptoAssets are usually extra metadata in transactions that updates some state. The USDT token actually runs on the bitcoin blockchain, on an early 2nd layer network called OMNI. ICO takes the cryptoasset further and issues some 2nd layer token and then resell that for the underlying cryptocurrency. Its a magic bean sale, paid with gold coins.
An ICO on ethereum, for example, is simply a database entry that says your address holds some number of tokens in a contract. You do not own them, you are just tagged as having a certain number. Most contracts have a suicide clause. One authorized (we hope... ooops) method call could nuke that value instantly.
With a cryptocurrency, you control the value stored in unspent transactions. With this you own the private key. No external party can remove those funds with that private key.
That hasn't existed before.
Because these are both embedded into the coin valuation it feels more like stock to me than currency. Specifically it might be like owning stock in eTrade, which has utility value as a platform for trading stock, and an arbitrary value based on consumer demand.
The only reason it is harder to notice with crypto is because the size of the market you can use crypto in is so ridiculously small (relative to a national currency) that investment value and speculative effects dominate.
Yeah, that's literally exactly why it is a bubble. It's a big if, but that's how you rationalize entering the market.
This article is an interesting read and seems to suggest something like that:
https://medium.com/@mcasey0827/speculative-bitcoin-adoption-...
The crash was mostly independent of Dimon's statements.
Not only that, there's no such thing as a "cryptocurrency bubble". There are bubbles for particular cryptocurrencies. Just as there are bubbles for particular investments. But generalizing isn't meaningful.
And furthermore, a focus on cryptocurrency trading is the fundamental problem. People trade fiat currencies, but they don't (as far as I know) trade any fiat currencies that are primarily used for investment, rather than in commerce.
Me, I just want an electronic currency that can be used anonymously. To get paid, and buy stuff. Because actually, I can't convert with fiat currencies without risking anonymity loss. So it goes.
As in Brave, the new browser from Brendan Eich (founder of Mozilla, famously invented JavaScript in 10 days)? Hardly a scam...
Either the reporter didn't do their research or twisted the facts to fit their story.
It is quite obvious it is both.
- Dogecoin creator was always a cryptocurrency skeptic. The article even admits it but papers over it.
- Blockchain =/= Bitcoin. The article insinuates that any blockchain-related startups are built on top of Bitcoin.
- ICOs =/= Bitcoin.
- "early adopters often used it to buy drugs, weapons, or other illicit goods on the dark web"
- "including Jamie Dimon, the chief executive of JPMorgan Chase, who last week called Bitcoin a “fraud,”" This line makes it clear what NY Times' outlook is, they quote an opponent of cryptocurrencies like he is an expert.
[1] https://www.poynter.org/news/new-york-times-copy-desk-top-ed...
Both of these facts mitigate the risk that the creators are scammers with no intention of using the funds for the designated project. But it doesn't fit the narrative!
The scam is in the back end of how ICO's are run. Even if the project is legit, doesn't mean the token distribution was legit. $35m in 30 seconds??
More details: https://medium.com/the-bitcoin-podcast-blog/a-look-at-the-ba...
https://www.reddit.com/r/BATProject/comments/6lnrf6/screenca...
Many ICOs give deep discounts to "partners" who may not have even spent anything, but are just used as an endorsement and social proof. Within days those partners will be dumping on others.
I suppose by definition VCs look very similar to ICO "partners", but the latter's due diligence will rest entirely on finding the greater fool, whereas the VC will seek to establish whether the team can actually deliver, product fit, etc.
Thats said, I'm sure there are a handful of exceptions to both VCs and ICO partners.
Diffused to over 19,000 holders now:
We talked about indirect ads via Brave, too -- these would pay publishers a greater share than they get from programmatic ads today -- but haven't done them and we won't without publisher opt-in. We're focusing on user-private (not in any publisher ad slot) ads first.
Bitcoin made currency decentralised and permissionless.
Ethereum has made capital raising and equity holding decentralised and permissionless. Sure, lots of people talk about SEC compliance, but in reality anyone can raise equity for anything now. You can issue a token to fund for a drugmarket if you wish, and pay dividends, and noone can stop you really. The market cap of ethereum is 22 billion.. is that to high or too low for the promise of permissionless securities?
This is a common misconception, that cryptocurrencies can somehow exist outside government control, and it makes me doubt some of the long term value of Bitcoin. A government can basically make anything it wants illegal, and once cryptocurrencies become large enough, there will be tons of additional regulations and control.
Look at the legitimate drug companies for comparison.
In a few years we'll have a good idea based on marijuana in several US states. We will have to sift out the tourists though, because there do seem to be a lot of those. At least, here.
We could also look at alcohol prohibition for a historic example.
In a country where Bitcoin is banned, a consumer derives almost no utility from Bitcoin because they can no longer immediately exchange it for fiat currency or goods unless they leave their country. Thus the demand for bitcoin falls, and if less people use it, it becomes less valuable (network effects). That directly hurts its value in the long run.
If you were to imagine a world where Bitcoin is banned by all governments, then no one would desire to own it or trade it, and it has virtually no value.
The friction of government control is partly what allows things like Netflix, Hulu, et al to survive. If there were no copyright, then you'd seen tools that were just as good thrive on various p2p backbones.
Instead, the pressure from law enforcement on developers, big libraries of content, indexers, etc keeps the experience of for pay sites better for most people, and so most people just pay whatever streaming website.
Sometimes law enforcement isn't about winning ever battle so much as tilting economic scales.
But my point was that even though it's illegal, they can't stop it. One of the game of thrones episodes was on torrent before it even aired.
A governement can make bitcoin illegal. But stop it? No way.
Only totalitarian states have this power in practice. In a democracy, where e.g. 75% of people use Bitcoin, the government can’t criminalize it — if it were able to, that government wouldn’t be democratically elected. A democratic government does not have an opinion separate from the people; indeed that’s the whole idea of democracy.
If only a small fraction of people are using Bitcoin, it will not pose a threat to government, and it will have no incentive to criminalize its use. Only when a large part of people are using Bitcoin can it pose a problem to government, and once we reach that point the opposition to make it illegal will be too great.
An example of this is the military-industrial complex (disproportionate spending linked to politics). Or the way marijuana has been illegal for the past 100 years (a false campaign under the guise of protecting people).
If Bitcoin is banned early enough to harm liquidity and adoption between itself and fiats, and a government approved cryptocurrency is introduced as a competitor, then I think Bitcoin could basically be killed in an economy.
It seems theoretically true, but not in practice. While I have several hunches,[2] I admit I don't fully understand why it shakes out this way.
[1] Plus steg, to the extent you think that's a separate discipline.
[2] Like, we don't yet have good enough crypto[1], or it takes time, or most people don't care enough to participate in networks that enable others to speak freely, or authoritarian police forces let governments cheat at information security games (they don't actually have to prove anything to torture you), or some mix of all of those. I change my mind at least daily as to which of these is most important.
Very few people need what Ethereum is offering, a lot of people want to be millionaires before they've done anything, and they're willing to lie, scam, and exaggerate to get that. Is not part of the lesson of 2008 is that if you build your economy on sand, it's gonna collapse?
Then lobbyists eventually get the regulations weakened enough for a round two.
At least with cryptocurrencies, no one should have the illusion that somehow the government will prevent a collapse or bail them out. Unless, of course, they are "too big to fail".
I wouldn't call myself a bitcoin fanatic (I hold a very small amount, just for the fact of making myself learn about blockchain and cryptocurrencies), but these articles are not well-researched.
They don't understand the difference between Bitcoin and Dogecoin, let alone the difference between ICOs and Bitcoin, not to mention their misunderstanding that blockchains are a technology, not Bitcoin.
The article even admits Dogecoin's creator was always skeptical and made the coin as a joke, so him suddenly saying he is skeptical is just about the least shocking thing.
“Briefly stated, the Gell-Mann Amnesia effect is as follows. You open the newspaper to an article on some subject you know well. In Murray's case, physics. In mine, show business. You read the article and see the journalist has absolutely no understanding of either the facts or the issues. Often, the article is so wrong it actually presents the story backward—reversing cause and effect. I call these the "wet streets cause rain" stories. Paper's full of them.
In any case, you read with exasperation or amusement the multiple errors in a story, and then turn the page to national or international affairs, and read as if the rest of the newspaper was somehow more accurate about Palestine than the baloney you just read. You turn the page, and forget what you know.”
Almost no one sits down and says "oh, indeed, this article is competent and a correct statement of fact"
> I refer to it by this name because I once discussed it with Murray Gell-Mann, and by dropping a famous name I imply greater importance to myself, and to the effect, than it would otherwise have.
Their conclusion after exploring a number of cryptocurrencies is that the environment attracts a fairly large number of fraudsters, scammers and pump-and-dumpers. Doesn't mean the entire ecosystem is 100% scammers, but the probability of an average joe being hit by a scam is quite high.
What other common use case should they have covered for their readers? Micropayments on the Web? Wide retail acceptance? We know the ship has sailed on those two.
GOt that idea from here: https://publication.widmerdun.com/the-perpetual-bubble-machi...
People are making a living simply by flipping, insider trading, fake insider rumours, companies stringing out claims and updates, releasing of Alpha's that are paper models (not really even prototypes), teams with a lack of devs with relevant crypto background, ideas that have no use of a blockchain at all, tokens that offer no utility, or whose utility is yet to be determined, etc. Tokens that have utility, but whose utility is relatively small, yet whose investor base and node base is YUGE. It's turning into a bloodbath of fuckery.
1# CrytoCurrencies are free from the existing monopolies of the banking sector, money exchangers and politics. You can argue that those hegemonies should have control, but it is undeniable that there is tremendous value to many in that control weakening and being eliminated.
So you can see a source of inherent value.
#2 CrytoCurrencies are incredibly secure, can be extremely private and become ever more secure overtime because of the effect of mining, every watt burned acts to secure the network in an irreversible way
#3 Mining is the first application, mining secures the network and participants are rewarded. More generalized applications with things like solidity only increases the value of the network.
CrytoCurrencies are very much in an early phase, and not cleanly understood. There's a long way to go.
But the point is that it is the same with all money - people don't want it for itself - but rather because they expect to exchange it for something that they'll want in the future.
I was always puzzled about this. Real people are buying real stuff with crypto currency. It sounds like a Monty Python skit: "Your money isn't real! You didn't buy that! You didn't sell that! This transaction never happened, stop it!"
On the other hand, the fall of one cryptocurrency to scammers doesn't mean all of them are destined to pan out the same way. This article doesn't really offer any evidence for that extrapolation, either.
I often wonder though if Cryptocurrency's killer app is just capital flight from China, with every other use case just so much noise.
While that toy theory may seem reductive, it's miles more explanatory than the models offered by either the 'bubble' or 'will soon replace global financial system' camps.
The blockchain idea is novel, but I think way less valuable than the hype has led us to believe.
Now, here's the core problem preventing people from understanding the reality of the bubble: in almost all bubbles there is still a kernel of honest, real value inside the bubble. That's the impetus for the bubble, but it doesn't prevent the bubble from being a bubble. Housing values during the 2000s were based on a strong economy and increasing demand in some fast growing cities. In some places housing values merely plateaued during the financial crisis, in some they never stopped going up. But, of course, across America there was a vast drop in housing values, a huge increase in foreclosures, and a recession that spread across the entire planet. It was a bubble, the bubble popped, bad things happened.
A decade prior to that was the dot-com bubble. Many new internet businesses were growing like crazy, investment and stock valuations had gone off the deep end, leaving rationality behind. Businesses with no prospects for ever turning a profit were having money rained down on them from VCs and IPOs. Then eventually the bills started coming due, people became more skeptical of dubious business plans, venture capital dried up, stocks started getting dumped. Money stopped flowing so freely from investors into ridiculous startups and from there into the rest of the economy. The entire world economy was pushed into severe recession. But, of course, that doesn't mean there was nothing of value inside the dot-com bubble. Amazon cut its teeth in that era, and grew from a fledgling book store into a fulfillment powerhouse expanding into a variety of goods and services. Easily tens if not hundreds of billions of dollars in real honest to goodness value was built by internet companies during the dot-com boom, and many companies weathered the bust just fine, some even getting stronger. Google was born during the recession, in fact, in an era when basically the only way you made it with a dot-com company was to already be turning a profit or to have a very good and well executed idea.
Of course there is real, substantive valuable stuff happening with cryptocurrency. But is that the majority of what's happening? Or is most of the activity, most of the valuations and "market caps" driven by speculative investment? It's pretty clear that it is the latter and that cryptocurrencies are in a huge bubble. And just as with all bubbles, when it pops it's going to be painful. Maybe something of value will survive? But only then will we know for sure what the true, hard-nosed practical value of cryptocurrencies is.
This is a snowball effect that won't apply to real estate or stocks, but does apply to currency.
Until people see the difference, they are going to be continually blindsided by the increase in value of crypto currency.
USD just happens to be the most convenient financial instrument for a lot of people.
The more people that own and value BTC, the more convenient it will become to transact with, the more stores that will accept it, and then people will think of it and use it as a currency (if it succeeds, that is).
Any item of value is priced according to its future utility. So BTC's price now relates to what it's value as a currency will be, adjusted by the probability it will succeed, in the future.
If you don't believe that BTC will ever be used as a currency, then you don't believe in the success of the bitcoin experiment in general, and since that's its only purpose, then of course you would have to conclude its in a bubble. But if you do believe in the success of the experiment, then the price does not seem out of whack at all.
I'd argue that you are the one doing this. You're labeling something as what you'd like it to be and what it's intended to be, not what it is.
> If you don't believe that BTC will ever be used as a currency, then you don't believe in the success of the bitcoin experiment in general, and since that's its only purpose, then of course you would have to conclude its in a bubble
This is irrelevant to me. If I can profit off something, I don't need to form conclusions as to whether or not it's a bubble or whether or not it will succeed. I worked as an equities trader for half a decade. I didn't need to know the 5 year plan of AMZN before I bought it, nor did I need to know the 5 minute plan of a company stock that dropped 50% in a minute because of one large seller. All I needed was some clue that other people are willing to buy it for more than I did at some point in the future. At this moment in time, that's exactly what BTC is to me. I think it would be neat if it succeeded, but that isn't why I own it at this moment in time.
What does "labeling" mean? I'm just saying the value of cryptocurrency depends on whether in the future it will be used as a currency. If it will, then it's value is much higher than it's current price. If not, then it's value is zero.
> This is irrelevant to me. If I can profit off something, I don't need to form conclusions as to whether or not it's a bubble or whether or not it will succeed.
I thought we were talking about whether crypto is in a bubble or not. No? Then what are you talking about? Irrelevant to what?
What is intrinsic value of Bitcoin? There is none. But it is the same with dollars actually, yes if you live in the US then you can pay taxes with it, but you mostly pay taxes only after you earn dollars. And then the same with gold - the intrinsic value of gold as a technical material or for jewellery is probably a small fraction of its current market value. I tend to think that being in a bubble is a defining feature of money - people want it not for its value - but because they believe they'll later exchange it for something valuable.
Money is a perpetual bubble, a bubble that does not pop. I am not sure if there is a place for thousands of inflated bubbles. There is too much friction in such a system - you never know if the seller will accept your coins.
Not all cryptotokens are money - some are just securities with an intrinsic value - for example https://zrcoin.io/ which is backed by a promise to buy it back for the market price of 1kg of ZrO2.
The bubble can very much pop if people stop having faith in the currency and stop accepting it (or demanding larger amounts to compensate), making the currency lose its value.
This is a very large risk for most current cryptocurrencies, bitcoin included.
I would also argue that the Dollar has a very strong link to useful physical goods: it's the only currency OPEC oil is sold in.
In this case it's effectively used to describe the digital divide in a new network protocol, just as the dot-com bubble before it.
The casino analogy is accurate only if you ignore what most commentators fail to comprehend: Cryptocurrencies are both a technological innovation and a COMPETING CURRENCY.
https://en.wikipedia.org/wiki/Free_banking#History_of_free_b...
https://en.wikipedia.org/wiki/Alternative_currency
The Federal Reserve is very simply a banking cartel, which gives the United States a single stable currency to conduct transactions efficiently and maintain a unified economy. Obviously the trade-off in this system is a permanent banking oligopoly.
The casino analogy works better if you include the notion that we all live and work within a dramatically larger casino.
To answer the underlying point of the article, most of these cryptocurrencies are as much a scam as CompuServe, Usenet, Netcom, or whatever else is still walled off from the internet stack.
I don't see the NY Times writing articles about AMD being in a bubble...
As use of bitcoin is scheduled to grow, the pace of the production of bitcoins needed to support the market does not keep up.
This results in a steady increase of the value of bitcoin, which is good for adoption (more people will buy it to speculate and sellers will accept it), but endangers it as a mean of paiement as buyers are always better of paying in $, which devaluates over time, instead of Btc, which will increase over time.
The reason bitcoin will not be used for daily exchanges is the same as we do not use gold anymore. But since Btc has no intrisic value, I hardly see it as a reserve money.
Everybody has a cellphone. You pay and receive "money" with your cellphone. Wallets will be redundant in the future, everything that is in your wallet will be stored in your phone.
And you know which currency can be paid with your phone? Exactly!
And if I have to buy something, I will just trade in my value stored with the thing I want to buy. I don't see any need to go to an intermediate thing that keeps decreasing in value.
Paper money was preferred over gold because it was inconvenient to keep working with gold, not because the paper loses its value.
Bitcoin may be good to store value (gold or land being the best), but isn't adapted for exchange, as no one wants to use it to buy something. Sellers should offer steep discount for the opportunity cost in order to obtain the money, which isn't very likely.
- People who say crypto is a bubble missed to invest
- People who hype crypto are invested
However, the key is still to have a balanced portfolio and not just with crypto.
If the world is awash in cheap money, then it's almost tautological that most "assets" are in a bubble.
So yes it may be a bubble- but the bubble may very last a few months, a few years, or a few decades...who knows?
If I borrow your bitcoins, how will you force me to sell them? If we agree that a third party will warehouse those coins, how can I trust them? And if BTC plunges, who's to say that 3rd party will still operate?
All very different from shorting a stock.
But if you want to loan me your bitcoins, let's talk!
I'm also interested in borrowing any other bearer instrument that you possess? (Now thinking of bearer bonds in the movie Heat)
Still, you can short these 30% drops without problem.
Did shorting the housing market work out well in the crash? I remember a movie with Christian Bale, where it did.
https://en.m.wikipedia.org/wiki/Bearer_instrument
Also, counter party risk was a major issue during that financial crisis.
To be honest, as long as you trust a government, banks can be trusted with your money, especially since the government regulate banks since the government doesn't regulate crypto-currencies (yet).
Libertarian when you profit from crypto-currencies, until somebody steal you bitcoin wallet or until bitcoin crashes again. Then you're pretty happy to still use an insured bank account.
I would not be surprised to see bitcoin being used to launder money. All you would have to do is to sell a pile of dirty cash online against bitcoins, and send those dollar bill by the mail. I'm sure somebody already thought about that and is doing it already.
To be honest I would not understand why bitcoin is so high right now, a logical explanation would be drug money.