Please, let's move past the name calling. Calling something a bubble does not make it so.
Also, I thought they were the ones who were supposed to do the scaring...
Their actions aren't unwarranted because there's been a lot of scams. You're asking for an open market so that people can be defrauded.
All I mean is that by scarring you don't protect people from being defrauded. And I wouldn't care if I'd like to see people being defrauded, but in fact I do care, and don't find the "scarring/warning approach" to be working.
scarring ~ creating scars; scaring ~ frightening.
My opinion is, if you read that and believe this is the SEC attempting to merely "scare" you, that you really shouldn't be investing in Bitcoin. None of their statements seem incorrect.
Bitcoin is new, but it is most similar to forex IMHO, and all the disclaimers to forex apply. Forex has higher than average risk, particularly in developing countries where volatility can be very high -- the possibility of losing almost everything is above average. It is also quite a bit more prone to scams compared to other investment platforms. It can work out well, but I wouldn't plunge into forex without doing a heck of a lot of research, and I wouldn't bet the farm on a single forex investment.
That applies to Bitcoin too. But there are some additional specific risks not linked to forex though. With forex, you can use various economic indicators of the nation of the currency to attempt to make a more solid investment. I'm not sure what economic indicators are out there to help with Bitcoin. Bitcoin's not backed by any government, furthermore, so there is higher risk for government intervention as we've seen to some degree in China and South Korea, which will at the very least cause greater volatility. Furthermore, bitcoin has a huge disadvantage compared to forex right now: it is relatively illiquid. All that adds up to a very risky investment from my perspective at this point. Some might be willing to take the plunge anyways. But the office talk I hear on Bitcoin is way too casual compared to the actual risk.
Just the fact that a tweet from John McAfee can push a crypto up over 100% is reason for me to stay away from that stuff. Too much manipulation and FOMO going on.
I'd consider investing in a regulated crypto IPO though, if there's serious due diligence and a product that's actually being used.
That said, bubbles don't always have to end in a burst. If real and sizable use cases for cryptocurrency arise, the value could eventually catch up with the prices.
We also had the Japanese theme park bubble, which left behind a lot of scrap metal. Be wary of sampling bias.
The internet had explosive growth. New uses and technology were coming out constantly.
Bitcoin? It's not clear actual use of bitcoin as a currency is even growing. It's very possbile nobody uses bitcoin at all in 5 years. The internet on the other hand was an eventuality. We knew it wasn't a fad.
Yes, speculators backed a lot of bad business ideas but that was because people were getting online in droves because there were so many uses. Those companies failing didn’t change that, especially since there were so many examples showing that concepts were solid: e.g. a dotcom losing money on each sale didn’t mean online stores were doomed since Sears had proven the model many decades earlier.
It all depends on where you start counting. In 2008 it was just Satoshi and a few cypherpunks. I would argue it looked a lot like Arpanet [0]. So Fast forward 10 years from 1973 ... and was the internet really useful in 1983?
On January 1st 1983, "every machine connected to ARPANET had to use TCP/IP. TCP/IP became the core Internet protocol and replaced NCP entirely." [1] ... hardly a huge commercial success at that point.
[0] https://en.wikipedia.org/wiki/ARPANET [1] https://www.davesite.com/webstation/net-history2.shtml
That said, there were still plenty of ARPANET users in the early days if you look at the subset of people for whom network access was an option. The benefits of email were obvious and group forums like Usenet (1980[1]) had similar quick adoption, at least in technical or academic fields where communicating with people outside of your location was important. Similarly, FTP (1980[2]) had clear value and the pricing made sense more often than it might have seemed since all of the other alternatives cost money, too.
The other thing to remember is that this wasn't happening in a vacuum — while the internet was emerging, there was popular mainstream usage for companies like The Source, CompuServ, etc. starting in the late 1970s[3] and so again there was clearly a business opportunity if you could bring the access costs down. The number of people willing to pay by the minute to chat, shop, etc. suggested that an even large number of people would be interested as that per-minute rate dropped.
It's that last part which makes me question the current valuations: even if you assume that all of the operational problems were solved with Bitcoin, it's hard to see what value it has to the ordinary person beyond possibly reclaiming the ~3% overhead of a credit card transaction — and that's assuming that VISA, et al. wouldn't just lower their rates to beat whatever the operational cost + fraud insurance costs ended up being for Bitcoin.
1. https://en.wikipedia.org/wiki/Usenet#History
2. https://tools.ietf.org/html/rfc765
3. There's a great series starting with https://www.filfre.net/2017/10/a-net-before-the-web-part-1-t...
They easily could, their current rates contribute a lot toward cashback and points rewards and other marketing programs. Australia regulated a cap on rates at 0.4% iirc, and Visa still covered its costs.
> the number of [Usenet] hosts nearly doubled to 940 in 1984. More than 100 newsgroups existed, more than 20 devoted
How does that compare to the number of Bitcoin miners today? or the number of nodes (11,000)? or the number of users (>30M)?
> people have never had a reason to use it other than speculation.
I did. I paid small amounts for small jobs in various countries of the world with nearly zero fees. (Back in 2013). Had I used Paypal, 50% of the amount sent would have been eaten up by the exchange rate and fees. Bank transfers between these countries cost 100% of the transaction. I also use it to buy hosting, domains, vpns, etc.
> there was clearly a business opportunity if you could bring the access costs down.
Well, guess what? If you can bring the fees down in Bitcoin and Ethereum, there are clear business opportunities. And yet, still in the 90s people said "People will never shop online. You need to go to the store to see and try the stuff."
Actually, yes, that is a pretty good indication of a bubble.