It's quite amazing how far this bitcoin pyramid scheme has gone on for. A few weeks ago my dad asked me about bitcoin. The last time he asked me about an investment was silver back in 2011 when it was near $50...take that for what it's worth. Never under estimate the madness of crowds. There's books you could read about irrational crazes such as the tulip bulb mania and the south sea bubble. Bitcoin will probably go down as one of the biggest if not biggest bubble of all time. What's amazing is how the bitcoin bubble got re-inflated after bursting about 3 years ago. That's incredible and I suspect part of the reason for this is that institutional money got more involved which is scary.
If I could summarize the bullish thesis of bitcoin bulls it would be this: Bitcoin is the currency of the future because a) it has limited supply b) it is self governed by a decentralized system rather than a central authority which can print fiat currency at will c) you can transfer coins from one holder to another anonymously d) it's the poster boy of blockchain technology. All of this is fine and dandy but the problem is that bitcoin was created out of thin air by some random dude. It is not legal tender. The fact that it has limited supply is meaningless. My turds are of limited supply too, does that make them valuable? The fact that "the people" are saying bitcoin has a value given its current price does not validate it either. In Holland at the peak of the 1637 tulip bulb mania, tulip bulb prices fetched $100-$500K in today's dollars before collapsing over 99+% in a few months, hence the price did not "validate" anything. Just like with other manias, the price of bitcoin is purely supported by the speculative inflows of greater fools. These manias typically happen when a group of people are deluded into believing some pipe dream and it goes viral. Ultimately, you run out of suckers and the whole thing collapses.
The fact that bitcoin uses a clever technology, no way justifies the bitcoin token itself to have any value. Again, it's not legal tender, it's simply a "token" created out of thin air. Anyone can come up with their own coin and they have. There's several dozens of other coins out there, one more worthless than the next. Although some merchants are starting to accept crypto (mainly bitcoin), ultimately they have to convert to it to fiat currency for it to be useful and they are willing to take the risk of doing that....for now. Let's see how that changes when bitcoin collapses.
One might argue that fiat money is also created out of thin air and so it too should be worthless. Well, there's a big difference. Fiat currency is enforced by the government as it is legal tender, It is also needed to pay taxes. As such, society has set it self up to offer labor, goods and services in exchange for fiat currency due to the confidence/enforcement of the government that issues it and the strength of the underlying economy itself. It's not a perfect system as it is possible for the government to mismanage the economy causing the currency to lose value i.e. via inflation, but what's the alternative? Switch to bitcoin? Think about how silly and impossible that would be. You expect a government to relinquish its authority to manage the economy to an algorithm? To bitcoin miners? How would anyone be able to get a "bitcoin" mortgage to buy a house? The limited supply of bitcoin is a mismatch for the ever increasing growth in the economy. It would be massively restrictive and deflationary. Why am I even wasting internet space discussing this? And what about the ridiculous power that is being consumed to mine bitcoin? As much as the entire country of Switzerland. What a totally asinine waste of resources. It's so fucking ridiculous. This is the "currency" of the future????
The fact that institutional money is getting involved in bitcoin makes it scary because now the general economy can become at risk when this thing collapses. There's apparently a lot of manipulation in bitcoin trading as there's little regulation. There's already been a notable number of frauds and theft. I think most people are woefully underestimating the greater fool buying that is driving bitcoin. I turn your attention to a company called Signal Advance Inc. ticker SIGL. About 2 weeks ago Elon Musk tweeted favorably about messenger app Signal and it caused this stock to sky rocket from 0.60 to $70 in a couple of days even though it has absolutely nothing to do with app except for having the name Signal. Now, I could understand if there was a one day misunderstanding/confusion but the fact that this stock is STILL trading 10 times higher than it was prior to Elon's tweet 2 weeks later tells you something about how long stupidity and ignorance can linger on for in regards to any "asset" that's out there. We saw a similar stupidity in the trading of bankrupt Hertz in June. It was so stupid that Hertz tried to issue additional worthless shares to the suckers but lucky for them regulators blocked it. Too bad...they should have allowed it! These examples show you just how far greater fool buying can go. It can drive up prices of any asset regardless of its intrinsic worth even if that worth is 0.
I strongly suspect bitcoin will end badly....again, and this time for good. But don't get me wrong. I'm not like the embittered, miserable SOB permabear types whos gets angry about things like this. I laugh about it. If you can make money on it good for you! I salute you. I'm not a jealous or envious man.
I am also open for anyone to provide me with a convincing bullish case for bitcoin. Any takers?
No comments:
Post a Comment