The financial markets have never been more irrational. All sound traditional valuations are out the window in a classic tulip mania scenario.
Driving this is world-wide Central Banks money-printing, currently four times greater and rising, than that which followed the 2008 banking crisis. That exercise had a single desirable goal, namely to save the vitally important banking system, failing which we’d have faced an unthinkable disaster.
But it took five years for that liquidity to ultimately feed into share-markets and commercial property, driving yields down and prices up. The difference this time is the newly minted money went direct to the public, mainly in wage subsidies, and thus has quickly fed into the system.
So our share-markets are now operating solely on the bigger fool principle, that is ignore all normal value criteria and just buy as purchasers coming behind you will continue to drive up prices. Note I say prices and not values.
Nothing epitomises this insanity more than Bitcoin.
The true value of Bitcoin is zero. There’s a very good reason for that, namely it’s not actually being used as an alternative currency, which is its rationale, simply because it’s highly inefficient.
Some defenders have compared it to gold, arguing that gold similarly has no income-producing character and is merely a time-proven safe haven asset. That’s rubbish. It’s not a question of producing income, rather throughout human history gold has been, and remains, the foremost ornamentation material.
And it’s not just India in which every woman craves its acquisition for ornamentation, but a global age-old fact. A gold watch is viewed everywhere as superior, so too rings and numerous other things.
The gold medal indicates the best, not just in the Olympics but as a figure of speech, thus gold-plated, golden opportunity, gold standard, golden boy and so many similar terms reflect the value humans have always placed on the metal.
But Bitcoin has zero value, serves no purpose and is totally a reflection of the current speculative insanity in which all value criteria are ignored.
The fact that its promoters so frequently descend to fraudulent promotion says it all, this via the Internet.
I was a victim a year ago, with bogus advertisements on the Internet promoting it over my name. More recently other well-known Kiwi financial figures have also been subjected to this. That’s gone on world-wide.
Its defenders point to its prescribed limited supply as a reason why its value will increase. That only applies, (to repeat) if it actually has a function which it theoretically but not in practice does.
Here’s an illustration of that lack of logic.
I possess a right hand. It’s the only one in the world, not just now, but in entire human history and in the future, with its unique DNA.
If I had it amputated and stuffed then listed on the Stock Markets, can we expect frenzied bidding to drive its value ever upwards on the grounds of its uniqueness? The answer is no as it lacks the utterly bogus mystique factor currently surrounding Bitcoin.
The world’s largest Bitcoin so-called miner, Bit Digital, listed on the Nasdaq exchange, last week passed US $1.36b in market capitalism, its share-priced fueled by speculative mugs. Simultaneously a number of securities analysts declared it a scam.
Its chairman and CEO Zeng Erxin is now on the run from the police and a recently departed director plus its Chief Financial Officer are both in jail. Twitter has suspended its account and the company is being investigated in America for securities fraud.
Inevitably the day will come when the music stops and Bitcoin collapses back to its true value, namely nothing.
Over my life I’ve observed many insane speculative booms. Often-times early participants do well although mostly they became obsessive, believing they’ve discovered an infallible get rich holy grail. Invariably their obsession turns to dust as they lose their mania period gains.
Also, over my life I’ve watched lots of people become seriously rich, indeed I’ve done so myself.
Such people share common characteristics in their approach, namely hard work, patience and considered analysis, none of which are features of Bitcoin speculation.
Welcome to the digital age
Bitcoin has value for money launderers?
That’s the official narrative, and true to some extent. But if the (presumed) anonymity of bitcoin is good for launderers, just wait till they hear about cash! Or the success rate of money laundering controls for everything else. That’s just 0.2% according to the UN (or 0.05% more recently in my own paper in a peer-reviewed journal). If ‘Criminals Inc’ get to keep 99.95% of illicit gains, ‘taxed’ even less than multi-nationals, why bother with BTC, with every transaction logged in perpetuity, when business as usual is doing just fine?
Actually Cake Face, you and Sir Bob might be proved right by many orders of magnitude if this recent piece stacks up. It would be profoundly disturbing (for countless people, globally, and regulatory frameworks) if it makes Bernie Madoff look like a low-level nickel-and-diming rank amateur by comparison…
“The Bit Short: Inside Crypto’s Doomsday Machine”
With mania driven by companies buying bitcoin seeing their share price surge, aside from Elon Musk’s distaste for crypto, with Tesla now in the S&P500 it’d be a great experiment for it to buy a few billion worth of bitcoin. What happens when a bubble buys a bubble in a bubble? The Tesla logo is a tulip, right?
Gold is also in high demand for its innate chemical properties. Namely it doesn’t oxidise or degrade or react like other elements often do.
This makes it ideal for circuits in serious tech, quantum and super computers, nuclear reactors, nuclear bombs and missiles, submarines etc etc.
Bitcoin just makes me laugh. I dont agree it has exactly zero value as it has a few trivial uses, but what exactly can one do with bitcoin that cant be done with cash? Its like agreeing to pay $5 for $1 because someone else will give you $10 down the track for it.
I predict tears and more than a few jail sentences…
Bitcoin will be worth *zero* one day (many years from now). Meanwhile it is a commodity in short supply. Is it a ponzi scheme? Not according to this reasonably thorough analysis.
Bitcoin is as logical and meaningful as throwing a baked bean at a charging rhinoceros. The insanity of its complex reality however keeps the fools engaged and spending,.. it will crash and probably soon.
I agree with Sir Bob here, but he might not agree with some people’s inclusion of property values as also being a bubble that will burst. Sure housing has inherent usefulness, but the very fact that it is a necessity makes it even more prone to certain forces of economic rent as well as speculation. Most people can do without gold, it is not like people are having to consume less and less gold at a higher and higher cost as speculators set the prices of it.
It still puzzles me why Govts around the world haven’t banned it full stop. The entire concept appears toundermine “real” currency and systems.
It seems to.me that if I wanted to move funds around without the usual inspection (everything over $10k here) this is how I would do it. I understand, with no actual first hand experience, Bitcoin can actually be brought and sold in countries throughout the world. I have no idea of margins or transaction fees over and above the market rate that apply.
The concept behind bitcoin, and the internet, was to free the masses from the establishment, and there manipulation.
The idea was good, fixing supply, removing corrupted government from manipulation and having a universal means of exchange; removing the requirement for parasitic middlemen.
Sadly like the internet, the establishment have worked out a means of continued control. Algorithm’s have eaten into the objectivity of the Internet, while speculation (much of it I suspect facilitated by competing interests protecting their private tax system) is putting pay to Bitcoin as a medium of exchange.
Ask yourself, if you had a $20 trillion private tax system, why not throw a few bullion at competition to put them out of business!
Lastly; since you touched on it, the common conception that a collapsed banking system would lead to an unthinkable disaster is nothing more than a false narrative. Iceland’s banking system was one of the few that was allowed to collapse, yet their economy recovered the quickest. Go figure!