Coin Watt May

I don’t welcome a currency that’s so useful to kidnappers and extortionists — Charlie Munger

I am fascinated by the crypto phenomena as much as the next person. The current value of all the Bitcoins are over 500 billion dollars —that is a lot of money by any measure. Money from where though? And also, just a few weeks ago the total value of all Bitcoins was a trillion dollars. Incredible, for sure, but it seems seriously volatile.

I don’t own much crypto but I do follow the developments and I have many questions. The biggest question is: when will the Bitcoin bubble burst? My guess, when the stock market bubble pops.

Here is a summary of some commentators I follow online — these are mostly not my thoughts/words; just some interesting food for thought:

In the 17th century when the prices of tulips in the Netherlands reached crazy highs this was considered the first financial bubble. This is what we also saw during the dotcom explosion.

Bitcoin is having a difficult month. Gamblers, er, investors, realize that they are merely holding a tulip (or a Bitcoin) — it is all speculation. Prices head south due to massive sell-offs. We have experienced a similar cycle during the dotcom bubble of the early 2000s and the housing bubble that preceded the global financial crisis of 2008.

Bitcoin isn’t money. It’s a worthless speculative asset with zero backings of anything or anyone. It is just a tulip. But look, a lot of people have made a lot of coin on it. But Warren Bufett is right. This is not going to end well. Coin made out of air will vanish back to where it came from.

Bitcoin is not a store of wealth, it is not an inflation hedge, and it really isn’t an asset either. It is a hustle. Bitcoin is the best-known cryptocurrency and has been under pressure this month triggered by a bunch of tweets from Elon Musk, but the recent news from China sent is said to have caused the sell off.

Bitcoin miners are being paid with free Bitcoin that gets halved every 4 years. The only reason most miners haven’t left yet is because the price has kept increasing. But this is unsustainable. Eventually the price will no longer keep going up, and you will see a mass exodus of miners.

What real value does a bitcoin actually have other than a greater fool buying from a lesser fool. People are blaming Elon for the recent price drop, but did you ever stop to consider that if an asset can’t stand up to a tweet than it isn’t really an asset at all.

Bitcoin transaction fees are sky high right now and will only go higher. As less free Bitcoin is gained, transaction fees will have to become a larger share of miner compensation. With Bitcoins low transaction volume rate, the fees paid will either make mining unprofitable, or make conducting transactions prohibitively expensive.

It has been said that Bitcoin is a pyramid scheme with no fundamentals. And let’s not forget the cost of electricity utilized by crypto.

“What is the definition of a Ponzi scheme; when you look It up in the dictionary it says bitcoin.”

I believe that cryptocurrency is here to stay, and I believe it will play a role in all of our futures, but I think there is going to be a very bumpy ride to get there. Be careful. Only gamble if you can afford to lose and if you have some fun.

To end off, watch this — it is proper funny: the talented Schalk Bezuidenhout talks about Ripple.