Don't Hate Bitcoin, It's a Free Market Construct! But "Wishes Aren't Fishes"

There is a huge difference between disliking Bitcoin as an investment and disliking Bitcoin as a construct.

Some of the flaws of Bitcoin are by now well-understood: It does not scale, it is nearly useless for routine purchases, and its use of energy in mining is problematic in many ways.

Forbes contributor Peter Tchir says You Don't Have To Hate Bitcoin To Think It Is Overvalued.

I continue to think Bitcoin and other cryptocurrencies have further to fall and I am unlikely to become bullish until Bitcoin drops below $5,000.

The basic premise is that speculators got way ahead of themselves in terms of the adoption rate. The adoption rate has slowed by every metric I look at, while speculators are still stuck holding onto cryptocurrencies that have declined in value. Virtually every purchase of Bitcoin since the spike higher around U.S. Thanksgiving is now losing money. Those holding cryptocurrencies bought with credit cards are feeling the additional pain of interest payments if they bought using credit (which scares me as a concept as I analyzed here).

While new adopters are happening at a declining rate, the amount of regulatory and tax scrutiny is increasing.

Despite being bearish, I believe that there will be value in some cryptocurrencies, even Bitcoin itself, and some of the ICO's - which seem to be viewed with a high degree of skepticism right now (justified in many cases).

Which ICO will be worth it? Which crypto should we back? When should I buy Bitcoin? These are all questions that we will continue to try and answer.

For now, I think regardless of the cryptocurrency you are looking at - you will be able to buy it cheaper, significantly cheaper in the near term.

We have gone from FOMO or what I called the Five Stages Of Not Owning Bitcoin Grief to a concern that purchases might have been foolish. While the true "believers" don't see that, I see it and think the mentality needs to change for Bitcoin to go higher - all markets are driven by emotion at some level and we went from extreme fear of missing out for the average person, to a concern that the naysayers are right.

FOMO In Reverse

FOMO (Fear of Missing Out) is in reverse.

Unlike Tchir, I do not suggest $5,000 is a good buying point. I did not like Bitcoin at $5,000 on the way up, so why should I (or anyone) like Bitcoin at $5,000 on the way down.

I see much promise in the technology, but that does not make Bitcoin a buy at any price.

Yet, there is no reason to wish for Bitcoin to fail, unless of course you are short crypto.

Bitcoin Surge

The surge of Bitcoin to what I believe are absurd prices is a function of policies of Central Banks.

The reasons put forth by HODLers as to why Bitcoin cannot be a bubble are ridiculous.

Moreover, it's easy to root against the coin out of jealousy or the incessant ramblings of the true believers who still think Bitcoin is headed to $100,000 or even a $1,000,000.

The mining costs alone suggest those targets are pure silliness.

Free Market Concept

It's important to understand that Bitcoin is a free-market concept.

That's the bottom line.

Thus, I won't root against Bitcoin even though I find the incessant Tweets and price targets of the true believers more than a bit galling.

Where Will Bitcoin Be One Year From Today?

The HODLer cheerleaders who say "Don't worry about what it's doing now, look at where it will be in a year," are also galling.

The statement implies Bitcoin will be higher a year from now. Why will it be? Even if it "should be", which I strongly disagree with, perhaps it won't be.

No one knows where Bitcoin is headed. And that's a fact.

Also it's pretty easy to tell people to HODL when many who did so intend to dump when the prices rise back up.

Wishes Aren't Fishes

Galling price-cheerleading aside, as a free-market anti-fiat currency, there is every reason to want Bitcoin to succeed.

But wishes aren't fishes or the nets would always be full.

Meanwhile, the price keeps ratcheting down. Every recent rally has been sold. Will that change? Perhaps.

Then again, central Banks or governments could easily squash Bitcoin like a bug, if they want to.

I do not agree with such a policy, I merely suggest it's quite likely at some point.

It is fantasyland material to believe Bitcoin will replace the Dollar, the Pound, the Yen, and the Yuan, and central banks will not stop it.

Mike "Mish" Shedlock

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Aktuar
Aktuar

Call me paranoid, but one potential problem with bitcoin and cryptocurrencies is that when they (inevitably) fail, the central bank/big government people will say "See what happens when we let the free market handle something as important as money? See? See? We told you this needed centralized management by really smart people."

Blacklisted
Blacklisted

You really should not be that tough on Mish. Just because he has been saying that stocks are in a bubble and the dollar would collapse does not mean his intensions are bad. Afterall, none of the problems that caused the financial crisis have been fixed. Mish just doesn't understand that the rest of the world is in much worse shape. It should be noted that most of the doom and gloomers are dollar haters and gold bugs.

Since you discount the doom and gloom scenario, I have to ask, do understand exponents? For example, exponential increases in health care costs or budget deficits can appear benignly linear for decades, then all of a sudden they begin to go parabolic. Put 9.3% per year increases for 37 years in your calculator and you will see why health care costs are unsustainable. The same problem will be seen with interest expense on the debt, which is already passing defense spending, and rates have not even started to gap higher, which is coming over the next 18 months. You can ignore reality, but you cannot ignore the consequences of ignoring reality.

Superman07
Superman07
Blacklisted
Blacklisted said: You know that Bitcoin is not the end-all for crypto's or blockchain technology, and you know that when people generalize, using Bitcoin as the moniker for the space, they know the technology is rapidly evolving and being studied for adoption by more enterprises almost daily. Yet, you only focus on Bitcoin. Why? When discussing the Internet and search engines, why don't you focus on Archie, Infoseek, WebCrawler, Lycos, AltaVista, or Netscape? You are right - I don't know when a better solution will replace Bitcoin; or Ethereum, Litecoin, Ripple, EOS, Stellar, NEO, Monero, Dash, etc., but I do know the value provided by blockchain, cryptography, and a distribute ledger is being increasing understood by more organizations, including govt's around the world. The Genie is well out of the bottle, and NO central bank can stop it, just as they cannot stop rates from rising or reduce the interest expense that is getting ready to implode govt's around the world. Being massively uniformed does not mean there is a Russian conspiracy to elect Trump, Assad gassing his own people, Iraq having WMD's, QE's will cause the dollar to crash and gold to rise, and it certainly doesn't mean enterprises will ignore the significant value offered by cryptocurrencies (even Bitcoin). The HODLers and others understand that a sovereign debt crisis is right around the corner, and as the debt bubble pops and Socialism collapses, govt's will get increasing desperate to confiscate other people's money - including the wealth sitting in bank accounts, 401K's, and IRA's. The HODLers believe the banksters and fraudsters in the establishment have had their chance, and they blew it spectacularly. Why not give a distributed network of software programmers a chance? They pretty much control everything we use now anyway - why not the monetary system? God knows, they couldn't do worse. BTW, Govt's and CB's cannot stop visible illegal drug use, how do you think they will stop bits flying invisibly around the world? Force may work in parts of the world where citizens are not armed, but it will not work here...and why would anyone want govt force to prevail?

You to central banks, “you can’t stop it” Central banks back to you, “hold my beer”.

Rayner-Hilles
Rayner-Hilles

@Blacklisted

@Realist

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