Reflections on Bitcoin's Broken Parabola

John Hussman makes comments on parabolic charts in general, and Bitcoin specifically.

On a log chart things do not look as messy, yet the parabola is clearly still visible, two of them in fact.

Bitcoin Log Scale

If Bitcoin's third parabola rises as much as the first two, the price target is $100,000.

But will there be a third parabola? If so, from where?

Who cares, just Hodl?

The Hodlers need a third parabola.

Fundamentally, there is no reason to expect one. Bitcoin does not scale (other cryptos claim to). Transaction costs are ridiculous.

Some claim these problems can be fixed. OK, so why aren't they? Will it matter if they are?

What about barriers to entry? Here's the answer: there aren't any.

Volatility makes Bitcoin useless as a day-to-day currency. It is a speculative plaything, even if the technology isn't.

Ideas of mass adoption seem absurd. And finally, what about Central Banks or governments ruling it illegal?

Many Hodlers ignore all these issues, but the earlier believers made a fortune.

Carnival Barkers

Those still Hodling have become carnival barkers. They have to. They desperately need more people to ignore the broken parabolas and buy on belief.

Mike "Mish" Shedlock

Comments (20)
No. 1-20
Carl_R
Carl_R

Your log chart looks a bit odd where it shows the peak as "$1,9345".

Mike33
Mike33

First of all, Hussman is a complete joke and people that bought bitcoin at the peak will likely still have more money than people who've invested with Hussman, let's not forget that.

Bitcoin transaction costs are back near zero though mainly because interest in bitcoin is lower now. So please get facts straight. Not saying bitcoin will be a good method of transactions going forward but it's not an issue now.

Wouldn't shock me if crypto is best asset class to invest in if you buy in a year or so once all the stupid gets wrung out of the system. The fact that it got so stupid and went up so fast and still is sitting at 6k (when you called it a bubble at 2k) indicates some long term staying power even if it's not a buy now.

truthseeker
truthseeker

Apologize off topic: Mish sorry but I’m beginning to consider myself as a contrary indicator because I once again agree with Avi Tiomkin’s article n Barron’s “Fed Rate Cuts, QE Will Resume Soon.” It seems like I’m always going around looking for people who agree with my point of view, so to b objective, that would mean it’s not too late for me to buy the ETF tech stocks which I said to myself many months ago.Anyway I wish you would comment on Avi’s article if possible, but if not I understand.

thimk
thimk

Prognostication aside , Hussman is spot on. Bitcoin was spawned from deranged monetary policy .

SweetKenny
SweetKenny

Bitcoin is the next phase in the monetary system away from real money. Gold based -> gold backed -> partially gold backed -> not gold backed -> imaginary

cecilhenry
cecilhenry

The Tiomkin article says that 'the decrease in unemployment is offset by stagnant real wages and the historically low labor-participation rate.

How do you have low unemployment AND low labor participation without there being massive lying or distortion of real employment trends??

Something is off.

Stuki
Stuki

".How do you have low unemployment AND low labor participation without there being massive lying or distortion of real employment trends??"

All popularly reported and endlessly regurgitated "economic" measures and "indicators", are just simple, mindless, Newspeak.

It's not that they can't be well defined in a strict technical sense. But rather that the name chosen for them, intends to convey that they describe something meaningful in the real world. Which they don't.

They're popular because they are so simplified that they allow clear means for politicians, apparatchiks, bureaucrats, banksters and other busybodies to "manage" them in a supposedly "good" way. By the usual micromanagement and interference in the lives of others, that is all the above can ever hope to do. (In a Fiat regime, they are all, specifically, highly correlated with simple debt growth. To the point where there is no need to follow any of them. Just look at debt growth. If it's accelerating, every "indicator" show "the economy" doing "good." And vice versa. Nice way for pointless, useless banksters and their protector Saint The Fed to pretend they are somehow useful for anything at all...Which, of course, they aren't.)

Economics, as properly practiced (read Rothbard), pays no attention to any such metric. As none of them mean anything. There simply exists no little tweaks and levers by which a bunch of clueless apparatchiks can "manage" "the economy" to make it "better." All such "management" does, per definition, is gum up the works of a system that; always, everywhere and for all of history past, current and future, on any possible planet and in any universe aside from possibly Heaven; works best if the apparatchiks were all dead and replaced by noone.

Which, of course, isn't what the of-less-use-alive-than-dead crowd wants to hear. So they instead make up pointless, meaningless "indicators" of what they insist are measures of "the people's" wealth and "well being." Which they can then busy themselves screwing and messing around with at will. Hoping none of the actual "people" notices, that despite "the economy" supposedly doing so "well," people themselves are, in fact, having less and less in common with free and reasonably well off citizens; and instead are looking more and more like simple indentured servants. And subjects of a childish, progressive social experiment that, even in theory, has an exactly, identity, zero chance of ever ending well.

JonSellers
JonSellers

My understanding of bitcoin: Transactions are settled by independent people "mining". People are willing to mine because they are paid in bitcoin. There is a hard, mathematical limit to the number of bitcoins that can be mined. At the point of the final coin, there will be no more payment for mining, and people will stop. When people stop mining, no more bitcoin transactions will be settled. Since you will no longer be able to trade them, they will be worthless.

Can someone explain why this is incorrect?

RonJ
RonJ

"Bitcoin is the next phase in the monetary system away from real money. Gold based -> gold backed -> partially gold backed -> not gold backed -> imaginary"

It's really all imaginary. There is nothing that is permanent, economically. Gold standards have come and gone. They may come back again, but they will also go away again when the cycle returns to the same phase as last time. Glass -Steagall was supposed to prevent IT from ever happening again. When it got in the way, it was dismantled. IT, is now happening again. That Glass-Steagall would prevent IT from happening again, was a lie. A gold standard doesn't prevent IT from happening, either.

A gold standard is a lie that works, until it doesn't and it is abandoned, just as Glass -Steagall was.

Carl_R
Carl_R

Well, that's it in a nutshell, isn't it? Great point. One thing I am certain of, is that the ultimate price of Bitcoin is zero. 200 years from now, will anyone want an old data file? I doubt it. I have no clue how long it will take to get there, or how high it might go in the meantime. The second thing I'm sure of is that there will be a lot more imaginary monies invented in the future, as the inventor makes money out of nothing, which is hugely profitable.

goldenbadger
goldenbadger

The most glaring exceptions in the financial sphere to parabolas eventually breaking down are when fiat currencies collapse. The Venezuelan bolivar vs. everything else parabola, expressed as bolivars per something else, may land at infinity (i.e. a completely new Venezuelan currency).

The vast majority of cryptocurrencies' parabolas, in units of cryptos vs. real stuff, will land at infinity (i.e crypto equals $0.00), just as most click-valued tech bubble stocks settled at $0.00. Whether Bitcoin and Ethereum survive becoming irrelevant in the world of "investment" is the question at the moment, and it's not looking good.

Stuki
Stuki

In addition to the "statutory" fee, in new coin, received by the miner, which decreases over time until there's nothing left, a miner of a successful block also gets to collect (or not...) transaction fees that is included (or not...) with each transaction. Every time a sender sends a payment, he has the option to add a transaction fee, of whatever size he fancies, to the payment.

When creating a block, miners have some discretion over which transactions to include, and tend to pick those with highest fees first. Leaving those with lower fees to languish unsettled until things are slow.

It may sound like a payment system built on bribes, but, reality is, some transactions require "real time" settlement, others do not. And since each transaction is costly (in terms of processing power) to verify, allowing end users to inform and induce miners to prioritize transactions, by selecting the size of transaction fee to include, allows for efficient utilization of a limited resource.

Blacklisted
Blacklisted

Attitude/demand will take on a whole new vibe when govt confidence collapses. One would think that the gold bugs would understand this basic fact. Oh ya, these are the same people that believe they must bash the dollar to justify a rise in gold.

When budgets explode from a rising dollar and rates, and govt promises evaporate, where are investors going to go? Individuals can go to gold, if they think they can keep govt from confiscating it, but the younger generation is more comfortable with digital currency.

Carl_R
Carl_R

And yet, while they may be "comfortable" owning digital currency today, if they take a parabolic loss, they may not be nearly as comfortable owning it anymore. Especially in times of crisis, people will be looking for a safe place to put their wealth, something that is a historically good store of value. With digital currency accomplish that? If it passes the test of time and holds a stable value, perhaps yes. If it continues to crash and people take a big loss, perhaps not.

Carl_R
Carl_R

Crypto mining via Malware is on the rise, and one website uses the computers of visitors to mine for crypto during their visit: