Bitcoin rose about a month ago, on December 17, to a high of almost $ 20,000. As I write, the cryptocurrency is under $ 11,000 … a loss of about 45%. That’s more than that $ 150 billion of the lost market cap.
Learn a lot of hand-holding and tooth-grinding in crypto-commentariat. It’s neck-and-neck, but I think the “I-told-you-so” crowd has an edge over the “excuse-makers.”
Here’s the thing: Unless you’ve lost your bitcoin shirt, it doesn’t matter. And most likely, the “experts” you see in the press don’t tell you why.
In fact, the crash of bitcoin is remarkable … because it means we can all stop thinking about cryptocurrencies entirely.
The Death of Bitcoin …
In a year or so, people won’t talk about bitcoin on the grocery store line or on the bus, like now. Here’s why.
Bitcoin is the product of rational failure. Its designer has clearly said that the cryptocurrency is a reaction to the government’s abuse of fiat currencies such as the dollar or euro. It would have provided an independent, peer-to-peer payment system based on a virtual currency that would not be discounted, as there would be a limited amount of it.
That dream has long been jettisoned in favor of raw speculation. Surprisingly, most people care about bitcoin because it’s a quick way to get lots of fiat currency! They don’t own it because they want to buy pizzas or gas with it.
Aside from being a terrific way to transact electronically – it’s extremely slow – the success of bitcoin as a speculative game makes it useless as a currency. Why would anyone spend it when it’s so fast? Who would accept one if it was rapidly declining?
Bitcoin is also a major source of pollution. It takes 351 kilowatt -hours of electricity just to process a transaction – which also releases 172 kilograms of carbon dioxide into the atmosphere. That’s enough to power a U.S. household for a year. The energy used by all bitcoin mining to date could power nearly 4 million U.S. households a year.
Paradoxically, the success of bitcoin as a thing of the past speculative game – not the planned use of the libertarian – attracted the government explosion.
China, South Korea, Germany, Switzerland and France enforce, or consider, bans or restrictions on bitcoin trading. Several intergovernmental organizations have called for joint action to curb the apparent bubble. The U.S. Securities and Exchange Commission, which previously seemed likely to approve bitcoin-based financial derivatives, now seems skeptical.
And according to Investing.com: “The European Union is enforcing stricter rules to prevent money laundering and terrorist financing on virtual currency platforms. It is also looking at the limitations of cryptocurrency trading.”
We may see a viable, widely accepted cryptocurrency in the future, but it’s not bitcoin.
… But an Advancement for Crypto Assets
Good. Acquiring bitcoin allows us to see where the true value of crypto assets is. Here’s how.
To use the New York subway system, you need tokens. You can’t use it to buy anything else … even if you are potential sell it to someone who wants to use the subway more than you.
In fact, if subway tokens have a limited supply, a viable market could emerge for them. They may even sell for more than their original cost. It all depends on how many people want to use the subway.
That, in short, is the scenario for the most promising “cryptocurrencies” other than bitcoin. They’re not money, they are tokens – “crypto-tokens,” if you like. They are not used as general money. They are just fine within the platform on which they were designed.
If those platforms provide essential services, people want crypto-tokens, and that will determine their price. In other words, crypto-tokens have value to the extent that people appreciate the things you get for them from their partner platform.
That will make them real assetswith intrinsic value – because it can be used to get something that people value. That means you can reliably expect a stream of revenue or services from owning such crypto-tokens. Critically, you can measure that stream of future return against the crypto-token price, just as we do when we calculate the price/earnings (P/E) ratio of a stock.
Bitcoin, in contrast, has no intrinsic value. It has only a price – the price determined by supply and demand. It can’t generate future revenue streams, and you can’t measure anything like the P/E ratio for it.
One day it will be worthless because it won’t give you anything real.
Ether and Other Crypto Assets Are the Future
The crypto-token ether is sure murag like a currency. It is traded on cryptocurrency exchanges under the code ETH. Its symbol is the Greek uppercase Xi character. It is mined in a similar (but less powerful) bitcoin process.
But ether is not currency. Its designers describe it as “a fuel for operating the distributed Ethereum application platform. It is a form of payment made by the platform’s clients to the machines that execute the request operations. “
Ether tokens give you access to one of the most sophisticated distributed computational networks in the world. It’s so promising that big companies are falling out with each other to improve its practical, real -world use.
Since most of the people who sell it never understand or care about its true purpose, the price of ether has been bubbling and bubbling like bitcoin in recent weeks.
But eventually, ether will return at a solid price based on the demand for computing services that it can “buy” for people. That price will represent real value which may be priced in the future. There is a futures market for it, and exchange-traded funds (ETFs), because everyone has a way to assess its underlying value over time. Like we do with stocks.
What is that value? I don’t know. But I know it’s more than bitcoin.
My advice: Get your bitcoin, and buy ether the next dip.