Bitcoin peaked about a month ago, on December 17, at nearly $ 20,000. As I write, the cryptocurrency is less than $ 11,000 … a loss of about 45%. It’s more than that $ 150 billion in lost market capitalization.
Include a lot of hand twisting and gnashing of teeth in the crypto-commentator. It’s neck and neck, but I think the “I told you” crowd has an advantage over the “excuses”.
Here’s the thing: if you just haven’t lost your shirt on bitcoins, it doesn’t matter at all. And most likely, the “experts” you can see in the press aren’t telling you why.
In fact, the collapse of bitcoin is great … because it means we can all just stop thinking about cryptocurrencies.
Death of bitcoin …
In about a year people will no longer talk about bitcoin in the queue at the grocery store or on the bus like now. That’s why.
Bitcoin is a product of justified disappointment. Its designer has clearly stated that cryptocurrency is a reaction to the government’s abuse of currencies such as the dollar and the euro. It was to provide an independent, peer-to-peer payment system based on a virtual currency that cannot be challenged as there was a finite number of them.
This dream has long been rejected in favor of crude speculation. Ironically, most people care about bitcoin because it seems like an easy way to get more fiat currency! They do not own it, because they want to buy pizza or gasoline with him.
Aside from the awful way to make electronic transactions – it’s painfully slow – the success of bitcoin as a speculative game has made it useless as a currency. Why would anyone spend it when it’s so quickly appreciated? Who will take one if it depreciates quickly?
Bitcoin is also a major source of pollution. To process a single transaction requires 351 kilowatt-hours of electricity, which also emits 172 kilograms of carbon dioxide. That’s enough to feed one American household a year. The energy consumed by all bitcoin mining today can provide nearly 4 million U.S. households a year.
Paradoxically, the success of bitcoin is as old-fashioned speculative game – not provided for by libertarian use – attracted government repression.
China, South Korea, Germany, Switzerland and France have introduced or are considering bans or restrictions on bitcoin trading. Several intergovernmental organizations have called for concerted action to stop the obvious bubble. The U.S. Securities and Exchange Commission, which at one time probably approved bitcoin-based financial derivatives, now seems to be hesitant.
And according to Investing.com: “The European Union is introducing stricter rules to prevent money laundering and terrorist financing on virtual currency platforms. It is also examining restrictions on cryptocurrency trading.”
Someday we may see a functional, widely accepted cryptocurrency, but it won’t be bitcoin.
… But the impetus for crypto-assets
Good. Overcoming bitcoins allows us to see where the real value of crypto-assets is. Here’s how.
To use the New York subway system, you need tokens. You can’t use them to buy anything else … though you do could sell them to someone who wanted to use the subway more than you.
In fact, if subway tokens were in limited quantities, a bustling market could arise for them. They can even trade much more than they originally cost. It all depends on how many people I want enjoy the subway.
In a nutshell, this is a scenario for the most promising “cryptocurrencies” other than bitcoins. They are not money, they are tokens – “crypto-tokens”, if you will. They are not used as a common currency. They are good only in the platform for which they were designed.
If these platforms provide valuable services, people will want these crypto tokens and this will determine their value. In other words, crypto-tokens will have value to the extent that people evaluate what you can get for them on an associated platform.
It will make them real assets, s intrinsic value – because with their help you can get what people value. This means that you can reliably expect a stream of revenue or services from owning such crypto tokens. It is critical that you can measure this future return flow against the crypto-token price, as we do when calculating the price / earnings (P / E) ratio of a stock.
On the contrary, bitcoin has no intrinsic value. It has only a price – a price set by supply and demand. It can’t bring future revenue streams, and you can’t measure for it anything like a P / E ratio.
One day it will be useless, because nothing real will give you.
Ether and other crypto-assets are the future
The ether of the crypto-token is sure it seems as a currency. It is traded on cryptocurrency exchanges under the code ETH. Its symbol is the Greek symbol “Si”. It is extracted by a similar (but less energy-intensive) process to bitcoins.
But the air is not a currency. Its designers describe it as “the fuel for Ethereum’s distributed application platform. It’s a way customers pay the platform for machines that perform the requested operations.”
Ether markers give you access to one of the world’s most complex distributed computing networks. It’s so promising that big companies are falling for each other to develop practical uses in the real world.
Because most people who trade it don’t really understand and care about its true purpose, in recent weeks the cost of airtime has been bubbling and foaming like bitcoin.
But eventually, ether will return to a stable price depending on the demand for computing services that it can “buy” for people. This price will represent real value which can be estimated in the future. It will have a futures market and exchange traded funds (ETFs) because over time everyone will have a way to estimate its underlying value. Just like we do with stocks.
What will this value be? I have no idea. But I know it will be much more than bitcoin.
My advice: get rid of bitcoin and buy ether at the next drop.