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September 1, 2024 - 1:00pm
Although the mother of cryptocurrencies has struggled to hold above the $60,000 mark in recent days, its enthusiasts still insist it will soon get back on its feet and resume heading upwards, possibly to a million. Given the extreme volatility of Bitcoin, the claim actually sounds plausible.
By choosing a starting point during one of its dips, and then extrapolating from the subsequent rally, it’s easy to come up with astounding annualised rates of increase. For instance, during a two-month period early this year, Bitcoin rose at an annualised rate of several thousand percent.
The problem is that these rallies don’t last, and are subsequently offset by another dip. Stretching it out over time, Bitcoin fails to impress much, worth no more today that it was at the end of 2021. You’d have done better to buy gold.
That 2021 cut-off date in the rise of Bitcoin isn’t accidental. That’s when Federal Reserve chair Jerome Powell said it was time to retire the word “transitory”, signalling the end of the cheap-money era. Soon after, central banks across the West began raising interest rates, and the roaring bull markets in a host of asset classes, from real estates to stocks, came to an end. Unless we return to a cheap-money era, it’s hard to see what role crypto will play.
Looking back to the start of the crypto era, we can detect three distinct periods. Each was defined by the changing policy regimes of central banks, and in particular the US Federal Reserve. The first lasted from Bitcoin’s creation in the wake of the 2008 financial crisis until the start of the Covid-19 pandemic in early 2020. This was the time during which central banks tried to shore up asset values and stimulate the economy by slashing interest rates and using the novel device of quantitative easing — essentially giving free money directly to the Government and, eventually, the private sector. During this time, Bitcoin rose steadily from its humble, shadowy origins until it was worth around $10,000.
The second period began when pandemic lockdowns plunged the world economy into recession, and central banks responded by slashing interest rates so deeply that credit became essentially free. The flood of money into markets which resulted sent Bitcoin ballistic, and it rocketed some 600% over the next two years.
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SubscribeLike every other asset, its price is controlled by sentiment.
To this day, I simply don’t understand the appeal of bitcoin. It doesn’t work as a currency or medium of exchange: it’s barely accepted by merchants and transactions are slow and costly to process. Nor does it work as an asset: unlike gold or property, it has no intrinsic value; and unlike bonds or equities, it yields no income.
So, can anyone here explain to me its appeal, and where it derives its value from?
The value of Bitcoin is that you, the owner, have full control over it.
A legal authority cannot take it away unless they can compel you to disclose secret knowledge.
Contrast that to a bank account where authorities can take possession of it without your cooperation.
You could say the same about the “invisible friend” you had as a kid.
Or they just shut the power off!
If the miners decide it’s no longer cost effective to mine them bitcoin will just disappear.
Have a read of the bitcoin standard by saifedean amous. I could throw the usual buzz words around but really the fact is regular money is created by banks and central banks as loans which mathemstically cannot be repaid = therefore money supply ( and debt) grows to infinity and those who can “create” the money benefit as they buy apprecisting assets with depreciating currency. That is why young people cant buy houses and start families. It is also why governments exagerate every problem as an excuse to print money ( hence war, green nonsense, covid lock downs etc. )Supply gets monopolised by already powerful institutions who borrow cheap.
Bitcoin is automated , with fixed supply and almost impossible to shut down because it depends on decentralised nodes. Therefore it should appreciate relative to regular money even if it is only used for saving
The only “fly in that ointment” is that Bitcoin isn’t a “real thing”.
Maybe we should discuss god.
Please leave me out of it.
To summarise this article : bitcoin might go to million. But those august central bankers have pinky promised that they will stop printing money so dont buy it.
I prefer the KNC coin.. King’s new clothes.. or even the digital groat?
The fact that Bitcoin is still worth $60K is still a testament to something, given that it has no intrinsic value at all.
Neither does a piece of paper with ‘100 dollars’ printed on it.
It has value because you and I believe it has value.
The paper money has value because it is backed by a nation. That’s why the US dollar has value, and the (late and unlamented) Zimbabwe dollar didn’t (and I should know, because I have 50 billion of them).
I have 50 trillion Zim dollars framed on my wall!
But the USD only has value because we believe it is backed by the US government. It’s still only a piece of paper with no intrinsic value. Yuval Noah Harari explains this phenomenon as the ‘stories we tell ourselves’.
Bitcoin isn’t backed by anything, and it was almost certainly set up by a criminal (or criminals) for his (or her) own nefarious purposes. All that “altruistic” stuff spruiked by crypto-cultists is so laughable I am surprised anyone at all believes it.
Strictky speaking, you are correct. bitcoin has no intrinsic value and does not exist. It is better though to think of the bitcoin network as a real thing composed of individuals using a bitcoin ledger ( also a real thing). The network is backed by computing power and energy expenditure via ” mining” which governs issuance. In other words to get a bitcoin you must spend energy in the real world by running computations, earn it from someone who has bitcoin to spend or exchange it for regular money.
By contrast regular money is created on an ad hoc and aribrary manner dependent on politicians, bankers and the general public. It therefore grows in volume and depreciates in purchasing power over time. Sometimes slowly, sometimes suddenly but that is the reality of government money. The btc network is individuals and institutions who are using a btc ledger to maintain and grow the purchasing power of your savings even as the money creation games get played out
The whole bitcoin thing tells you everything you need to k ow about the global warming crisis. Not to mention the whole ai thing.
It tells you what you need to know about the intelligence of the human race too.
People are susceptible to snake oil salesmen.
I understand how it works. All that energy use produces what? “Smoke and mirrors” basically.
Money that’s hard for your government to steal.
Crypto will always have a place when governments spend more then they make.
Yes, because when the chips are down, what you really want is something created by crooks which is intrinsically worthless.
You just described big government.