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Bitcoin: Millennials' Fake Gold

Discussion in 'CryptoCurrency' started by umerjutt00, Dec 8, 2017.

  1. umerjutt00

    umerjutt00 Jr. VIP Jr. VIP

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    I’ve been asked about Bitcoin a lot lately. I haven’t written anything about it because I find myself in an uncomfortable place in agreeing with the mainstream media: It’s a bubble. Bitcoin started out as what I’d call “millennial gold” – the young (digital) generation looked at it as their gold substitute.

    Bitcoin is really two things: a blockchain technology and a (perceived) currency. The blockchain element of Bitcoin may have enormous future applications: It may be used for electronic contracts, voting, money transfers – and the list goes on. But there is a very important misconception about Bitcoin: ownership of Bitcoin doesn’t give you ownership of the technology. I, without owning a single bitcoin, own as much Bitcoin technology as someone who owns a million bitcoins; that is, exactly none. It’s just like when you have $1,000 on a Visa debit card: That $1,000 doesn’t give you part ownership of the Visa network unless you actually own some Visa’ stock.

    Owning Bitcoin gives you a right to … what, actually? Digital bits?

    I can understand gold bugs and the original Bitcoin aficionados. The global economy is living beyond its means and financing its lifestyle by issuing a lot of debt. Normally this behavior would cause higher interest rates and inflation.

    But not when you have central banks. Our local central bankers simply bought this newly issued debt and brought global interest rates down to near-zero levels (and in many cases to what would have been previously unthinkable negative levels). If you think investing today is difficult, being a parent is even more difficult. I tried to explain the above to my sixteen-year-old son, Jonah. I saw the same puzzled look in his eyes as when he found out where babies come from. I also felt embarrassed, for my inability to explain how governments can buy the debt they just issued. The concept of negative interest rates goes against every logical fiber in my body and is as confusing to this forty-four-year-old parent as it is to my sixteen-year-old.

    The logical inconsistencies and internal sickness of the global economy have manifested themselves into a digital creature: Bitcoin. The core argument for Bitcoin is not much different from the argument for gold: central banks cannot print it.

    However, the shininess of gold has less appeal to millennials than Bitcoin does. They are not into jewelry as much as previous generations; they don’t wear watches (unless they track your heartbeat and steps). Unlike with gold, where transporting a million dollars requires an armored track and a few body builders, a nearly weightless thumb drive will store a dollar or a billion dollars of Bitcoin.

    Gold bugs would of course argue that gold has a tradition that goes back centuries. To which digital millennials would probably say, gold is analog and Bitcoin is digital. And they’d add, in today’s world the past is not a predictor of the future – Sears was around for 125 years and now it is almost dead.

    A client jokingly told me that his biggest gripe with me in 2016 and 2017 was that I didn’t buy him any Bitcoin. I told him not so jokingly that if I bought him Bitcoin, he’d be right to fire me.

    Maybe I’m a dinosaur; but, like gold, Bitcoin is impossible to value. What is it worth? It has no cash flows. Is a coin worth $2, $200, or $20,000? But Wall Street strategists have already figured out how to model and value this creature. Their models sound like this: “If only X percent of the global population buys Y amount of Bitcoin, then due to its scarcity it will be worth Z”. On the surface, these types of models bring apparent rationality and an almost businesslike valuation to an asset that has no inherent value. You can let your imagination run wild with X’s and Y’s, but the simple truth is this: Bitcoin is un-valuable.

    In 1997, when Coke’s (NYSE:KO) valuation started to rival some dotcoms, bulls used this math:

    “The average consumer of Coke in developed markets drinks 296 ounces of Coke a year. These markets represent only 20% of the global population.”

    And then the punchline: “Can you imagine what Coke’s sales would be if only X% of the rest of the world consumed 296 ounces of Coke a year?” Somehow, the rest of the world still doesn’t consume 296 ounces of Coke. Twenty years later, Coke’s stock price is not far from where it was then – but on the way it declined 60% and stayed there for a decade. Coke, however, was a real company with a real product, real sales, a real brand and real tangible, dividend-producing cash flows.

    If you cannot value an asset you cannot be rational. With Bitcoin at $11,000 today, it is crystal clear to me, with the benefit of hindsight, that I should have bought Bitcoin at 28 cents. But you only get hindsight in hindsight.

    Let’s mentally (only mentally) buy Bitcoin today at $11,000. If it goes up 5% a day like a clock and gets to $110,000 – you don’t need rationality. Just buy and gloat. But what do you do if the price goes down to $8,000?

    You’ll probably say, “No big deal, I believe in cryptocurrencies.” What if it then goes to $5,500? Half of your hard-earned money is gone. Do you buy more? Trust me, at that point in time the celebratory articles you are reading today will have vanished. The awesome stories of a plumber becoming an overnight millionaire with the help of Bitcoin will not be gracing the social media. The moral support – which is really peer pressure – that drives you to own Bitcoin will be gone, too.

    Then you’ll be reading stories about other suckers like you who bought it at what – in hindsight – turned out to be the all-time high and who got sucked into the potential for future riches. And then Bitcoin will tumble to $2,000 and then to $100.

    Since you have no idea what this crypto thing is worth, there is no center of gravity to guide you or anyone else to make rational decisions. With Coke or another real business that generates actual cash flows, we can at least have an intelligent conversation about what the company is worth. We can’t have one with Bitcoin. The X times Y = Z math will be reapplied by Wall Street as it moves on to something else.

    People who are buying Bitcoin today are doing it for one simple reason: FOMO – fear of missing out. Yes, this behavior is so predominant in our society that we even have an acronym for it. Bitcoin is priced today at $11,000 because the fool who bought it for $11,000 is hoping that there is another, greater fool who will pay $12,000 for it tomorrow.

    This game of greater fools is not new. The Dutch played it with tulips in the 1600s– it did not end well. Americans took the game to a new level with dotcoms in the late 1990s – that round ended in tears, too. And now millennials and millennial-wannabes are playing it with Bitcoin and few hundred other competing cryptocurrencies.

    The counterargument to everything I have said so far is that those dollar bills you have in your wallet or that digitally reside in your bank account are as fictional as Bitcoin. True. Currencies, like most things in our lives, are stories that we all have (mostly) unconsciously bought into. (I highly encourage you to read my favorite book of 2015: Sapiens, by Yuval Harari.)

    Of course, society and, even more importantly, governments have agreed that these fiat currencies are going to be the means of exchange. Also, taxation by the government turns the dollar bill “story” into a very physical reality: If you don’t pay taxes in dollars, you go to jail. (The US government will not accept Bitcoins, gold, chunks of granite, or even British pounds).

    And finally, governments tend to look at Bitcoin and other cryptocurrencies as a threat to their existence. First, governments are very particular about their monopolistic right to control and print currencies – this is how they can overpromise and underdeliver.

    No less important, the anonymity of cryptocurrencies makes them a heaven for tax avoiders – governments don’t like that. The Chinese government outlawed cryptocurrencies in September 2017. Western governments are most likely not far behind. If you think outlawing a competitor can happen only in a dictatorial regime like China’s, think again. This can and did happen in a democracy like the US. With Executive Order 6102 in 1933, US President Franklin D. Roosevelt made it illegal for the US population to “hoard gold coin, gold bullion, or gold certificates.”

    However, nothing I have written above will matter until it does. Bitcoin may go up to $110,000 by the end of the 2018 before it comes down to … earth. That is how bubbles work. Just because I called it a bubble doesn’t mean it will automatically pop.

    Source: https://www.investing.com/analysis/bitcoin--millennials-fake-gold-200270435
     
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  2. deal with it

    deal with it Jr. VIP Jr. VIP

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    you need bitcoin to buy altcoin.

    whales dont want this to die so they will try their best to buy bitcoin for higher price even for no reason.

    You need fucking solid reason to bring it down. Right now there is none.

    If it goes down like -5000$, people will look for reason on web, if they find none they will just assume it as correction and try to buy it before someone else buys.
     
    Last edited: Dec 8, 2017
  3. kaminkii

    kaminkii Newbie

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    Thanks for this article , really enjoyed reading it.
    I dont know how far this bubble will go but it will explode someday thats why i dont
    invest in bitcoin its just a way to big risk.
    its just like playing roulette high risk high reward and people are just going for the hype.
     
  4. NX_NULL

    NX_NULL Regular Member Premium Member

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    All illegal stuff such as drugs are being sold by bitcoin, most of porn websites accept bitcoin as money too...
    These guys give bitcoin real value. When people start using it as money its value will go to roof.

    Experts believe the real value of bitcoin is around $1000 now , because of the hype people rush to buy bitcoin to exchange it to USD at a greater price so the prices is keep going up and up but you should not forget only a small fraction of people in world own bitcoins and small fraction of those who own bitcoins use it as money... and by all these its true value is still as high as $1000 and on market people trade it for $+15K.

    imagine if more people own bitcoins and more people use it as real money, Its value will go beyond million dollars for each bitcoin.

    Dont forget there is only 21 million bitcoins in world not like USD or other currency that can be unlimited.
     
  5. iamDeLaSoul

    iamDeLaSoul Junior Member

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    well put, enjoyed reading, had the same position from the beggining of this craze
     
  6. tb303

    tb303 Senior Member

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    Read through waiting for it...there is is...fucking tulips again.
     
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  7. NagacomesforU

    NagacomesforU Power Member

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    Salty bro?
     
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  8. kittykut

    kittykut Senior Member

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    These "experts" are the largest holders of bitcoin. Of course they will say this
     
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  9. blogzandstuff

    blogzandstuff Elite Member

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    The UK government and the rest of the EU are bringing in regulation at the end of this/beginning of next year, so taxes can be collected. This is a classic bubble, inflated by would be so called economists, who spit hatred at anyone who thinks it can't continue, the snowflakes don't remember the dot com bubble, then you could start a site selling chocolate teapots and investors would throw millions at you for fear of missing out, that crashed. The younger ones on here will not understand that something can't go up forever, bitcoin is built on the greater fool principal. Watch all the so called experts fall silent when this ends, like gamblers they never mention losing
     
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  10. issorc

    issorc Power Member

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    I actually believe that it will be the beginning of the end of bitcoins when people start to use it as real money. I don't want to pay 5$+ just on transaction fees every time and I guess I'm not alone with that. In addition, Bitcoin won't be able to process enough transactions once the masses should adapt and use it to pay for their daily goods. The blockchain is an incredible technology that will open many doors and is a good basis for further development but I doubt that Bitcoin will play the biggest role in the future of cryptocurrencies.
     
  11. blogzandstuff

    blogzandstuff Elite Member

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    Stalker alert!!!! You snowflakes are funny
     
  12. ambushiv11

    ambushiv11 Jr. VIP Jr. VIP

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    It's simple man, stop hating, invest what you aford to lose. I lose the 400$ train and joined at 3k$. Cashed out the initial investment and play with the virtual "USD" that I have. Basically I play with money I've never had :)
     
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  13. tb303

    tb303 Senior Member

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    Generation X and proud buddy.

    And stalker wtf?
     
  14. blogzandstuff

    blogzandstuff Elite Member

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    Buddy not, my opinion is different to yours, so we'll leave it there
     
  15. mickyfu

    mickyfu Jr. VIP Jr. VIP

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    They won't, they will just all start declaring "Don't care anyway I made millions" The reality being they are now skint as fuck and should have cashed out when they had the chance. But that's gambling for you.
     
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  16. ∂αякѕтαя

    ∂αякѕтαя Regular Member

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    Dot com bubble led to start of some of top companies of current times. Btc will not go up forever and may even end up getting dumped real hard unless they solve slow transaction and high fees issues. On the other hand btc also got the early advantage since it was the first crypto.
    Whatever happens we may see new cryptos taking over btc and leading the market.
     
  17. tb303

    tb303 Senior Member

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    Spoken like a true millennial. Chuck an insult at me and then tell me to shut up when I question it.

    I suppose I'll have to start using this more :(
     
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  18. blogzandstuff

    blogzandstuff Elite Member

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    I'm far too old, a 70s kid lol!
     
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  19. KraftyKyle

    KraftyKyle Jr. Executive VIP Jr. VIP

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    Ah I thought this was your long, thought out opinion... then I got to the end and saw the source. Hah.
     
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  20. roman375

    roman375 Jr. VIP Jr. VIP

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    Not this again. Are we making new threads now for every new article we find that says bitcoin is a bubble or bitcoin is going to the moon? There is literally nothing in that article that has not already been brought up and discussed in the one hundred other threads on this topic in this subforum.
     
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