We’re All Doomed: Bitcoin Boy Band Edition

Just five days after diving 30%, Bitcoin is back near $8,000, no worse for wear after a truly harrowing plunge erased some $35 billion in market cap as “investors” abandoned ship in favor of bitcoin cash.

But true to form, it’s bounced back – and “big league.” Have a look:

Bitcoin

There you go – no problem. What’s a 30% declines among friends, right?

“My sense is that today’s rally is driven by a resurgence in interest and viability for the SegWit2x hard fork,” Spencer Bogart, head of research at Blockchain Capital, told Bloomberg on Friday, adding that “despite the fact that it was called off, there is still some group of people that will follow through with the intended fork.”

Whatever, Spencer. Meanwhile, Thomas Peterffy has joined the ranks of those who believe the upcoming launch of Bitcoin futures needs to be very carefully orchestrated lest the move should end up imperiling the entire U.S. economy. As we detailed on Thursday, Peterffy penned an open letter to Christopher Giancarlo essentially warning the CFTC chairman to quarantine anything to do with cryptocurrencies. Here’s an excerpt from the letter for those who missed it:

…if the Chicago Mercantile Exchange or any other clearing organization clears a cryptocurrency together with other products, then a large cryptocurrency price move that destabilizes members that clear cryptocurrencies will destabilize the clearing organization itself and its ability to satisfy its fundamental obligation to pay the winners and collect from the losers on the other products in the same clearing pool.

Also on Thursday, Katsunori Sago, CIO of Japan Post Bank, said Bitcoin should be trading at around $100 – so just “slightly” below where it is now.

Sago called the Bitcoin craze “far worse” than the dot-com bubble. He did say that blockchain may indeed be the future, but quickly added that’s “years away, possibly more than a decade — so there’s no need to buy bitcoin now.” Your best bet, he concluded, “is to stay away from it.”

But not everyone agrees with Sago. For instance, take world-renowned finance gurus “Forever In Your Mind”, who stopped by “Cheddar” on Thursday to regale whoever watches “Cheddar” with their thoughts on the crypto universe. To wit:

Right. You’ve got to love how that conversation begins with “I know a lot about Bitcoin” and yet by the end of it, it is abundantly clear that literally none of those five people know anything at all about Bitcoin.

But who you gonna believe, right? Old fogies like Dimon and Peterffy or these guys?…

Bitcoin

 

 

 

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13 thoughts on “We’re All Doomed: Bitcoin Boy Band Edition

  1. Ok Heisy, I just bought another $5k of Bitcoin, despite my favorite writer saying otherwise. And you know why? Because neither you or Dimon or anyone else has articulated to me exactly how governments are going to put the kabosh on this thing. Rather, your whole lot is looking a bit “old fogyish” in your insistence that Bitcoin is not fundamentally sound. So, until you explain to me how that will happen, I’m forced to buy more. If you want to save me, present a compelling argument — grounded in the software and mechanics of how Bitcoin works — detailing how governments are going to curtail this thing.

    An adoring fan.

    Rudy

    • thanks Rudy. it’s going to zero.

      i can’t tell you when just like i can’t tell you the winning lottery numbers, but as usual, i would suggest you be honest with yourself.

      there is a reason why Jamie Dimon is richer than you.

      of course just like all bubbles, people will suspend disbelief and then when it all crashes and burns, they’ll wonder what happened before jumping into the next bubble.

      Rudy my friend, there is nothing new about this dynamic. it happens over, and over, and over again. this time it’s Bitcoin, last time it was MBS, the time before that it was the dot-com darlings, and on and on and on.

      the result is always – always – the same. you’ll lose everything if you keep pressing your luck on this.

      • Argh, not the response I was looking for!

        But, as always, I learned something and got a good laugh while reading your reply.

        Unfortunately, I still disagree. I will limit by allocation to a low percentage of net worth, but I still believe bitcoin has transformative potential, and that the government may not be able to shut it down by the time it tries. All the macro trends you discuss with such whit point to a de-centralized, finite, global, digital currency having exponentially growing appeal over the next few decades, particularly as fiat currencies crumble with hyper-inflation, helicopter money, etc. on the horizon.

        Here in Brooklyn I can buy a slice of pizza using bitcoin! No bank, credit card company, or government knows I’m doing it. Time to go reassure myself with a nice, hot slice.

        Rudy

        • right up until the government tells that pizza shop that if they allow bitcoin transactions, they will be subject to arrest and/or fines.

          and see that’s what you folks don’t seem to understand: the government can do whatever it wants.

          this isn’t like you ban drugs but people still buy drugs. this is a means of exchange. if the government wants to put a stop to that, they can do it tomorrow by decree and there isn’t anything at all that you can do about it.

          sure, there might still be businesses that will accept under-the-table bitcoin transactions, but there are also businesses that would accept a kilo of coke in exchange for a used car.

          the point is: ultimately you think this is up to you, but it’s not.

          • this nonsense about “well, the government can’t stop it because it’s untraceable” is no more valid for Bitcoin than it would be for a cocaine-based payment system.

            there is no way to “trace” the number of times someone trades a gram of coke for a polo shirt.

            but that doesn’t mean that the government has not effectively shut down the possibility that grams of cocaine are a viable way to pay for polo shirts.

            can you find someone who would “sell” you a polo shirt in exchange for a gram of coke? well, probably. is there a way for the government to “trace” that transaction? well, no. especially not if the polo shirt is used.

            but by virtue of the fact that cocaine is illegal, it will never be the case that the most efficient way to buy a polo shirt is by trading coke for it.

          • I agree with that thought process, but only if the status quo holds true. I would also accuse you of ignoring all of your own well-thought analysis of where this is all headed — successive rounds of QE, helicopter money, possible hyperinflation.

            I’m not buying Bitcoin for the next year’s prospects, I’m buying Bitcoin for the next twenty years’ prospects.

            If the dollar spirals into perpetual decline — following successive rounds of QE, debt to GDP exploding higher, eventual helicopter money — what happens then? Will consumers still avoid a virtual currency because the government proclaims it illegal? I’m not so sure, Heisy.

            Take Venezuela. Conversion to dollar is limited by law, they trade on the street at a premium, and now bitcoin is being used there. Granted, the good ole’ USA ain’t Venezuela, but isn’t hyperinflation, hyperinflation? Consumers will seek another means of exchange where they can have some faith in the value being upheld.

            As long as Bitcoin has a 2-3% chance of becoming a widely used global currency, then my very basic weighted average probability calculation says its undervalued at current prices. May take 20 years, but I have that time and more.

            Lastly, I question whether the government can stop it not because its untraceable but because the blockchain is recorded by thousands of servers spread throughout the world. Each government has its own jurisdiction, and so is limited in its scope. I wouldn’t be surprised if offshore tax havens also eventually act as offshore server farms for digital currencies…Bermuda, the largest server farm island on the planet!

          • so your proposal is to own something that requires servers and electricity as a hedge against a hyperinflationary nightmare.

            do you see anything wrong with that logic?

            it’s ridiculous. people are in soup lines and you think anyone is going to give a goddamn about a virtual currency? people can’t afford bread and you think they are going to be logging on to their bitcoin wallet? people are living by candle light and you think they’re going to be transacting in Bitcoin?

            that’s patently ridiculous.

  2. There is an aphorism regarding the company you keep, and being a bitcoin owner as well, and seeing those uhhh…’investors’ makes me rethink my place on this Earth.

    Scary.

  3. one other thing I would note here.

    the Fed could kill this overnight by making digital convertibility of Bitcoin to dollars a crime.

    that doesn’t work with drugs because you can exchange physical drugs for physical dollars. if the Fed made digital convertibility to dollars a crime, the mere act of converting it would be a criminal act.

    just like that, “poof!” there go the exchanges.

    • Based on what I’ve read on the subject, that’s exactly how the governments could curtail bitcoin. This would prevent me from completing the initial transaction I discussed initially, right? Or from converting Bitcoins back to dollars (any other currency). With that said,there is very little that governments can do about Bitcoins that have already been purchase. Those are out there in the digital universe now, and can’t be curtailed easily. So, if the government continues to drag its feet, and more bitcoins are mined and purchased with dollars (or other currencies), then eventually you have a self-enclosed system that doesn’t need so-called “on-ramp” and “off-ramp” points (which is your connection between an exchange like Coinbase and your bank account). Eventually, you may be able to earn in bitcoin and spend in bitcoin, at which point the self-propagating system is complete and the government, banks, credit cards are shut out (outside of attempting to break into the code, shutting down mining operations, etc.)

      The only difference between you and me, Heisy, is that I assign some probability greater than 0% to that last scenario.

      Now cue Heisy!

  4. I agree with H on this one. If you have, or think you will have any serious interest in using, trading or heaven forbid investing in cryptocurrencies like BitCoin, I would highly recommend reading this seven article series (link below) by Paulo Santos in Seeking Alpha. It is the most in definitive, in depth, well analyzed, and clearly explained illumination of the pros – cons/risks – rewards – and estimate of the probable future of current cryptocurrencies that I have seen.

    (https://seekingalpha.com/article/4121499-bitcoin-series-1-basics)

  5. Thanks Jenn and Durwood. I think Heisy needs to watch that Andreas clip. And ive followed Paulo’s work closely, though not sure Heisy has!

    Rudy

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