Bitcoin, ‘Reliable Store Of Value,’ Collapses 20% In 48 Hours

Bitcoin collapsed on Monday, although “collapse” is a relative term when you’re talking about something that’s quadrupled over the space of a year.

At one point, “digital gold” was on track for its biggest two-day slide since March.

But don’t fret too much, because Guggenheim’s Scott Minerd said it’s just a “setback” — a “flesh wound,” if you’re a Monty Python fan.

“Bitcoin’s parabolic rise is unsustainable in the near term,” he said, in a tweet timestamped eight minutes to midnight on the east coast. “Vulnerable to a setback.”

Minerd, you’ll recall, told Bloomberg Television last month that Guggenheim’s “fundamental work” suggested Bitcoin could be valued at up to $400,000.

I lampooned that in these pages, and I’d like to say I was justified in doing so. It’s not about whether Bitcoin can make it to nearly half a million dollars. Rather, it’s about the notion that Bitcoin, a thing which doesn’t exist in any real sense, has no internal rate of return, and no logical connection to any economic cycle, can be “fundamentally” valued.

As you can see in the figure (above), the combined Sunday-Monday decline was more than 20% at one juncture.

I shouldn’t have to say this, but I do: “Stores of value” (and some, if not all, of Bitcoin’s proponents have described it as such), don’t generally suffer two-day declines of 20% or more. If they did, the world would be better off on a barter system.

Importantly, it’s not even possible to know whether the chart above is 100% accurate. It’s basically accurate. But given the myriad avenues down which one can drive to obtain a Bitcoin quote, it could be more or less accurate depending on what avenue someone else drove down to get their Bitcoin quote.

I’m sure crypto proponents will insist there’s a standard. And, yes, Bloomberg has what’s supposed to be a reliable price. But the fact is, by the time you read this, the entire story could have changed. It could be up 20%.

Isn’t that what makes it fun? Well, sure. And that, more than anything else, underscores my overarching narrative vis-à-vis Bitcoin. Like gambling and skydiving, it can be exhilarating. But, also like gambling and skydiving, it can be dangerous.

“The target technical upside of $35,000 has been exceeded,” Minerd said. “Time to take some money off the table.”

That’s coming from a man who helps oversee $233 billion in total assets.

To be fair, maybe Scott was tweeting from a locale where it wasn’t actually midnight. That is: Perhaps it only appeared to those on the Eastern Seaboard that he was watching the digital token late into Sunday evening. But it’s at least possible that Minerd was up at 11:52 PM staring at Bitcoin.

“Institutional interest” indeed.