Bitcoin peaked about a month ago, on December 17, at a maximum of nearly $ 20,000. As I write, the cryptocurrency is below $ 11,000 … a loss of about 45%. That’s more than $ 150 billion in lost market capitalization.
Include a lot of twisting of hands 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: Unless you’ve just lost your bitcoin shirt, it doesn’t matter at all. And chances are, the “experts” you can see in the press don’t tell you why.
In fact, the collapse of bitcoin is wonderful … because it means we can all just stop thinking about cryptocurrencies at all.
The death of bitcoin …
In about a year, people will not be talking about bitcoins in the queue at the grocery store or on the bus, as they are now. That’s why.
Bitcoin is a product of justified disappointment. Its designer explicitly stated that the cryptocurrency is a reaction to the state’s abuse of fiat currencies such as the dollar or the euro. It had to provide an independent peer-to-peer system based on virtual currency, which could not be debated because there were a limited number of them.
This dream has long been rejected in favor of harsh speculation. Ironically, most people are interested in bitcoin because it seems like an easy way to get more fiat currency! They don’t own it because they want to buy pizza or gasoline with it.
As well as being a terrible way to transaction electronically – it’s painfully slow – the success of bitcoin as a speculative game has made it useless as a currency. Why would anyone spend it if it evaluates so quickly? Who would accept one when it is rapidly depreciating?
Bitcoin is also a major source of pollution. It takes 351 kilowatt hours of electricity just to process a transaction – which also releases 172 kilograms of carbon dioxide into the atmosphere. That’s enough to power an American household for a year. The energy consumed by all bitcoin mines so far can power nearly 4 million US households in a year.
Paradoxically, the success of bitcoin as old-fashioned speculative game – unintended libertarian uses – has attracted government measures.
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 contain the apparent bubble. The US Securities and Exchange Commission, which once seemed to approve bitcoin-based financial derivatives, now seems hesitant.
And according to Investing.com: “The European Union is applying stricter rules to prevent money laundering and terrorist financing on virtual currency platforms. It is also addressing restrictions on cryptocurrency trading.”
We may one day see a functional, widely accepted cryptocurrency, but it will not be bitcoin.
… But a boost for crypto assets
Okay. Overcoming bitcoin allows us to see where the real value of crypto assets lies. This is how.
To use the New York subway system, you need tokens. You can’t use them to buy anything else … even 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 supply, a bustling market could arise for them. They may even trade for much more than they originally cost. It all depends on how many people want to use the subway.
In short, this is the scenario for the most promising “cryptocurrencies” other than bitcoin. They are not money, they are tokens – “crypto-tokens”, if you will. They are not used as a common currency. They are only good within the platform for which they are designed.
If these platforms provide valuable services, people will want these crypto tokens and this will determine their price. In other words, crypto tokens will have value to the extent that people appreciate the things you can get for them from the platform associated with them.
That will make them real assets, s intrinsic value – because they can be used to get something that 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 flow of future returns relative to the price of the crypto token, just as we do when calculating the price / earnings ratio (P / E) per share.
Bitcoin, in contrast, has no inherent value. It has only a price – the price determined by supply and demand. It can’t generate future revenue streams and you can’t measure something like a P / E ratio for it.
One day it will be useless because it brings you nothing real.
Ether and other crypto assets are the future
The crypto-marker ether is safe It seems as a currency. It is traded on cryptocurrency exchanges under the code ETH. Its symbol is the Greek capital sign Xi. It is mined in a similar (but less energy-intensive) bitcoin process.
But ether is not a currency. Its designers describe it as “fuel for the operation of the distributed platform for Ethereum applications. It is a method of payment made by the customers of the platform to the machines performing the requested operations.”
Ether tokens give you access to one of the most complex distributed computing networks in the world. It’s so promising that big companies are falling on top of each other to develop practical, real-world applications for it.
Since most people who trade it don’t really understand and don’t care about its true purpose, the price of ether has skyrocketed in recent weeks.
But eventually, ether will return to a stable price based on the demand for computing services that it can “buy” for people. This price will represent real value which can be determined in the future. There will be a futures market and exchange traded funds (ETFs) for it, because everyone will have a way to assess its core value over time. 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 your bitcoins and buy ether the next time you dive.