Bitcoin peaked about a month ago, on December 17, at a peak 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.
In crypto-commenting, raise a lot of handshakes and gnashing of teeth. It’s neck and neck, but I think the multitude of “I told you-so” takes precedence over “excuses”.
Here’s the thing: if you haven’t just lost your shirt on bitcoin, it doesn’t matter at all. And chances are the “experts” you can see in the press aren’t telling you why.
In fact, the decline in bitcoin is wonderful … because it means we can all just stop thinking about cryptocurrencies.
Death of Bitcoin …
In about a year, people will no longer talk about bitcoins in line at the store or on the bus, as they are now. Here’s why.
Bitcoin is a product of justified frustration. Its designer has explicitly said that cryptocurrency is a reaction to the government’s misuse of fiat currencies like the dollar or the euro. He needed to provide an independent, peer-to-peer payment system based on a virtual currency that could not be broken, as there were a finite number of them.
That dream has long since been thrown out in favor of raw speculation. Ironically, most care about 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.
Aside from being a horrible way of electronic transaction – 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 they appreciate it so quickly? Who would accept one when it is quickly depreciated?
Bitcoin is also a major source of pollution. It takes 351 kilowatt-hours of electricity to process just one transaction – which also releases 172 kilograms of carbon dioxide into the atmosphere. That’s enough to power one American household for a year. The energy consumed by all bitcoin mining to date could power nearly 4 million U.S. households a year.
Paradoxically, bitcoin success as old-fashioned speculative game – and not its intended libertarian use – attracted government action.
China, South Korea, Germany, Switzerland and France have applied or are considering bans or restrictions on bitcoin trading. Several intergovernmental organizations called for joint action to stop the obvious bubble. The U.S. Securities and Exchange Commission, which once seemed to approve financial derivatives based on bitcoin, now seems indecisive.
And according to Investing.com: “The European Union is enforcing stricter rules to prevent money laundering and terrorist financing on virtual currency platforms. It is also exploring restrictions on cryptocurrency trading.”
We may one day see a functional, widely accepted cryptocurrency, but it will not be bitcoin.
… But an incentive for crypto assets
Good. Getting over bitcoin allows us to see where the real value of crypto assets is. Here’s how.
To use the New York subway system, you need tokens. You can’t use them to buy anything else … even you they could sell them to someone who wanted to use the subway more than you.
In fact, if subway tokens are in limited supply, a lively market could emerge for them. They may even trade for a lot more than they originally cost. It all depends on how many people want use the subway.
This is, in short, a scenario for the most promising “cryptocurrencies” other than bitcoin. They are not money, they are tokens – “crypto-tokens”, if desired. They are not used as a general currency. They are only good within the platform for which they are designed.
If those platforms provide valuable services, people will want those crypto tokens and that 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 on their affiliate platform.
That will make them real property, sa intrinsic value – because with them you can get something that people appreciate. This means that you can reliably expect a stream of revenue or services from owning such crypto-tokens. Critically, you can measure that flow of future returns against the price of a crypto token, just as we do when calculating the price-to-earnings (P / E) ratio of a stock.
Bitcoin, by contrast, has no intrinsic value. It has only a price – a price determined by supply and demand. It can’t generate future revenue streams and you can’t measure anything like the P / E ratio for that.
One day it will be worthless because it brings you nothing real.
Ether and other crypto assets are the future
Crypto-token ether secure it seems like like currency. Cryptocurrency exchanges are traded under the code ETH. Its symbol is the Greek capital Xi sign. It is mined by a similar (but less energy intensive) process as bitcoin.
But ether is not a currency. Designers describe it as “the fuel to manage the Ethereum distributed application platform. It’s a form of payment that platform customers make to machines that perform the required operations.”
Ether tokens give you access to one of the most sophisticated distributed computer networks in the world. It’s so promising that big companies are falling over each other to develop practical, real-world ways to use it.
Since most people who trade it don’t really understand or care about its true purpose, the price of ether has blown up and frothed like bitcoin in recent weeks.
But eventually, ether will return to a stable price based on the demand for computer services that it can “buy” for people. That price will represent actual value which can be appreciated in the future. For this, there will be a futures market and exchange traded funds (ETFs), as everyone will have a way to assess its core value over time. Just like with stocks.
What will that value be? I have no idea. But I know it will be a lot more than bitcoin.
My advice: Get rid of your bitcoin and buy ether on the next drop.