I was revisiting old posts from early in the blog and it has me reflecting on the rise and fall of Bitcoin and other cryptocurrencies. It was obvious hysteria between Thanksgiving and Christmas 2017. The internet and financial independence forums were taken over by crypto-bros, bragging about how much money they made in Bitcoin and writing nonsense about various “currencies”, ICOs (initial coin offerings), and discussing building “mining rigs”. If you attempted to debate them, they would respond with a meme and tell my how I didn’t understand the “new world”. Here was an actual response I got before I gave up:
For anyone who’s been somewhat close to a prior bubble, this thing was too easy to spot. There was rapid price acceleration on something with a minimal underlying value. It not only had minimal underlying value, but it could be reproduced through the combination of computing power and electricity. People were posting about how much money they were making and everyone “wanted in on it”. Traditional finance writers were even musing about the video game of the year for 2017 being Coinbase.
The mania around Bitcoin and other cryptocurrencies even lured the godfather out of retirement to post Why Bitcoin is Stupid.
What is going on with Bitcoin and all the crypto-bros one year later?
The financial independence forums are noticeably quiet regarding bitcoin. Uber drivers are not talking about bitcoin at the pace they were. I caught this segment on CNBC and so did Downtown Josh Brown. Reading this tweet then watching the “strategist” is pretty incredible. The only positive in this four minutes of gibberish is CNBC found some diversity in the world of crypto-bros.
This is like a market update from an alternate reality. None of the "names" being alluded to actually exist as investable entities in real life. It's literally a report from the land of make-believe. I'm fascinated by this… https://t.co/rzJi6JAR6i
— Downtown Josh Brown (@ReformedBroker) November 19, 2018
Some of the major investment houses are still kicking around the idea of trading platforms, ETFs, and “strategies” regarding crytocurrency, but as the mania dies off so does the economics of facilitating this insanity. The biggest related company to bitcoin mining (NVIDA) just had their stock fall off a cliff. Its surprising it took that long, but as the saying went during the 1800s gold rush “Don’t go mine gold, sell the mining tools”. The same for the Oil Boom, there’s a reason Howard Hughes and his son were early billionaires in the US.
So how low will it go?
Who really knows the answer to this? Cryptocurrency’s only legitimate use is a niche payment system to get money to countries who’s governments are unstable (or don’t like the developed world) very much. It is a challenging store of value when it can be easily stolen. This past week some technology executives who should have access to the best cyber security in the world had over a million dollars in concurrency stolen. Some estimates had over $1bil in cryptocurrency stolen in the first half of 2018 alone. Wikipedia has its own page dedicated to tracking the major thefts of this “currency”.
First world governments are also catching on to the need to track and regulate cryptocurrency. These countries monitor the banking system to help identify illegal activity and manage corruption. An untraceable currency is a risk to law enforcement and countries will aggressively pursue mechanisms to track cryptocurrencies. CNBC is still out there interviewing people holding a title of “cryptocurrency trader”, which tells me this still has a long way to fall before we figure out what legitimate uses might actually exist.
Bitcoin shares could bleed another 30% before they bottom, cryptocurrency trader Michael Moro said. https://t.co/BFVY0yIiHC
— CNBC (@CNBC) November 23, 2018
The only positive is at least the average individual should know enough by now to not be suckered into buying this garbage.