Bitcoin peaked about a month ago, on December 17, with a high of nearly $ 20,000. As I write, the cryptocurrency is under $ 11,000 … a loss of about 45%. This is more than $ 150 billion in lost market capitalization.
Follow the hassle of twisting and gnashing your teeth at the crypto-comment. It’s neck and neck, but I think people who have told you “do it” have an advantage over “excuse makers.”
Here’s the thing: unless you’ve just lost your t-shirt with Bitcoin, that doesn’t matter at all. And the “experts” you see in the press probably won’t tell you why.
In fact, the fall of Bitcoin is wonderful … because it means we can only stop thinking about cryptocurrencies.
The death of Bitcoin …
In a year or so, people won’t be talking about bitcoins at the grocery store or on the bus, like now. Here’s why.
Bitcoin is the product of a justified frustration. Its designer explicitly said that the cryptocurrency was a reaction to the government’s abuse of fiat currencies such as the dollar or the euro. It was supposed to provide an independent peer-to-peer payment system based on a virtual currency that could not be degraded, as there was a finite number.
This dream has long since been abandoned in favor of raw speculation. Ironically, most people 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 pizzas or gas.
In addition to being a terrible way to make electronic transactions (it’s agonizingly slow), the success of Bitcoin as a speculative work has made it useless as a currency. Why would anyone spend it if they appreciate it so quickly? Who would accept one when it depreciates quickly?
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. It is enough to feed a US home for a year. The energy consumed so far by all bitcoin mining could power nearly 4 million American homes in a year.
Paradoxically, the success of Bitcoin as a thing of the past speculative game – not its intended libertarian uses – has attracted government repression.
China, South Korea, Germany, Switzerland and France have implemented or are considering bans or restrictions on bitcoin trading. Several intergovernmental organizations have called for concerted action to curb the obvious bubble. The U.S. Securities and Exchange Commission, which once seemed to approve bitcoin-based financial derivatives, now seems dubious.
And according to Investing.com: “The European Union is implementing stricter rules to prevent money laundering and terrorist financing on virtual currency platforms. It is also studying limits on cryptocurrency trading.”
We may one day see a functional, widely accepted cryptocurrency, but it will not be bitcoin.
… But an increase in cryptographic assets
Well. Overcoming bitcoin allows us to see where the real value of cryptographic 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 you I could sell them to someone who wants to use the subway more than you.
In fact, if subway tokens had a limited supply, a lively market could emerge for them. They could even change for much more than they originally cost. It all depends on how many people there are to want use the subway.
This, in a nutshell, is the scene of the most promising “cryptocurrencies” other than bitcoin. It’s not money, yes tokens – “cryptographic tokens”, if you will. They are not used as a general currency. They are only good on the platform for which they were designed.
If these platforms offer valuable services, people will want these cryptographic tokens and this will determine their price. In other words, cryptographic tokens will have value to the extent that people value the things you can get for them from their associated platform.
That will make them real assets, with 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 the ownership of these cryptographic tokens. Critically, you can measure this flow of future returns against the price of the cryptocurrency token, as we do when we calculate the price / earnings (P / E) ratio of a stock.
Bitcoin, on the other hand, has no intrinsic value. It has only one price: the price set by supply and demand. It cannot produce future revenue streams and nothing can be measured as a P / E ratio.
One day it will be useless because it doesn’t make you real.
Ether and other cryptographic assets are the future
Secure cryptographic ether looks like like a coin. It is traded on cryptocurrency exchanges with the code ETH. Its symbol is the Greek character Xi in capital letters. It is exploited in a process similar (but with less energy) to bitcoin.
But ether is not a currency. Its designers describe it as “a fuel to operate the Ethereum distributed application platform. It is a form of payment that customers of the platform make to the machines running the requested operations.”
Ether tokens give you access to one of the most sophisticated distributed computing networks in the world. It is so promising that large companies fall on top of each other to develop practical and real uses.
Since most people who trade it don’t understand or care about its true purpose, the price of ether has bubbled and broken like bitcoin in recent weeks.
But eventually, ether will return to a stable price based on the demand for computer services it can “buy” for people. This price will represent real value which can be fixed in the future. There will be a futures and exchange traded funds (ETF) market, because everyone will have a way of assessing their underlying value over time. Just like we do with actions.
What will this 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 in the next bathroom.