Some have tipped bitcoin to hit $100,000 or more by the end of 2021. I’ve even come across one person claiming $300,000 per bitcoin by the end of 2021. Is any of this realistic?
Trigger warning: I’m a crypto skeptic, I’m convinced that what we have is a massive bubble. If you have deeply embraced Crypto, then it might be wise if you stopped reading.
There is no avoiding the observation that the Crypto price has risen sharply and that has made some a great deal of money. The problem I can see is that many of those that believe are jumping into it all without really understanding what it is and without grasping that they could see everything wiped out.
The temptation is obvious. Back in September 2015, a single Ether token could be purchased for about $0.50. We have recently seen those same tokens pass $3,500. Suppose you bought $1000 of them back in 2015. Today that $1000 would now be worth … well, I’ll let you do the maths.
The frantic rhetoric of some is exactly as expected, “It can only increase and keep going up, you better jump in before you miss out.“
The Crypto Cult
A rapidly rising money supply leads to traditional currencies being devalued. To hedge against that, some are investing in Crypto.
That is of course recent. A longer view is the thought that Blockchain is the future. This means bypassing traditional banking. If that was indeed correct, then business entities would embrace crypto as a way to pay. Some already do, but not really at scale.
For Crypto to be truly viable we should be seeing a steady rise in crypto transactions. I use the term “Crypto Transaction” to refer to somebody actually buying something with it, not simply buying Crypto. Here rests one observational evidence-based point; we don’t see this happening.
The reason is obvious. The Crypto price volatility makes every purchase with crypto an insane risk.
It might also be worth pointing out the crazy transaction cost which was upwards of $60 per transaction at one point.
With no oversight and no regulation Crypto is also very prone to being manipulated. It is very much a reminder of 1929, a time when stock prices went wild, skyrocketed, and then the bubble burst.
In 1921, RCA shares were less than a dollar. By 1929 they were over $115 per share. It was an illusion. The root cause was the stock being pumped up by various investment firms. When reality kicked in, it collapsed down to ¢25.
You might think that this is not possible with Crypto. Exactly the same has been happening with Crypto …
Bitcoin’s (BTC-USD) rise in 2017 was nothing short of a miracle as it rose from $900 to $20,000. Investors were eager to get their share of the profits as it seemed that nothing could bring the cryptocurrency down. The big question at the time was what caused the rally. However, years later, it became evident that the focus should’ve been around who. A study led by two professors of finance, John Griffin and Aman Shams, alleged that a single large player was behind the dramatic runup by making large exchanges of tethers — a cryptocurrency “tethered” to USD. Run through a Bitfinex account, this constant exchange enabled the single account to illegitimately raise the price of Bitcoin to a level likely far above what it ever would have reached on its own.
Then there is this …
Another study uncovered that around 95% of all reported trading volume of Bitcoin is simply nonexistent.
Crypto is not an “Investment”
When you buy a stock in a company, you are buying a share of an organisation that actually does something. When you buy crypto, you are not investing. Its actual value is zero, it is in theory simply a way to pay for goods.
The rocketing price is all down to manipulation and human emotions. The only thing driving the price is market excitement. Long term, with no real future, this is not sustainable.
That’s a cue for a “Well I hope you enjoy being poor” quip from a believer. To which I will add, if you pour all your resources into it, then you risk being completely wiped out.
Are you buying?
If you are then I have some Dutch Tulip bulbs I’d like to sell you.
My advice … don’t touch Crypto with a barge pole.
Meanwhile those that believe will no doubt continue to believe because they are too deeply invested in the illusion to hit pause and step back.
There is of course one guaranteed way you can make a small fortune with Crypto … you start with a large fortune.
- Pay Attention to What The Skeptics Are Saying About Cryptocurrency – Listen before you fall for the hype.
- Harvard crypto skeptic calls Bitcoin a ‘hedge against dystopia’ – Harvard professor Kenneth Rogoff says that he doesn’t see Bitcoin succeeding, barring extenuating circumstances.
- JPMorgan CEO Jamie Dimon says he’s still a crypto skeptic: ‘I’m not a bitcoin supporter. I have no interest in it’
- Cryptocurrency investors should be prepared to lose all their money, Bank of England governor says