Bitcoin peaked about a month ago, on December 17, with a high of almost $ 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.
Sign of a lot of hand wringing and teeth gnashing in the crypto commentary. It’s neck-to-neck, but I think the “I told you so” crowd has the upper hand over the “excuse makers”.
Here’s the thing: Unless you just lost your shirt on bitcoin, this doesn’t matter at all. And the “experts” you may see in the press most likely won’t tell you why.
In fact, the fall of bitcoin is wonderful … because it means that we can all stop thinking about cryptocurrencies altogether.
The death of Bitcoin …
In a year or so, people won’t be talking about bitcoin in line at the grocery store or on the bus, like now. This is why.
Bitcoin is the product of justified frustration. Its designer explicitly said that the cryptocurrency was a reaction to government abuse of fiat currencies such as the dollar or the euro. It was supposed to provide a standalone peer-to-peer payment system based on a virtual currency that couldn’t be downgraded as there were a finite number of them.
That dream has long been abandoned in favor of pure 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 pizza or gasoline with it.
In addition to being a terrible way to transact electronically, it is terribly slow, bitcoin’s success as a speculative game has rendered it useless as a currency. Why would anyone spend it if it appreciates so quickly? Who would accept one when it’s depreciating fast?
Bitcoin is also a major source of pollution. It takes 351 kilowatt-hours of electricity just to process one 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 mining to date could power nearly 4 million American households for a year.
Paradoxically, bitcoin’s success as outdated speculative game – not its intended libertarian uses – has attracted government repression.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 limitations on bitcoin trading. Several intergovernmental organizations have called for concerted action to stem the obvious bubble. The US Securities and Exchange Commission, which once seemed likely to approve bitcoin-based financial derivatives, now seems hesitant.
And according to Investing.com: “The European Union is implementing strict 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 and widely accepted cryptocurrency, but it won’t be bitcoin.
… But a boost for crypto assets
Well. Beating bitcoin allows us to see where the true value of crypto assets is. That is how.
To use the New York subway system, you need tokens. You can’t use them to buy anything else … though might Sell them to someone who would like to use the subway more than you.
In fact, if subway tokens were limited, a lively market could emerge for them. They could even trade for much more than they originally cost. It all depends on how many people want to use the subway.
That, simply put, is the stage for the most promising “cryptocurrencies” other than bitcoin. They are not money, they are tokens – “crypto tokens”, so to speak. They are not used as general currency. They are only good within the platform they were designed for.
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 value the things they can get from their partner platform.
That will make them real assets, with intrinsic value – because they can be used to get something that people value. That means you can reliably expect a stream of income or services from owning such crypto tokens. Fundamentally, you can measure that stream of future returns against the price of the crypto token, just as we do when we calculate the price / earnings (P / E) of a stock.
Bitcoin, on the other hand, has no intrinsic value. It only has one price: the price set by supply and demand. You can’t produce future streams of income and you can’t measure anything like a P / E ratio for him.
One day it will be worthless because it offers you nothing real.
Ether and other crypto assets are the future
The secure crypto ether It seems like a coin. It is traded on cryptocurrency exchanges with the code ETH. Its symbol is the Greek character Xi in capital letter. It is mined in a process similar (but less energy intensive) to bitcoin.
But the ether is not a coin. Its designers describe it as “a fuel to operate the Ethereum distributed application platform. It is a form of payment made by the platform’s clients to the machines that execute 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 are battling each other to develop practical uses in the real world.
Because most of the people who trade it don’t really understand or care about its true purpose, the price of ether has bubbled and foamed like bitcoin in recent weeks.
But eventually, ether will return to a stable price based on demand for the computing services it can “buy” for people. That price will represent real value That may be priced in the future. There will be a future market for it and exchange-traded funds (ETFs), because everyone will have a way of evaluating its underlying value over time. Just like we do with stocks.
What will that value be? I have no idea. But I know it will be much more than bitcoin.
My advice: ditch your bitcoins and buy ether in the next drop.