Bitcoin peaked about a month ago, on December 17, at a high of nearly $ 20,000. As I write, the cryptocurrency is less than $ 11,000 … a loss of about 45%. It’s more than $ 150 billion in lost market capitalization.
The crypto-commentary has a lot of wringing of hands and gnashing of teeth. It is, but I think the “I-I-told-you” crowd has an advantage over the “excuses”.
Here’s what: if you just haven’t lost your shirt on bitcoins, it doesn’t matter. And most likely, the “experts” you may see in the press are not telling you why.
In fact, the collapse of bitcoin is great … because it means we can all stop thinking about cryptocurrencies altogether.
Death of bitcoin …
In a year or so, people won’t talk about bitcoin in the queue at the grocery store or on the bus like now. That’s why.
Bitcoin is a product of justified disappointment. 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 virtual currency, which could not be reduced, as they were limited.
This dream has long been abandoned in favor of crude speculation. Oddly enough, 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 gas for it.
Aside from the fact that it’s a horrible way of electronic transactions – it’s painfully slow – the success of bitcoin as a speculative game has made it useless as a currency. Why would anyone spend it when it is valued so quickly? Who will accept it if it depreciates quickly?
Bitcoin is also a major source of environmental pollution. Only one transaction requires 351 kilowatt-hours of electricity, which also emits 172 kilograms of carbon dioxide. That’s enough to feed one family in the U.S. for a year. The energy consumed by all bitcoin mining to date can power nearly 4 million U.S. households during the year.
Paradoxically, bitcoin success is as old-fashioned speculative game – not its intended libertarian use – attracted government repression.
China, South Korea, Germany, Switzerland and France have introduced or are considering bans or restrictions on bitcoin trading. Several intergovernmental organizations have called for concerted action to contain the obvious bubble. The U.S. Securities and Exchange Commission, which once seemed to approve financial derivatives based on bitcoins, now seems to be hesitant.
And according to Investing.com: “The European Union is introducing stricter rules to prevent money laundering and terrorist financing on virtual currency platforms. It is also considering restrictions on cryptocurrency trading. ”
Someday we may see a functional, widely recognized cryptocurrency, but it won’t be bitcoin.
… But an incentive for cryptocurrencies
Good. Overcoming bitcoin allows us to see where the real value of crypto-assets lies. Here’s how.
To use the New York subway system, you need tokens. You can’t use them to buy anything else … though you do could sell them to someone who would like to use the subway more than you.
In fact, if subway tokens were in limited quantities, a lively market could emerge for them. They can even trade much more than they cost initially. It all depends on how many people I want to enjoy the subway.
This is, in a nutshell, a scenario for the most promising “cryptocurrencies” other than bitcoin. They are not money, they are tokens – “crypto-tokens”, if you will. They are not used as a common currency. They are good only within the platform for which they were designed.
If these platforms provide valuable services, people will want these crypto tokens and this will determine their value. In other words, crypto-tokens will have value to the extent that people appreciate what you can get for them from their associated platform.
It will make them real assets, з intrinsic value – because with their help you can get what people value. This means that you can reliably expect a stream of revenue or services from owning such crypto tokens. The important thing is that you can measure this future earnings flow against the crypto-token price, just as we do when calculating the value for money (P / E) of a stock.
Bitcoin, on the other hand, has no value of its own. It has only a price – a price that is set by supply and demand. It can’t bring in future revenue streams, and you can’t measure anything like a P / E ratio for it.
One day it will become insignificant because it will not give you anything real.
Ether and other cryptocurrencies are the future
Ether crypto-token for sure it seems as a currency. It is traded on cryptocurrency exchanges under the code ETH. Its symbol is the Greek symbol Si. It is extracted by the same (but less energy-intensive) process as bitcoin.
But the air is not a currency. Its developers describe it as “the fuel for Ethereum’s distributed application platform. This is a form of payment that customers of the platform make to machines that perform the requested operations.
Essential tokens give you access to one of the most sophisticated distributed computing networks in the world. It’s so promising that big companies are rushing at each other to develop practical, real-world uses for it.
Since most people who trade it don’t really understand and care about its true purpose, the price of ether in recent weeks has bubbled and frothed like bitcoin.
But eventually, ether will return to a stable price based on the demand for computing services that it can “buy” for people. This price will represent real cost which may be assessed in the future. This will be done by the futures market and exchange traded funds (ETFs) because everyone will be able to estimate its base price over time. Just like we do with stocks.
What will this value be? I have no idea. But I know it will be much more than bitcoin.
My advice: get rid of bitcoin and buy ether on the next drop.