I
recently commented that it would not surprise me if bitcoin plunged to $1.00.
That was not a prediction, it was a comment.
Still, I still feel a collapse in bitcoin is likely.
For discussion, please see Cash
Dinosaur: France Limits Cash Transactions to €1,000, Puts Restrictions on
Gold; Bitcoin End Coming?
In response, reader Creighton writes ...
Hello Mish
While I'm not going to argue the point about the possibility that Bitcoin
drops to $1, or less, (that could happen yet, but not for the reasons you
propose) I felt it necessary to point out something you seem to have overlooked.
While it's likely that the US government watching Bitcoin in order to get
some pointers about releasing it's own version of the US$, they would also
have noticed that Canada attempted to do that exact thing two years ago.
It went nowhere. And it went nowhere for the same reason that the US, or
China, or any other nation, couldn't expect to succeed in the same market.
Bitcoin was first to market in the, previously non-existent, field of
non-state Internet currencies. Precious metals don't work, because there has
to be a vault somewhere. The Liberty Dollar & Egold both tried that, and
both got raided. There is a real market for a working non-state
currency, that can't be screwed with by state actors. Bitcoin isn't
perfect, as I have stated before, but if it's going to zero, it will be
because one of the many start--up cryptocurrencies that have arrived since
Bitcoin turns out to be substantially better at doing the same things.
I understand that you are not a crypto-geek like myself, and that I'm biased
because I understand how Bitcoin actually does what it does, but I can
honestly say that it does some things in completely novel ways; and has
features that no fiat currency, digital or otherwise, has been able to do
internally. There are entire financial institutions in the finance
industry founded upon solving many transaction problems that Bitcoin handles
just fine internally, for the cost of about a nickel per transaction. Bitcoin
is actually capable of taking over all the functions of notary publics &
most of the functions of county clerks, everywhere.
Western Union's cash transfer business model is walking dead. Keep an open
mind, because there is a fair chance that you will eventually use Bitcoin, or
its successor, in some capacity within a decade. Perhaps only as a cash
transfer method, with the intent of switching back to cash immediately, but
that day shall come.
Governments can no longer just suppress these new crypto-currencies and
expect them to go away. The last chance to crush Bitcoin was several years
ago, before the hashing rate (the cryptographic support of its security
model) shot past the capability of the largest non-classified supercomputer
on Earth.
Today (I just checked bitcoinwatch.com) it is over 4 million petaflops. The
largest (unclassified) supercomputer on Earth is only 33 petaflops. It
would cost more than the market capitalization of all of Bitcoin to build a
computer cluster capable of matching that, and it would take years; by which
time it would take still much more.
Someday, you too will be a convert, if never a fan.
Mish
Response to Creighton
Hello Creighton. I fully understand that bitcoin is innovative and
disruptive. Yet, all it takes is government action to make it illegal.
It does not even take action by the US to do bitcoin in. China could do it in
given that 80% of bitcoin transactions are from China, most likely fraudulent
as I have pointed out.
Bitcoin vs. Uber
The car service Uber survives even though it has been banned nearly
everywhere.
I started accumulating all sorts of links many months ago. I collected well
over 20. Here are a few of them.
In spite of the fact Uber is banned nearly everywhere, the company survives!
Why?
Because Uber is what the masses want.
Uber Cars Outnumber Yellow Taxis in New
York City
Please consider Uber Cars
Outnumber Yellow Taxis in New York City.
For the first time, there are more black Uber cars
on the streets of New York City than traditional yellow taxis, figures have
revealed.
The New York Taxi and Limousine Commission said there were 14,088 registered
Uber cars compared with 13,587 yellow cabs.
However, the number of trips taken in yellow cabs far outpaces Uber rides.
That is because many Uber drivers work part-time, whereas taxis often operate
all day.
Do the Masses Want Bitcoin?
I do not believe the masses want bitcoin. Heck, do the masses even know what
bitcoin is?
Bitcoin has a legitimate model. Yet, it is not a model the masses care about.
As such, it is heavily dependent on the graces of governments and alternative
models.
Governments can easily create (and demand usage of their own digital
currencies). Governments cannot easily disrupt Uber.
Question of Sentiment
If I am wrong, then bitcoin will survive (just as Uber has survived numerous
bans everywhere). In the end, it all boils down to sentiment.
I question whether or not public sentiment on bitcoin will be sufficient to
overcome government restrictions.
In contrast, Uber has fared phenomenally in spite of governmental attacks
everywhere.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
