The Bros may be using part of their stimulus checks to buy stocks, but others will likely be using it to buy Bitcoin…
It seems like only last week (because it was) that Bitcoin was priced at $50,000 per coin, but by Friday, the price had surged to $60,000, a 20% increase in just one day. The reason doesn’t matter; it is what it is.
The case against Bitcoin as an investable asset is long and compelling. It has no use case; there’s almost nothing you can buy with a Bitcoin, and it has no return other than higher prices based on an application of the greater fool theory.
A glance at the price chart shows it’s clearly a bubble, the worst in history, worse than NASDAQ in 2000 during the dot.com frenzy and worse than the Japanese stock market in 1989.
What Good Is It?
Bitcoin simply doesn’t have much practical use. It is also filling the atmosphere with CO2 because most of the “mining” (really high speed computer calculations requiring monumental amounts of electricity for processing and cooling) is done in China, where most power plants are coal-fired.
Now, CO2 is a harmless trace gas that plants need to grow, so I’m not complaining that Bitcoin mining is churning out more of it. But it does require tremendous amounts of electricity. What about Bitcoin as a possible reserve currency?
Bitcoin will never be a reserve currency because its capped issuance amount makes its price deflationary, which is unattractive to borrowers. Without a Bitcoin bond market, there can be no securities in which central banks can invest reserves.
Worse yet, the Bitcoin price is a Ponzi scheme driven by the issuance of the stable coin Tether, which has never accounted for the billions of dollars that have been taken from naive Tether investors. That said, none of this matters.
Bitcoin has become a belief system. The true believers see what they want, hear what they want and are immune to the arguments of the non-believers.
Bitcoin simply doesn’t have much practical use. It is also filling the atmosphere with CO2 because most of the “mining” (really high speed computer calculations requiring monumental amounts of electricity for processing and cooling) is done in China, where most power plants are coal-fired.
Now, CO2 is a harmless trace gas that plants need to grow, so I’m not complaining that Bitcoin mining is churning out more of it. But it does require tremendous amounts of electricity. What about Bitcoin as a possible reserve currency?
Bitcoin will never be a reserve currency because its capped issuance amount makes its price deflationary, which is unattractive to borrowers. Without a Bitcoin bond market, there can be no securities in which central banks can invest reserves.
Worse yet, the Bitcoin price is a Ponzi scheme driven by the issuance of the stable coin Tether, which has never accounted for the billions of dollars that have been taken from naive Tether investors. That said, none of this matters.
Bitcoin has become a belief system. The true believers see what they want, hear what they want and are immune to the arguments of the non-believers.
Golden Anchor
This points to the difference between the “content” of Bitcoin (the price history and types of features discussed above) and the “environment” created by Bitcoin (the unseen and not understood impact on thought and behavior from any new media technology).
Bitcoin will never displace the dollar, but it could destroy confidence in the dollar by its all-encompassing impact. This could cause social disorder and contribute to the decline of linear, rational civilization.
My solution to this conundrum is to hold physical gold. For the Bitcoin believers (and others), the solution is always… more Bitcoin.
The market is becoming unhinged. Gold can be your anchor. Don’t worry about the short-term fluctuations along the way.
Gold plays a long game; you should focus on the long-term…
- Source, Jim Rickards via the Daily Reckoning
