Bitcoin hit a price target of almost $ 20,000 on December 17, almost 17 months ago. As I write this, the cryptocurrency is less than $ 11,000 … a loss of about 45%. It’s more than that $ 150 billion lost market cap.
See a lot of screaming hands and teeth in the crypto comment. It’s a no-brainer, but I think the “I told you” crowd has an advantage over “excuse-makers”.
Here’s the thing: Unless you’ve lost your Bitcoin shirt, this doesn’t matter at all. And chances are, the “experts” you see in the press aren’t telling you why.
In fact, it’s a wonderful crash of bitcoin … because it means we can all stop thinking about cryptocurrencies.
The death of Bitcoin …
In a year’s time, people won’t talk about bitcoin in the grocery store or on the bus like they do now. Here’s why.
Bitcoin is a product of justified frustration. Its designer explicitly said that a cryptocurrency like the dollar or the euro was a reaction to the abuse of the fiat government. It had to offer an independent and peer-to-peer payment system based on a virtual currency that could not be diverted, as there was a finite amount.
That dream was long overdue for gross 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 pizzas or gasoline with it.
As well as being a huge way to trade electronically – it’s incredibly slow – the success of bitcoin as a speculative game has become useless as a currency. Why spend it if someone appreciates it so quickly? Who would accept one when it is quickly repaying?
Bitcoin is also a major source of pollution. It takes 351 kilowatt-hours of electricity to process a single transaction, which emits 172 kilograms of carbon dioxide into the atmosphere. That’s enough to feed a U.S. home for a year. So far, the energy consumed by all bitcoin mining can power nearly 4 million homes in the U.S. for a year.
Paradoxically, bitcoin’s success as obsolete speculative game – unforeseen libertarian use – has attracted government repression.
China, South Korea, Germany, Switzerland, and France have imposed or are banning or banning bitcoin trading. Several intergovernmental organizations have called for joint action to contain the obvious bubble. The U.S. Securities and Exchange Commission, which once seemed to accept bitcoin-based financial derivatives, is now in doubt.
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 exploring the limits of cryptocurrency trading.”
You may one day see a functional and accepted cryptocurrency, but it won’t be bitcoin.
… But the Crypto Asset Boost
Good. Overcoming Bitcoin allows us to see where the true value of cryptographic assets lies. Here’s how.
To use the New York subway system, you need tokens. You can’t use them to buy anything else might sell the subway to someone who wants to use it more than you.
In fact, if subway tokens were in limited supply, their lively market could be created. They may even exchange it for much more than it initially cost. It all depends on how many people there are want to use the subway.
That, in short, is the scenario of the most promising “crypto-currency” other than bitcoin. They are not money, either tokens – “crypto-tokens”, if you like. They are not used as a general currency. They are good only within the platform they were designed for.
If these platforms offer valuable services, people will want these cryptographic tokens and this will determine the price. In other words, cryptocurrencies will be valuable as long as people value the things you can get from their platform.
That will make them real goods, with intrinsic value – because they can be used to get something that people value. This means that you can reliably expect a stream of revenue or services from owning these cryptocurrencies. Seriously, you can measure this stream of future earnings by the price of a cryptocurrency token, as we do when we calculate the price / earnings ratio (P / E) of a stock.
Bitcoin, on the other hand, has no intrinsic value. It has only one price – the price set by supply and demand. It can’t generate future revenue, and you can’t measure anything like the P / E ratio.
One day it will be useless because it will not get you anything real.
Ether and other cryptocurrencies are the future
Crypto-tokens ether for sure it seems like a currency. Cryptocurrency is traded on ETH code. Its symbol is the Greek character Xi. It comes out in a process similar to Bitcoin (but with less energy consumption).
But ether is not a coin. Its designers “describe Ethereum as a distributed application platform as a fuel for operation. It is a form of payment made to machines that run the operations requested by customers of the platform.”
Ether tokens access one of the most sophisticated distributed computing networks in the world. It is so hopeful that big companies are falling on top of each other to develop its practical and real uses.
Since most people who trade don’t understand or care about its true purpose, the price of ether has been bubbling and foaming like bitcoin in recent weeks.
But eventually, the ether will return at a stable price depending on the demand for computing services that it can “buy” for people. That price will replace it real value that may be the price in the future. There will be a market in the future, and exchange-traded funds (ETFs), because everyone will have a way to assess their underlying value over time. As we do with stocks.
What will that value be? I do not know. But I know it will be much more than bitcoin.
My advice: take off your bitcoin and buy ether in the next leap.