The "Experts" Are Getting Crypto All Wrong


Bitcoin peaked about a month ago, on December 17, at a peak of nearly $ 20,000. At the time of writing, the cryptocurrency is less than $ 11,000 … a loss of around 45%. It’s more than $ 150 billion loss of market capitalization.

Cue a lot of hand twists and gnashing of teeth in crypto-commentary. It's neck and neck, but I think the crowd "I told you" has the advantage over the "makers of excuses".

Here's the thing: Unless you just lost your shirt on bitcoin, it doesn't matter at all. And chances are, the "experts" you see in the press won't tell you why.

In fact, the Bitcoin crash is wonderful … because it means that we can all stop thinking about cryptocurrencies.

Bitcoin's death …

In about a year, people won't talk about bitcoin on the line at the grocery store or on the bus, as they are now. Here's why.

Bitcoin is the product of justified frustration. Its designer has explicitly stated that cryptocurrency is a reaction to the government's abuse of fiat currencies like the dollar or the euro. It was supposed to provide an independent peer-to-peer payment system based on a virtual currency that could not be downgraded, as there were a finite number of them.

This dream has long since been abandoned in favor of raw speculation. Ironically, most people care about bitcoin as it seems to be an easy way to get more fiat money! They don't own it because they want to buy pizza or gas with it.

Besides being a terrible way to process electronically – it's extremely slow – the success of bitcoin as a speculative game has made it useless as a currency. Why would someone spend it if he appreciates so quickly? Who would accept one when it depreciates quickly?

Bitcoin is also a major source of pollution. It only takes 351 kilowatt hours of electricity to process a single transaction – which also releases 172 kilograms of carbon dioxide into the atmosphere. This is enough to feed 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, the success of bitcoin as an elder speculative game – not its planned libertarian uses – attracted government repression.

China, South Korea, Germany, Switzerland and France have implemented or are considering bans or restrictions on the bitcoin trade. Several intergovernmental organizations have called for concerted action to contain the obvious bubble. The U.S. Securities and Exchange Commission, which once seemed likely to approve bitcoin-based financial derivatives, now seems hesitant.

And according to "The European Union is implementing stricter rules to prevent money laundering and terrorist financing on virtual currency platforms. It is also examining the limits of crypto trading -currencies. "

Someday we may see a functional and widely accepted cryptocurrency, but it will not be bitcoin.

… but a boost for crypto assets

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 something else … although you could sell them to someone who wanted to use the metro more than you.

In fact, if the metro tokens were limited, a lively market for them could arise. They could even trade far more than they originally cost. It all depends on how many people want to to use the metro.

This, in summary, is the scenario of the most promising "cryptocurrencies" other than bitcoin. They are not money, they are tokens – "crypto-tokens", if you want. They are not used as general currency. They are only good in the platform for which they were designed.

If these platforms provide valuable services, people will want these crypto tokens, and that will determine their price. In other words, crypto tokens will have value as far as people appreciate the things that you can get for them from their associated platform.

That will make them real goods, with intrinsic value – because they can be used to get something that people appreciate. This means that you can reliably expect a stream of income or services from the possession of such crypto-tokens. Critically, you can measure this flow of future returns relative to the price of the crypto-token, just like we do when we calculate the price / earnings (P / E) ratio 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 cannot generate future revenue streams, and you cannot measure anything like a P / E for that.

One day, it will be worth nothing because it will bring you nothing real.

Ether and other crypto assets are the future

Safe crypto-token ether seems like a currency. It is traded on cryptocurrency exchanges under the code ETH. Its symbol is the capital Greek character Xi. It is mined in a process similar (but less energy-consuming) to bitcoin.

But ether is not a currency. Its designers describe it as "a fuel for running the Ethereum distributed application platform." This is a method of payment made by customers of the platform to the machines performing the requested operations ".

Ether tokens allow you to access one of the most sophisticated distributed computer networks in the world. It is so promising that big companies fall on top of each other to develop practical and real uses.

Because most people who trade it don't really understand its true purpose or care about its true purpose, the price of ether has been bubbling and frothing like bitcoin in recent weeks.

But ultimately, the ether will come back at a stable price depending on the demand for the IT services it can "buy" for people. This award will represent actual value which can be evaluated in the future. There will be a futures market for this and exchange traded funds (ETFs) because everyone will have a way to assess its underlying value 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 your bitcoin and buy ether the next dive.

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