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'Cryptocurrencies Are Like Lottery Tickets That Might Pay Off in Future' (theguardian.com)
With the price of bitcoin down 80% from its peak a year ago, and the larger cryptocurrency market in systemic collapse, has "peak crypto" come and gone? From a column: Perhaps, but don't expect to see true believers lining up to have their cryptocurrency tattoos removed just yet. At a recent conference I attended, the overwhelming sentiment was that market capitalisation of cryptocurrencies could explode over the next five years, rising to $5-10tn. For those who watched the price of bitcoin go from $13 in December 2012 to roughly $4,000 today, this year's drop from $20,000 was no reason to panic.
It is tempting to say, "Of course the price is collapsing." Regulators are gradually waking up to the fact that they cannot countenance large expensive-to-trace transaction technologies that facilitate tax evasion and criminal activity. At the same time, central banks from Sweden to China are realising that they, too, can issue digital currencies. As I emphasised in my 2016 book on the past, present, and future of currency, when it comes to new forms of money, the private sector may innovate, but in due time the government regulates and appropriates.
But as I also pointed out back then, just because the long-term value of bitcoin is more likely to be $100 than $100,000 does not necessarily mean that it definitely should be worth zero. The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy. It is no coincidence that dysfunctional Venezuela is the first issuer of a state-backed cryptocurrency (the "petro").
It is tempting to say, "Of course the price is collapsing." Regulators are gradually waking up to the fact that they cannot countenance large expensive-to-trace transaction technologies that facilitate tax evasion and criminal activity. At the same time, central banks from Sweden to China are realising that they, too, can issue digital currencies. As I emphasised in my 2016 book on the past, present, and future of currency, when it comes to new forms of money, the private sector may innovate, but in due time the government regulates and appropriates.
But as I also pointed out back then, just because the long-term value of bitcoin is more likely to be $100 than $100,000 does not necessarily mean that it definitely should be worth zero. The right way to think about cryptocurrency coins is as lottery tickets that pay off in a dystopian future where they are used in rogue and failed states, or perhaps in countries where citizens have already lost all semblance of privacy. It is no coincidence that dysfunctional Venezuela is the first issuer of a state-backed cryptocurrency (the "petro").
I'm old enough to remember when cryptocurrencies were going to replace fiat currency.
Now, they're lottery tickets. Do the coinbros know that almost everyone loses money on lottery tickets?
You are welcome on my lawn.
The premise here is that people will suddenly see the value of cryptocurrency, and not some better cryptocurrency that they create then, but the old cryptocurrency. The problem with this is that the naive folks who bought cryptocurrency on its run up, mortgaging their homes and running up their credit cards, aren't going to be in the market that way a second time.
It's over. It only goes down from here. It never had any intrinsic value, and the folks who were in denial about that have had to face it now.
Bruce Perens.
I also have a few zero volume penny stocks back from gambling... Err day trading penny stocks.
I keep them around as a reminder of what results from hubris and greed.
Most of these cyryptocurrencies will end up the same: no bid.
Don't be a bag hodler.
No the problem is that the value of your CURRENT cryptocurrency is just going downhill and will be worth nothing in the long run. This will happen for all cryptocurrencies and the reason is that people just create new and new cryptocurrency.
The only people that can cash in are the people that originally created the cryptocurrency and they cash in before it becomes worthless. So everyone is trying to create their own cryptocurrency to cash in. Rinse repeat. An endless cycle that will never stop and makes common cryptocurrency useless.
The only way that a cryptocurrency can work, is if it is backed up by a government state so that you are quaranted to have an actual value for the currency based on the trust for the government. We have a name for this it's just called "Currency".
Lottery usually has (a) certain guaranteed odds of winning, crypto has no guarantees. (b) Lotteries are usually licensed with a limited number of licenses at any time. There is literally no limit on the number of possible cryptocurrencies.
The value of major cryptos is unlikely to go to hard zero though. There is utility in BTC and friends which is circumvention of regulations. Someone will always want to launder money and sell drugs.
But it's very unlikely for a legit application of blockchain to exist at all because a distributed transaction with consensus is fundamentally more expensive than a centralized one with a trusted third party. All, and I mean absolutely all with no exceptions, all current companies/products in "legit" space are doing things with blockchain purely for marketing/FMO reasons. All of these apps can be done more efficiently without the blockchain.
There. Done.
sed -e 's/Chuck Norris/Rajnikant/g' joke > fact
When cryptocurrency was opened to the stock market it became doomed to failure. Before that, the "value" was rising because it was useful. Its only intrinsic value is that value it presents for exchanging goods and services. For people who actually "use" cryptocurrencies, it's value needs to be kept stable, or everyone would refuse to use it, and thus it would have zero value
Enter the stock market, and now the market traders all want to make money by trading the currency itself, a thing with no intrinsic value except for what it can do. If the people who use it all cashed out then the stock market price would be $0. The way the stock market "makes money" (actually move money from one account to another) is to second guess what the other traders will think its value will be tomorrow. Buy low, sell high of course. The stock market will not "make money" unless the price/value is volatile. If the price was consistent over time the traders would have zero interest in it, because they can't trick the other traders into valuing it more tomorrow than today, because the price would be stable. In order to make money in trading cryptocurrency, it is in the traders best interest to force the price to become volatile and then to correctly guess tomorrows value. They will try every trick in the book to force wide swings in the "market value", even emplying illegal tricks if they can find a way to make that happen.
See the problem yet? The traders WANT the price to vary, and the users of it DEMAND the price to be stable! The traders will do everything in their power to make the value fluctuate, while the people trying to use it will be moving their share to some other currancy which is more stable, thus forcing the value to further decline. This is a feedback loop biased towards zero value.
When a stock for a traded company does poorly you can sell off its assets and regain some of that original value. When a cryptocurrency tanks it becomes worthless, and nothing can be sold off or recouped from the electronic dust that remains. Its value then is merely nostalga. It has no value beyond what other people think it will be worth tomorrow. If everyone thinks it has zero value, because nobody can trust that value being stable tomorrow, then the cryptocurrency is 100%, without any doubt, completely worthless. At that point you can thank the stock market for making your cryptocurrency wallet worthless.
If you are going to invest in any cryptocurrency my advise is to pick one that states up front that it will never be openly traded on the stock market. That one may have a chance at actually being stable, and you can count on its only intrinsic value, trust in its worth tomorrow being the same as today.