• Home  / 
  • BitCoin
  •  /  Imminent Death of Bitcoin Predicted

Be ready for the Reboot. Subscribe to new articles via email... »

Imminent Death of Bitcoin Predicted

Mark Jeftovic
By Mark Jeftovic / November 15, 2013

100-hundred-bitcoin-will-buy-this-carI have noticed Business Insider’s Henry Blodget’s typically frantic sensationalism which trumpets “news” such as his “Bitcoin could go to $1 million”, where he goes on to attempt to take down the currency as something that is in a bubble and will eventually become worthless:

“But I was getting at a more profound point. $400 is a perfectly reasonable target for Bitcoin. As is $1,000. As is $10,000 or $100,000 or $1 million. And as is $0.01.

In his writings, Blodget seems on a mission to deconstruct bitcoin, dismiss it as a bubble and a fad.
However, as I am now growing tired of observing, nearly every single criticism I see levelled at bitcoin is more appropriately applicable to fiat currency.

Among Blodget’s favourite arguments is that Bitcoin “has no value” because:

“Unlike gold or dollars or other things that have widely accepted utility, Bitcoin’s price is determined entirely by what someone else is willing to pay for it.”

It’s true that I don’t have a degree in economics and no central banking experience, but I’m not exactly financially illiterate and I’m at a loss to think of any good, commodity or service exchanged in an ostensibly free market whose value is not “determined entirely” by what somebody else willing to pay for it. Unless you count things where the value is also determined by what some counter-party is simultaneously willing to sell it for, but in any case, this still includes bitcoin, and everything else in the known universe of free markets.

There is no “inherent price” in anything, there is only what market participants are willing to pay for things. The only exceptions are government edicts like currency pegs and price controls and everybody knows, none of that stuff works. In command economies price discovery tends to occur in burgeoning black and grey markets and guess what? Those too set prices based purely on what people are willing to buy and sell at. This is not news, at least it shouldn’t be.
In a another article Blodget flogs the point:

“There is absolutely no way to value Bitcoin, which means there is nothing constraining its price other than supply and demand.”

Again, what’s Blodget’s point? This isn’t some incontrovertible damning of Bitcoin, it’s a vapid truism.

I’m not saying that the bitcoin price will continue its meteoric ascent ( in fact if I were a day trader I’d be betting against it)

But I will comment ( again ) that even if something’s price action is really in a bubble – that doesn’t mean that it is worthless and will go to zero after the price action blows off, or that the underlying phenomenon loses all utility after a crash. In fact that is more the exception than the norm.

But what I will say is bitcoin specifically and crypto currencies in general are here to stay. This is the evolution of money.

The criticisms levelled against bitcoin and crypto-currencies in general are rife with profound misunderstanding, gross irony or just plain raw, defensive fear. Blodget prides himself on having written extensively on bitcoin, let’s look at a couple of his arguments:

It will never be widely accepted because

1) governments will ban it or

2) it’s too complicated and “shadowy”

These are easy, #1 – they can’t. A government “banning bitcoin” is akin to a government banning prime numbers. They may pass the edict, it won’t really change much. Any full-on banning of the use of bitcoin in private transactions will only further bankrupt the government of any remaining credibility and further alienate the political class from the real world.

Number 2, that bitcoin is “too complicated and shadowy” is a pretty solid argument and difficult to refute. A good example of this is how the internet never gained any traction and pretty well died in the crib around 1994 because it was overly complicated and shadowy.

Blodget is probably right about the price action of Bitcoin being in a bubble, or at least headed for one. It’s certainly in a secular bull market now, and as Henry says, it could be a long time and a lot higher before it blows off.

But the price action of bitcoin is a sideshow. In the overall scheme of things, crypto-currencies are here to stay and that is where all the real action is.

It isn’t about buying a few bitcoin now and making a pile of money off it later. This is short-sighted.

What it’s really about is providing lubricant for capital flight when the next government tries to recapitalize it’s zombie banks out of its subjects savings. It’s about unhindered mobility of capital. It’s about complete transactional privacy. It’s about providing basic functions of money and currency that the current powers-that-be have mishandled and lost all credibility for handling. It’s an inelastic currency and that makes it sound money and it’s the perfect compliment to gold and silver.

To paraphrase Amschel Rothschild, who famously opined

“Give me control of a nation’s money and I care not who makes it’s laws”

I counter with:

“Give me a crypto-currency and I care not who abuses their power”.

About the author

Mark Jeftovic

Mark Jeftovic is the creator of Wealth.net, founder and CEO of Canadian domain registrar and DNS provider easyDNS.com and member of the indie rock sensations The Parkdale Hookers.

His personal blog is at markable.com

Click here to add a comment

Leave a comment:

Google Analytics Alternative