Bitcoin reached a peak of almost $20,000.00 on December 17. The cryptocurrency is currently trading at $11,000, a loss of approximately 45%. This is more than 150 billion of lost market capital.
There is much hand-wringing, gnashing of teeth and much more in the crypto-commentariat. Although it’s close, I believe the “I-told you-so” crowd is the winner over the “excuse makers.”
This is the truth: It doesn’t really matter if you have just lost your shirt over bitcoin. Chances are that the “experts” in the media aren’t going to tell you why.
Bitcoin’s crash is actually a blessing. It means that we can all stop thinking about cryptocurrency.
The End of Bitcoin…
People won’t talk about bitcoin as much in a year than they do now. Here are the reasons.
Bitcoin is the result of justified frustration. The cryptocurrency’s creator explicitly stated that it was created in response to government abuses of fiat currencies such as the euro or dollar. It was intended to be a peer-to-peer, independent payment system that was based on a virtual currency. This virtual currency couldn’t possibly be debased since there were only a limited number of them.
This dream has been abandoned in favor of pure speculation. It is ironic that most people are interested in bitcoin because it looks like a simple way to obtain more fiat currency. They don’t want to purchase gas or pizza with bitcoin.
It’s not only difficult to transact electronically, it’s also painfully slow. Bitcoin’s success has rendered it obsolete as a currency. It’s hard to believe anyone would spend it when it is increasing in value so quickly. It’s hard to believe anyone would take one when it’s rapidly depreciating.
Bitcoin is also a significant source of pollution. To process one transaction, it takes 351 kilowatt hours of electricity. This also results in the release of 172 kilograms carbon dioxide into our atmosphere. This is enough energy to power one American household for a whole year. For a year, the energy used by bitcoin mining could power nearly 4 million households in the United States.
Paradoxally, the success of bitcoin as an old-fashioned speculation play and not its intended libertarian uses has drawn government attention.
South Korea, Germany and Switzerland have all implemented or are considering banning bitcoin trading. Many intergovernmental organizations called for coordinated action to curb the apparent bubble. Although the U.S. Securities and Exchange Commission seemed to be ready to approve bitcoin-based financial derivatives once, it seems now hesitant.
According to Investing.com, “The European Union is implementing stricter regulations to prevent money laundering or terrorism financing via virtual currency platforms.” It is also investigating limits for cryptocurrency trading.
One day, we may see a functional and widely accepted cryptocurrency, but it won’t be bitcoin.
strong >… However, Crypto Assets are getting a boost
Good. It’s possible to get over bitcoin and see the true value of crypto assets. Here’s how.
To use the New York subway system you will need tokens. They can’t be used to purchase anything, but you could trade them to someone else who wants to use the subway more often than you.
If subway tokens are in short supply, there might be a vibrant market for them. They may even be traded for much more than their original cost. It all depends on how many people want the subway to work.
This is how the most promising “cryptocurrencies” look other than bitcoin. They are not money. Instead, they are tokens. You can call them “crypto-tokens.” They can’t be used as general currency. They can only be used on the platform they were created.
People will be interested in crypto-tokens if they offer valuable services. That will determine their value. Also, the value of crypto-tokens is determined by how people value the services they can receive from the associated platform.
This will render them real assets and intrinsically valuable. Because they can be used to get something people value, it will also make them tangible assets . This means that you can expect to receive a steady stream of revenue and services from holding such crypto-tokens. Importantly, you can calculate that stream of future earnings against the crypto-token’s price, much like we calculate the price/earnings (P/E), of stock.