Two Things To Think About
Since I am writing this on Monday, January 15th, but won’t post it until tomorrow I have one complete thought and one that is still waiting for more information.
My first thought is about the SEC’s decision to allow these Spot Bitcoin ETF’s to list on major exchanges.
By now it is pretty clear that I think that Bitcoin and it’s ilk are a sophisticated Ponzi scheme. Yup, I said it. It’s a scheme to defraud someone and hopefully it is not you.
I get all the people on Instagram saying they bought Bitcoin at 100 dollars and they are now sitting on millions. I get that there are seriously intelligent people out there that believe that Bitcoin or some other cryptocurrency will replace the US Dollar as the most important currency in the World.
I also get all the arguments for the investment in these new ETF products. Sure, Kathy Wood says that Bitcoin or some form of Bitcoin will change the way commerce is done in the future and she and her investors will riding this wave as Bitcoin blows through 100,000 dollars all the way to 1.2 million dollars a piece.
Hmmm, now she is obviously the smartest woman that has ever invested in the World ever but her math is skewed beyond belief.
Let’s do some high school (non Honors) math here. If she thinks that Bitcoin will have a value of 1.2 million dollars at some point in the future, has she ever actually calculated that number or did she just pull it out of thin air? You can’t do this math on your Iphone BTW, it will explode.
Here is her calculation:
$1.2 million X 21 million Bitcoins=2.5 Quadrillion dollars. Hmm, seems a little rich huh? Considering that the value of all currency and commerce on the planet is roughly 85 Trillion dollars. Yea, no.
Even modestly looking at it at 100,000 dollars a Bitcoin, that works out to be 21 trillion dollars. Still unrealistic.
This is a currency in only name and while money may flow in or out of these ETF’s their will be a point where it either becomes something more or it becomes a big scam. I opt for the scam.
I am in a very small minority here for sure. Hey even Larry Fink ( The guy who said they won’t invest in anything that does not have a strong ESG component. How did that go?)says it’s a new World and we (Blackrock) are putting both feet in on this one. Ok. Hope he is wearing a lifevest.
Right now, the value of the Bitcoin universe is right around a trillion dollars. A trillion dollars and it does nothing. It is a digital creation. Like an NFT. It only has value because it has created an atmosphere of value. An ecosystem of value that once the ecosystem fails or doesn’t create a permanent place for that value, it will die.
That, by definition is a Ponzi scheme. Create value where there is none and then sell that value to the next level down the pyramid. Sure Bernie Madoff and his brethren knew what they doing and I believe the proponents of this scheme know what they are doing as well.
They have created something so sophisticated that they don’t even know where it came from, who created it. They also don’t realize that if someone can create such an incredible math problem, there will eventually be people who can go in and steal those tokens and who are you going to call?
From the beginning of time, there have been people who have stolen from other people. It is a fact of humanity. People will find ways to take money that is not theirs. Governments have agencies that deal with this all the time. Fighting counterfeiting, arresting bank robbers, so on. People want the easiest way to the most money. I am sorry to tell you that there will be a time where this “currency” will be stolen and no one will ever find it. Ever.
Breaking into Coinbase is one thing, probably happens more than we know. Thats one thing but outright figuring out the codes and depositing these stolen tokens in some random place will happen. The FDIC may insure the deposits of savings institutions up to a certain point, they won’t be insuring any of this.
You are on your own.
Everything has an inherent value, everything. What people together or on their own decide they are willing to pay for something is how commerce is transacted. The price of Bitcoin is predicated on more people wanting it than don’t. The supply of this currency is increasing slowly and the demands for it are increasing more rapidly, hence the price goes up. It is of limited supply so theoretically the price should go up to a point where no one is willing to pay higher than that price. Once that happens and all of the tokens have been “mined” what will happen? Will the volatility diminish? Will the price come back down? Will interest dissolve after the initial players have cashed out?
My feeling has always been this: If you want a high risk investment, go for it. You can tell all your friends how much money you are making. It is just amazing that everyone is making money on this investment. No one has ever lost a dime. Maybe some people have cashed out too early but they made a profitable trade. I guess Bitcoin will go down in history as the only surefire way to riches.
Yea, OK.
Here is another little dose of reality. The value of Bitcoin has gone up dramatically in the last year. Truly amazing, I’d say, yet on what is probably the second biggest event in Bitcoin history, the price pretty much went no where. Could it be that most of the value was already priced in by Thursday? Or was it the availability of big institutional money shorting these ETF’s? I don’t really know just yet but it seems a little odd that the floodgates were opened and while their was a rather large amount of trading in these 11 ETFs, the price didn’t reflect an onrush into the space.
Let’s face it though, you open 11 ETFs on several different platforms and you trade over 3 billion dollars of the stuff and the media is saying it was a rousing success. I am not so sure about that. There have been few ETF’s that have garnered the attention these 11 did and yet they only trade a few billion dollars? There have been singular ETFs that have entered the market and traded over 5 billion dollars on their first day, so 11 ETFs trading 3.5 billion dollars and all the buzz. I don’t think it was that much of a success. Sorry.
Maybe someone else has said this but every stock (or ETF) will eventually trade at the right price. This will hold true with cryptocurrency as well. Supply will meet demand, always. There will always be times where one of the two forces are more prevalent but it will always correct itself. That is economics 101. Obviously, Bitcoin does not adhere to laws of economics and that is just a touch scary to me.
My next thing is the Iowa caucuses. I don’t know who will win and I honestly don’t care. I know how the media makes Iowa out to be some harbinger of good (or bad) news for candidates. Give me a break. Iowa is not an accurate slice of this country. Why should a state that has around two million registered voters, which roughly one and a half million of them vote, be so significant?
The media has to make a story line for something like Iowa. If Nikki Haley gets more than 12% of the vote she will be riding a solid wave into next weeks New Hampshire primary. A caucus vs a primary. It is all meaningless because Donald Trump should waltz away with this event. Next week as well.
I have repeatedly gotten on the media’s case for multiple reasons and this is just another example of, trying to make something significant out of nothing.
Let’s face it, The Media Hates Donald Trump. Even Fox News has a certain enmity towards President Trump. They hate him but they feed off him constantly. If Donald Trump faded away to Mar a Lag Go. Brian Williams would have to go back to lying about his adventures and Wolf Blitzer would go cry in the Green room of his War room. They would see ratings drop and have less and less to bitch about.
They fight to keep him out of office but they know that the only way they can survive is if he is in office. Talk about a conundrum.
So we have to listen to the blathering for another week and all it is going to do is stoke up Donald Trump’s base even more.
Wonder what would happen if CNN decided it was time to tell the truth and admit how wrong they were with there love affair with the Biden administration and by proxy the Obama administration? Not saying that would force them to endorse Donald Trump but maybe that would allow them to have a more balanced political reporting. I know that will never happen but a guy can dream can’t he?