171202 Bitcoin’s Future

 

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http://www.bitlisten.com creates a bubble for every bitcoin transaction in real time.  The size of the bubble and the sound it makes are proportional to the trade size.

 

Once Bitcoin reaches its fighting weight, we probably won’t notice it.  Bitcoin is just another form of currency.  But the differences between life now and then will be obvious.  Exchanging money will be instantaneous.  There will no longer a need to wait for a check to clear, or stocks to be sold, or an insurance policy to be “cashed out.” Business is conducted between total strangers without a second thought.  Avoiding certain expenses simply because the banking fees are excessive would be a thing of the past.  There are no fees.  At that future time, bitcoin is just as common as dollars and cents are today.  Credit and debit cards disappear.  There’ll be no need for them. You’ll keep your bitcoin wallet on your smartphone.

In the transition from now ’til then, from bitcoin as a curiosity to bitcoin as a commodity, your other assets do not change.  Your house, which may be of average value on an average block in America, continues to be of average value.  Your stocks and bonds go up and down in value as they did before and continue into the future.  Gold and silver do what they have always done in providing safe haven and stability.  What will change is the value of bitcoin, going from zero to its ultimate value, whatever that is.  When it reaches that amount, it should become as stable as any currency can be.  We live in a dynamic world.  Shit happens.

When bitcoin started, it had no value.  The programmers, having fun with it, got the ball rolling.  Ever hear the story about the slice of pizza a programmer purchased for 10,000 bitcoin.  True enough.  From those early times, as people’s confidence grew in the concept and the currency, the value of bitcoin has continued to rise.  As it now ‘goes parabolic’ people liken the craze to a financial investment bubble, e.g. the tulip mania of the seventeenth century in the Golden Dutch Age.  Remember, the dot-com bubble of 1999?  There are similarities to that bubble and what is happening around bitcoin today.  At that time, anyone who could convince a group of investors to plunk down a few hundred grand could make themselves a website and a dot-com IPO.  Today ICOs (Initial Coin Offerings) are appearing almost daily.  Someone has an idea for a cryptocurrency and Bob’s your uncle.  The only thing is, Bitcoin is not a bubble or anything close to it.  Bitcoin represents the birth of a new asset class, cryptocurrency based on encryption techniques and money.

What is happening at the moment with bitcoin is a once in a lifetime phenomenon.  During this transition period, you can take your fiat currency and exchange it for another asset class, cryptocurrency, and ride the wave.  However, these are not tidal waters which ebb and flow.  Bitcoin is here to stay.  The only question is how pervasive it will be in our economy.  Compare it to gold. All the gold in the world weighs about 5.5 billion ounces.  There are 7.5 billion people in the world.  That works out to about 3/4 ounces gold per person.  If the gold were distributed evenly throughout the world, each person would have about $1000 in gold.  There are 21,000,000 theoretical bitcoins.  At present, 16,600,000 have been mined.  The rest will be mined in the coming 100 years as set out by the system’s designer, Satochi Nakamoto.  If Bitcoin came to represent all wealth, as we once used gold, each bitcoin would be about $452,000.

Bitcoin grew 400% from $2450, five short months ago, to $10,929 as of this writing. On the night it hit $11,500 to set a new high, it fell 20% in the next few hours. There is no doubt that the bitcoin market is volatile, no place for the faint-hearted, timid, nervous, easily scared, fearful or afraid.

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171201 Not All Dot-com Companies Failed

webvanIf you’re old enough to remember the dot-com bubble you might remember what was going on at the time that gave rise to the fever.  The Internet was brand new.  Companies were popping up left and right.  All they needed was a value proposition and a domain name and off they went.  There were stories of instant, overnight millionaires who took a simple idea and turned it into a fortune.  Before you knew what was happening, many a famous actress or TV personality would be promoting his or her new dot-com idea and funded an initial public offering (IPO).  Hundreds of IPOs were streaming onto the market every day.  Suddenly, thirty million dollars in an IPO, for a website whose famous celebrity founder/owner was an expert in fashion advice and thought her website which would give advice to others would be an instant success.  It took several months but when these hotshot startups started bleeding money, no amount of funding was going to make them work.

In every industry sector, there were many bright ideas. There were well-funded websites for selling beauty products like iBeauty.com, Beauty.com, Reflect.com, and Eve.com. They all failed. One famous fail was Boo.com, a would-be pioneer in the e-commerce space. It was founded in ’98, started selling branded fashion apparel in ’99, and ended burning through $135 million by the end of the second year. Webvan was founded in ’99 as an online grocery store, delivering groceries (including perishables) to doorsteps across the US much like FreshDirect does today.  Webvan went from being a $1.2bn company to being liquidated in under two years.

The digital forerunner of Bitcoin, in 1999, was sold like a gift card without a store to back its value. The overall consumer reaction was “why?” Have you ever heard of eToys.com and Pets.com. Both failures but not for lack of a good idea.

But what did we know? Gwen Stefani gives fashion advice as a Wall Street investment?  Who knows? No one knows.  Well… the bubble burst.  Those dot-com dreams disappeared and Wall Street got much more realistic about Internet riches.  That doesn’t mean that no one made money.  Many companies got started then with very good ideas and made lots of money the old-fashioned way. Amazon, Yahoo, Google, Facebook, LinkedIn, and eBay are amongst those, for example.  They earned it.

There’s talk right now about a cryptocurrency bubble, fueled by Bitcoin’s valuation.  Everyone mentions the tulip bubble and talks about outlandish prices going up in smoke for a virtual commodity no one can describe or understand.  What is happening at the moment has many similarities to the dot-com bubble.  Every nerdy programmer with a micron of an idea for a new cryptocurrency is creating an ICO (Initial Cryptocurrency Offering).  Most are sketchy ideas that have not been thoroughly fleshed out and lend themselves to scams and fraud.  ICOs have been outlawed in many countries.  Some of the ideas sound plausible.  Some don’t. Of the top ten cryptocurrencies, most of them will thrive.  Of the bottom ten cryptocurrencies, most won’t.