By Mason Mohon | @mohonofficial
The news is in, and crypto is apparently dead. Again. After reaching a peak of nearly $20k in December of 2017, Bitcoin has been on a steady decline, ready to end 2018 at a far lower point than it began it with. With Bitcoin has gone every other major cryptocurrency. They are all on a steady decline, and those that invested at the all-time-high are most definitely on some kind of suicide watch.
Some drank crypto kool-aid. The storm of ICO’s that were probably scams caused a lot of people to lose a lot of money. Never forget BitConnect.
On a Reddit forum dedicated to the discussion of Bitconnect, one person published the number of a suicide charity whilst others made the astonishing (and probably untrue) claim that crime syndicates were now looking to exact revenge on the people who launched the cryptocurrency.
The broader public sees BitConnect’s scam/death as the inevitable fate of crypto. The mainstream hasn’t hesitated to bury it six feet under with our former president and move on. Bitcoin and cryptocurrency make little to no waves on the mainstream media anymore. I have even wondered to myself if it is truly dead.
But then I remind myself that Bitcoin (and the crypto market) has finished a year lower than it started before. 2014 was a year much like 2018.
I wondered if the same doomsday tales were told back then before I was into crypto. A quick Google search that limited the search parameters to late 2014 and early 2015 revealed a treasure trove of news articles. History truly does repeat itself.
My favorite of these is a Washington Post article titled “Bitcoin revealed: a Ponzi scheme for redistributing wealth from one libertarian to another“.
Bitcoin hasn’t just fallen 76 percent the past year. It’s fallen 36 percent the past two days, as you can see below, with a 24 percent decline the past 24 hours. It’s too bad Bitcoin doesn’t have a central bank to help stabilize its value.
What in the name of Satoshi Nakamoto is going on? Well, two things. First, Bitcoin’s big bubble has been slowly deflating for over a year now. It has no inherent value, after all, because, despite companies trying to get free PR by saying they’ll accept it, almost nobody uses it to buy anything other than drugs. Second, though, is a problem that’s all too familiar to anyone who tried flipping condos in Miami ten years ago. Bitcoin miners, you see, borrowed money—and real money, as in dollars—that they could only pay back if Bitcoin prices kept rising, or at least didn’t fall this much.
Those silly drug dealers and miners have multiplied their investment by around 20 times since that article was written, even despite Bitcoin’s seemingly low price. The crypto doomsday has yet to come. CNN Business had a similar thing to say:
If they handed out awards to financial assets like they did to movies, then Bitcoin would definitely be the winner of the Razzie for worst currency.
The problem is that some fans of Bitcoin seem to think that it is also something that could be a good investment.
CNN published this in 2015. I audibly laughed when I read that line. These same doomsday sayers are back, and once again they are ready to tell us the grim news that it is doomsday. A finance professor explained on MarketWatch:
I explained what it would take for bitcoin to become worthless. Bitcoin is getting close to that point. As I argued, once Bitcoin’s price falls below its cost of mining, the incentive to mine will deteriorate, thrusting bitcoin into a death spiral. That is, without the mining activities supporting the ledger that maintains the records of who owns what — bitcoin is, after all, a set of encrypted numbers that cannot establish the ownership of anything — bitcoin will become worthless.
This is the exact same argument that the 2015 CNN business article made. And look how accurate their prediction was.
The best way to destroy your credibility when it comes to new markets like that of cryptocurrency is to say its over when the party has barely begun. And although we’ve handed out a few appetizers, the party has still barely started.
The United States, as well as the entire global economy, has based itself on debt. We surround ourselves with negative value. We prop up one house’s foundation on another shaky house. The monetary elites are doing something very wrong.
The entire system of Keynesian economics is based around piling up short-run problems in the long run, because after all, we’re all dead in the long run. An economic downturn is a market correction because malinvestment happened. But instead of letting the market correct itself, the state decides to inject a new stimulus package and allow for more malinvestment to occur. This covers for the immediate issue, but it only pushes the inevitable collapse further into the future. They stack up, the soon-to-come collapse only gets worse.
The problem with the system is quite obvious. But the scientific gloss of Keynesian mainstream economics makes it more appealing for academia. Thus, all of our generations economists don’t know better. And this is why crypto is necessary.
When the next global financial crisis occurs, and the world realizes organizations with $20 trillion in debt can’t possibly ever pay it back, and thus must print it instead, and thus fiat is doomed… watch what happens to crypto.
— Erik Voorhees (@ErikVoorhees) November 8, 2018
The man behind the curtain will soon be revealed. And when that happens, there will be a demand for something else. It might be gold. It might also be cryptocurrency. But there is going to be an alternative.
Binance CEO Changpeng Zhao is optimistic about the future of cryptocurrency. Even though the crypto market value shrank from $800 billion to $200 billion this year, Binance reported record revenue. The cryptocurrency exchange reported making over $3 billion in the first half of 2018.
CZ (Zhao’s nickname) thinks that the community needs to put things in perspective. Although things are grim compared to January, the market is booming when compared to two years ago. CZ stated:
Even if I don’t know what will catalyze a bitcoin bull run, I am certain it will happen. Sooner or later, something will trigger it.
Furthermore, Fred Wilson, a notable venture capitalist, made clear that the cryptocurrency community should look to Amazon to realize that all is not lost. During the 1999 tech bubble, Amazon was trading at $90/share. When the bubble burst, though, it plummeted down to $6/share. It took about 8 years for the stock price to recover.
Now, Amazon is the second largest tech conglomerate, sitting right behind Apple. Wilson explained that cryptocurrency could be in a similar position:
So while crypto asset prices are down 80-95% in USD terms over the last year, they could and probably will go lower. Amazon was down 80% a year into the post-bubble bear market and it got cut in half again before it made a bottom almost two years after it peaked. What we have yet to see in crypto land is when they kick you when you are down. And that is certainly coming.
I think some crypto asset (and possibly a number of crypto assets) will have a price chart like Amazon’s current one in 18 years. But we will have to do what Amazon did, hunker down and build value and survive, for quite a while to get there. And I think things will get worse before they get better.
But those who stayed were rewarded, although it took a long time for that to happen. We didn’t see meaningful paydays in the Internet sector until the 2007-2008 period and the big paydays didn’t start coming until 2010 and beyond.
You can’t just jump ship when the going gets tough. That looks like selling at lows and buying Bitcoin at $19k. It’s a really bad idea, and FOMO should never guide investment if the asset is already at the moon.
Bitcoin, blockchain, and the other crypto assets have promise. Their applications range from libertarian revolution to crypto anarchism to business decentralization to gambling away your college savings. The future is on its way. Are you going to buy a ticket?
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