Finance

THIS WEBSITE Is Systematic

So this is a post about Bitcoin. It seems you aren’t allowed to exist nowadays without having an opinion on all things blockchain. Actually my opinion on Bitcoin and (what I believe are called) ‘alt-coins’ is the same as my opinion on a lot of things: a deep scepticism blended with almost total agnosticism. Fact is I don’t see why I have to have an opinion with this stuff.

I have plenty of places to put my investment capital, thank you very much. So it seems appropriate to close 2017 with this post (and the release of two BTC futures on developed exchanges within the last few week is also genuine new-news). If nothing at all else I won’t have to constantly spend your time in replying to the hordes of people constantly requesting me what I think about any of it. A caveat: I’m writing this as an economist / trader / trader; I’m not a technical expert on the technology aspect of the stuff. Grab a few pinches of sodium – you are going to need them. Coin. I will interchangeably use the terms bitCoin, BitCoin, bitcoin and BTC.

What is BitCoin for? A means of payment (like US dollars)? A store of value (like US dollars and Gold)? An investment (i.e. a store of value that is ideally going to move up in price and/or come back a stream of payments, like shares in eBay)? The mining process is extremely energy inefficient (each transaction consumes 250kWh; my family of five people and a kitty uses about 25kWh a day.

  1. Alternative customized look-through approach
  2. The Winton Global Alpha Fund also did well attaining 2.46%. A large contrast to my very own trading
  3. A country’s income can include presents from residents of international countries, called
  4. I would meet the employee on their shift
  5. Payments to criminal offense victims
  6. What the goal of the task is

The price is extremely volatile. It creates the German tag of the Weimar Republic appear to be the Swiss franc. Although unlike the inter-war mark it goes up in value as well as down. Bitcoins are lost or taken easily. That is also a problem with cash (though you’d struggle to lose £74 million in fifties), but not so much with ‘legacy’ electronic payments.

It turns out to be quite difficult to turn Bitcoins back into real cash (see here for just one example) unless you use some foxy derivatives that involves an extremely high effective purchase fee. I’m aware that some individuals think a few of these problems are soluble. So all the BTC cheerleaders have finally pivoted to stating that BTC can be an investment. 37 trillion in narrow money.

There can be an inconsistency here – BTC will only make sense as an investment now if it seems sensible in the future as either a means of payment or as a store of value. It is because unlike investment in say stocks and shares or bonds it generally does not produce a blast of revenue or coupons that may be valued. This helps it be a bit more like Gold, which people like as a store of value, and if the brown stuff hits the fan it can be used as a medium of exchange also. If we debunk the utilization of BTC as a way of store or payment of value, then the investment case is also debunked.

People have likened the BTC mania to both the late 90’s technology increase and the tulip mania in Holland through the 17th century. Arguably it’s worse than both of these. Some of the firms in the late 90’s tech increase did have practical businesses and ended up being worth something. If a tulip is bought by you, at least you have a good tulip to look at.

If you get a BitCoin you have literally nothing at all of any intrinsic or visual value. Nevertheless the vast interest being shown by people with will make it feel very much like the tech increase, which I remember well (I’m not quite old enough to remember Tulip mania). What’s the future of Bitcoin? The very first thing we need to do is ask how likely it is that the issues outlined above will be soluble anytime soon.

This is the most speculative area of the post, because (a) we’re looking at the future – which is hard and (b) it’s relaxing on the shaky technical knowledge I’ve about blockchain technology. It is advisable to read this if you would like to listen to from somebody who understands what they are discussing. Slow: We just need more miners on the case. Of course bandwidth can be an issue, particularly if miners tend to become concentrated in a little variety of places with cheap electricity.