Blog

Is Bitcoin a Bubble?

Is Bitcoin a Bubble?
Profile photo of Caleb McMillan

bitcoin-dollars-300x200According to an author over at CoinSpeaker.com, Bitcoin and Ethereum will never be in a financial bubble because “digital bubbles are impossible.” He gives his three reasons, one of them being “the Theory of Reflexivity which belongs to George Soros.”

Do I think digital currencies are in a bubble? Yes.

Bitcoin may function well as a payment system for people who don’t like traditional financial institutions, but the Fed’s dollars are still the reserve currency of the world. The supply chain is priced in US dollars, not bitcoins.

And given that the bursting of the bond bubble may send the US dollar to the dustbin of history, the emerging new currency will either be a world currency brought to you by the same people who wanted Hillary Clinton as president, or, markets will prevail and we’ll return to gold and silver, even in their botched government-regulated forms. 

One thing is for sure, we won’t switch over to Bitcoin.

As Gary North has already demonstrated, it’s basically a pump-and-dump scheme. No one says, “I think I’ll create a money,” and then introduces it to the market. That’s not how money works.

Now, I’m willing to concede a bit and admit that the blockchain itself is revolutionary. But we’re still in the infancy of this technology. Benefits of smart contracts, blockchains, and newer, better technology will involve a variety of products and services to hit the market.

Once smart contracts and blockchains are common place in the economy (namely, the supply chain), then, out of this adoption of new techs, a blockchain commodity will emerge that functions well as a new money.

In the meantime, Bitcoin is an empty shell. A brand for a new payment system anyone can copy. It can easily head to zero.

A digital coin has no value other than what people assign it. Blockchain or not, we’re a long way from a world economy priced in crypto. 

Besides, the market for introducing additional digital coins is literally endless. The current digital coin market is just a product of this crazy stock-market casino. Since 2008, and perhaps before, this market has been removed from any core fundamental reality. 

So, of course, Bitcoin is in a bubble — everything is in a bubble.

Bitcoin could be money, if, in the future, when smart contracts and blockchains are integrated into the supply chain, as the mechanics get figured out, a blockchain money emerges to remedy the inconveniences of not having an industry gold standard.

Maybe Bitcoin will survive. Maybe it’s good to hold onto bitcoins you bought at $100. Maybe this time, it’s different. 

But right now, it’s speculative asset.

We’ve got a long way to go. Once smart contracts and blockchains work their way into our daily lives, once they become useful as commodities, then, I suspect, a blockchain money will emerge. It will probably be backed by gold.

Or will it be Bitcoin in its current manifestation? 

Is Internet Explorer still the kingpin of the world wide web? 

Are you reading this on a machine running Windows 95?

Did Microsoft eventually release a 32-bit operating system?

Blog
Profile photo of Caleb McMillan
@Caleb983

Caleb McMillan is a writer that lives in Vancouver, British Columbia.

More in Blog

My letter to the NY Times re: Typical Keynesian Whitewash

Patrick BarronAugust 14, 2018

My letter to the NY Times re: Typical Keynesian Whitewash

Patrick BarronAugust 14, 2018
walter

Join Us at the Rothbard U 2018 Opening Reception

Mises CanadaJuly 10, 2018

Understanding Economic Theory Is Essential for Understanding the Benefits of Free Trade

Patrick BarronJune 23, 2018

China’s Currency Manipulation Does NOT Harm Its Trading Partners

Patrick BarronJune 19, 2018
hayek

Trumping to Serfdom

Doug FrenchJune 18, 2018

The market provides its own punishment for irrelevant discrimination

Patrick BarronMay 20, 2018

Unilateral Free Trade Would Benefit All UK Citizens

Patrick BarronMarch 21, 2018

The EU elite are ignorant of the true meaning and importance of “comparative advantage”

Patrick BarronMarch 15, 2018