I am tethered to the analog world of things I think are real.
I don't mind ageism. It is the one arena where people still joke about their prejudices against people as a group without getting shamed.
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| "Peace Bear" Beanie Baby: $35,000 |
That brings me to crypto. I still don't get it. I think it is a Ponzi scheme and a scam. I think it is like an investment in baseball cards, comic books, or Beanie Babies. They are a castle built on rainbows.
The fact that Bitcoin prices have gone down in value in the past year may take some of the blind enthusiasm out of the supposed asset. Bitcoin is down just under 60% for the year.
A few places will exchange goods or services for it, which technically makes it a medium of exchange. Bitcoin is not useless. It can be used for secret transfers of large amounts of wealth--ideal for drug transactions or tax avoidance. Large transfers of U.S. dollars are tracked. Under current tax law, people file tax returns stating under penalty of perjury that they are reporting their cryptocurrency transactions. That is hard to enforce.
There is something big that tethers the U.S. dollar. We can pay taxes with it. The tax bill comes with a dollar figure and we can satisfy that debt with a dollar payment. Federal, state, and local taxes are my biggest obligations. I need dollars to pay them. Men with guns and the ability to seize my property stand behind collecting those obligations. If, for example, Jackson County, Oregon told me I could pay my property tax bill with either $10,000 or half a bitcoin, payable on November 15, then on that day I would have a choice. I could either give them a check for $10,000 or I could look at the price of bitcoin. If it were the price it is today, $19,250, I could buy that half a bitcoin for about $9,625, and pay the bill that way and save money. Other people would do the same thing, bringing the value of Bitcoin right up to the $10,000 level--if there were enough people in Jackson County to move the market. Bitcoin and the dollar would trade at a parity of value--$20,000 per full Bitcoin--set by that link. That tethering won't happen until a larger collector of debts than Jackson County, Oregon provides an ongoing open-ended willingness to settle obligations to it in the form of both dollars and Bitcoin at a set price. I expect that the only debt collector big enough to do that is the U.S. government. itself. I don't expect the government to agree to that.
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| Divorce 1990's. "We lost our minds." |
I think cryptocurrencies are a bust waiting to happen. They aren't money. They are a collectable. I may be wrong. I am certainly old-fashioned in my thinking.
If someone young and smart wants to do a guest post explaining why Bitcoin and other cryptocurrencies are valuable, please write.
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7 comments:
Last spring, I used Bitcoin to send money to the Ukrainian military so they could purchase weapons and ammo. Crypto is useful for some things, primarily when you need to transfer funds in ways unsupported by normal financial institutions.
But it’s only an “investment” if you get in on it early. I’m sure Satoshi Nakamoto made a killing…
It’s called wisdom Peter. Even a few people do well in Ponzi schemes.
Being neither young or smart, as I understand it a medium of exchange has value as long as the transaction is solely in that medium whether Beanies or diamonds...value for value. It's in the exchange rate that it gets complicated...dollars for Beanies, etc...and as you know for most currency it's close to one to one, even though millions are made on the fractional differences.
I agree that cryptocurrency is suspect. Unlike Dollars or Euros it's not based on actual economic activity, but on the fact that it's a finite digital commodity whose value is based on that is getting sliced into thinner and more valuable pieces. Maybe a Ponzi, but more like Nintendo. It seems to me that unlike Dollars, which can marginally fluctuate, Crypto can actually fall to zero.
It does take dollars to obtain Bitcoins, to buy in or purchase the computing power to "mine" crypto, and ultimately one will cash out into Dollars (capital gains taxes and fees apply) or risk losing by holding on to their "wallet" when it crashes.
I'm opting for Publisher's Clearing House...
To me, the ultimate in self-delusion is buying non-fungible tokens with cryptocurrency. It’s like buying something imaginary with imaginary money, except you have to pay cash for the funny money first. I’ll pass.
Crypto-, or more like pseudo-? Maybe ersatz-.....
Hi Peter, it's a common misconception that Bitcoin enables untraceable transactions. In fact it is the opposite. Every transaction on Bitcoin leaves a public record of all the details of the transaction. So it is very easy to track money on Bitcoin, even more so than in the traditional financial system.
Mixer services try to obfuscate the provenance of funds by pooling and mixing the funds of a large number of entities. However, it is easy to see who is interacting with a mixer. For example, OFAC recently put Tornado Cash (until then, the most popular mixer service) on its list of sanctioned entities, and I think it is not going to be hard to enforce.
Than’s for saying that, Peter. You’re the first person I’ve met besides myself, who at least suspects that bit coins are nothing but another pyramid scheme. And of course some people make out like a bandit; that’s how pyramid schemes always work, since there is not an infinite number of suckers to buy at higher and higher prices.
I’m surprised bit coins haven’t been declared illegal, like other pyramid schemes.
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