Chart from Investing.Com.
It’s difficult to deny a bitcoin crash is underway, but the true believers will deny the crash anyway.
The HODLers’ expectations of big bounces are being sold hard.
This post adds little to the discussion, but I have a couple of articles planned in which I will detail how and why the true believers are wrong about mining costs and miners supporting the price of Bitcoin.
For now, and contrary to true believer statements, buy the dip has morphed into buyer beware.
Belief in bubbles is fun, until they pop.
Mike “Mish” Shedlock
This book is basically my ontological bible. It’s a beautiful compilation. Let me give you the first page of Paul’s chapter “Universe from bit” to show you what I mean:
“I refute it thus!” Samuel Johnson famously dismissed Bishop George Berkeley’s argument for the unreality of matter by kicking a large stone. In the light of modern physics, however, Johnson’s simple reasoning evaporates.
Apparently solid matter is revealed, on closer inspection, to be almost all empty space, and the particles of which matter is composed are themselves ghostly patterns of quantum energy, mere excitations of invisible quantum fields, or possibly vibrating loops of string living in a ten-dimensional space-time.
The history of physics is one of successive abstractions from daily experience and common sense, into a counterintuitive realm of mathematical forms and relationships, with a link to the stark sense data of human observation that is long and often tortuous. Yet at the end of the day, science is empirical, and our finest theories must be grounded, somehow, “in reality.”
But where is reality? Is it in acts of observation of the world made by human and possibly non-human observers? In records stored in computer or laboratory notebooks? In some objective world “out there”? Or in a more abstract location?
link to amazon.com
@Ambrose_Bierce
“There are no unicorns, an electric charge in a memory chip is intangible. period. Money is of course real, and yes gold is money if you want it to be.”
That argument won’t land with me because I believe reality is fundamentally composed of information, and not anything you would consider materially tangible. Read “Information and the Nature of Reality: From Physics To Metaphysics” by Paul Davies.
In the end the new name will be shitcoin.
By the way, lest someone think I was trying to be critical of Mish for his timing in my post above, it was exactly the opposite. His posts on Bitcoin have been perfectly timed to transition points, where the “crash” was facing critical points where it could either turn into a rout, or it could bounce. Each time, so far, Bitcoin did bounce, but each successive bounce was more feeble. This bounce was the most feeble of all, and seems likely that a full scale rout is on.
I know what money is and bitcoin isn’t money. Any digital currency is going to be transaction only, in its final form. There are no unicorns, an electric charge in a memory chip is intangible. period. Money is of course real, and yes gold is money if you want it to be.
You really need to write the executives at IBM, Google, NASDAQ, Hitachi, Diamler AG, and many other major companies and explain how they are wasting $millions trying to exploit the benefits of this phony technology.
BTW, why are you still supporting Facesuck, when they obviously feel a few deaths is a reasonable tradeoff for their continued growth? link to dailymail.co.uk
“Money is a medium of exchange!”
“No money is only a unit of account.”
“Neither of you are right! Money must fundamentally store value.”
“What stuff and nonsense, money is just anything that will settle a debt.”
“What really matters is what government will accept as taxes.”
“Bah! Nationalist can’t think beyond his own border: what matters is what government accept as payment from each other.”
“No internal state sovereignty is fundamental, but not the treasury rather the central bank: what does the central bank hold as reserve?”
“Nonsense, the central banks don’t control jack shit. It’s what creditors around the world in general hold as reserve to motivate other people’s faith.”
“Money I suppose is nothing but what history has arbitrarily decided is money.”
“An accident of history!? What rubbish is that! Can’t you see the great powers that are in play in each jurisdiction’s court system? It is there that the question of money is finally decided, not by some bottom-up collective.”
“Maybe in barbaric nations, but our common law system is a system of contract and equity. People must AGREE on what suffices as means of payment or it’s not fair!”
“Sir, have you not heard of the phrase ‘legal tender’?”
“Oh? Pray tell is just any financial corporation’s credit legal tender then?”
“You have a point, but I suppose it comes down to what the bailiffs serving the court will accept as payment, and they usually come around with wireless card machines don’t they?”
“Well that’s a reach isn’t it? Look credit is just an intangible promise, a mere contract in itself. You can’t make a judge rule on a commercial contract that itself only concerns the trade of a contract can you?”
“Well I think the laws of accounting from which our banking system emerged means you very well can.”
“So much for your gentlemanly common law agreement then. Congress decides what’s money when they legislate the banking system. And that’s that.”
“Congress is bankrupt, and so will the banks be too. Then they’ll throw a tantrum and investors in US capital will pull out, the dollar will hyperinflate, and the nation will just simply fall apart. Tell me what then will be money?”
“Gold! History votes rare metals.”
“Well I say the future is cryptocurrency!”
“Only if Cryptocurrency enforced by the state and backed by gold!”
“Oh what nation is going to enforce cryptocurrency when the chips are down. You misunderstand, cryptocurrency is the future precisely because government need not have a stake in it.”
“Bah all empty speculation and nonsense: the fact of the matter is nobody is using cryptocurrency as money now. Don’t talk to me about the future!”
“All very well BUT WHAT IS ‘MONEY’?”
goto 1;
@Ambrose_Bierce @theplanningmotive
Must we continually argue over what is and isn’t money? It’s not a very useful debate to have; it’s a fight over words more than anything else.
The primary obstacle to mining at present is electricity. Secondly but probably more important is technology, new GPU, chips that will decode the transaction faster, and use less power. Yes Bitcoin is NOT money it is electronic barter, and has the potential to set up a uniform price discovery mechanism, where barter was always regarded as too slow for modern economies, at instantaneous speeds money as a store of value becomes obsolete.
Maybe I’m missing something in the “cost of mining floor” argument, but if the costs of the miners set the floor, but as the price drops and high-cost miners drop out, so miner’s costs also drop, isn’t this a positive feedback loop downwards?
The cost of mining only provides minor psychological support for the price. It most certainly can fall below that point. Look no further than what happened to silver in the 90’s. Yes, if the price falls below the cost of mining, mining will drop significantly, but with a substantial amount of bitcoin in existence already, the price is determined by demand, not by supply.
On another note, Mish, your timing of these articles remains impeccable. I don’t trade Bitcoin, and have no interest in doing so, but it appears that every article you have made on the subject has coincided with a bottom, and been followed by a rally. Just from memory, it seems that you had an article after the crash from $18,000 to $12,000, which was followed by a rally to $16,000, then another article when it fell to $6,500, following which it rallied to $11,000, and now you hit it again at $6,638, after which it rallied to $7,100 so far. I agree with you on the direction. I’m just smiling at your timing.
A the marginal utility theory raises it’s head. First we have a thing costs as much as people think it is. A purely psychological, phenomena. Then we have the cost of production theory. The price will be governed by the cost of mining. Then we have that shillobeth, Fiat currency, which has been around for two and a half centuries or before central banks were around in many countries. Bitcoin is not and never will be money unless and until it becomes state currency, or just another form of the dreaded Fiat currency.
Psychology is always involved in a crash. Whether Bitcoin is useful or not, the price is irrelevant. Price is what people believe it is worth at any specific time.
Yes I understand that – a huge Bitcoin advocate yesterday tolg me it was “impossible” for bitcoin to drop too far because mining costs would prevent it. I am going to write a column on that. Wish I could find the Tweet but I lost it (or he deleted it)
So, trading all of my gold for bitcoin was NOT a good idea?
You remind us all that cryptocurrency isn’t just any religion.
It is our religion. It is the religion of the faithful Mish reader.
And Sechel is its Judas of logic who’d sell out bitcoin for thirty dollars that shall be worthless when the banks crash (then he’ll hang himself). 🙂
Its real its just not certain is these companies are going to be around. The best argument for bitcoin is FIAT currency and central bankers failed monetary policies. The second argument is regulations on currency transaction associated with crime and drug use, and targeted terrorist organizations which also use their money to do social good. In short the corruption of the money used in a global economy to support the elite corporations who are also responsible for providing the (global) MIC with great quantities of standardized goods, which function as fascist extensions of this policy while denying economic funds to competing third world countries who either don’t play along, or demand some measure of autonomy. This is not a rant, this what the big heads talk about in their office on the top floor, and of course how to get control of it.
link to safr.kingfeatures.com
Once all the suckers are scared away, it will drop to almost nothing.