Bitcoin is Bitshit
Bitcoin is gambling. It has nothing to do with being a ‘digital currency’ and anyone who claims it is, is more than likely part of the ‘pump and dump’ scam that is Bitcoin, to try and inflate the price (and so increase the value of their holdings.)
It’s not a currency — you can’t buy and sell things with it? How many websites have you come across that list prices in Bitcoin or any Cryptocurrency for that matter?
Why do people have Bitcoin? For one reason only — in the hope of making money.
And just like betting on the horses or the lottery, you can indeed make money if you are lucky.
And anyone who tells you ‘it’s the future of money’ is just sprouting bitshit. If it was the future of money then surely you would be able to buy and sell things with Bitcoin? But that doesn’t work for two very simple reasons:
- No one in the real-world lists goods for sale in Bitcoin or accepts bitcoin as payment. (Same with all the other wannabe Cryptocurrencies)
- The value fluctuates so wildly that it’s impossible to price things in BTC — more difficult than the Zimbabwean dollar even.
It’s no use for buying things with. So it’s not money. And it’s certainly not the future of money.
Say I wanted to sell my rather flash car for bitcoin. My car is worth around $60,000. Late last year I decided to sell this for bitcoin. Had I put it on the market in November, I would have asked just one bitcoin — which happened at the time to be worth around $60,000 per bitcoin.
But if I had sold it in December, I would have received a value of just $46,000 for my car, for the same 1 bitcoin. Were I unlucky enough to have sold it on the 24th Jan 2022 I would have received the value of just $33,000 for the car. The value of Bitcoin halved in 2 months.
Which of course means you would be nuts to buy or sell anything in bitcoin. It’s no use as a currency. In fact the real value of Bitcoin went down an amazing 22% in just 3 days in January 2022.
So how can you sell or buy anything in Bitcoin when the value fluctuates so wildly? You can’t.
Or maybe, you might think, you could have dynamic pricing, so it tracked the conversion rate. So the BTC price of my car would vary between 1 BTC in November to 1.4 BTC on 20 Jan and it would have to be 1.8 BTC just three days later. Who is going to buy anything in Bitcoin when the amount of bitcoin you need is impossible to pin-down?
If it’s no use as money, what is it?
It’s a random number generator that people gamble on.
This has been the price (in USD) of Bitcoin since the start of 2021 to early 2022.
Just after this chart was grabbed, Russia invaded Ukraine and the price went down 20%.
It oscillated between a high of around $60,000 and a low of half that, $30,000 in a period of just over a year.
That’s just the recent price history. Go back a few years and Bitcoin lost 83% of its value in exactly one year from Dec 2017 to Dec 2018. Were you unlucky you might have turned a $10,000 investment into $2,000 in just 12 months!
In the UK it’s worse than gambling because you pay Capital Gains Tax on all gains made from gambling on bitcoin. Which is a little unfair as you don’t pay capital gains tax on the horses, or lottery winnings.
PayPal
Recently PayPal added the ability to buy and sell Bitcoin. Why? You can’t buy things with it on PayPal. You can’t even transfer your bitcoin to other people. It’s trapped in PayPal. The only thing it can be used for in buying or selling against a mainstream currency. If it can’t be used for any trading why would you buy Bitcoin? One reason — in the hope its value will go up against the dollar, and you can sell it for a profit. That’s gambling.
The Google Ad makes it clear — Buy, Sell & Hold. Nothing about trading for goods or buying things with it. Nothing about using it to transfer value to others (the original intent of Bitcoin and, ironically, what PayPal was created for also).
I can guarantee that anyone who promotes Bitcoin, who hypes it for any made-up reason (“the future of currency”), is doing so for one real reason — they own Bitcoin and hope that the more people buying it will increase the price so they can make a profit from you.
But if you accept it as a random number generator you can bet on, that’s fine. Gambling is a very lucrative business (for the gambling companies, usually not for the punter). And it’s a business PayPal has just got itself into.
Here’s another chart over the exact same period since the start of 2021.
Looks like that would have been a better bet. At least it didn’t halve in value twice in the period, like Bitcoin did. This is the S&P 500 stock market index.
Bitcoin is fundamentally value-less. ‘It has no utility’ as a very famous investor has said (Buffet). Its value is purely and only what other people will pay for it.
I’ve heard people say it’s inflation proof and an insurance against the certain devaluation of the dollar (or pound) because so much money has been printed recently and Bitcoin has a limited supply.
Er, OK. That might be correct (it’s certainly correct inflation will dwindle the value of your Dollars, Euros or Pounds), but what bloody use is anything that fluctuates in value up or down 50% each month or so?
The other risks are not trivial — there appears to be a general movement to outlaw this currency. China has, other countries have also or are talking about it. So soon there’s a very real risk you’ll have an asset that is non-tradeable, and outside of the legal financial world.
And of course there’s the inevitable lure of ‘get rich quick’ schemes to the criminally minded. There have been some spectacular real-world scams involving billions being lost. Here’s a scary, yet entertaining story about one:
https://www.netflix.com/title/81349029
Why are so many people putting so much money into Bitcoin and other Crypto coins? Why are hedge funds and investment funds buying Bitcoin if it’s just a scam?
What’s the purpose of these funds? To make money. So, just as with everyone else in the game, that’s the only reason they play. It’s gambling.
The inventor of Bitcoin (in 2008) described it as:
“A Peer-to-Peer Electronic Cash System”
Bollocks.
That might have been the mysterious Mr Nakamoto’s original goal and intent, but he failed. Do people use Bitcoin to transfer cash from person to person? Of course not, no one does.
If you want to transfer cash from one person to another, that’s what PayPal is for isn’t it? (Well, it was, before they decided to get into the Gambling business.)
Bitcoin is hopeless for its original intended purpose, largely because, as described above, its value is so unpredictable.
If I want a peer-to-peer electronic cash system that works, it’s called PayPal. With PayPal when I send you $1000, I know you’ll get $1000, and assuming you don’t spend it, it will be worth $1000 a month later.
People buy Bitcoin in the hope the value goes up and they are smart enough to cash-out at some point and make a profit. Gambling.
As any investor knows. Investing is easy. Buying things is easy and most of the time making ‘virtual’ profits is easy. The difficult part is not the buying, it’s the selling and converting your virtual gain into a real physical cash gain.
It’s easy to make a virtual unrealised gain (Don’t start me on the insane moves in the US to tax virtual, unrealized, gains. But that’s another story). The clue is in the word ‘unrealized’. The gains are not real. Like your Bitcoin investment, it’s all pie-in-the-sky unreal money, until you sell, then it becomes real (and you can pay your taxes on your gains).
Unfortunately most people don’t sell when they should, they hold, and then panic when the price goes down and sell at a loss in order to not make a greater loss. Which causes the price to collapse even more, which makes more people sell. That’s why Bitcoin (and so many investments) are so volatile.
On the way up it’s FOMO (fear of missing out). On the way down it’s FOLA (fear of losing all). Which is why most people buy high and sell low — the very best way to lose a lot of money.
Blockchain
You might have heard comments like ‘Bitcoin is safe because it’s built on Blockchain technology’. You might, if you’re a geek, ask what is Blockchain?
And that’s a different story.
That’s the technology that underpins all Crypto currencies. Blockchain, in a single sentence, is ‘a distributed hack-proof ledger of transactions.”
Now Blockchain is interesting and has real value. This ‘ledger of transactions’ is distributed around the world — so it’s not stored on one computer, and it’s owned by no one. This is why you see the words ‘decentralized’, ‘secure’ and ‘trust’ used a lot in Crypto world. Blockchain is a shared database of records (the blocks) that are unhackable *
Blockchain is useful — it has real utility and it will likely transform multiple industries. Blockchain is a great invention. Bitcoin, built on Blockchain, is not a great invention. It started as a nice idea, but failed and is now the province of scamsters and gamblers.
*Unhackable for now, at least until Quantum Computers become powerful enough, which some say might happen within 10 years. But if that happens, no encryption existing today is secure.
A Ponzi Scheme?
You could make an argument that Bitcoin is a Ponzi scheme. A quick definition:
A Ponzi scheme is a fraudulent investing scam which generates returns for earlier investors with money taken from later investors.
Because Bitcoin has a finite supply (21 million coins in total) the more people buy (the later investors) the higher the price goes so enabling the early investor to make a profit. The only way to make a profit from Bitcoin is to sell your coins to later investors who pay more than you did. So almost by definition Bitcoin IS a Ponzi scheme.
On the other hand you could equally make an argument that’s nothing more than the simple ‘supply and demand’ rules of economics. The more the demand there is for a limited supply, the higher the price goes. Oil and Gold do the same thing. The difference is both of these have an inherent utility and value. You can do useful things with both.
The danger is that prices are determined largely by sentiment. When there’s a market panic, driven by things like a war, people prefer to have real cash and so sell their ‘investments’. It’s now quite apparent that this applies to Bitcoin that dropped 25% at the start of the Russia-Ukrainian war (and as I update this on 26th May 2022, is down 57% from it’s peak not that long ago).
And since the price is determined largely by sentiment, and supply-and-demand, it’s also likely to be subject to very high volatility when a large holder dumps his supply of bitcoin.
After I wrote this piece, this crash happened. (I was talking about ‘market panic’)
‘How this man just caused a $45 Billion crash’
https://www.youtube.com/watch?v=3KZY41SqaTI
$45 billion wiped out, largely from people who believed the crap about Bitcoin being ‘the future of money’.
A great NY Times article (possibly behind a firewall):
https://www.nytimes.com/2022/03/31/style/ben-mckenzie-crypto.html
