In early 2018/late 2017, this blog made a reversal from being optimistic about Bitcoin to selling. I personally sold some around 19,000 and then another batch around 15,000-16,000. Some of this went into cash, some into stocks, and also some into alt coins. The alt coins are down, so it’s not like I didn’t avoid losing money on those, but overall I came out ahead than had I just held my original Bitcoin and done nothing else. Because I still own Bitcoin and other currencies, that’s not too say the past day hasn’t been nerve racking.
Given that South Korea has numerous times, as far back as mid-December, hinted at the possibility of a trading ban, I’m not sure why this particular instance caused such a large price decline when a very similar headline just a week ago only caused the price to fall 10%. After a certain point, it’s sounds like crying wolf.
With Bitcoin now 50% off its highs, there is less talk about Lamborghinis, million-dollar price targets, or how Bitcoin will make the dollar obsolete.
And that brings me to this article, It Can All Go To Zero
The immediate problem with the author’s logic is he’s conflating an individual stock (Interliant, which in 2002 went bankrupt and went to zero) with the entire crypto market. Although individual coins can become worthless, and some have, the index cannot. A more apt comparison would be the total crpyto index, which as of writing stands at over $500 billion, versus the Nasdaq 100 tech stock index. Even at the bottom of the tech market crash in 2002, the Nasdaq 100 never went to zero, but bottomed at around 1200 even though many individual tech stocks went to zero. It’s now at over 7000. That shows the importance of patience and diversification. But crypto-currencies serve a purpose…they can be more convenient than cash. For example, if you’re unable to open a bank account and or if your PayPal account gets frozen. They offer an untraceable [1] and irrevocable place to park cash, that governments cannot seize if they don’t know the key, which also explains why some governments are seeking to regulate and or ban it. But that does not make the dollar and central banks obsolete, just as gold hasn’t.
One advantage coins have over stocks is that stocks can go bankrupt and have to report financial statements, but a digital currency costs nothing to run and can exist, in theory, indefinitely.
[1] Although individual transactions can be traced, the ownership and location of the wallets cannot.