I'm not a Bitcoin expert. I'm not here to push an agenda. Buy it, don't buy it. That's not my business. But, before making any drastic decisions and jumping in based on the hype, I would ask that you take the time to read this post, ponder the content, and research it. I too thought about buying into Bitcoin two different times in the past. Once when it was still in it's infancy, and again when it was sitting at $900. The first time gave me pause after reading this article in the WSJ explaining how Goldman Sachs was funding Bitcoin. The last time was right before the current media blitz extolling the profitability of Bitcoin. A couple of days ago, something occurred to me while watching a YT video mentioning how cryptos were a good thing, decentralized, and all the usual feel good talking points, and it wasn't good. The realization was, well, all of these talking points are mostly half truths and whole lies.
Talking point #1: It's Decentralized. No, actually it's very centralized. First off, the "blockchain" is nothing more than a set of encrypted databases, setup peer-to-peer style, so the ledger entries can be updated and backed up. Not only does this "ledger" contain your personal info, but also includes a record of ALL transactions. Secondly, there is a hierarchy of people that "own" most of the bitcoin, including large mining operations, that have the ability to manipulate the market.
Talking point #2: It's an alternative to the banking system.Nope. Goldman funded it and began clearing futures on it. In fact, the entire blockchain technology is being developed by everyone from Microsoft to big banks. Let's stop kidding around.
Talking point #3: It's a store of value. No, it's not. A great example of a store of value is silver or gold. While their prices fluctuate, they always have value. It defies common sense to equate great volatility with value. Value implies worth and stability. Gold and silver will always have a value. Volatility is like a hot potato. You only hold it long enough to throw it the next person, which is precisely what the crypto market is. If you hold it too long, you will get burned. A bitcoin is nothing more than a database entry. Where does your money go? To the person you bought the bitcoin from.
Talking point #4: It's secure. Guess again. These exchanges get hacked and hit big. Just a few days ago another exchange filed bankruptcy due to a large hack. There also reports of man-in-the-middle type of attacks where hackers can grab crypto during an exchange. A good hacker will tell you encrypted information is the best information. Encryption can be broken.
Talking point #5: It has a market cap. Guess what, so did Enron and a lot of other companies that went belly up. Where exactly is all of that "cash"? Yeah, I don't know either.
Is BTC in a bubble? Is it a Ponzi Scheme? Or is it legit? In my view it's none of these. It's a pump and dump. Go back and look it's history. It will go up,up,up, and BANG! BIG corrections. Each leg higher always leads with some media story. They sucker in the noobs, crash it, re-buy it, and repeat. How high can it go? It's hard to tell. With Goldman backing it they can take it into outer space. My prediction is this: when they can no longer sucker people into mortgages, second mortgages, loans, and going into the market with both fists, the prices will level out. Now that they brought in futures trading, I do expect the market to stabilize at a certain point and regulation to be slowly brought in.
The most chilling statement I have heard about Bitcoin has to do with market manipulation. One guru actually said "all markets are manipulated, so it's no big deal." Seriously? The BTC market has so few transactions and such a limited amount of coins, manipulating the entire market could be done with a million or two in cash or coin. As far as I can tell, it's actually the manipulation that drives the volatility and profitability. Speaking of profitability, grabbing the profits can be considerably more difficult than buying the coins. Once in, if the market is experiencing a correction, good luck selling it for market value. I have heard that some exchanges have a $10,000 daily limit on transfers. If too many people are trying to sell, the exchanges crash. The best time to exit is while the price is on the rise. Thanks for reading.
