Why the ‘Big Short’ Guys Think Bitcoin Is a Bubble
Overall, the experts cited in this article make weak points. There are legitimate concerns with crypto (which I would be happy to discuss if anyone wants to have sane dialogue), none of where really covered in depth.<p>&gt; “My view is that bitcoin will ultimately end up going to zero. And I think we are in the final stages right now.”<p>Bitcoin&#x27;s market value will never go to zero. Let me explain - bitcoin was borne out some internet guy&#x27;s (we call him &#x2F; her &quot;Satoshi Nakamoto&quot;) idea of what money could be and how to implement it on the internet. It was not theorized in a white paper by PhD economists from MIT or U-Chicago. It proved itself in the internet&#x27;s black market, and made its way to the main stream. It is fundamentally a bottom up proven technology, it did not come from the top down like the modern fiat dollar. In the event that  bitcoin does not have value in the main stream, it will always have some value in the internet&#x27;s dark market, and it won&#x27;t be zero.<p>&gt; “And the U.S. dollar is backed by the full faith of the United States. Does bitcoin have an army?”<p>Money does not need an army. The army gets paid in money, the money does not make the army. Humans traded in coinage before organized nation states or even city states. Contemplate this - what good is an army when they do not know who the anonymous holders of the internet money are? Who do they attack? And when the fiat money gets in inflated to zero, who protects the civilian government from a hungry and angry army that has <i>all</i> the guns?<p>&gt; “Nothing is priced in bitcoin&quot;<p>Bricks of cocaine are priced in bitcoin. So is fiat currency. I could go to a local bitcoin meetup and trade bitcoin for dollar bills, no KYC. I can do the same on the dark web, and have USPO deliver me dollars. That makes my bitcoin as good as cash, and everything is priced in cash. By the transitive property, bitcoin is cash.<p>&gt; Despite a steep sell-off in May and the growing certainty that the Securities and Exchange Commission, the U.S. Treasury, and even the Department of Justice are getting ready to clamp down on the cryptocurrency world, retail and institutional investors alike have kept buying. When China announced on September 24 that it would ban all cryptocurrency activities, bitcoin fell less than 6 percent.<p>Fun fact - chairman of the SEC teaches courses on blockchain and crypto at MIT.[1] Doubtful that the US will go the way of China. And if it does, so what? The Chinese ban was a non-event. And if you think you can ban bitcoin, you do not understand bitcoin.<p>&gt; “As I dug into the actual underpinnings, it just became very clear that what was actually going on was cultlike behavior with no real understanding of the asset or the economic implications for the model that it was proposing,” he says.<p>This is a better description for fiat currency than bitcoin.<p>&gt;  “What a crazy concept this is that we as a country embrace so many bright, young, talented people to come up with a replacement for our reserve currency,” he said at the Economic Club of Chicago.<p>...&quot;so many smart, bright, young, talented people&quot;...I think this quote speaks for itself.<p>&gt; Bitcoin, its critics like to say, is nothing but electricity. “To tell me that something that’s constructed as a computer program, where you engage in some process of sitting there in front of your computer and, after a period of time and the expenditure of a bunch of electricity, a message appears on your screen that you have created something, that’s ridiculous,” Singer said on an investment podcast earlier this year. “It’s nothing.”<p>Yes, this how the bitcoin protocol defines the value of coins, but so does the fiat denomination that people are <i>willing</i> to pay for bitcoin. It&#x27;s a traded market now, and that&#x27;s where most of the value is coming from.<p>&gt; As Roubini put it in the Goldman report, “Bitcoin and other cryptocurrencies have no income or utility, so there’s just no way to arrive at a fundamental value.”<p>Yes there is - go on a bitcoin exchange, see the fiat exchange rate for bitcoin, that&#x27;s the fundamental value.<p>&gt;  He also scoffs at those who call it digital gold. “Bitcoin could disappear one day, but gold won’t.”<p>Highly unlikely that a globally distributed electronic ledger that can fit on like 500gb hhard drive would ever disappear. SMH, these people need to do more research on the subject of crypto.<p>&gt; Green estimates that 40 percent of bitcoin’s real-world transactions are still criminal in nature (don’t forget, the first killer app was black-market bazaar Silk Road), including recent ransomware hackings. Bulls argue that the real number is a lot lower. A report by industry firm Chainalysis pegged it at less than one percent in 2020 — less than than comparable figures for cash.<p>Mr Green is lying and ignorant on the subject of bitcoin.<p>&gt; “I would broadly describe what’s going on with El Salvador as they’re trying to make money-laundering the national business,” says Green, who contends that El Salvador is at risk of becoming a narco state.<p>Holding morality, legality, and potential human suffering aside, what El Salvador is going to be good for the value of bitcoin. Sad but true.<p>&gt; hedge-fund mogul Ray Dalio of Bridgewater Associates, who dabbles in cryptocurrencies, said he believed regulators would “kill” bitcoin if it became too successful.<p>Again, if you think you can ban bitcoin, you do not understand bitcoin.<p>&gt; “I can see why governments need to fight this thing. They are probably going to shut it down at some point.”<p>The fact that governments already see it as a threat (China, especially) signals the vulnerability they see in the legacy fiat system.<p>&gt; Beyond all the specific arguments and counterarguments, the fact remains that those from the “big short” set making the case against bitcoin are generally not making the same kind of real-life short bets that made them so much money in 2008.<p><i>Face palm</i> Speaks for itself.<p>&gt; “You can’t be short it in scale,” agrees the short seller. Like some of the others who fundamentally dislike it, he even has a small position in bitcoin. “If it goes up, I’ll make a little bit of money. If it goes to zero, I’ll be so happy, I will gladly lose the money.”<p>Hubris and schadenfreude - these do not mix well for the incumbents in a legacy, obsolete system.<p>*Fundamentally, bitcoin and the mechanics of crypto are challenging how people think about money - what it is and how it fits into our lives. That is a good thing.*<p>[1] <a href="https:&#x2F;&#x2F;ocw.mit.edu&#x2F;courses&#x2F;sloan-school-of-management&#x2F;15-s12-blockchain-and-money-fall-2018&#x2F;video-lectures&#x2F;session-1-introduction&#x2F;" rel="nofollow">https:&#x2F;&#x2F;ocw.mit.edu&#x2F;courses&#x2F;sloan-school-of-management&#x2F;15-s1...</a>