Are cryptocurrencies anything but a ‘mania’?
A tinkerbell effect? – where it exists because we believe?
And is the Bitcoin price based on a valuation of it’s utility or is it just based on growing interest and a fever for its unquantifiable and unrealised potential?
Below is the Google trend of Bitcoin searches from January 2017, and a chart of the price from January 2017..how about that correlation?…
What do you think?
History has proven that a currency becomes a currency through a process:
- It starts as a commodity (e.g Gold)
- Banks offer to store it for a fee and provide claims to it.
- Once a reputation for redemptions is established, the currency can develop into fiat money (paper money, not backed by a commodity, its value derived from the forces of supply and demand).
For the fiat money to be sustainable it must:
- be durable,
- be divisible,
- be fungible (interchangable – i.e one $20 note is the same, and holds the same value, as two $10 notes)
- have a high value in relation to its physical weight
Does Bitcoin and other cryptocurrency exhibit these properties? I would say more yes than no. But there are certain properties which limit cryptocurrencies’ application as useable currencies and holders of value (i.e hacking, safe-keeping, transaction costs).
One would expect that any sustainable currency will also need to be accepted by international exchanges and countries, and thus regulated..likely defeating the object of Satoshi’s vision. Also likely to enter the same black box economics and monetary sourcery as the Dollar once it gets traded on exchanges and leveraged. But just maybe this unicorn will withstand the will of the Rothschilds and their kind..
One thing we can be sure of – we live in exciting times!