Lately several financial news shows have been going gaga over the way Bitcoin is rising.
This raises the question of what the real future “value” of Bitcoin will be.
Which gets to the question of what is money and what determines the value of a currency.
First, fundamentally ANYTHING can be used as currency. Things with inherent value are in some ways better, since if the central authority backing a fiat currency goes away, the currency does too… Islanders have carved rock donuts, folks have often liked using rare metals as currencies. Now, for most of the world, we’re OK with little pieces of pretty printed paper. Go figure.
So there isn’t anything that inherently prevents the virtual value of Bitcoin from rising. Yet it is a very sterile asset that only has obscurity and compute costs to give it value.
Yet globally governments are assaulting currencies. (Why? Well, that’s more for the political class to answer…) India recently withdrew the “large” bill that made up near 90% of their currency. IIRC, their max note is now about $2.50 value. Euro land has withdrawn the €500 note. The USA is requiring reporting of ever smaller units of currency at banks. Given that context, there’s ample need for a generic medium of exchange beyond the reach of any given government.
So a computed “Block Chain” with validity checks built in has merit as currency.
But… what are the problems?
1) It has NO inherent or real value. Copper can be made into electronics and both silver and gold can be made into jewelry or other goods. Yet paper money also has no inherent value.
2) It is not backed by any official agency or government. We’ve seen both big rises and big falls in the “value” of a Bitcoin. Left to only market forces, without Central Authority “management” the value can and dose change rapidly. Plunging with the FBI confiscation of a wad of Bitcoin when Silk Road was busted, shooting up as the Financial System has come to discover it.
3) The USA, at least, has declared them a Capital Good so you get to file capital gains and losses on every transaction. Basically, the IRS has decided on the “Annoy the hell out of them and make THEM report transactions” strategy to criminalize the “anonymity” factor, so every transaction must be adjusted and tracked to your taxes where you must account for all those loverly SPAM ‘n Eggs dinners on offer…
4) ANYONE can create a cryptocurrency, and they have. But the “Land Rush” is only beginning. Just like anyone can print “store coupons” or I.O.U.s, but in this case the I.O.U. can’t be redeemed from the issuer…
So Bitcoin has run up from near $1k to near $4k in a hurry. OK, that’s a bubble… Admittedly, one driven by governments trying to abolish cash larger than a cup of coffee and a doughnut… But can it continue? Hell yeah! It can continue right up to the point where it becomes a crash and folks all want out at once…
Here’s a chart of BitCoin Index from Bigcharts:
Price rocketing up and well away from the SMA Stack – classic OMG warning posture. MACD has that “alligator head” shape it gets on an overshoot to flat (that may proceed long steady up but also frequently means ‘about to go down’). Momentum “way high” but declining from a peak. ADX/DMI shown near 40 (black line ADX) momentum – way above the usual 20 to 30 or the calm ‘below 20’. Yet the top blue line looks like it’s formed a peak and is declining while red it turning upward.
Sure looks bubblicious to me…
Others Join The Money Printing Parade!
Lists many more cryptocurrencies. Others have seen that anyone can make one of these:
List of cryptocurrencies
From Wikipedia, the free encyclopedia
This is a list of cryptocurrencies. There were more than 900 cryptocurrencies available over the internet as of 11 July 2017 and growing. New cryptocurrency can be created any time. By market capitalization, Bitcoin is currently (2017-08-19) the largest blockchain network, followed by Ethereum, Bitcoin Cash, Ripple and Litecoin.
Release Status Currency Symbol Founder Hash algorithm Timestamping (POS, POW, or other) Notes 2014 Active Auroracoin AUR Baldur Odinsson (pseudonym) Scrypt POW Created as an alternative to fiat currency in Iceland. 2009 Active Bitcoin BTC, XBT Satoshi Nakamoto[nt 1] SHA-256d POW The first decentralized ledger currency. Cryptocurrency with the most famous, popular, notable and highest market capitalization. 2017 Active Bitcoin Cash BCH SHA-256d POW Hard fork from Bitcoin 2017 Active BitConnect BCC Scrypt PoW & PoS The community driven decentralized cryptocurrency that allow people to store and invest their wealth in a non-government controlled currency, and even earn a substantial interest. 2014 Active BlackCoin BC Rat4 (pseudonym) Scrypt POS Secures its network through a process called minting. 2014 Active Burstcoin BURST Burstcoin Community SHA-256d Proof of Capacity First Proof of Capacity coin, First Smart Contract, First Atomic Cross Chain Transfer. 2014 Inactive Coinye KOI, COYE Scrypt POW Used American hip hop artist Kanye West as its mascot, abandoned after trademark lawsuit. 2014 Active Dash DASH Evan Duffield & Kyle Hagan X11 POW & Proof of Service[nt 2] A bitcoin-based currency featuring instant transactions, decentralized governance and budgeting, and private transactions. 2013 Active Dogecoin DOGE, XDG Jackson Palmer & Billy Markus Scrypt POW Based on an internet meme. 2014 Active DigitalNote XDN XDN-dev team, dNote CryptoNight POW A private cryptocurrency with an instant untraceable crypto messages and first blockchain banking implementation, use CryptoNote protocol. 2013 Active Emercoin EMC EvgenijM86 & Yitshak Dorfman SHA-256 POW & POS Trusted storage for any small data: acts as an alternative, decentralized DNS, PKI store, SSL infrastructure and other. 2015 Active Ethereum ETH Vitalik Buterin Ethash POW Supports Turing-complete smart contracts. 2015 Active Ethereum Classic ETC Ethash POW An alternative version of Ethereum whose blockchain does not include the DAO Hard-fork. Supports Turing-complete smart contracts. 2013 Active Gridcoin GRC Rob Hälford  Scrypt Decentralized POS The first cryptocurrency linked to citizen science through the Berkeley Open Infrastructure for Network Computing 2015 Active IOTA IOT, MIOTA ... Curl ... The first cryptocurrency using the Tangle, a next generation blockchain, as distributed ledger technology. 2011 Active Litecoin LTC Charles Lee Scrypt POW The first cryptocurrency to use Scrypt as a hashing algorithm. 2014 Active MazaCoin MZC BTC Oyate Initiative SHA-256d POW The underlying software is derived from that of another cryptocurrency, ZetaCoin. 2014 Active Monero XMR Monero Core Team CryptoNight POW Privacy-centric coin using the CryptoNote protocol with improvements for scalability and decentralization. 2011 Active Namecoin NMC Vincent Durham SHA-256d POW Also acts as an alternative, decentralized DNS. 2014 Active NEM XEM UtopianFuture (pseudonym) SHA3-512 POI The first hybrid public/private blockchain solution built from scratch, and first to use the Proof of Importance algorithm using EigenTrust++ reputation system. 2014 Active Nxt NXT BCNext (pseudonym) SHA-256d POS Specifically designed as a flexible platform to build applications and financial services around its protocol. 2013 Active Omni MSC J. R. Willett  SHA-256d N/A Omni is both digital currency and communications protocol built on top of the existing bitcoin block chain. 2012 Active Peercoin PPC Sunny King (pseudonym) SHA-256d POW & POS The first cryptocurrency to use POW and POS functions. 2014 Active PotCoin POT Scrypt POW Developed to service the legalized cannabis industry 2013 Active Primecoin XPM Sunny King (pseudonym) 1CC/2CC/TWN POW Uses the finding of prime chains composed of Cunningham chains and bi-twin chains for proof-of-work, which can lead to useful byproducts. 2013 Active Ripple XRP Chris Larsen & Jed McCaleb ECDSA "Consensus" Designed for peer to peer debt transfer. Not based on bitcoin. 2015 Active SixEleven SIL fflo (pseudonym) SHA-256d POW Also acts as an alternative, decentralized DNS. 2011 Active SwiftCoin STC Daniel Bruno, Chartered Market Technician  SHA-256 POW First digital coin with theoretical value based on the work required to produce electricity. First block chain to support currency creation by interest paid on debt. Solidus Bond proto smart-contract. One of the first digital coins patented in the US. First block chain to support encrypted mail with attachments. 2014 Active Synereo AMP AMP Dor Konforty & Greg Meredith POS POS Trying to create a world computer, Synereo’s 2.0 tech stack incorporates all faculties needed to support decentralized computation without central servers. 2014 Active Titcoin TIT Edward Mansfield & Richard Allen SHA-256d POW The first cryptocurrency to be nominated for a major adult industry award. 2017 Active Ubiq UBQ Julian Yap Ethash POW Supports Turing-complete smart contracts; air-gapped fork of Ethereum 2014 Active Vertcoin VTC Bushido Lyra2rev2 POW Next-gen ASIC resistance and first to implement stealth adresses. 2016 Active Zcash ZEC Zooko Wilcox Equihash POW The first open, permissionless financial system employing zero-knowledge security.
I’m waiting for Paramount / CBS to create Quatloos and only accept them for StarTrek payments… ;-)
Yes, there’s a limit on how many of any one kind can be “mined” for those using ‘proof of work’ methods. As of now, for BitCoin, the electricity needed to “mine” a new coin with a regular computer exceeds the value. Most “miners” have even moved on from GPU based computes to dedicated ASICs of some sort. So just start your own new CryptoCurrency and start mining it…
While I like the idea of electronic cash, the simple truth is that it is just another fiat “money” and can become worthless overnight. Either by government mandate, or by people just walking away from it.
To me, the present rush upward in the exchange rate for a BitCoin just shouts:
“BUBBLE Happening Now!!! GET OUT!!!”.
Your mileage may vary. I’m not offering financial advice. It maybe be God’s Gift for whatever you are doing. Do what you want and don’t listen to Some Guy on the internet… but don’t try to sell me a BitCoin either. I’m not into chasing bubbles…