I have always said cyber coins like Bitcoin are vapor. And every so often I am confirmed that I am not far off from the mark. I also get a lot of hate mail when I negatively cover bitcoin. So goes it for a financial analyst covering the world of finance and trying to help people.
No, bitcoin isn’t all vapor, but it’s certainly more vapor then it was the last time I wrote about it. My articles and radio shows on bitcoin started when it was around $60,000 a coin. Then I penned another article at around $41,000, again at about $30,000 (it drops so fast I can’t keep up), another article and radio show when it breached $19,000 (on the downside of course), and last week it fell another 15% into the $16,000’s.
When my emails light up shortly after these articles hit the news wires, I get mail from the usual suspects (people that own it), and the usual comments, like I don’t understand it.
If you read each of my crypto articles, they usually begin with the statement “I don’t fully understand it,” so I am not sure why they reiterate that in their emails. I mean “I already said that!”
I will say it again, I don’t fully understand what Bitcoin is. Nor do probably 90% of the people that own it. What I do understand however, and likely my detractors don’t, is what an asset mania is.
Yes, I get it. Bitcoin is a decentralized currency that can’t be destroyed, is in cyberspace or even onboard a localized “wallet” that one can physically possess, and supposedly the currency of the future.
Well, on the currency of the future part, I will add: not in its present form. Currencies have to retain a store of value. That translates to being stable, and that means in both directions, up and down. Bitcoin and those other “vape coins” like it are anything but stable. In fact with 20,000 cyber coins now available, likely most of them are just a Ponzi scheme. My opinion of course.
The latest cause for this most recent musing is the news that one of the largest exchanges where people trade and store bitcoin is in trouble. Financial trouble of course and is there any other when it comes to cyber coin?
What happened: On November 8, an article came out on a crypto news service suggesting that the CEO of one of the largest cyber coin exchanges FTX, Sam Brinkman-Fried, was using the firm’s funds, aka clients, to bail out one of FTX hedge funds, a highly illegal transaction. Apparently Brinkman-Fried said as much when hours later he admitted in an interview:
“I f…..k up”.
That sounds pretty clear to me as an admission.
Bitcoin plummeted another 15% on the news.
Then on November 11, they filed of bankruptcy. Then good ol’boy Sam stepped down.
Hence another “caveat emptor” article on the dangers of cyber coins by yours truly.
It wasn’t but a few months ago similar shenanigans surrounding Bitcoin and their exchanges rocked the cyber coin universe in what is becoming a familiar theme here on Money Matters.
No, I don’t hate cyber coins. I actually own a tiny amount of them, or at least I did. I haven’t checked lately and kind of kissed off the funds when I bought them at, where else, FTX.
Ironic isn’t it.
No, I don’t fully understand Bitcoin, but I know a mania when I see one, and there have been many throughout mankind’s financial history.
They all have a great story: The early money makes a ton, imitations pop up (how about 20,000 of them), everybody believes they can only go in one direction (up), celebrities, banks and businesses start to participate (and they have), then crookery starts to pop up, prices start to flatten, illiquidity in dealers begins to appear, followed by bankruptcies, then the news wires are flooded with denials and assurances by remaining participants all is fine (we are here), then more firms fail, and the entire thing implodes with devastating losses to many. Then regulators dissect the whole mess and the event is complete.
I don’t know if cyber coins will run the gamut and implode entirely, nor does anyone else. It might go up in a grand ball of vapor, or it might become the greatest currency of all. My prognostication is the first one if you haven’t guessed.
But ask yourself, given the above description of all other previous manias in history, do you see any resemblance here?
I sure do.
“Watching the markets so you don’t have to”
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, and California Insurance License #0L34249. His website is moneymanagementradio.com, and was recently voted Best Financial Advisor in Nevada County. 530-559-1214.