Marc Cuniberti In response to my article a few weeks back covering the recent Crypto currency (Bitcoin and similar tokens) blow up, a reader reached out offering to better explain the workings of Bitcoin.
My article detailed the bankruptcies and liquidity issues of a handful of bitcoin exchanges. Specifically the blow ups included but were not limited to the firms of Celsius, Voyager and Three Arrows. The news was alight with stories of people losing their life savings or a portion thereof and firms halted withdrawals, closed down. Already, malfeasance seems to be rampant as Ameer and Raees Cajee, the founders of Africrypt have gone AWOL and can’t be found after abandoning their firm. They are not the only ones. The founder of a popular crypto exchange in Turkey has disappeared, with media reports indicating that he has fled the country with $2 billion as roughly 300,000 frustrated users have suddenly lost access to their accounts. The physical whereabouts of Zhu Su and Kyle Davies, who started Three Arrows in 2012, are also currently unknown.
The detractors of my previous article may be right on one point. I fully don’t understand the workings and wherewithal of Crypto. But that was the point. I don’t understand all of it, and I am certain most that play in the cyber coin universe don’t.
But I don’t need to fully understand it, the cyber coin asset to give the opinions expressed in my last article (can be found here: https://moneymanagementradio.com/).
What I do understand however and what the detractors of the article don’t is the technical and human price action and buying habits we have seen and continue to see in Bitcoin like cyber coins resembles every other mania in history, only in the case of Cyber coins, the actions blows previous mania metrics all to hell.
Simply put, the extremely volatile price movements absolutely prevent Bitcoin, at least now, from becoming a valid procurement currency. Currencies must maintain their purchasing power. When I say “maintain” I don’t mean always go up. That certainly is not maintaining stability. To better grasp that, think of an air traffic controller telling an airplane to “maintain’ its altitude. Obviously that doesn’t mean go up or down. It essence it means stay still. The same holds true for any potential currency. It must remain relatively price stable. It is anything but price stable.
When a Tulip bulb in Holland skyrocketed in price to a high of ten years annual salary in the 17th century, or property in Tokyo went as high as $139,000.00 a square foot in the 80’s, I also didn’t fully understand all the ins and outs of these asset markets, but I don’t have to. I know a bubble when I see one and they have occurred over and over in man’s history and date back to the Roman times and beyond.
Back to my article reader who contacted me offering to educate my on bitcoin. I politely said no. Like I said, I don’t need to understand bitcoin to draw a historical and monetary conclusion for it, but perhaps my reader should bone up on the symptoms signs and causes of an asset mania. If he did, he might find that perhaps many people that bought Tulip bulbs in Holland way back when, or Japanese real estate in the 80s’, or Dot.Com stocks in the 90s’ or even real state in the mid-2000s’ fully understood those things. But they all lost their shirts when the mania collapsed in the end.
No my dear reader, I don’t need a class on bitcoin to know it looks an awful lot like the other manias that ended badly, complete with cons, thieves and wiped bank accounts.
And now, we see disappearing CEO’s, collapsing firms and frozen withdrawals, but to name a few of the early possible signs it may all be coming to an unfortunate but familiar end.
Like I said, I don’t fully understand bitcoin, and I doubt many do. But they will fully “get it” if their life savings evaporate one morning into the cyber universe, never to be seen again.
And then, like the iconic movie “Ghost Busters”, who ya gonna call?
No one can forecast markets or any cyber coins at any time so take this with the proverbial grain of salt.
“Watching the markets so you don’t have to”
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(As mentioned please use the below disclaimer exactly) THANKS (Regulations)
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, 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, SDSU, and California Insurance License #0L34249. His website is moneymanagementradio.com, and was recently voted Best Financial Advisor in Nevada County. 530-559-1214
