Maggie's Farm

There are several reasons for the high rates of return. For one, they're not just mediums of exchange. They are also units of value - and as such, that value can fluctuate depending on popularity, much as the Euro or Yen fluctuates against the dollar. No - they don't gain 1,000%. However, they are also relatively pegged to each other AND each nation manipulates its currency to such an extent that growth of the supply is (over time) exponential.
Which is why a unit of value which has a limited supply (Bitcoin and its cousins all have very limited numbers of available 'coins' to use - much like there is a limited amount of gold in the world). So increases in the currency supply will yield increases in the 'value' of cryptos. More real world dollars, laid against never increasing amounts of cryptos = growth. Simple math.

A second reason is the lack of volatility in the stock and bond markets. Day traders need a place to trade. Without a place to go to have reasonable 'action' for speculation, the cryptos provide them a place to park their liquidity. This liquidity increases the 'value' of the cryptos.

A third reason is currency failure. Each nation, as its currency failed (Greece, Cyprus, etc.) yielded a need for people to export their money quickly, easily and without much friction (or oversight from the watchful eye of government). Cryptos are an EASY way to hide what you don't want the government to know you have - ESPECIALLY if the currency is collapsing and the government is imposing rules on the export of currency.

I could go on and on - but each example gives more reasons why the claim this is "Tulipmania" is simply a vast misunderstanding of what is actually going on.

EVERY claim laid against why cryptocurrencies are fake, unreal or not useful - EVERY claim - can also be made about 'real' currency.

Example - someone today asked me "Aren't you concerned about the fact that it's known North Korea is mining cryptocurrencies and selling them at a profit to fund their nation?" Answer - "No. Not any more than I was worried about the fact that North Korea is/was the largest single counterfeiter of $100 and $500 bills. If they've found a legitimate way to earn the cash they need, then all the power to them - it's better than worrying about how they've been undermining the dollar."

Another - "Aren't you concerned about cryptocurrencies being used to fund illicit activities like drug purhasing or prostitution?" Answer - "You mean the way the dollar (or any currency) is used to do this? What make cryptos worse or better in that regard?"


Another - "Aren't you concerned that cryptocurrencies aren't backed by anything?" Answer - "Tell me again what the dollar or the Euro are backed by? The 'faith and credit' of nations which are heavily in debt and printing currency to pay off that debt? Which is a more stable solution?"

Even economists of a certain (Austrian) bent recognize the value. Friedrich Hayek, long ago ruminating on the role of money in the economy pointed out that governments shouldn't control the money supply, that when banks created their own money and each currency competed, the market was able to determine which currencies were 'best' and most useful/meaningful in the market. When governments took over that role, is when inflation started being a problem of monumental proportions, and stock markets began bubbling.

Decentralized currencies are the future.

Usually I agree - if people who don't typically talk about something like the stock market suddenly start asking about particular stocks, you can usually take that as a sign of being near a market 'top'.

However, the very strange thing about cryptocurrency is that none of the pros have really paid much attention to them, considering them faddish or 'unreal'. I have friends in tech who don't do stocks but have been in cryptos for up to several years.

Seems to me the roles are possibly reversed here. Locally, I have many Wall Streeters living in my town. None really discussed this topic. I noticed, this past summer, that started to change. One at a major firm began discussing them with me at a party, less currency, more blockchain.
When the same topic suddenly cropped up at work, I realized something was changing.

Most of the growth of the cryptos, up until now, has been driven by foreign and/or illicit activity. As I mentioned, early on, Bitcoin was used for puchasing illegal activities and substances, and this attracted the first round of money. Then several currencies failed and caused the first huge run up, which attracted the attention of people who normally have no place to put their money.....until the relative anonymity of cryptos opened up a new opportunity. This, then, attracted the attention of day traders seeking volatility when none was available in the stock market.

I think we're only just starting to see the 'real' money showing interest in this. When you see nations using their central banks to manipulate or benefit from them (China, North Korea, South Korea and Venezuela are all playing in the space now, or trying to enter it/regulate it), then a fundamental change has taken place.

No, not without quantum computing power.
Which is a risk, but not quite yet. I assume this may be a risk that is solved before quantum computing is a thing.

Actually, they won't. That's part of the "problem" the government has with these exchanges. Unregulated and outside the lines - the SEC is only catching up with them now.

That said, even if they did figure it out - he's not happy with the gains?

I'm not foolish enough to outright say "You are wrong." It's quite possible the stock market could be a fool's errand.

However, I'd say based on my interaction with blockchain tech, and getting a handle on what banks are now using cryptocurrenices for now - the concept that they are all garbage is far from the truth. In fact, many banks are investing in the cryptos in a variety of ways simply because the costs of transaction, portability and exchange are pretty close to zero. They are excellent tools.

But, it could turn out to be this is a fad. I really don't think it is, not based on what I've been working on. It's become clear to me that in certain cases, cryptos offer the ability to transact quickly, cleanly and at a low cost per exchange. Discrepancies are nearly non-existent in exchanges utilizing cryptos.

You MAY turn out to be right. I sincerely think you'll find out you're wrong.

This is all absolutely correct.
This is the same kind of solution we're applying in my industry to fight fraud.

There are issues of knowledge about passing along information - who you are purchasing from, and being sure that the source is reliable and who they say they are. Blockchain solves this issue in more ways than one.

I don't get notifications of comments on old posts anymore, but I happened to go back and look at this, so I saw your post (only been 4 days, so hopefully I'm not too late).

Bitcoin will continue to win as long as the price of computing power is less than the costs of mining. Once that threshold is crossed, Bitcoin's value will diminish. This is true of ANY cryptocurrency which currently uses blockchain technology and needs to be 'mined'. That doesn't mean they become worthless, though. It just means the value of 'mining' isn't offset by the value gained. People still mine gold, but many of the miners barely break even. The same will be true of BTC. I don't really know what happens as BTC reaches this point, but I have some thoughts.

1. Energy has long been undervalued as a means of value/exchange, yet it is ENTIRELY what modern economies are based on. So BTC and other cryptos have the ability to be the first TRUE modern economic currency linking what makes our productive capacity meaningful with the the value of that capacity.
2. The value created by cryptos will become so intense, it will fuel a need to 'find' or 'innovate' new energy resources that are cheaper. The upside, at that point, is limited only by the costs of whatever new energy resource is developed. Consider, the money created by a new crypto millionaire tossed into fusion tech the way Musk has funded Tesla and his space endeavors. We could be on the verge of real change.
3. New systems, developed from blockchain tech, but utilizing far faster computations and less energy, make a new crypto more valuable. In essence, this is what causes ANY currency valuable go up and down in value. A nation with a solid economy and strong fundamental has a strong currency. If it turns out it was developed through gimmickry and it loses its edge, it declines in value and prominence. The Yen in the 1980s and early 90s, for example. The Chinese Yuan today, shown to have risen to prominence on the back of questionable gimmickry, faces some hefty headwinds (which is why China is doing what it can to kill crypto competitors - they know the competition is legit and will expose their economy's flaws).

So I can't answer your question in terms of which of the 3 outcomes will 'win'. I will say I agree (to a degree) with McAfee that BTC will "go to a million" (maybe...but I think he overstated where it's going, at least in the near term). But others, like Ethereum ARE being adopted and used. Criminals are abandoning BTC as the privacy issue is overwhelmed with all the attention it gets. So BTC and Ethereum...yeah, they'll continue for a while.

Ripple (XRP) will keep going up. Here's why. While there is no 'value' to XRP, it's just a token and can't be used as a currency (yet), it has legitimate uses in banking and therefore will become more and more popularly used, even as some banks develop their own proprietary forms of XRP. Its recent run was speculative on the "Coinbase adoption" belief would drive it higher....until Coinbase said no (for now). However, its use IS a cost - and therefore XRP NEEDS to have a price against it for it to be determined as a valuable tool. That cost will vary based on how many banks use it AND how many transactions they process through it. Either way, it's not a traditional crypto, but it will have some incredible uses in traditional finance. It is groundbreaking in many ways.

I am not familiar with hashgraph - would love if you'd share where I can learn more?

So ultimately I'd lay 2 more outcomes:
4. New "money" growth will propel investment and innovation into new energy - thereby making the cryptos themselves more valuable (BTC and others)
5. The governments of the world crack down and make it all illegal (like the US did with gold at one time). Which, in my estimation, will make them EVEN MORE VALUABLE because that's what happens with black markets.

There's a 6th scenario - we suffer a major recession and the Fed pumps tons of dollars into the economy, yielding a slight bump which is temporary and meaningless. People flock to cryptos because THEY ARE more stable than a centrally controlled currency. They skyrocket and the economy recovers on the back of improved prospects of cryptos (think about how regions, during recessions, created their own 'currencies' like Ithaca Hours).

There is, of course, scenario 7, which I don't believe. It's all BS and eventually Schiff is right and you mark it to zero.


I really just don't see 7 happening. BTC was created in order to overcome the problems which lead to, and caused, the 2007/2008 meltdown - centralized mismanagement of money.
It is volatile because it is new, it is volatile because nobody understands it yet. But nobody understood the internet in 1992, either. Bill Gates called it a fad. 10 years later, he was scrambling to be relevant in a world he ignored.

I would suggest ignoring cryptos at your own risk. The current crop may not survive or thrive. I don't think that's true - but maybe they won't. Either way, why take that risk?

All I did was put a little in. Not more than I can afford to lose. If I'm right, I'm happy. If I'm wrong, I lose only a little. The reward to risk is high.

Cryptos ARE changing how the economy works - if only very slowly. Charles Hughes Smith wrote a year ago that if only ON TENTH OF ONE PERCENT of world financial assets moved into Bitcoin, it would hit $17,000. As of today, it's at $17,000.

As I said, I wrote my little bits 4 years ago - and I saw it then, but had no money. I missed a good chunk of the run. But I really don't think the run is over yet.

"Bitcoin will continue to win as long as the price of computing power is less than the costs of mining"

I thought a bit more about this. In a way, these are interrelated, so it's possible to say the price of computing IS the cost of mining. But mining yields payments of Bitcoin, so I should change cost of mining to profit of mining, since it's really the amount of BTC that is paid out that is the value of mining. In providing the computing power, if I get 1 BTC a day, and my cost of computing is only $1,000, then I'm getting a 16X return daily.

Very few areas in the US will give you that kind of return, but lots of areas outside the US will (mainly in nations with heavily subsidized energy). Even if BTC were valued at $1,000, there could be value in mining, because you're earning more coins and if you're also trading, you can benefit.