So many falsehoods, so little time!
Needless to say this is not advice of any kind, especially not investment advice. Let’s just jump right in and talk about what is and isn’t real.
Crypto coins and currencies are not stocks. They may “trade” like stocks but they have none of the same rules and regulations, and in case it wasn’t obvious they don’t sell donuts or snowshoes or bubbly soft drinks.
Therefore, comparing the total value (and borrowing the term “market cap” from the stock market) of, say, Ethereum to a Bank or an Airline is utter and complete nonsense that means absolutely nothing.
In essence it is a “clever” device to try to somehow degrade (or elevate!) the buyers of a coin and illustrate to them that they could have used the same US dollars to buy B of A shares or stock in some other dumb company. It is also a way to distract and move attention away from what might really be going on.
Should the climate and environment fear BTC?
The amount to energy used to mine BitCoin is not relevant, especially when being compared to a country in order to misstate the magnitude and why it’s “bad”. You’ve probably heard Pennsylvania, The Netherlands, or Greece or maybe Luxembourg. But did anyone ever check how much energy was used to mine actual gold? Or manufacture electric car batteries? Or race cars in Indianapolis or Daytona?
Well, someone did check how much energy is used to power ATM machines (you know the ones that spit out paper dollars and charge you a ton to get them). It turns out it’s potentially on par with the energy used to mine bitcoin. But who’s counting.
Somebody is counting, of course. In his great article for aier.org, Joakim Book writes in detail about the absurdity and calculated scapegoating of a swath of mainstream media who all seem to be trying to create a consensus that BitCoin (and all crypto) is worthless, and then exaggerating how, therefore, the energy used to mine it is some kind of an abomination.
What is it about Bitcoin’s energy requirement that really triggers these people? If you think Bitcoin is a terrible payment mechanism, a subpar currency, a destabilizing base money, or a grand financial fad, those are arguments on their own merits – what’s energy got to do with it?
On a first-pass observation it’s a perfect “gotcha” argument: if you think Bitcoin’s value-add is zero, or negative – Kelly happily calls it “a destructive asset class” – any amount of energy would be a waste, a climate nightmare, an environmental catastrophe. After all, we often hear that this monetary scam consumes electricity on par with small– or medium-sized countries.
The comparisons of energy use are not only absurd they are hilarious: after taking the random estimates people have made of an activity that no one can measure since it is a decentralized private activity, it appears that the entire BitCoin mining energy use per year is somewhere between 40 and 100 Terawatts. And, therefore:
If Bitcoin had not existed, it’s safe to say that our Alphaville electricity police would have found some other miniscule electricity user to complain about – maybe Christmas lighting (7 TWh), ski resorts (2-5 TWh), or online gaming (75 TWh). Perhaps the global banking system’s ATM networks (at something like 25 TWh)?
Thing 3: to understand money and crypto it helps to grasp the meaning of numbers
There an odd thing that happens when money, greed and percentages collide. This is seen all the time related to the stock market. When a stock “surges” from $50 to $100 per share the 100% gain is celebrated with great gusto. When the same shares retreat (crash, collapse, etc) back to $50 per share the “50%” loss is large but somehow half as large as the 100% gain that preceded it.
This is just how numbers work, ok? And if a coin, such as DogeCoin, is priced (in US $, of course) at .05 cents and then it goes to “all the way up” to .10 cents that is a 100% gain. At the same time BitCoin, at, say, $50,000 per coin, it has to go to $100,000 to do the same 100% doubling trick. Which do you think is more likely within a short time frame?
On one level they could be somehow equivalent if there was any way to measure human behavior- but precisely due to our human natures and all the magical thinking and emotional baggage that surrounds transactions in “money” of any kind, people automatically ascribe some kind of meaning to how the lower priced asset (in this case DogeCoin) is “outperforming” the higher priced asset when the penny priced asset rises 1000% percent, from a very low level, while the higher priced asset “only” doubles or triples.
It is absolutely true, of course, that starting out with a sum to invest, a popular benchmark is $1000, it will indeed yield more returns via any vehicle that rises in price by a higher percentage. And that is where all the excitement is. But extremely low priced stocks or “alt coins” in this case always tend to be more volatile and almost always move in larger relative percentages due to the human nature described above, in both directions, one should add.
What, in the name of x is really going on?
It has not yet been widely speculated on but all this cryptomania action could be pointing to a loss of faith in the dollar, and by extension, the financial system and the government. Since 2008 there is plenty of reason for people to cast a skeptical eye towards banks and the monetary system.
Many crypto devotees are younger (compared to Buffet and Munger everybody is young!) and came of age in the shadow of the 2008 financial crisis (the so-called ‘Great Recession”) and were watching stocks rise for over a decade while the economic fundamentals were nearly comatose. And, yes, they look forward to an ever worsening climate crisis during their prime.
So, is it any wonder that there might be a mistrust of the financial system and the “allmighty dollar”? Is it any wonder that BitCoin and Crypto currencies in general might seem worth a second look?
The big showdown may come sooner than later
Ultimately it is only government regulation and opposition that can really stop this progression toward a belief and trust in a different kind of money. Perhaps it is the fear of Crypto becoming more and more entrenched that has so many “haters” reaching for exaggerated nonsense metaphors to try to discredit the “hodlers” and believers.
And there lies the ultimate question. Like Genghis Khan who printed paper money, made it law that it must be accepted as payment, and found it convenient to put to death any that did not comply, it is a mistake to underestimate what lengths governments will go to protect and shore up “Sovereign money” when it is threatened to any independent monetary instrument (such as crypto).
It is the prediction from the anti-crypto crowd that BitCoin will “go to zero” that is the one criticism that could, indeed, turn out to be accurate. That is why the cheerleaders in the establishment, like Elon Musk, Mark Cuban, Visa and more everyday, actually are very important in building a kind of eminence-bulwark against sudden, drastic attempts by governments, independently or in concert, to stop people from ascribing value to whatever medium of exchange they feel is safest and most beneficial. Even if it has a picture of a cute dog on it, rather than a dead president.
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