Why Bitcoin Is Not A 'Fraud' Or 'Bubble', But Something You Should Take Seriously

Unless you have been asleep for the last year, you cannot have failed to catch the buzz around bitcoin and other cryptocurrencies such as Litecoin, Ethereum’s Ether and Ripple’s XRP. There are even some coins that were created as a joke that are getting significant investments, such as Dogecoin. Dogecoin was created as a way to educate people about how cryptocurrencies work, but the creator never expected it to be used as a currency. Jackson Palmer, the founder of Dogecoin, says himself: “When I jokingly tweeted about ‘investing in Dogecoin’ in late 2013, I never imagined that the tongue-in-cheek cryptocurrency I had just brought into the world would still be around in the year 2018, let alone hit a $2 billion market cap like it just did” in early January 2018. Apparently, Asian investors like Dogecoin because they misread it as Dog ecoin, and investing in a dog-friendly cryptocurrency is very popular in some countries.

It is a little like the craze for cryptokitties that almost broke the Ethereum blockchain late last year. CryptoKitties is a game where users breed and trade digital kittens using Ethereum-based smart contracts, and it became wildly popular, so much so that some cats were being traded for $80,000, and the total value of the game reached $12 million in December 2017. Just for a game using cryptocurrencies to create digital cats.

What I am describing here is the mad world of cryptocurrencies that few understand, many are investing in and no one knows what will happen. Everyone predicts that this is a bubble and the whole market will come crashing down, and yet for each stumble the market takes, it just comes bouncing back. In fact, there is an excellent website called 99bitcoins.com that started charting the predictions that bitcoin would disappear back in 2014. So far, they have tracked 236 forecasts of bitcoin’s death, and yet it still keeps growing. I find this interesting as I have personally been tracking bitcoin since 2011, and have just heard over and over again from my financially experienced colleagues that it is a scam, will fail, is silly, undermines the system and will never work. Yet it does work. It enables people to trade online for low cost with no financial intermediaries involved. This is the real concern: that bitcoin and other cryptocurrencies could eradicate the need for financial institutions.

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Nathan Feifel 5 months ago Contributor's comment

This article reads much better as an endorsement for DLT and blockchain than it does for Bitcoin. The author's statement "you cannot use a bitcoin blockchain without a bitcoin" is true, but actually seems like a tangent from the primary substance of the article (which, for the record, is very well written). Bitcoin is what brought the DLT and blockchain to the forefront, but now that we have exposed the underlying technologies and learned how to use them independently from Bitcoin, Bitcoin's current value doesn't appear to stem from the technology that it's running on.

Carol Klein 5 months ago Member's comment

This stuff is so technical it makes my head spin. #Crypto? #DLT Distributed ledger technology? #Blockchain? I think I need to throw in the towel. Give me good ol' gold any day.

Nathan Feifel 5 months ago Contributor's comment

Very reasonable!

Tom Ellis 5 months ago Member's comment

Just wanted to quickly add one more tidbit. The definition of a bubble is an overpriced, in market talk, equity or entity. The dot com bubble, for the most part was not a true bubble as, much like Bitcoin, the new 'start-ups' had nothing behind them. Not an asset, not a sound business plan not even a solid management team behind them.

My forte in the 90's/2000 was telecommunication start-ups. By a very high percentage rate most start-ups would draft a 'business plan' walk into a VC and receive both funding and a valuation based on that funding. The VC for the most part knew exactly what was going on. Seed the company, retain office space, burn as much as the seed money as you could to show the trade rags that you were building something. Create a buzz. Go for second round of funding thus increasing your valuation. The end game. An IPO with nothing or next to nothing tangible behind it. Does anyone remember Pet.com? I do, they had 4 employees and they were http coders to enhance their web site to induce the public to "oh's and ah's". I' be willing to bet that 99.9% of Bitcoin traders/investors of date have not yet once used the crypto in a transaction. Watch. It's going to get very ugly. I only wish there was a way to short it once it arrives at 15K again.

Dick Kaplan 5 months ago Member's comment

Really interesting comments Tom Ellis. Personally, I'd like to hear what the author, Chris Skinner, has to say in response.

Carol Klein 5 months ago Member's comment

I'm amazed that there are so many experts who discuss this and yet there is no clear concensus. Some of us are desperate to know if bitcoin and the rest are the next big thing, or a sucker's trap.

Tom Ellis 5 months ago Member's comment

And yet we've not yet seen $BTC-X ($BITCOMP) used for anything except trading, the very definition of a bubble. However $XRP-X has clients, keeps a reserve of 55 Billion XRP in reserve to build out their infrastructure and bolster their portfolio. What does Bitcoin do? Trades with no tangible assets. How many P2B transactions do we see for bitcoin? ATM's? IMO Bitcoin is one of the most robust Ponzis I've seen in my life and I lived through and worked in the dot com bubble whereas all you had to do is walk into a VC's office to get $20MM in seeding.

David P. Goldsmith 5 months ago Member's comment

Nice comments Tom. You might like an interesting article I just read by Nathan Feifel on whether #Bitcoin was a #ponzi scheme or not: www.talkmarkets.com/.../an-objective-look-at-bitcoin-what-no-one-is-giving

Nathan Feifel 5 months ago Contributor's comment

Thanks for the mention David P. Goldsmith. There are MANY issues with Bitcoin, but being a Ponzi scheme is simply not one of them. Look up the definition of Ponzi scheme and try to factually articulate that Bitcoin is one.

Also, comparing BTC and XRP in such a manner is not particularly effective as they have different goals. As a side note, BTC is a completely decentralized ecosystem and XRP is quite centralized at the top.

David P. Goldsmith 5 months ago Member's comment

Good additional points worth noting.

Currency Trader 5 months ago Member's comment

Yes, tons of good cryptocurrecy content here. You can see it all in one place: www.talkmarkets.com/.../cryptocurrencies

Cynthia Decker 5 months ago Member's comment

Good points Tom.