Bitcoin Plunges 29% in Two Days!


May 27th

Bitcoin peaked at $2779 on Thursday, in less than two days it hit a low of $1973, thats a loss for “investors” (read gamblers) of over 29%. If a real currency was to plunge 29% in two days people would assume the country that issued the currency was going bankrupt, or had just been invaded by a Trump lead army, or some other massive upheaval.

But thats the point Bitcoin is not a real currency, issued and backed up by a country’s government and revenue (read taxes), or backed up by some other intrinsic value, like directly linked to the price of gold. It is a bunch of 1s and 0s, yes the number of coins (read 1s and 0s) that can be issued are limited by the mathematical calculation required to create new coins, and that creates scarcity, and when something is scarce and there is a demand, people place a value on it.

Just like Beanie Babies, or phone cards, or comics, or ostrich eggs, or tech stocks in the eighties, or one of the biggest bubbles in history, the great tulip bulb bubble of 1630. All of these bubbles had something in common, huge demand for limited stock, wild swings in prices, lot’s of people who didn’t understand market dynamics, and the ultimate market crash where fortunes were lost by those getting in late, with that wealth being transferred to those that were in early.

Now some people are saying “this time it is different”, because it is a “currency” that can be spent on “real cash”, or goods and services, or that it is becoming widely accepted. Of course that was true of all the previous bubbles, Tulip Bulbs in 1635 were used to buy homes, or ships, comics in the 1990s were traded for big cash. Phone cards, which were essentially bits of plastic with pretty pictures were bought, sold and traded for thousands.

At the moment the Bitcoin market dynamic is driven out of east asia. A few years ago China made it difficult for it’s population to gamble, which at the time was mostly done in Macau. These restrictions ruined the Macau gambling market, reversing previous double digit growth and pushing it in to negative territory. The chinese are known globally for their appetite to gamble, so restrictions in Macau was not going to stop them.

The chinese moved to property, prices in major cities across the globe exploded, funded by chinese appetite to invest. That didn’t sit well with the country’s leaders, massive amounts of capital outflow was not good for the economy, so they put in restrictions for sending money out of the country. That lead to local property prices in major chinese cities exploding, that didn’t go down to well with the country’s leaders, so they brought in mortgage restrictions to stop it (see where we are going here).

Now the chinese eyes are all over Bitcoin as the latest hottest “investments”, in truth it is just another way for them to gamble. But here is the thing, the chinese government is already catching on, and where they see people losing fortunes overnight, like a 30% drop, they are more likely to act. So be warned the day of reckoning maybe close.

By the way, why Bitcoin? Because you have heard of it?

There are over 25 cryptocurrencies, Dodgecoin, Litecoin, Ethereum, Peercoin, two of my favourites – PotCoin and TitCoin and the list goes on and on. You can literally start up your own cryptocurrency over a weekend. If you really believe this is not going to all end in tears, maybe you should look at one of the other coin options, at least they don’t have chinese house mum gambling activities priced in to it.

2 Responses

  1. Varanasi says:

    Your use of hyperbole to get your name on an article is sad since not a single item you reference has anything relating to Bitcoin. The IRS, Department of Treasury, and other countries have declared it a VALID currency. Do some actual homework before you try to write again. You look like a grade school kid late with his homework.

  2. J says:

    Looks like Joe missed the boat on getting in early and has been waiting for any opportunity to bash BC. Congrats Joe, you got ’em, now the early adopters are only kindof rich instead of just super rich.

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