When I wrote about Bitcoin in December, I gave my thoughts on the long-term value of the ill-fated cryptocurrency. I put it at precisely zero, because I reckoned it has no underlying rational value.
It’s no good as a currency as it’s far too volatile — ask the good folk of Venezuela what they think of an unstable currency. And as an investment, it has nothing tangible behind it.
Some value?
But after talking with some other observers, I’m starting to think maybe it does have some rational value after all — as a gambling mechanism. A great many humans seem to love gambling, and they’ll place a valuation on a mechanism that facilitates it.
Bitcoin exists in a limited quantity, and as long as there are people willing to bet on what the next person will be willing to bet… we have a market for a gambling mechanism that people will place value on.
I’ve seen Bitcoin likened to a lottery, but that’s a weak analogy. It’s like a lottery that has no prizes, just other people who want to buy tickets in limited supply. And with a lottery, you can calculate an expected return — which is why I only ever buy National Lottery tickets when there’s been a rollover and the total prizes are more than the total stake.
But even with all that, I still see the rational value of Bitcoin as being close to zero, if not actually zero itself. And I think 2019 really could be the year when it finally hits rock bottom.
Inexorable fall
Over the course of 2018, the value of Bitcoin plummeted from a December 2017 high of almost $19,800 per coin to only $3,600. Those who bought at the peak (when deluded cultists were predicting prices of $100,000 and more) and held on all year lost 80% of their money.
I rarely take much notice of what cryptocurrency ‘analysts’ have to say, and they’re usually talking it up as still being the great long-term investing hope that clouded people’s eyes so badly. But even they don’t seem too optimistic right now.
I’m getting a general feeling that, even after Bitcoin’s spectacular fall, it still hasn’t found its bottom — if it had been oversold, we’d have started to see a new upwards movement by now.
Admittedly the analysts are generally only using nonsensical chart analysis for their opinions, but do you know what I think is happening?
Sinking ship
I think every shakeout is causing disillusionment among yet another portion of the cryptocurrency hopefuls, and that it’s permanent. When the price stays low, or even falls further, they’re not coming back — because they’re increasingly understanding what a load of hokum it is.
For Bitcoin to make any sustained comeback, I think it will need to attract new money from new punters — and I just don’t see where that’s going to come from. Instead, I see the current trend continuing right through 2019 — and every time there’s a new fall, more followers will finally reach the panic stage.
What would I do if I had any Bitcoin? I’d sell it, right now, no matter how little it was worth. Even if I only got enough back for a sandwich, that’s more than I think it will be worth this time next year.