Crypto Skeptic
I'm poorer for it...but here's what I think
Continuing from my Monday post:
Skeptics are the other end of true believers, these also come in a range. Some are angry at crypto and get mad when it goes up. Myself, I am interested in crypto, and I enjoy watching my friends make money on it. But it’s just a ship I’m not getting on until I can be convinced it’s worthwhile. Clearly, it’s been going up, and clearly it could keep going up. Maybe it hits $1,000,000 a coin, or more.
To me it just seems like a pure greater fool theory investment. Meaning the price is completely derived from buying and selling. In one way the stock market is similar to that, buying and selling surely drives stock prices. However, people like their iPhones and buy them for a lot of cash. If everybody still liked iPhones but hated Apple stock to the point where it dropped to zero, I could buy all the stock and pocket billions of dollars of iPhone profit myself. I pay high prices for Apple stock because I don’t think there will be a world where people hate the stock so much it goes to $0, someone else will want their share of the iPhone profit. I don’t know where the iPhone is with crypto. What’s stopping it from going to $0 besides a pure greater fool theory?
My prediction, subject to change, is that crypto will continue these booms and busts, and eventually the opportunists will get tired of that game. I don’t know when but on some future boom most of the opportunists will sit out, which will lower the potential for the booms rise. Eventually the traders will sit out because it won’t be as lucrative or fun without the opportunists and then you’re left with just the true believers. The true believers would essentially have to agree among themselves what an appropriate price for a coin is, and essentially set the price at that level, otherwise, they will never be able to buy or sell things with their coins. I don’t see how a limited supply of coins will help this. If anything, it hurts, we print more money to dissuade people from holding their money, it encourages spending.
The way I could be wrong, is if the true believers can convince everyone that crypto is better than money. Or at least better than something valuable that it replaces. Perhaps new technology will come out and make that argument more compelling. That would be interesting. Today, I’m unsure where the true believers point to and say, “why wouldn’t you use crypto to do XYZ”. The main argument I see is “number go up”.
My understanding of the true believer argument is that the limited supply of coins is an anti-inflationary feature. I argue that’s going to be a bug. It is decentralized, but my understanding is that’s only true under certain conditions, if enough holders of the coin agree on something that can change (I could be wrong here). It’s hard to say its secure when its constantly getting stolen, and they like to point to the transparency of it, and the secrecy of it, which one is it? It doesn’t seem to be secret because most users want to convert it back to dollars because…it can’t buy anything. They say it has lower transaction costs, but not less than me handing you cash, and I can Venmo or Zelle any of my friends for free…
Maybe future technology advances changes these arguments, or maybe I’m not understanding something…but from my point of view the only compelling reason to own crypto is that it has the potential to rise in price. That sounds like a greater fool theory investment to me.
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