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Why Bitcoin is a mania and fake currency, faker than the dollar

Bitcoin had a tremendous run in the last year or two. Unfortunately, it is creating a fake sense of mastering the world of investing and invincibility. Many people entering into Bitcoin think that they mastered investing and nothing can go wrong because they have a strong understanding how to invest, that bitcoin is a new future, amazing technology, and it cannot be controlled by any government.
 

They dismiss any warning or criticism by saying that we do not understand bitcoin and thus cannot see what they see.
 

I do not consider myself an investing or trading guru. I started investing and trading in 2006, so 11 years ago. It cost me a lot of money learning the hard way how the market works. But I know one thing for sure and to know it no one needs to be a guru: it doesn’t matter what you are involved in, the trading/investing principles will always be same.
 

It is shocking to see how many ignorant people are now involved in buying bitcoin with no understanding those same principles which cost me tons of money in the past learning them. And I can see them doing the exact same mistakes, same ignorance, same arrogance.
 

Many bitcoiners access purchasing BTC with no rules nor strategy because they think they do not need any. “Bitcoin is different, it is not a rigged stock” they say. Many invest with no slight clue of what they are doing. Many invested in about a year ago or less, now they are sitting on nice gains, and they think they are now gurus of trading. They advertise and try to sell you more bitcoins because they get referrals. And they deeply believe that this is exactly how investing or trading world works. It is that easy! You buy a bitcoin, sit a bit, and turn it into huge gains. Almost like when people were buying several houses to flip them in a month for huge profits…
 

When was it? Ah, about 10 years ago, in 2008. A sad thing is that many bitcoiners were born in or after 2008 or were too young (5 or 6 years old) to grasp what was going on around them with the housing market. They do not have the knowledge. So telling them that what they are doing resembles the housing bubble means nothing to them.
 

Bitcoiners confuse demand in BTC with value and consider BTC undervalued at any level. When I asked them where is the value of BTC and whether they consider it undervalued or overvalued all of them (ALL!!) said that “bitcoin is still undervalued because it is a new technology, new economy, new world, new currency which cannot be controlled by any government. And the value is in iut because people think so and they want BTC and because they want BTC it is the value of it”.
 

How naive!

This will not end well.

The more I listen to bitcoiners praising BTC the more I see another resemblance with dot com bubble. Back then, investors too believed in a new technology, internet companies changing the world, they too were considered not to be regulated by the evil government because they could operate via free internet. And once again, the bitcoiners dismiss this argument too. Bitcoin is different. Well, it is not. It is not. And this mania will end one day. And it will not end well.
 

Here is a simplified look at what bitcoiners have wrong:

 
USD

JNJ

dot com

btc
 

Bitcoiners have two choices, they would either listen to others and approach BTC with caution or keep fooling themselves.

 





One response to “Why Bitcoin is a mania and fake currency, faker than the dollar”

  1. JC says:

    Personally I’m torn on BTC myself and have started speculating with money that I can afford to lose. If it’s gone in a few months or years so be it because it isn’t going to change my life much other than maybe delay any potential FI by a month or so. But if it does actually take off and you are looking at $100k USD per BTC then there’s still a lot of room for growth. I’m willing to take some money that I can afford to lose to throw at that risk/reward profile. It’s definitely in its infancy or potentially it’s decline if it truly is a mania, but the thing is no one knows for sure because we don’t know how this will play out.

    The problem is that figuring out what BTC is exactly is still being determined. Is it a currency, a collectible, a commodity, an asset or just 100% worthless electrons? We don’t know for sure. If it does indeed turn into a currency over time then there will be something backing it and that would be the GDP of the world. Of course governments stepping in could easily alter that set up.

    Aswath Damodaran had 2 great articles about BTC that you can check out here going over those exact scenarios.
    http://aswathdamodaran.blogspot.com/2017/10/the-bitcoin-boom-asset-currency.html
    http://aswathdamodaran.blogspot.com/2017/10/bitcoin-backlash-back-to-drawing-board.html

    Although BTC has changed things for instance in Venezuela with the runaway inflation people living there have started using BTC as a currency because their own currency is f*cked right now. It’s also helped with money transfers too because you don’t have to pay an arm and a leg to transfer money with BTC compared to say Western Union.

    At this stage of the game I pretty much liken BTC to investing/speculating in like a dot com company or any other highly speculative item. Yeah there’s a chance you come away with nothing except some losses you can write off on your taxes, but there’s also the chance that it could take hold and still be around decades from now. After all companies like AMZN and GOOG were considered highly risky investments. Of course there was also pets.com and an untold number of other companies that have no real underlying value.

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