BITCOIN’S PRICE EXPLOSION IS A MANIA
Bitcoin, and the underlying blockchain technology, was a solution looking for a problem, it seems.
doesn’t make it the winner. I think cryptocurrencies will all eventually go down for a long, long time. Again, I am not necessarily calling a top in bitcoin, although it seems likely. I am just taking profits because the reasons I fell in love with bitcoin have disappeared. The real riches are going to be made from blockchain applications, not blockchain owners or even blockchain mining. When I have written about bitcoin in the past, I held some core beliefs: • Bitcoin is a store of value. • Bitcoin was going to develop a killer app. • Blockchain technology was the true revolution. However, things have begun to move away from that script... One feature that attracted me to bitcoin was its scarcity. When I bought bitcoin, about 55% of all bitcoins in existence had already been “mined.” Mining is the process of bitcoin creation that takes truly enormous computing power and gets more and more difficult to do as fewer and fewer are left to be mined. Similarly, an estimated 65% of the world’s gold reserves have also already been mined. Gold becomes more and more difficult to get NO LONGER A STEADY STORE OF VALUE
out of the ground as the low-hanging fruit has been taken and more technology and money is needed to do so. Gold requires higher prices for the remaining reserves to be mined. For example, look at the move in gold as President Richard Nixon left the gold standard. Gold suddenly had real value in an inflationary world... It exploded higher, further than anyone could forecast. There is only so much gold in the world, and people were desperate for it as a store of value. Bitcoin was a similar store of value. There are only ever supposed to be 21 million of them. No more were ever supposed to be created, which was part of the genius of the design. But today, there is a debate about changing this. Some in the bitcoin community are contemplating a way to split bitcoins in two, allowing for the creation of more bitcoins. The debate continues to rage on, with a number of alternatives discussed, from “hard fork” to “soft fork” and “Segregated Witness”... the details of which are too convoluted to go into here. All I know is that a change is likely to come... somewhere, somehow... Without going into the complex technical details, the point I want to raise is that if the
34 | July 2017
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