Whether or not the trend is your friend... depends on which side of the trade you're on... or if you're in the trade at all, or have risk exposure to it without knowing...
Bitcoin is driving interesting ponderings... but it isn't close to posing systemic risks... yet. The timeline on which that might occur, were the current bubble sustained indefinitely... is mostly about math... which I've not bothered with poking at yet.
Bitcoin is "presumed" by many in the market to have a "good as" quasi-monetary authority about about it... which I note while musing... The hurdles from "quasi" to "real" are significant... and distant enough to be ignored.
Otherwise, at current excess valuation... btc is a significant presence in the market... but not a dominant presence... Were it to evaporate tomorrow it would hurt some people... some more than others... but it wouldn't be an outlier in the history of failures. Assuming that the only possible outcomes are success... bitcoin takes over the world and all other currencies disappear... or failure... bitcoin fails of itself, or is regulated out of existence... seems to miss the point of innovation's role in the economy... typically not being all or none in result... but often "sideways"... as bitcoin has done before, as between this and prior bubbles.
How much of what we see now... is tied more to the bubble nature of the economy... than to the bubble nature of bitcoin in particular ? Poked at that yesterday... noting a blindness seems to exist... in which bitcoin participants think they are opting out of the "fiat" economy and its attendant risks by participating...
How might that happen ? I give you... demonstrable proofs of modern histor-illiteracy... and its counter-point.
This first link contains some things that are worth talking about... but even in those things the author tends to be wrong about them... His bit on free markets is a gem... in which he blames free markets for our problems, while at the same time pointing out that's not possible... because the concept isn't even taught in business schools... so those who are running our systems cannot be slaves to ideas they've not been taught, to which they are not adherents... and goes on to denigrate "so called" free trade... while failing to notice that "so called" free trade is not free trade... while blaming free trade for what goes wrong under its name... that isn't its fault... Priceless.
But, my point isn't just the obvious in economic ignorance it exposes... but the impact of that scale of economic ignorance as it is seen considering itself in historical context:
The 4 (or 5) Worst Market Failures in Human History
The author assumes both that all of human history has occurred in America.... and "since NAFTA". I went looking for links to help me put bitcoin in historical context, here... and found it in an unexpected way. How many die-hard participants in bitcoin today... would find the authors arguments compelling ? One might consider it a a reason for pause.
A better result... on the expected path... found here:
Famous bubbles
It relies on a single reference, likely not a surprise to anyone here... but gives a nice summary.
Pay particular attention to the Mississippi Bubble... in which a Scottish gambler, who apparently knew a thing or two about IOU's... "invented fiat" for the French... and then tied the French treasury into a stock market promotion scheme to obviate the weight of the French debt.
Note, America's only role in any of this... was that about a century later America would purchase the swampland that was used to back the market manipulation scheme from the French. That deal got done, in part, perhaps, because the scandal tied to the events of 1720 remained inconvenient long after the fact... and as people wouldn't let them forget... the only way to shed the shame was to get rid of the position.
Might be fun to study what Jefferson said about it in his personal writings... and compare that to the remnant that might exist in French archives.
The point, though... not only was fiat "invented" in this way... so was "the failure of fiat"... relevant today to the dollar and all the other fiat currencies along with it... but also:
Bitcoin, as a new innovation or a reinvention of currency... also operates outside the constraints developed to limit fiat related risks... constraints that were developed in the wake of the Mississippi Bubble... that don't require a degree in economics to understand.
Terra incognito... on the maps of the era... those lands where the only westerners to be found were explorers or pirates... those same virtual lands that are today explored and occupied only by more modern entrepreneurs... the risks shared by the investors backing them... and enlarged by the pirates using those places far outside of regulatory oversight... from which to stage raids preying on the traffic in regular commerce...
Trade accordingly... |
