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Bitcoin lessons

Paul Krugman writes a column about Bitcoin and crypto in general titled “Bubble, Bubble, Fraud and Trouble” – Jan. 29, 2018

Jim Cramer says the current cryptocurrency market is a “sham.” – Jan. 18, 2023

I remember heated debates when I visited San Francisco with friends who’d discovered Bitcoin. This must have been 2012 or 2013, I can’t remember, but I wouldn’t budge an inch from saying Bitcoin was worthless and nothing more than ones and zeros. How could something with nothing tangible attached to it be worth anything? It seemed obvious to me then and it was only in 2015 when I understood the potential of the blockchain tech underpinning Bitcoin, Ether and all the rest that Bitcoin made sense.

It took me a few more years to then understand and appreciate Bitcoin’s role as a global payment network – remittances and inflation protection are hard for most Westerners to appreciate, yet are a huge part of the financial world. So if you’d listened to me back then and didn’t buy Bitcoin, I’m sorry. I wish I had bought some, ffs.

But those little reminders at the top, I did some math on those. If you ignored Krugman’s advice in Jan. 2018, when Bitcoin traded for $11,296, and bought some and held until this week, you’d be sitting on an 811 percent gain. Same with Cramer, buying on the day he shammed the market and holding until now would give you a 398 percent return.

The high came on Wednesday, when Bitcoin hit $103,000.  What an incredible journey this thing has been on.

A fun part of every serious bull market is how alternative coins -- basically everything other than Bitcoin and Ether, I’d argue – start to pump after a bit. Bitcoin always shoots up first, and things may move with it, but not to the same degree. Then, once Bitcoin gets near the perceived top folks start to sell and put profits into alt coins. This includes Ether, as it’s been shown to lag a Bitcoin rally but not usually miss it entirely. We’re in this phase now, as the slew of stories on XRP demonstrate.

If you don’t know what XRP is, it’s the native token of the Ripple network, which was meant to compete with the $190 trillion cross-border-payment market.  That’s where correspondent banks send money flying around the globe, which turns out to be one hell of a profitable business. Banks like it, and will fight to the death to prevent XRP from replacing the euros, dollars, yen and yuan sluicing through the system. Over the years, Wall Street has successfully defended the market, and XRP and Ripple haven’t made a dent. And yet, XRP is pumping now.

I have strong opinions on XRP. I did a fair amount of reporting on it while at Bloomberg News, and understood quite well the struggle Ripple had on its hands. That hasn’t changed, and the company doesn’t seem to be making any inroads to cross-border payments that I know of. The Securities and Exchange Commission sued them, but the company got off pretty light and the go ahead was given for retail investors to buy and sell XRP to their heart’s content.

That news led to a jump in XRP, yet it didn’t change the fact that there’s hardly any demand for it other than speculation. And, honestly, is hoping for the elimination of regulatory overhang really how you want to structure your portfolio?

The recent XRP pump is no different than any other shitcoin pump. It’s certainly not based on fundamentals. Could it be due to the applications to the SEC to approve an XRP exchange-traded fund? I doubt it for the simple reason that no one needs an XRP ETF. The company also introduced its own stablecoin in October, which may leave you scratching your head. But then you remember the insane interest income blue chip stablecoin firms pull down and it makes sense. Yet again, no one needs a Ripple stablecoin. No one needs XRP, for that matter, unless you’re day trading alt coins.

We’re in the market stage where it’s never clearer that the dominant throughline in crypto is greed. Everyone is out to get rich, while of course there are builders and founders and believers in decentralized tech in the mix, this is how it is. Keep an eye on XRP. When it starts to fall, you’ll know the market has moved on to even more esoteric and useless coins, and the bull will be nearing its end. – Matthew Leising, editor in chief, Decential Media

Have you read the definitive history of Ethereum? No? Well then get your copy of Out of the Ether while you can.