Clint Eastwood's Advice On Bitcoin Speculation

Tyler Durden's picture

Authored by Simon Black via SovereignMan.com,

In 1559 while on a trip to southern Bavaria, Swiss scientist Conrad Gesner spied a curious flower in the garden of a diplomat in Augsburg.

The flower was called a tulip, derived from the Persian word dulband, meaning “turban,” which described its conspicuous shape.

Gesner was intrigued.

He asked the man who owned the flower about its origins and determined that it came from Constantinople in the Ottoman Empire, modern-day Istanbul.

Soon the tulip began spreading across Western Europe.

It was rare, something that only the very wealthy could afford to import directly from Constantinople.

By the early 1600s the rage had caught on to the upper middle class, especially in the advanced economy of Amsterdam and the Dutch Republic.

As demand grew, the price of tulips kept climbing, and soon people started buying up the flowers as a speculation.

In time no one was actually buying tulips anymore to keep them as a personal luxury item like they had done in the past.

Tulips had become nothing more than a speculation– people would buy, hold for a short while, and then sell at a much higher price.

This is the first classic sign of a bubble.

Whenever people starting buying up some item or asset exclusively because they expect to sell it quickly after a rapid price increase, and not for the asset or item’s originally intended purpose, you can be certain that you are in a bubble.

It was the same with the housing bubble back in the early 2000s.

No one was buying houses anymore to live in them, or even to rent them out for other people to live in.

After all, that’s the intended purpose of residential real estate.

No, instead, everyone was buying houses with the sole intention of selling them off in a short while after a rapid price increase.

Presto. Bubble.

The thing about Tulip Mania is that it continued for years, defying any possible logic or reason.

The price history of tulips is shocking, though a bit opaque; no two tulips were the same, so one species of tulip was priced totally differently than another.

Some were more moderately priced. Others were insanely expensive, with famous stories of a single bulb costing as much as a house.

In Charles Mackay’s great book Memoirs of Extraordinary Popular Delusions and the Madness of Crowds, there’s a story of a single bulb of the Semper Augustus species being sold in 1636 for 12 acres of land.

Another was bought for a new carriage, two horses, AND 4600 florins (worth over $160,000 today based on the content of precious metals in the florin at the time).

[Bear in mind that the average house in Holland rented for about 55 florins in the mid 1630s.]

And that wasn’t even the top of the market.

A 1989 academic study published in the Journal of Political Economy, shows, for example, that the Semper Augustus species reached its peak at 5500 florins (roughly $193,000) in 1637.

That’s up from 1,000 florins ($35,000) in 1623, which is still insane.

But Semper Augustus was THE premium bulb. The lower quality species didn’t sell for as high a price, but the price growth far more ridiculous.

A standardized lot of Gouda species, for example, sold for about 1.5 guilders in early 1635. Two years later the price was nearly 10x higher.

Even in the final weeks of the bubble, prices were still soaring.

A standardized lot of Admirael van der Eyck increased more than 3x just between July 1636 and February 1637.

This was right around the time that retail speculators jumped into the market.

Until 1634 the tulip market was dominated by professional growers who had a good understanding of the business.

After 1634, though, people were quitting their jobs to trade tulips full-time.

A lot of them started making unimaginable sums of money, crediting their newfound wealth to intelligence rather than dumb luck.

This is another classic sign of a bubble: when the average Joe starts making tons of money in a market (and often credits that fortune to his smarts).

I’m telling you all of this because Bitcoin just crossed the $2,800 threshold. Actually as I write this Bitcoin just passed $2,900. And by the time you receive this it may be north of $3,000.

Look, I am no detractor of cryptocurrency. Blockchain and cryptofinance are incredibly powerful tools. They are the future.

One day when people actually adopt cryptocurrency as a medium of exchange, there will be real fundamentals underpinning the price.

But right now this is just pure speculation showing all the classic signs of a bubble.

No one is buying Bitcoin for its originally intended purposes, i.e. to be a decentralized medium of exchange.

People are buying because they’re betting that the price will go up. Just like tulips.

But eventually tulip prices collapsed.

The lot of Witte Croonen species that sold for 1,668 guilders in 1637, for example, was worth just 37.5 in 1642, a decline of 97.7%.

Moreover just like tulips, there are countless ‘non-technical’ users who couldn’t tell the difference between Blockchain and Blockbuster that have made tons of money… and think they’re really smart (as opposed to lucky).

This mania with Bitcoin could last for years. It could go to $10,000 or more. Who knows. We don’t know if it’s 1622 or 1632 or 1637.

So if you’re thinking about speculating in Bitcoin right now, there’s only one question to ask yourself:

“Do I feel lucky?”

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
bigdumbnugly's picture

i know what you're thinking.  Was that five gold coins or six i just traded for an invisible  cryptocurrency?  Huh punk?

Raffie's picture

BTC being adpoted globally by countries and companies.

So, based on news about it is why I put some into it.

If my crystal ball was not broken I would tell all of you.

kliguy38's picture

"its a store of value"...........BWAAAAAAAAAAAAAAAAAAAAAAAA.....wake up you proles....they're gonna SCREWWWWWWW U

DownWithYogaPants's picture

Meh.  I don't think Simon knows the first thing about cryptocurrencies.

yomutti2's picture

Simon knows fuck-all about most of the topics he discusses so confidently.

 

pods's picture

Bitcoin used to be a great way to get $$ out of the country.  Now, not so much as you can lose 10% in the time it takes your plane to land. No thanks,

pods

tmosley's picture

>Risk losing 10%

>Risk losing 100% and maybe go to jail and/or be executed

Decisions, decisions.

Stackers's picture

Same old tired analogy that does not hold water.

Bitcoin is not a flower.

A tulip has no use beyond being a flower

Bitcoin is a speculation not on a bubble, but a speculation on a new technology capable of changing the world as we know it.

mobtown's picture

Here's why everyone should get out of bc now. I'm thinking about getting in.

USisCorrupt's picture

And here I thought that they were describing the Dollar as well as all FIAT currencies.

I like my Bitcoin, Ethereum, Ethereum Classic, Monero, Cloak, Litecoin & Bytecoin.

And that Ethereum is just getting started!

http://www.outsiderclub.com/report/the-ethereum-revolution/2295

gold-is-not-dead's picture

Im into bitcoin from 2011, made shitloads of money.

Current state, imho, of course it's a bubble, look at weekly chart, PARABOLIC!!!

bottom this time is around $500

Oldwood's picture

Hah! Use? Crypto doesn't even have a physical presence. You can at least burn cash. Crypto....and popf it's gone.

tmosley's picture

If it is formless then neither can the deepest spy discern it, nor the wise make plans against it.

Endgame Napoleon's picture

Well, if there is no value in things that are just purely decorative, why do homes with particular style characteristics command MUCH higher prices? Sure, the homes are useful, but they sell for more due to being a Craftsman, an Eastlake, etc.

Oh, and Eastwood is one of the best filmmakers. I think, anyway.

Sudden Debt's picture

Your answer is the most stupid of all.

Nobody buys bitcoin to buy pizza's. That's why it was created.

And bitcoin was like the tokens you can buy in amusement parks where the park gets it's money in advance.

The profit for the developpers is the rot, the bitcoins that are lost.

And there's plenty of rot in bitcoin already.

And about your response: you bought it because you have no clue what it's about, you just gave it a meaning that fits your own vision, which is wrong.

Bitcoin was a game token like litecoin. A game token for computer games.... The future will have fun with you.

Why do you think it started at 25 cents? That is the intrensic value of bitcoin.

Exponere Mendaces's picture

Its our favorite east european goat herder with his shepard logic.

Oh god, you think lost coins are a profit-making scheme?

Do you get high before you post, or is this just a natural parasite from the goats you herd jumping into your bloodstream?

Tokens... game tokens... computer games... you show a rather stunted understanding of technology.

Do you own any electric device that has a transistor? Are you posting to ZH from a town library?

How someone can actually use technology to be a complete luddite is really an amusing contrast.

By the way, Bitcoin's first trade wasn't at a quarter -- but you'd know that if you were posting something close to the truth, instead of garbage.

 

webmatex's picture

And:

Earl Thompson, formerly of UCLA, takes a different approach. He reckons that the market for tulips was an efficient response to changing financial regulation—in particular, the anticipated government conversion of futures contracts into options contracts. This ruse was dreamt up by government officials, who themselves were keen to make a quick buck from the tulip trade. 

In plain English, investors who had bought the right to buy tulips in the future were no longer obliged to buy them. If the market price was not high enough for investors’ liking, they could pay a small fine and cancel the contract. The balance between risk and reward in the tulip market was skewed massively in investors’ favour. The inevitable result was a huge increase in tulip options prices (see below right). (The price of options collapsed when the government saw sense and cancelled the contracts.) Spot prices (the price that traders paid for immediate delivery of tulips) and futures prices (the prices that traders would be compelled to pay for future delivery of tulips) were not volatile. And any movement of the spot/futures price was determined by simple supply and demand—the fall-out from the Thirty Years’ War, one of the bloodiest in European history, was one important factor. 

http://www.economist.com/blogs/freeexchange/2013/10/economic-history

UrbanMining's picture

Cryptos or the new layer of the internet
-Eliminate the need for internet security businesses
-Undercut any transfer of value
-Beat fiat currencies bc of limited amount of supply

Everything in a 100 years from now will be more connected through the internet. A majority of things we as humans do will be more digital based than physical on a everyday basis. I mean, just think about how we feel today when we lose our phones. It's truly a feeling that words can't describe. As we progress with technology we will just become more and more connected to it. So my opinion, my bet? Go long, go long term, don't look back, and let it play out. Short term swings will happen but banks and fiat currencies have to go lower. It's a irreversible long term trend that fundamentally can't be solved. Only pumped with more Fed policies and bandaids.

runswithscissors's picture

And the IRS will get its cut when you "cash" out

Grave's picture

thats the sheep mentality right there
as long as you keep "thinking" like a sheep, you will get fleeced

cashing out is the dumbest thing to do - bitcoin is deflationary, and therefore its value increases exponentially as it gains more and more users
(in a few years people wont be able to afford even 1 bitcoin, total supply is 21m ever, population 7b and growing, do the math,
time will come when owning 1 bitcoin will place you in a group at the top of the wealth pyramid)

keep all your bitcoins and watch their value explode out of galaxy as debtfiat scam collapses within the next 20 years
and best of all, this will be the greatest wealth transfer in history, leaving current psychopaths and sociopaths in power rotting on the waste-heap of worthless debtfiat shit

and be your own bank, dont trust online wallets, exchanges, etc,
they can be strong-armed by gov thugs
get a hardware wallet, secure it with passphrase only you know.
your mind is the best safety there is.

factorypreset's picture

I have nothing against Bitcoin. In fact I'm quite excited about it.  However I think many of its advocates are overly optimistic regarding its ability to supplant the evils of our banking and financial institutions. 

tdag's picture

Bitcoin will save the world! (and make me rich to boot!!) lol.

hongdo's picture

Best you don't let anyone know you have any (like posting on-line), or they will force you to give up your pass-phrase like they can force you to open your safety deposit box or give up your iPhone password.

noless's picture

Good luck remembering something that can't be reversed engineered through your psychology.

Endgame Napoleon's picture

They always get their cut, except when they are handing out welfare, disguised as tax credits. Then, then take a loss.

business as stusual's picture

Please explain how they are going to get their "cut".

Exponere Mendaces's picture

Oh lordy, another retiree.

You have zero knowledge of what you are talking about, and it shows.

What's your alternative - Gold?

No really, if your use-case is getting money out of the country, what is your magical solution?

Its always something with the old ones, they just can't get it. No wonder taxi cabs are still operating, they're scared of new things like Uber and Lyft and are piling into things they are comfortable with. (Even if it is inferior.)

Hey, just like gold.

 

eclectic syncretist's picture

TPTB are letting them run just long enough to get skeptics to convert to thinking that digital currencies are the way to go; then the banksters will take it over and start a new parasitic iteration of "the great skim of humanity".

SafelyGraze's picture

unlike other bandwagoneers, I personally hold onto my bitcoins because of their intrinsic value

and by that I mean, they represent solutions to actual math problems that I really really needed to solve

and they are a store of value in that the really really important problems are now SOLVED

and I have proof of that work

it is like when you need to know whether a big number is prime or composite and it would take you a long time to factor it but somebody has already done the factor-testing for you and they have proof of their work

that is real value

that is something that you want to hold on to and pass down to your grandchildren

 

DisorderlyConduct's picture

The value of computation and proof thereof declines over time.

Log tables used to require a king to finance. Now they're free.

Moores law is against anyone betting that calculation holds value since the means to calculate is getting faster and cheaper. New algorithms and tech are used against the classical hard problems every day.

What happens when bitcoins can be computed in half the time at 1/4 the power consumption?

Grave's picture

read the fucking bitcoin whitepaper

difficulty adopts and increases/decreases depending on computing power competing for block reward

tdag's picture

that is not a reliable method to determine difficulty. do you think the big boys give a shit about mining? And brute factoring is only one of at least two other attack points.

Exponere Mendaces's picture

Put on your bifocals and read the white paper.

You're spouting nonsense wrapped up in oldtard speak.

We can't help you understand, but we can point you in the direction of the knowledge.

Maybe you'll toddle over there after you're done posting garbage, but I wouldn't bet on it.

 

tdag's picture

"that is real value" ... until it's not....ergo it's compromised. then poof!

KFBR392's picture

what the holy fuck are you rapping about??? dumb it down please. is bitcoin a digital currency or magic abacus???

Exponere Mendaces's picture

Another enured cog praising the machine he operates in.

How proud you must be.

 

e_goldstein's picture

My alpaca ranch is doing splendidly!

Isn't yours?

Croesus's picture

He's jumping on the bandwagon, just like the latest crypto-'investors'. He makes a few good points in this piece, though.

@ Raffie:

"So, based on news about it is why I put some into it."

There's an old adage: "Buy on rumor, sell on news".

Endgame Napoleon's picture

If you have money, why can't you just diversify and reduce your risk by buying some low-maintenance land that is not taxed as much, some rental property to get some monthly income, some gold or, if you prefer another color, silver or platinum, and some bitcoin to round it out so that you are not considered to be stuck in the past by the youth. Then, your assortment of conservative investments would be less boring looking. Does rose gold have any investment value? It would give a broader range of color options, which is important for attracting female investors. Just yellow gold, no rose gold? I thought copper was a rare metal. They use it to make rose gold. Rose gold needs its own investor group.

Crash Overide's picture

Tulips still exist, what did I miss?

Beatscape's picture

I always click on the "I'm Feeling Lucky" button on Google. Gotta take your chances while you have the guts. Kinda like Fight Club.

Bigly's picture

Why are you still using google?

It is skewed to their sjw leanings. Try duckduckgo

buttmint's picture

Simon AzzHat Black and professional scaremonger Mike Synder are my two least favorite ZH authors.

Think "abomination fascination"....Black literally rips off Clint by implying Eastwood was contacted by bitcoin for his opinion. Disingenuous.

Black is just an ass hiding in some adobe shack In SA.
If Synder had written the same article, it would be "....50 ways to leave your dollar lover....ripping off Paul Simon.

Both clowns belong buried in the back pages of USA, underneath all the parakeet dung of my fave bird, Rocco

webmatex's picture

You mean like - for a fistfull of dollars i get LightCoin, for a few dollars more i get BC?

That really makes my day!

Got enough silver thanks.

Raffie's picture

Lets see, gold/silver are faith based wealth.

Cryptos are faith based wealth.

So........... wealth is whatever you think it is.

 

 

Crash Overide's picture

For the crypto haters I have a few words:

Derivatives

FED Fiat

John Corzine

 

Just saying...

Placerville's picture

India

Cyprus

Venezuela

Zimbabwe

Debt Ponzi

ZIRP

NIRP

 

Croesus's picture

Wrong.

Gold's value & silver's value aren't derived from faith exclusively. Their value is derived from scarcity, rate of production (1 oz/20 oz, generally/ historically), their qualities as metals themselves, and the labor/energy needed to produce them. Their millenia-long appeal transcends cultures, races, geographical boundaries, and religions.

In short, they are "Natural Money", valued in all nations.