Bitcoin Isn't The Bubble - The Global Financial System Is

Authored by  Liberty Blitzkrieg's Mike Krieger via The Hill,

Pretty much every article you read about bitcoin in the mainstream press ends up in the same place.

You may not hear it until the seventh or eighth paragraph, but eventually you’ll be told that the whole thing is nothing more than a modern day "tulip bubble." The more creative types will also throw around the South Sea or Mississippi Bubble. You get the point. The consensus among the very smart experts is unanimous: bitcoin is clearly and indisputably a gigantic bubble that’s set to burst. I’ve been hearing this since the early days of getting involved in the space back in 2012. But I’m not convinced.

For one thing, bubbles don’t do what bitcoin has done since its inception in 2009. During my 10-year tenure on Wall Street, I saw several bubbles grow and then burst, and one thing you learn is that an actual bubble rises like crazy and then totally pops. It doesn’t come right back a couple of years later and soar again to a new price 10 times greater than the previous bubble's high, which is what bitcoin has done after each one of its three or four previous “bubbles” burst.

That’s not a bubble, but something else entirely.

 

https://www.zerohedge.com/sites/default/files/inline-images/20180108_btckrieg.png

Let’s take the oil price in the middle of the last decade as an example of a real bubble. The price went on a historic and seemingly unstoppable run all the way to $150 per barrel in 2008. It then proceeded to burst in spectacular fashion just ahead of the financial crisis, plunging all the way back to $30 before rebounding. Ten years later and the price is still nowhere near that prior high, with it currently trading around $60. That’s what happens when a real bonafide bubble bursts. It stays below the prior high for decade at least, sometimes forever. The behavior of bitcoin since the "genesis block" has been completely different.

While we’re on the topic of bubbles, it seems the truly gigantic bubble in the world isn’t bitcoin, but rather the global debt market. This leviathan now stands at around $233 trillion, or 318 percent of global GDP. Even more troubling, an estimated $11 trillion of government debt now trades at negative yields. This means whoever is buying this paper is doing so despite the fact they are guaranteed to lose money on the “investment.” Much of this buying has been propelled by central banks which can print their own currency and buy debt indiscriminately. This is not characteristic of a healthy financial system (particularly so many years into a global recovery), but rather a zombie one that’s been artificially propped up since the financial crisis.

Therein lies the crux of the issue.

Bitcoin and the crypto asset ecosystem it spawned seem to be a logical reaction to our zombified financial system, which itself is built upon the shaky foundations of a gigantic debt bubble. The rise of bitcoin foreshadows the emergence of something potent and new in the realm of money and finance, which also happens to be something the world desperately needs.

Central Banks might be able to keep interest rates artificially low if they continue to aggressively buy government debt, but they can’t stop innovation or prevent millions of people across the world from moving into a different paradigm. The longer the zombie financial system is kept afloat, the more people will want to opt out of it and into a voluntary, decentralized alternative that’s far more ethical, transparent and permissionless. This desire for something distinct has been the driving force behind Bitcoin adoption since the very beginning.

That’s not to say there isn’t bubble behavior going on in the broader crypto asset space at the moment, there certainly seems to be.

Rather, it’s to say that reflexively calling Bitcoin a bubble because you don’t like it, or don’t understand it, is missing the much bigger picture.

The real bubble is larger and far more dangerous, and it lies at the heart of the global financial system. If anything, bitcoin and other crypto assets are merely providing an escape hatch from this legacy system, while simultaneously offering an opportunity for a better and more decentralized future.

Comments

manofthenorth VWAndy Mon, 01/08/2018 - 19:08 Permalink

No question that a straight trade is ALWAYS the best.

Unfortunately it is rarely an option.

For ALL other local transactions the trinity of noble metals,(gold, silver and copper) are the next best option.

The sad reality is however that a century of economic malfeasance, corruption and indoctrination have left so few of these and the knowledge of their use and value in the hands of so few Americans that it seldom occurs.

The gold was STOLEN in 1933

The silver was STOLEN in 1964

and by 1981 they were so insolvent at the US Treasury as to not be able to afford the copper for pennies.

And while it is true that there is a MASSIVE global everything bubble,

bitcoin is the biggest , fattest bubble in the history of the world.

In reply to by VWAndy

zorba THE GREEK manofthenorth Mon, 01/08/2018 - 20:05 Permalink

I read your profile. Sold my business 7 years ago and have been living off of $3200/month SS (wife and me) and selling off my gold. But I have been selling more gold to buy more silver because, like you, I believe silver is going to far out perform gold in the next few years. The only thing I believe in more than silver, is God and Satan. Everyone will have to chose between the two. I have chosen God and silver. I wish you and your love ones, health and happiness in the new year. 

In reply to by manofthenorth

manofthenorth zorba THE GREEK Mon, 01/08/2018 - 21:20 Permalink

I have told my mining associates that the day will come that silver is as valuable as gold, 

it may take another 100 years but it will come.

Almost all the gold ever mined has been hoarded.

Almost all the silver ever mined has been consumed.

I have made my choices as well ;-)

Sending wishes for a happy, heathy and prosperous new year from my family to yours,

In reply to by zorba THE GREEK

dadoody Gap Admirer Mon, 01/08/2018 - 19:14 Permalink

Exactly. And this article is worthless.  
Fact of the matter is that nearly everything is a "bubble", and you can choose to get your valuations and timing right or sit here making general asnine articles that have zero value. 

I used to enjoy these articles  5 years, but it's the same vague sky falling bullshit all the time. Worthless print. 

In reply to by Gap Admirer

HRClinton VWAndy Mon, 01/08/2018 - 21:10 Permalink

I told you before... that Cryptos represent...

1. Flight of fiat capital (1st order effect). Speculation is 2nd order effect.

2. Birth of a whole new Monetary System.

Calling it a "bubble", is like the Horse & Buggy industry saying "Cars are a bubble."

 

(I swear -- every damn day -- that ZH is full of Flat-Earth and Frontier Oldbug retards, who just refuse to grasp the new concepts and paradigm. They're like old nags that need to be shipped off to the glue factory or turned into Soylent Green.)

In reply to by VWAndy

Archive_file Mon, 01/08/2018 - 18:38 Permalink

Bitcoin is functionally useless, it’s prehistoric tech. There is a WAVE of altcoins that actually function now.

RaiBlocks (XRB) appears to be the best.

free

instant

all coins distributed 

available on KuCoin or Binance

Womb Service Archive_file Mon, 01/08/2018 - 21:44 Permalink

XRB and IOTA are centralized. They require control nodes. This, ultimately, makes them useless. Bitcoin is slow, clunky, and inefficient. It is the old lady on the block, and not very sexy nowadays. There is a reason for this. If you want decentralized, trustless and permissionless then you have to pay the price for it. There is no free lunch. POW is still king. Bitcoin's best use cases are as a reserve currency, store of wealth and a settlement layer. In those roles it absolutely excels, even with high fees and a clogged blockchain. 

Bitcoin was already invented. It's called Bitcoin.

In reply to by Archive_file

Sizzurp JRobby Mon, 01/08/2018 - 19:08 Permalink

You can come up with a thousand reasons not to buy BTC, or you can put your fears aside, buy 1 or 2, and hodl them for a few years. If BTC goes to 100k plus at least you won't feel as bad, and if it goes to zero you haven't lost much.

In reply to by JRobby

ultraticum Non-Corporate Entity Mon, 01/08/2018 - 19:09 Permalink

If the cat in your analogy is the government (beloved fiat money conjurers), and the mouse is Bitcoin, I say respectfully you're wrong.  Here's why:

 

Assymetric cryptography, distributed globally and now via satellite, is MATH that no government on earth can beat, expressed in CODE which is nothing more than speech.  Speech will not be banned to the extent we will not be able to seek refuge in CODE and MATH when trying to escape the money cartel's tyranny.

And that my friends, is why cryptocurrency is much more interesting than a price chart.

In reply to by Non-Corporate Entity

Don Sunset Mon, 01/08/2018 - 19:05 Permalink

I'm counting on my Monopoly money to save me.  If that doesn't work I've got my Monopoly shoe position marker.

If neither of those work, I may need my Monopoly get of jail free card and take a ride on the Reading RxR card.

You best have good plans like these.

Antifederalist Mon, 01/08/2018 - 19:07 Permalink

It can be undervalued long term and a short term bubble at the same time.

Those who make the "bubble claim" are looking at price action only and not where we are on the long term adoption curve.

What percentage of people own Bitcoin?  I bet less than one tenth of one percent of the world population.  Fixed supply, more adoption?  I wouldn't want to be short.

Herdee Mon, 01/08/2018 - 19:09 Permalink

Blockchain technology will wipe out all of Wall Street's fucking crooks. That's why politicians and countries want it dead. It's to keep their bankster bum-buddies alive and rich who live off of the poor like bloodsucking leeches.

Brazen Heist Herdee Mon, 01/08/2018 - 19:17 Permalink

Bingo...Dapps and blockchain have the potential to revolutionize finance and commerce, and act as a de facto court of arbitration when humans and their vested interests/emotions get in the way. They can potentially eliminate cronyism and corruption from many processes if applied correctly.

Funny how we engineer artificial intelligence to keep us in check.

In reply to by Herdee