Bitcoin is a global supernova

BTC surpassed $11k last night:

When does BTC become too big to succeed? That’s the question. Not yet clearly but the rate of growth is so out of this world that it is already sight.

BTC rose 4200% in 2017. If it repeats that in 2018 then its market capitalisation will be roughly $7 trillion.

That will make it the fourth largest economy on earth.

This is all pure conjecture, bullshit really, but it gives some notion of how ridiculous the phenomenon of the world’s first global pyramid scheme and bubble is. At that size, it is likely that were the value to crash, then it will destabilise the global economy. Especially so if the run-up is being driven by debt at the margin, which it almost certainly is.

Global GDP is roughly $80 trillion. If BTC reached $7tr then crashed 90% then the asset, and possibly monetary, shock would be material. It would be the same size as wiping one third off the value of the US stock market though obviously more diffuse.

And crash it will. If it reaches such sizes, BTC will be a threat to every bank and taxation regime on earth. Governments are dumb and slow but they’ll wake in fright when it’s big enough.

Joe Stiglitz is exactly right:

BTC is shaping as the stupidest thing that I have ever seen in global markets.

Comments

  1. A serious question: in theory, if debt is not used to buy btc then isn’t the world no richer and no poorer after it crashes? There is wealth transfer (those holding it at the end lose, everyone who sold it to them wins). But no change in the amount of money in the world? (We will have wasted a lot of electricity getting there, but generating the power did create some wealth I suppose).

    I can see how unsecured debt changes the picture. I suppose the question is, would anyone seriously lend a lot of money to a bitcoin speculator without full real-world collateral for the loan?

    • Solution:
      Lift interest rates across the globe to kill that beast and return the faith in paper money.

      • This, absolutely!!

        Demolishing the value of people’s earnings (and thus their labour and (true) entrepeneurship) is not only testament to how the system is broken beyond repair, in the long run it will make it worse because people will try to derive some value from it anyway – leading to stupidity such as this.

      • Most of Project Syndicate appears to be “We know best” authoritarians.

        Their response to Brexit was to suggest that “bogans” and “deplorables” (“They’re not even university educated, you know.”) should not be allowed to vote.

        When one recalls that the universal adult voting franchise is barely a century old in most of the world, one realises that the norms of the Modern Era are ephemeral indeed.

        If the Elite’s interests are seriously threatened they will respond with “whatever it takes”.

  2. A substantial part of that are the holdings of Satoshi and coins held in thrown-away hard drives decaying in landfill. Part of the reason for the high price of Bitcoin is the built-in supply destruction. How much of the Bitcoin supply has essentially been destroyed? Impossible to now. The biggest risk is if some kind of crack allows those destroyed coins to be resurrected, perhaps by brute-forcing the wallets they were held in etc.

    • With current computing capabilities it would take something like 500 million years to crack a single bitcoin private key through brute force.

    • You could make a very good guess of how many have been destroyed or lost by measuring the contents of the wallets that haven’t been touched since 2012.

      Losses from 2013 on will be minimal as that was when the price first started to take off and gain media attention.

    • Some estimates are around the 3 to 4 million mark of Bitcoins are lost forever. With 21 million bitcoin to be mined in total – this leaves around 17 to 18 million ever to be available (provided more are not lost forever). Last count – there were around 15 million millionaires in the world. Makes for interesting maths.

  3. Hence you’re better off buying coins with real world applications that are not so easily snuffed out by corrupt liberal democracies. Join CoinSpot and buy as much Monero (XMR) as you can. Further, if you’re looking for the next big thing, insider information or just general banter head on over to https://boards.4chan.org/biz/

  4. Here’s the 4th International on Bitcoin. nail, meet head.

    “Now, with financial markets flush with cash, billionaire investors are eyeing cryptocurrencies as a means of securing even more massive returns on their investments. When and how this bubble pops is difficult to predict, but one thing is clear: When it does, it will take a substantial chunk of the real economy with it, with disastrous consequences for working people all over the world.”

    https://www.wsws.org/en/articles/2017/11/29/bitc-n29.html

  5. NIRP/ZIRP to save the banksters is the stupidest thing ever seen in markets. How much yield can you get on JGB sweeper?

    Yet some DEMAND lower rates for longer…

    • Tell it to the neoclassicals miggie, you know the quasi monetarists, not that the c-corps would change their act regardless. Do you see the inherent flaw with models like IS-LM w/ Taylor bolt on, et al, maybe is something much simpler and older, like influence peddling…. but naw… that that would undo the entire edifice of what some call economics [Science – !!!!!] today….

      disheveled… tho the libertarians would argue they earned it – !!!!!!!!!~~~

      • What – ????? – part of the tide that lifts all boats did you miss in the run up to the GFC or the results of NIRP/ZIRP.

        Buy [tm] your logic all asset bubbles are earned income, so now were down to the psychology of entitlement e.g. if its in your pocket or others i.e. RE vs. Crypto. You missed out on the latter but now are [feel] vindicated. Its like a flash back to pre Oz or other places where those that had bought previous musing about others having missed the boat, get in now, or be left behind thingy…. Lamentum… those poor souls…

        It also makes wanking on about FIRE sector profits a wee bit incoherent.

        It also confuses price with value, you have to take price first to find its value in conversion. Past conversations with Koch libertarian PhD’s inform me they’d agree.

        disheveled…. that you fail to acknowledge the similarities wrt the C/RE debacle, decades in the making, on both a psychological and economic level has to be an epic case of bias conformation seeking. You can’t whinge about one and not the other miggie.

  6. As one of my friends said, “I just had to buy some. All my friends were doing it and I couldn’t stop thinking about it.” He’s made a few grand, in theory, but he also only invested what he was happy to lose. “It’s like going to the casino and putting it all on black.” Crypto-mania!

  7. The chickens come home after currency debasement. The only thing that matters now is finding the next bubble and riding it. Tell me this is not hyperinflation under cover of whatever will wear it. LOL, Black Friday comes to mind….

  8. I can easily pop this bubble. All I have to do is buy some Bitcoin. The more I buy, the more it will fall.
    It works almost universally across all investment and asset classes at all times of the investment cycle.

      • “Now I know the perfect kiss is the kiss of death
        [frogs]”

        https://youtu.be/x3XW6NLILqo

        Fantastic song, mediocre singing. Yes, there are frogs, a cowbell and even a car crash. They wanted to finish it with Porky Pig saying “That’s all folks.” but couldn’t afford the royalties. Also, one one of the late Jonathan Demme‘s best music films.

  9. I used to really like this blog, but I’m glad I stopped reading about 2 years ago and went all in on bitcoin. There’s a reason why economists aren’t rich. 100% wrong about everything. Bitcoin, hold, houses, AUD 50c. When are you going to apologise to your readers?

      • Colleague I work with from China was telling me how easy it was to make money on the Shanghai stock market a couple of years ago, it just keeps going up. Then it crashed, she lost money. Tell me again when people cash out

    • @ Buzzy, overthinking things is the problem. As silly as it sounds, being a “do-er” in life usually gets you further. Economists are almost always years too early with their calls.

  10. Bitcoin is simply Tulipmania of the 21st Century. It shares all the characteristics of the Tulip bubble. No one knows what to actually do with them, they can be mined / farmed with significant energy input, and they are “cool”/fashionable.

      • Yes Mig, but like any good bubble, getting on early or even in the phase it is in now, is a spectacular way to make money. The ability to enter a bubble early, or identify it early can make one spectacularly rich. The regret many people now have for not buying BTC at $50, $100, $500, or whatever, will make many of them get on now in earnest, probably just in time to get burnt to a crisp.

  11. St JacquesMEMBER

    I have no idea about this but perhaps when it starts chew up too much of the world’s computing power and slow up the internet it will pop? But as for Bitcoin “stupidity”, it seems to me to be just the other side of the ridiculous and criminal global financial system.

  12. “BTC rose 4200% in 2017. If it repeats that in 2018 …” Price prediction of BTC = 420k by end of 2018? You heard it here first!

    • I’m sorry, but your prediction is wrong.
      After in depth investigation of the fundamentals of the gold market in https://www.macrobusiness.com.au/2017/11/bitcoin-not-bubble-australian-property/ I have come to the conclusion bitcoin to $300k any day now.

      from http://www.numbersleuth.org/worlds-gold/
      “The best estimate at the end of 2011 is that around 165,000 metric tons (or tonnes) have been mined in all of human history. That’s about 181,881 ordinary tons or 363,762,732 pounds, or 5,820,203,717 ordinary ounces.”
      Feel the rarity, 6 billion oz’s. That makes bitcoin approx. 300 times rarer, Gold currently approx. $1000/oz, bitcoin to $300,000 any day now.”
      How could I possibly be wrong. 🙂

      PS I think I upset Revert2Mean a bit as well.

      • The real question to ask is, how much energy does it take to produce an $10,000 worth of gold (current BTC price) versus mining one bitcoin?

      • Well in both cases sale price has an effect on mining cost, if it costs more to mine the btc than its worth people stop doing it and it gets easier, if it costs less people mine more and it becomes harder. My guess total cost to mine $10k of bitcoin would be a bit less than $10k, assuming efficient markets yadda yadda yadda.

  13. Hi, can anyone tell me what the best way to buy small crypto’s are? I was looking at coinspot but they are massive on authentication and I am questioning if my identity could be stolen as they are very small. I registered with coinbase with the plan to transfer bitcoin to bittrex but they have crashed today so I’m not sure about them either. Is anyone else concerned about posting their driver licence and utility bill online to coinbase, coinspot, independant reserve etc?
    Thanks!

    • Giving them my drivers licence?!

      I would be more concerned if I was considering trusting them with thousands of dollars of my money in order for them to trade an unregulated financial product for me.

      Oh wait.

      • I don’t plan to chuck a lot of money at it, but there are a lot of new coins that may have potential down the track, and why not try a $50 or $100? Look at ETH, Litecoin, ripple 6 months+ ago. They have increased by huge margins from a small base so you don’t need a huge amount to invest.

  14. I can’t actually read the “Quantum computing will destroy Bitcoin ” article since I’m a cheapskate, but does it mention that Quantum computing destroys Bitcoin by breaking Encryption, Which will break all electronic banking, all encrypted websites, all web shopping, all email passwords, all login authentication to every computer system in existence, including all the military ones.
    Quantum computing will destroy everything is a more accurate headline.

    • I haven’t read it either – but if you look at the incentives, the FIRST target for whoever cracks quantum computing will be bitcoin. Who is going to mess about compromising web shopping when there are BTCs to steal (and no government / police with any incentive to stop them?)

      • As soon as wholesale theft of bitcoin becomes a reality they become completely worthless as no-one will trust them anymore.
        But why steal bitcoin, it is a tiny amount in the grand scheme of things.
        Compromising the EFT/VISA network gives you all the money in the world, quite literally.
        What happens when the entire electronic banking system becomes completely untrustable? That is a civilisation changing event.

      • True I guess. Leads to the really interesting question of – if it ended up in nefarious hands first – what WOULD it be used for? No use undermining visa / commerce for financial gain. Your winnings immediately become worthless as you crash the entire world. The high tech version of trying to shoot yourself in the foot and hitting yourself in the face.

        An insurgent / anarchist movement would love it though.

      • This is funny because you assume everyone in the field is a malicious actor.

        Assume if QC can crack encryption it can be used to encrypt and so we’re back to current state, aren’t we.

      • I guess institutions have the ability to invalidate transfers since there is still a human element. Bitcoin is trust through algorithm all transfers are final.

    • What it will break any encryption with a known method based on a public key cryptography, which is what most security protocols and cryptocurrencies are based on right now.

    • Hang on, you are one of the sites biggest bitcoin spruikers. Shouldn’t you be a millionaire by now like Mig?

      • I assume that’s directed at me, so I’ll respond.
        Compared to a lot on here I guess I look like a spruiker but all I am doing is spreading information, usually when I see disinformation being spread.
        I really pissed off Revert2Mean yesterday by pointing out nearly 6 billion ounces of gold have been dug up, and was only valuable cause it was shiny, never made any claims on it being a better or worse investment than gold and I think I triggered him.
        Now regarding those two points, the first is indeed factual even by his all the gold dug up ever would fit in a cube the size of a tennis court.(I did the maths on the bitcoin supernova comments I think).
        And gold was arguably assigned value in history because it was shiny, along with precious gems(shiny rocks).
        It seems like a valid argument to me.
        I tend to comment on bitcoin posts because I know a bit about it and tend to see big steaming piles of bs being written in the articles here.
        Regarding bitcoin specifically my opinion is one of 2 things happen, it becomes mainstream and the value will be astronomically higher than it is now, or it doesn’t and becomes worthless. I think the first option is even more likely now than I did back in 2012 when I first heard about it, of course I didn’t have the balls to bet my entire financial future on it.
        I own a few btc I got back then, and intend to hold them for a while yet. Hell if it gets expensive enough I will be rich 🙂
        Of course none of the above precludes btc crashing by 50% or 75% or more and recovering in the meantime, it’s done it before and will probably do it again, but then so do most other markets.

      • To be fair gold does have some industrial uses. It’s not *just* a shiny rock.

        Those uses certainly don’t drive its price, however.

    • Um, won’t banks and retailers buy their own quantum computers and implement some form of yet-to-be-invented quantum encryption that can create a key that can’t be cracked by a quantum computer, the same way standard computers now create keys that can’t be cracked by anything less than a machine that is 1000s of times more powerful?

      In the meantime, stealing bitcoin en masse via decryption seems self-defeating, because nothing will devalue bitcoin quicker than the idea that it is completely insecure and being stolen methodically by someone with one of these machines. And then you won’t be able to spend it anyway.
      It’s like stealing a well known Picasso or the Mona Lisa and trying to fence it, except worse, the act of stealing it triggers a re-assessment of Picasso’s reputation, and suddenly everyone thinks he’s not even half the artist Ken Done was.

  15. One question was what’s a reliable Bitcoin exchange. There isn’t one really, just ones that are still in business. I use coinjar.com, an Australian one, but who really knows who is behind what. I’ve had Bitcoins stolen twice. The last time from Mt Gox. I’d be a multi-millionare today if …
    Second. You talk about the Bitcoin supernova, and it will revert to mean in spectacular fashion. The real troubling sign is the second level cryptocurrency. I see it as analogous to leverage. There’s a commentator that regularly posts valuations, now over $1000 each for other crypto. BTC has infrastructure to support its use. It is used to buy many of these other crypto. ETH has a business case. Many don’t. Therefore this edifice is much much larger than the value of BTC and because these others are valued in BTC it is not a zero sum game.

    • On top of that, this is no longer ‘black’ money. I know of groups of IT contractors spending more time trading and talking about trading than doing productive work. I’ve lightened my exposure and taken out more cash than I ever invested, but I m waiting for more insanity before I close out completely. This part.of the ride is always nerve racking. Explosive run ups are.a.trend.ending characteristic, but useless for timing your exit perfectly. My take away …. When you just value BTC you underestimate the size.of the problem significantly.

    • The barely suppress smirk on the face of Mt. Gox’s CEO as he make his ‘apology’ should tell you everything you need to know about how the ‘hacking’ happened. I’m sure the same smirk will appear on the face on the CEO of those exchanges when the whole thing comes crashing down.

  16. It is another exponential growth chart like population, CO2, world temps,human idiocy, disruptive technology uptake.
    These things are interrelated.
    It may be we are too smart for our own good.

  17. Why people speculate on BTC is beyond me. Me, I am old skool investing in highly speculative biotech stocks like ONCS and MRNS.

    I am going to be rich!