The end of Bitcoin

See the latest Australian dollar analysis here:

Macro Afternoon

Via the AFR:

Currency expert Kenneth Rogoff warns that Bitcoin is “totally a bubble” because governments will ultimately impose regulations on the anonymous crypto currency and depress its value.

“But you might get very rich first.”

…Dr Rogoff said Bitcoin is “not going to be worth much” within a decade.

“I don’t think it will be zero because countries like North Korea will adopt it.

“In the long run, governments will make it difficult to use in legal transactions and that will dramatically reduce its liquidity and value.”

“If you look at the history of currency innovation the private sector always thinks of things first and the government always comes in and regulates.”

$13k overnight:

Government’s should act now. But as usual they’ll be too slow and only come in when the thing has become so big that the bust may destabilise wider markets.

Like all pyramid schemes, do not be last out!

Houses and Holes
Latest posts by Houses and Holes (see all)


  1. I don’t think so. “You can fool some people some of the time but you can’t fool all the people all of the time”. New kid is on the block.

    • Microsoft and other big players have just adopted/invested into IOTA digital currency as a way of paying for data in future, and example given, a IoT fridge orders eggs when they are low, decides on the best place to buy and pays with IOTA currency or BOM in Australia charges some small price for downloading its weather services data in future. IOTA isn’t blockchain, it uses something called Tangle but still its a digital currency that is been adopted by a number of big players for the secure data market place. Cisco, Samsung, Microsoft, Volkswagon are all getting on board.

      As for the comment that Bitcoin is a bubble, well that bubble is now just about at 19,000AU as of this writing and if its going to crash in the next 10 years think of it in terms of realestate, market goes up, market goes down

  2. Betting markets paying $1.45 to be above $11k

    “What will the Bitcoin close price be on 31st December 2017? This will be settled using the close price stated on”

  3. This is the maddest thing I have seen in investing – it’s like Tulip mania – in Sydney you hear people talking about it all the time – I met about three people last night opening accounts heard some guys on the street talking about Etherium – it is insane – what is it with human nature we keep making the same dumb mistakes

      • Bitcoin is not rising. Fiat (paper money) is crashing via QE low interest rates and debt.

        For those crying “Bitcoin is a bubble,” think about this. Is the “automobile bubble” over and mankind will be soon returning to horse and buggy? Is the “email bubble” over and we are all going back to writing and mailing physical letters with postage? Of course not.

        No one thought we could fool the population into using “pieces of paper” as currency, but by allowing those pieces of paper to be sold back to the bank for gold (or silver) – this allowed the conversion to happen. Between FDR and ending with Nixon (1972), the government decoupled gold from the paper currency – and the masses believe the pieces of paper in their wallets that say “$100” have value that is “backed by the full faith and credit of the US Gov.” So the ‘pieces of paper’ are backed by an entity that is -$20 Trillion in debt.

        The real bubble is “fiat” currency. Australia has ~2 Trillion in government and household debt.

        Remember, when you melt gold, you get gold, not “US gold,” “UK gold”, “French gold”, etc. Mankind has been in search of scarce resources to trade (sugar, sticks from certain wood, metals, chickens, …). Some worked better than others, for example, gold is scarce but not finite, is sub-divisible, and one ounce of gold is no different than someone else’s 1 ounce of gold. Like gold, Bitcoin is scarce and divisible (truly finite supply – 21 million total and caps out at 2140 and is divisible to 8 decimal places).

        Bitcoin is not rising. Fiat (paper money) is crashing. Pieces of paper with numbers printed on them (fiat currency) backed by bankrupt governments is crashing. You can still buy land, stocks, investment grade diamonds, Bitcoin, etc. to hedge the coming fiat crash.

        Ask yourself, “Is my $1,000 bank balance $1,000 out of what?” What is the denominator? The population is getting smarter as more people read the Internet. They want to know how many dollars, yen, euros I have out of 50 trillion or whatever. It matters.

      • Yep.

        Though it is important to remember that the destruction of fiat has been driven by the ‘needs’ of the private banks who yet again have demonstrated the perils of allowing parasites a role in the public monetary system.

        QE had one key purpose and that was to create a market and a floor for asset prices that had been driven up with fraudulent bank credit creation.

        A secondary purpose was to allow insider asset holders to exit their positions.

        Bitcoin is simply exposing the fraud that has been pulled by the banking system with the assistance of regulators who were either captured or felt there was a gun at their heads.

        The most remarkable thing about the rise of Bitcoin is the complete bubble in BS.

        Anyone following the bitcoin debate with a scintilla of perspective will have been struck by the army of useful idiots who don’t get what is going on.

        We are witnessing the biggest threat in decades to the vampire squid infestation of the body politic and instead of celebrating many are running (and hopping) to offer the squid moral support.

      • Just because fiat is stuffed, does not mean bitcoin is golden. You give the examples of rare metals and woods, yes. These things are not only rare, but require cost inputs to grow/mine and store/maintain. Which means there is a basic price anyone must pay to compete with those assets.

        Bitcoin is finite, but crypto is not. Anyone capable of writing 1 blockchain system is capable of writing a script that will generate a new blockchain as rapidly as possible. You could produce ??million, billion, trillion blockshains a day.

        So what does Bitcoin have? Name recognition. That is all. Anyone who has watched the rise and fall of tech companies over the last 4 decades will know very damned well that names come and go.

        The PC you’re currently using used to be described as an ‘IBM Compatible’. Because IBM was the benchmark for x86 PCs.

        Facebook is a household name, but there were a lot of similar sites before it, including MySpace.

        We see this a lot. There are a tonne of Uber/AirBnB/Kickstarter/GroupOn/eBay etc clones out there with name recognition. A lot of people won’t even think about it. The cost of replacing a brand is a marketing campaign and a few key figures speaking in favour of the new/clone system.

        Bitcoin can and has been cloned many times over. All we need is some notable economists and a massive marketing campaign and a new blockchain can be established.

        The argument that the abuse of fiat is what is driving BTC price is also seriously flawed. BTC goes up and down in big swings, but the things devaluing fiat aren’t being turned off and on like that. Confidence & greed is all that sustains BTC’s price. Confidence can be broken and greed evaporates when short term gains do.

      • Well said, Fekname. Fiat is devaluing but not as quickly as Bitcoin is growing, but nobody knows the extent to which the growth will continue as more competitors edge their way in. As fiat crashes, gold should be soaring… but I guess that’s a different ballgame.

    • The people who bought Bitcoin at $100 (lots of it) could get rich but those who buy now need BTC to reach A$40k just to double their money. The risk/reward payoff is outrageously asymmetric. The average Joe is an idiot when it comes to understanding risk.

    • It is completely wrong to call buying bitcoin “investing”. It is “speculating”. The most important thing to know when you are :speculating” is that you are speculating! You should be prepared to lose money because you are buying something not physically worth what you are paying for it at the time of purchse and that you are hoping for it to increase in value. If the sole reason for people to be buying BTC is speculation, then they will eventually tire of it and that is when fortunes are going to be lost. If you have any money in BTC, then you will have to decide when you have made enough(or lost enough) and sell. This is not going up forever. Once the bubble cracks there is going to a lot of pain going round. Personally I think there are a lot more poeple that have to be sucked in before the BTC mania will end. Once it has reached its saturation point, that is when it will turn. Think it will probably end somewhere between $100 000 and $1m per BTC, but am unwilling to find out.
      Maybe if I had given it a bit more thought a couple of years ago it would have seemed logical that there would be an enormous bubble and would have bought just to participate in the bubble. Will see $100 000 soon as the real worldwide frenzy kicks in and everyone starts buying.
      We’ll know in a couple of years how this is going to end.

    • Get on all the Aussie based exchanges first an check which markets they have. Atm all exchanges are dealing with massive numbers of new accounts which is slowing down their kyc procedures etc. Perhaps try and open an account with a couple of AUD/crypto exchanges. Once you have used fiat to buy crypto you can open a couple of accounts on foreign exchanges and then start to have some fun on them (they have WAY more markets). HOWEVER buy a hardware wallet!!! Don’t bother doing any of this without a hardware wallet for the crypto you will invest in and store. And for cryptos not yet supported by hardware wallets that you want to buy and hold, set up a wallet on a hard drive, don’t keep it on the exchange.

      Personally I use BTC markets as my gateway (AUD/crypto exchange) and then I have accounts with poloniex, binance and bittrex. BTC markets will send a snail mail letter to you as part of its kyc procedures. I’ve a trezor and it is easy to use once you get used to it. My ether wallet now has good educational click throughs to give you info to make sure you protect yourself.

      The whole thing is a bit overwhelming at first but it isn’t too difficult. Just do a lot reading, keep your cool, analyse what you read, come to your own conclusions. Good luck if you are taking the plunge. It’s fascinating and educational.

      • Buy a TREZOR hardware wallet. You can use a software wallet in the interim while you are awaiting delivery. They key thing with a TREZOR is the 24 word seed that will be used to secure your device, and enable to to recreate your device in the future should yours stop working or be lost. This seed is combination of words from a widely distributed2048 word list, but if you lose a copy your seed and your device fails you lose everything. Secure the seed safely on paper or even steel (Cryptosteel) in multiple locations (trusted relative or friend). Do not underestimate the importance of this step.

        It can also be used unique Two Factor hardware key to secure google / dropbox / gdrive accounts to replace SMS & Authenticator codes (TOTP) which are vulnerable to a range of hacks.

      • Popcod- thank you for the lengthy reply.

        I actually need to sell, rather than buy. What’s the benefit of a hardware wallet, in simple terms, for someone like me?

      • A hardware wallet completely secures you against hacking. The physical device is required to transfer Bitcoin off your wallet. That is why the physical security of the device and multiple secure copies of the seed are necessary.

        If someone can get hold of the device, there is a second layer of PIN security for the device itself. It won’t help you sell any quicker, just a much improved security model while you are trying to sell. It avoids you being Mount Goxedd (google Mount Gox).

      • @Andrew, about 2-3 weeks, because they only send to the street address and we have a post office box and the first letter got lost (we’re semi rural without a letterbox) and it had to be reissued and our mail had to be redirected. It was a saga. I got my account before they upgraded their kyc, but my parents ended up dealing with the new system.

    • Hi Peachy, Mig isn’t allowed to comment at the moment but he says or perhaps

  4. “I don’t think it will be zero because countries like North Korea will adopt it.”

    What an idiot. On this alone we can disregard anything he has to say on crypto. In what way & why would North Korea adopt bitcoin? Do they want their opponents to be able to track their transactions?

    • Yeah. North Korea will adopt it.

      In other breaking news, Hitler just rang and said he would adopt it too.

    • The moment I saw Rogoff I knew the article should be read for laughs.

      When someone quotes that guy they are just “….. havin a Laff”

      • Rogoff also hates cash . . . and any form of genuine Democracy (see his Brexit article on Project Syndicate).

        His view of Utopia is disenfranchised serfs forced to use government-issued electronic money so that their every move can be monitored.

      • . . . so that their every move can be monitored, and more readily taxed!

        Surely this must end well(!)

      • Rogoff is a ‘Statist’ shill. Wants government to control every element of people’s lives.

        The only one worse than him is Cass Sunstein who is, frankly, the most dangerous bureaucrat in existence.

    • Its true that Bitcoin is no longer useful as cash. Transaction fees are too high for small payments so merchant systems will drop Bitcoin. There are other better cryptocurrencies. The path ahead may get rough but cryptos are here to stay.

    • Ronin8317MEMBER

      It is too volatile to use in transaction. No problem with using it for speculation, but for transaction the price changes too much in a day.

  5. H&H … Please, stop the bull already. Bitcoin may suffer if the government’s make it unlawful AND expend significant money to enforce penalties and criminal charges. Yet it will still undeniably have changed the game and like narcotics, weapons etc, will still be used and preveleant and carry value, even perhaps more so than the 13k even if that’s after a significant fall.

    Mate, stop with the useless headline prints. Post less often but keep it high value.

    • MB is struggling to get by (which is normal for a start up business), and bitcoin posts drive traffic – just look at the comment count. The team needs to increase their subscriber base, so the logic is to make all BTC posts free, to draw in readers who might then sign up (even if only for a trial).

      Unfortunately I don’t expect them to do very well with their bash bitcoin angle, as they’re not bringing anything new or different to the table that you couldn’t read online six years ago. Hopefully their analytics will tell them that eventually.

    • HadronCollision

      @ Chris

      The value is not in comments etc. MB sometimes post “become a member” in response to comments

      It’s not really a powerful value proposition is it

      If MB offered value like Charlie Aitken did, or like what Grant Williams does, then yes.

      Instead, the value proposition appears to be around some posts. The posts are insightful, yes, and the comments great, but value is subjective and in my view it’s not there. Others will vehemently disagree.

      I actually would rather spend money backing MB into a senate seat where real change can be effected

      • Didn’t mean to imply that MB’S value was in the comments; I just use the traffic and comments on articles as an indicator of how many views it is getting.

        The value I get from MB is in their Australian economic analysis, especially in the jobs, housing, and retail markets.

  6. H&H you will be proven to be dead wrong about cryptos & specifically bitcoin. I don’t think you’ve cottoned on to the impact it will have across the world in a very short period of time.

  7. I’d like to see a poll run by MB to see how many readers have bought into cryptos. I’m starting to think it might be around 50%.

    • Relevant Stakeholder

      I got in when mig was goading people a month or so back. Things I’ve learned from the Oz housing market:
      A) A bubble can go on for a long f%$kin time
      B) MB an its readers pick bubbles early
      C) Asians ride speculative bubbles til their eyes bleed, currently there is strong demand from Asia

      Also on the off chance it destroys the fiat based financial system… well… the likelyhood bankers and other debt peddlers suffer physical harm increases.

      Treating it as a Melbourne Cup punt at the moment, just wanted to join the spectacle for once!

  8. A crash in bitcoin may now very wel spread into other areas due to its current size. If the Chinese are heavily invested in this it may take out their shadow banking and with it their banking system.

    How much debt in China again?

  9. Bitcoin is the weaker currency long term for three reasons.

    1) attrition via seizure or loss of the key
    2) it has no product
    3) it requires too much power

    Inflationary (monetist perspective) crypto, with a viable product and “interest” (proof of stake) will be more viable long term.

    Whether that’s ethereum or something else is up for debate. Eth does have the first mover advantage though.

    Inflation covers the attrition, a product ensures real money will flow in, and proof of stake cuts the power.

    The biggest challenge is transaction volume, and it looks like eth has more potential for that because the chain can split into “uncles” without forking.

    • I see the equation differently:
      1 (negative) it is not backed by a standing army
      2 (positive) it has earned trust

      • Sure.

        Now, loan me your bitcoins and I’ll return the current AUD value+10% in BTC in a year.

        If you’re willing to make that loan, you’re speculating that they’ll be worth a lot less in a year.
        If you’re not willing to make that loan, you’ve found another weakness. Given that they’re perpetually deflationary, there’s little incentive to spend them.

      • Myne – that is a strange straw man. It touches much more on the matter of volatility than any inherent issue with btc.

        If you were a good credit risk I’d make the loan. Because a 10% return is great.

  10. Ken also said Australia should benefit from the US growth catch up phase via technology. So goog,fb,uber appl will start paying taxes here?

  11. …and in real news, Bitcoin is currently in another rally because test results have been released which show transactions have been successful on the new Lightning Network, potentially bringing this second layer scaling solution a lot closer than was thought! This is YUGE!

  12. Destabilise wider markets? I doubt it. The entire crypto market is MINISCULE compared to say, the derivative market.

  13. What I don’t understand (someone help me out) is why Bitcoin?

    The core innovation is the blockchain, which I am completely sold on. But Bitcoin is not the blockchain, Bitcoin is simply a user of the blockchain. A large number of other cryptocurrencies can be (and have been) created that also use a blockchain.

    Another innovation of Bitcoin is the limitation of its supply as a new block cannot be created without proof that a difficult-to-compute nonce has been calculated. (On a side note, this is likely to impede BTC uptake in the future as it is inherently deflationary if an economy is growing). However, again, there’s nothing to stop other cryptocurrencies from creating their own mining systems, equivalent to Bitcoin (and they have).

    So why Bitcoin? Why not any of the other cryptocurrencies? A parallel would be mining for finite amounts of precious metals then minting those metals into coins, where there is no real limit on the number of precious metal elements that can be mined in a virtual world with an unlimited periodic table, then to turn around and scream “gold coins are the way!”.

    It looks like a straight up inertia / crowd play. I do think that crypto has a bright future, but I don’t think there’s anything spectacularly unique about Bitcoin that means it will remain king of the cryptocurrencies. It was first and has the most active community of developers and users. This is what’s being speculated on right now as I see it, a projection of future popularity. I hope it IS a game changer and IS popular into the future, but that really is a speculation with the real risk of a “pump-and-dump” happening here.

    • A lot would agree with you Mediocritas. I have been commenting here for a while that Bitcoin has serious problems and other cryptos like Bitcoin Cash do a much better job of being peer to peer cash – as it was originally intended. Its development has been taken over by an insurance company (AXA) and now that it is just trying to be digital gold it wont surprise me if the market wakes up one day to find the use case a bit hollow. The price action now is manic. It may well have a massive pull back but I do believe that cryptos are here to stay and for the reasons you state, another coin will rise as a more useful cryptocurrency.

    • Mediocritas,

      I find that the most interesting bit of all.

      It is also the bit that is the most educational.

      Clearly there are very few barriers to entry and yet it rises and rises (though other coins are rising as well)

      The ONLY thing keeping it afloat is faith, trust and confidence.

      It does not even have what paper backed by the state has to give value to its paper…..violence.

      Yet despite all that it survives.

      Kind of makes the point that what given money value is trust.

      It does not matter if there could be countless bitcoins. All that matters is that people for whatever reason trust the one they trust.

      Unfortunately, most people have little choice but to use money produced by a monetary system that is molested by the private banks.

      Viewed from that perspective is it really that hard to imagine why people are desperately searching for money they can trust.

      As you know my view is that the best most trust worthy ‘block chain’ is a system of deposit accounts run by the public sector.

      That would be my preference.

      Though of course I welcome private monies like bitcoin as a means of keeping the public sector money honest.

      Monopolies are not to be encouraged unless there is simply no alternative and when it comes to money that is hardly the case.

      • Cullen Roche has written some interesting stuff on what constitutes “moneyness” in the past (eg: Trust is indeed key. The threat of harsh repercussions for attempting to break the rules (violence of some form), are, when it really gets down to it, required to maintain trust in a monetary system.

        I argued (and Cullen agreed), that hyperinflations are initiated not by excess money creation, but by loss of power of the authority that controls the money system (particularly political turmoil). All the money that’s need to create hyperinflation is already out there, it just needs a reason to all blast home / be sold at the same time.

        Violence aside, ease of use is a key factor in determining the success or failure of a currency. Awkward money tends to disappear from circulation, being replaced by more convenient coupons that represent the awkward form.

        That “couponisation” of a currency creates the potential for fraud (creating more coupons than the underlying ‘coins’ they represent). Creating multiple claims on single resources is the fraud at the heart of our financial system and, like a game of musical chairs, it’s all fine when everyone’s up and dancing (and thinks they have a chair). Only when they all try to sit down do they realise that their “claim to a real chair” actually points to nothing.

        [edit: Bitcoin can avoid this (if only bitcoin is used) as supply is constrained, but the supply of crypto in general is not constrained. But even bitcoin runs the risk of multiple claims being created against it, which is, indirectly what the current Tether situation seems to be creating. ]

        Our fundamental currency system (coins / notes) is backed by the force of our government. Banksters have managed to hijack the system by creating fraudulent claims, making credit money indistinguishable from base money in our system, hence hijacking the trust system and putting the violence system into their service.

        The ability to exert control / power over others is key. This is why economic and monetary discussions inevitably end up becoming political. Who holds power over who in our society and is it acceptable? A “school” of economics describes a political view more than anything else.

        I’m with you in that I think humans cannot be trusted with concentrated control. Power MUST be distributed, meaning that the money system needs to be under democratic review and control of it cannot be allowed to concentrate into the hands of a few. A government that manages the money supply, must be democratically elected and accountable to the broader populace if inflation is mismanaged (public money). (Which is, incidentally, why I trust Bitcoin no more than I trust Gold. It will be hoarded and leveraged into power).

        At one time, economics was under the discipline of Political Economy and such things would have been considered. The field separated itself because economists imagined themselves to be real scientists and thought that if Science (particularly Physics) could declare itself separated from Natural Philosophy, then so too could Economics declare itself separated from Political Economy.

        But whereas Physics purged itself of Metaphysics (leaving that in Philosophy), Economics never managed to purge itself of Politics, and never will, because capital is inseparable from social power:

  14. Swings like mad now. Just a natural function of the exponential curve.
    You need guts to trade in it now. Expect 5-15% a day as normal activity.
    If you not experienced stay out.

    18th December will be interesting once short positions come into play.

    Does anyone know if short positions will get logged somewhere?

    • I’ve been trying to understand how shorting a (derivative) futures contract can bring the spot price down? Tail wagging the dog?

      • yeah I can’t get a clear answer on whether shorting can put downward pressure on the price, however a lot of articles are saying the the futures market could give bitcoin a boost allowing large funds to enter the market. I would then assume that the opposite would be true

  15. Don;t know enough about BTC but is the rise because once you buy it’s not liquid enough where you can just sell it or use it to buy other items? I thought it was difficult to use BTC to buy stuff, yes you hear the odd bloke trying to sell his house for BTC but other than that you can’t got to the ferrari store or 7.11 and buy stuff with it ?