Will Bitcoin follow the silver 1980 bust?

Bitcoin mania has similar parallels with the epic silver bubble of the 1970s:

Silver went through a huge bubble, moving from $6 to nearly $50USD per ounce in just over a year due to the Hunt brother’s cornering of the market. At the peak they owned one third of the world’s supply.

Sound familiar?

The Winklevoss twins (of ex-Facebook infamy) are the first billionaires from the Bitcoin bubble. While they may not have the same effect as the Hunt’s on silver, the parallels are similar.

At the end of last year, Bitcoin had fallen to just over $12,600USD and has recovered somewhat to almost $15,000, not after having a steep fall last week due to some exchange sheninagans:

Again, another echo of the silver bubble, where it was due to the regulatory authorities and exchanges that stepped in and changed the rules regarding leverage that ended the Hunts’ gamble.

Almost every major central bank has been forthright against Bitcoin and many regulatory authorities are pushing back against the cryptocurrency. Furthermore the ridiculous amount of electricity used for mining is getting out of control.

From Bloomberg:

The global power needed to create cryptocurrencies this year could rival the entire electricity consumption of Argentina and be a growth driver for renewable energy producers from the U.S. to China.

Miners of bitcoin and other cryptocurrencies could require up to 140 terawatt-hours of electricity in 2018, about 0.6 percent of the global total, Morgan Stanley analysts led by Nicholas Ashworth wrote in a note Wednesday. That’s more than expected power demand from electric vehicles in 2025.

“If cryptocurrencies continue to appreciate we expect global mining power consumption to increase,” Ashworth wrote in the note.

Miners will probably concentrate in low-cost power regions, including China and the U.S. Midwest and Pacific Northwest. Miners earn bitcoin-denominated rewards for performing the complex calculations needed to confirm transactions in the cryptocurrency.

Even Warren Buffett sees the danger and is on the bear side. From ZH:

Warren Buffett doubled down on his criticism of bitcoin Wednesday during an interview with CNBC, where he said he’s almost certain the cryptocurrency craze “will end badly” and that the current runup in value will be fleeting.

“In terms of cryptocurrencies, generally, I can say with almost certainty that they will come to a bad ending,” said Buffett, the chairman and CEO of Berkshire Hathaway.

“When it happens or how or anything else I don’t know, but I know this: If I could buy a five year put on every one of the cryptocurrencies, I’d be glad to do it but I would never short a dime’s worth.”

There may not be a silver lining here in speculating in the first stage of the rise of the cryptocurrencies.

Comments

    • It may bust but with the momentum of over a million people a week signing up and now exchanges blocking new applications because they are so overloaded with the verification processes it all just shows a lot more growth for the next 6 to 12 months. You can compare past charts but its like apples and oranges, the one fact you have is the huge numbers of people signing up.

      One thing I have noticed on crypto forums is the number of people that have had a guts full of the current system and the centralized banking cartel that even this website has labeled banksters. What will be interesting is when so much money transfers into crypto and how will it affect capital ratios or their ability to loan out money to the real-estate bubble.

      • How exactly do you think money “Transfers into crypto”?
        Where exactly do you think it goes? It just transfers from person to person, same as when anything else is bought and sold.
        Does money transfer into supermarkets as well?

      • True, accept that as more business and services adopt crypto that crypto becomes a form of currency where money is no longer needed. We will see a transition stage where money turns into crypto but at some point I believe its possible that crypto will take over as a dominate form of currency for many products and services, its all dependent on how many companies adopt the acceptance of crypto payments but many are finding that if they do accept crypto as a form of payment they access a much bigger market worldwide. There will be websites in future, maybe even now that just won’t accept cash and will opt for just receiving crypto payments. Once crypto finds a stable medium, where the price stabilizes more it will be adopted more.

        Unlike paper money many crypto’s you can only generate so many of them, paper money banks and gov just print as much as they won’t often interfering with rates for a short term benefit or a vested interest.

        As for bubbles, http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11973246 read this section, “””The World Bank believes the biggest risk comes in financial markets, where share price valuations are at levels not seen before except in 2000 and in 1929 – the dotcom bubble and the Wall Street Crash.”””

        This could of only happened because of reckless money printing worldwide, centralized control with vested interests and turning a blind eye to regulation. It’s another good reason to go to crypto, gov and banks just can’t be trusted to self regulate as they screw it up every time with greed.

        I would expect some farmers to click on to the fact that it would be better to be paid in crypto now than cash as they maybe better off.

      • Cryptocurrencies are not fiat, they have no backing of any Government (you can’t pay taxes with a cryptocurrency), and no one is using them to buy stuff.

        They’re more like a luxury commodity like Gold/Silver.

  1. Its probably trading a symmetrical triangle pattern at the moment just touching the bottom at 3 points.
    Could rise again to around 16200 and you would need to check for a potential breakout there.
    Its certainly very nervous trading now as it gets tighter to the apex and I would lean towards breaking down

  2. I firmly believe that BTC will follow silver’s historical path ; the speculative bubble phase of commodities, equities and bonds have entered the “peaking area” period.

  3. But Silver isn’t an alternative to central banks. Crypto offers a form of decentralized transaction system. It means we may not need banks anymore… So whilst speculation around Crytos may be out of control the block chain will live on and change everything in 1 way or another.

    It may no longer be possible to use QE the next time there is a financial disaster.

    • It may no longer be possible to use QE the next time there is a financial disaster.

      How awesome will it be to face the next economic catastrophe with the wealthy in control of nearly all the money and having to beg them to help out of the goodness of their hearts ?

    • Cryptocurrencies generally don’t have most of the desirable qualities that you want for something actually used as money. Bitcoin especially – thousands of times less energy efficient than traditional payment processors (Visa, PayPal, RTGS, SWIFT, ACH, etc.), payments costing up to tens of dollars, huge numbers of unverified transactions, fixed limit incentivises holding instead of actually using it… It’s no surprise that some of the few places accepting it (like Steam) dropped it. At the end of the day, it’s a virtual commodity with no fundamental value, and little use apart from speculation. Just hope there are plenty of greater fools around.

      Some of the critics have tried to soften it with “Bitcoin is useless and will eventually fail but blockchain is still revolutionary,” but more and more I agree with an article I read recently that argued that the usefulness of blockchain technology in general is really pretty overstated.

  4. Where did all the bitcoin fanbois go? Why isnt there 100 comments on a bitcoin article like there was 4 weeks ago? Oh, thats right, they were all full of sh1t…

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