Legitimately one of the worst analyses I've read of bitcoin coming out of a mainstream news outlet. For anyone who understands this technology, the flaws in logic should be glaring. Below I provide my rebuttal.
Peter Morici is an economist and business professor at the University of Maryland, and a national columnist
Mr. Morici -- if you read this, contact me and we can have a public debate on the DLive platform. If you're teaching University of Maryland what I read below, you're not doing them or yourself a favor.
Why bitcoin is for gamblers and bad actors by
Peter Morici writing for the Washington Times
Bitcoin recently lost about two-thirds its value in seven weeks — the fifth such collapse in recent years.
Great way to start the conversation by glossing over the fact that bitcoin has gained 10x its value over the past year after rising from null value at its inception. Bonus points for subtly implying that it has gone through terrible "collapses" in "recent years"! If by 'recent' you mean less than 10, that would be accurate considering its only been around that long.
Severe volatility ruins its utility as an alternative to national currencies, and ordinary investors who would prefer not to finance criminals, rogue states and terrorists should stay clear of it too.
Severe volatility is bad. This we agree on. As far as being an "alternative", I personally trust that the value of bitcoin tomorrow will be worth more than my dollar is today. I'm sure some Venezuelans and Zimbabweans would agree with this sentiment as well. Protip: you can't tell criminals what to do. They'll use the most efficient for their task while keeping them out of prison. Some criminals even use politicians, journalists, and academics to do their heavy lifting for them that keeps public scrutiny far away. This is far more effective at avoiding prison than simply using money to solve your problems, but that is another discussion entirely.
Advocates of bitcoin argue governments are tempted to print too much money to finance spending, instead of taxing, and thereby fuel inflation. They entrust control of their money supplies to independent central banks, but devious politicians can still spend and issue bonds. Ultimately, central banks must print money to finance those if investors won’t purchase the bonds at desired interest rates. Uncle Sam did plenty of that during the financial crisis to bail out banks, GM and Chrysler.
Bitcoin has no central bank. Instead its balances are recorded on a system of encrypted ledgers kept on large private computers. New bitcoin is created mostly by solving complex mathematical problems, and the total number of bitcoin in circulation will be capped at 21 million.
No central bank is a feature, not a liability. The entire blockchain can fit on a micro SD card, which can run a Raspberry Pi. Not exactly large, but certainly private... and there are thousands of them, and more. Some will be orbiting in space soon.
Individuals keep bitcoin in digital wallets and at commercial exchanges, and depositors can lose their money if those are hacked or badly managed. Bitcoin has no FDIC to bail out depositors.
There is a rule in crypto that I would advise you to learn before you write more on this topic: If you own the keys, you own the crypto. If you don't own the keys, you don't own the crypto. This is important for n00bs who attempt to store all of their cryptocurrencies on exchange where they are not in control of the keys!! If you DO in fact hold your keys however, you are now your own bank.
This requires a degree of competence and confidence. If you're not used to these things, you're gonna have a bad time. YOU WILL PAY A TUITION.
Holding bitcoin is like putting your hard earned savings in a locker at a train station — if the lock gets picked, you’re broke.
If someone is stupid enough to think anything in a train station is safe and secure, locked or not, you're probably going to spend that money on something stupid anyway. That said, if someone believes breaking the private key encryption of bitcoin and other cryptocurrencies is as simple as breaking into a locker at a train station, I've got some math problems for you to try... and a bridge to sell you.
Bitcoin does not perform the essential functions of money.
Please, please, please define the functions of money for the uninitiated....
Virtually all businesses only accept dollars or another national currency for payment, as do governments to collect taxes. Holders of bitcoin or any other digital currency must convert those to national currencies to purchase groceries, plane tickets or the services of a sage economist. (I don’t take bitcoin, but I do take dollars and several foreign currencies.)
Dammit. No definition.
Conversions are slow and costly — who would pay a $25 dollar conversion fee to purchase a $4 pound of bologna?
How exactly did you arrive at this $25 fee? You say this as if that is, was, and has always been, the normal fee for transactions. I personally just paid $0.20 for a transaction and it confirmed within 6 minutes. Note: these fees apply toa transaction of ANY size and appears over the network instantly. Confirmations add to the certainty of the transaction and the first happens in around 10-30 minutes. Much better than a stupid checkbook. Damn I hate those things.
Bitcoin’s value fluctuates so much and it can be quite slow to convert back to dollars to make large purchases — like a house or a retirement annuity — that it is a lousy store of value for your savings.
Slow to convert? Have you ever actually made a bitcoin transaction or is all of this based on expert opinion on CNBC? If you're worried about acquiring funds from converting bitcoin into fiat in order to buy a house or a retirement annuity, you did not plan your time wisely. Depending on your bank and exchange of choice, a week is the longest you'll wait. Usually in a day or two.
That reduces the purposes of holding bitcoin to speculation and illicit purposes.
Ooooo.. now its getting good. I'm noticing a subtle theme.
In December, about 18 percent of buyers purchased bitcoin using credit cards and many said they would pay off their balances using profits from their investment. Such buying on essentially zero margin puts banks that issue credit cards at significant risk of nonpayment. Consequently, Citibank, J.P. Morgan, Discover and many other big banks have decided to no longer permit cardholders to exchange dollars (or any other national currency) for bitcoin.
I'm reminded of a saying about fools being taken of their money. Also reminded of the importance of understanding threat dynamics and 'putting yourself in your enemies shoes'. If you honestly believe that the banks you listed disallowed use of credit cards for crypto purchases SOLELY TO PROTECT THEIR CUSTOMERS and not their oligopolistic control, you are far more trusting than myself.
In an increasingly cashless economy, those decisions make it even less likely that bitcoin will ever become a medium of exchange and no more than a derivative — a financial instrument whose price is determined by the value of an underlying asset.
It is already a derivative and its underlying asset is a global token made out of electricity and secured by math. If you fail to see the value proposition of those two distinct qualities, I suggest you try and live in a country without access to debit cards and banks.
The goods producing capacity of the U.S. economy ultimately is the asset behind the dollar. The full faith and credit of the U.S. government sounds lofty, but it’s the goods and services Americans can make that count.
Bitcoin has no Bitland — or perhaps it does.
It's called the internet. And yes, its pretty tangible.
Our friends in the gray economy and less desirable types raising money for North Korea and drug lords like cash. The Federal Reserve and Treasury can track money moving among banks quite easily but not cash — that’s why the Treasury no longer issues bills in denominations over $100.
Ahh... he managed to circle back around to this attack. The subtle theme returns. Well done. Some statistics or research would have helped.
Bitcoin ledgers are kept on private computers theoretically beyond the eyes of government officials; hence bitcoin has great utility for all things illicit. However, now governments in China and South Korea are cracking down, and the United States is not far behind.
And if hackers can steal from the exchanges, the Treasury can surely spy on them. Sooner or later we are going to have enough drug busts thanks to such snooping (as necessary, done with warrants) that drug lords and rogue states will have to lug around huge suitcases full of Jacksons and Benjamins for the lack of larger denominations.
You truly have no idea how this technology works, do you? This reads like a parody of other bad analysis of this space. Wow.
When bad actors start dumping bitcoin, its value will drop for good.
Solid fundamental analysis there, Mr. Gekko.
Meanwhile, the ordinary investor who trades dollars for bitcoin is merely gambling that he can get out before the bottom falls out and is helping finance some of the worst malefactors on the planet.
Really tied that bow together nicely. You forgot to mention that its destroying the planet and preventing us from contacting aliens. I would have applauded you more if you somehow insinuated that cryptocurrencies cause colon cancer or genetic disorders.
I just don´t understand why people prefer to criticize a thing they don´t understand, there is so many ways to say that you don´t understand this technology without making a fool of himself.
This "experts" are ridiculous, some know what they are talking about and want to protect the old system to secure their profits... and some have no idea what's the objective of the crypto world. Eventually cases like this happen.
Just a big problem with 'assumption of knowledge'... unless they're malicious and deceptive of course.
But just assuming 'well I know this technology and how this works, so this can't be that much different'. Next thing you know, you're agreeing to write a guest column in the Washington Times on a topic you've spent approximately 5 hours researching.
At least its easy to spot :)
like your new post and profile. Thank you for your service ! I just followed you!
This is very good post. Thanks for share.
Nice to see your post, great experience share of the post, very good job, well information
Thanks for great share
Great post! You just got a 6.67% upvote from @edensgarden!
Thanks for tasting the eden!
You got a 1.15% upvote from @buildawhale courtesy of @blakemiles84!
If you believe this post is spam or abuse, please report it to our Discord #abuse channel.
If you want to support our Curation Digest or our Spam & Abuse prevention efforts, please vote @themarkymark as witness.
Thank you for collaborating with me to promote this post as explained at https://steemit.com/steemit/@jerrybanfield/10-ways-to-fund-a-steem-growth-project.