The double-whammy of China's exchange shutdown plans and JPMC CEO Dimon's scathing attack drove prices off their highs. Bitcoin dropped from $5000 to $2950. It recovered to $4000, but prices appear stagnant, and still looking for a catalyst to return to recent highs. Technical analysis of prices warns that a head-and-shoulder pattern (where a recovery fails to surpass a recent high) point to further declines as the lack of momentum upwards leads more and more high-cost purchasers to sell quickly to cut their loses. Without a recovery to $5000, this price-analysis approach suggests a re-test of $2950. If buyers don't appear ahead of that turning point, a downward breach typically points to further losses. Perhaps $2500. Perhaps $2000. In the absence of fundamental analysis (because there are no profits or forecasts of profits or even use) these round numbers are psychologically meaningful and are significant guideposts to short term price movements.
But what about the long term? Dimon specifically called out Bitcoin - not the blockchain - as something that will not be around for the long term. How could he jump to that conclusion and imagine he can predict the future better than people with real expertise in cryptocurrency?
Before we dismiss Dimon's arguments as motivated by a conflict of interest, or simple ignorance, doesn't it make sense to try to understand them? And to consider both the context of his remarks, and what recent history suggests (while remaining aware that history only suggests - it neither dictates not even predicts).
First of all, a key point is that Dimon's intended audience is not people with some expertise in cryptocurrency but a general financial audience.... people seeing the huge spike up in prices who may be tempted - while ignorant - to rush in and but bitcoin or ether or an ICO.
As in INVESTMENT there are reasonable arguments that Bitcoin will fail, and that best hopes & prospects have been disproven. Putting aside its role as one gateway into the world of cryptocurrency, the hope that it would become a viable, widely-used payment system for the general public is now a lot less plausible than it was just 3 years ago.
It's too slow, too expensive etc. The higher the price and the greater the volatility, the better the trading & speculative opportunities - and the worse for actual payment use, and thus for a long term role in real world payments.
Sure, no one can see the future. Bitcoin may survive... But is it really plausible to believe that the original invention will represent the final word - where the entire crypto world is deploying efforts, new tech innovations, learning from past failures successes & shortcomings, to improve on the original model?
The last time the collective wisdom learning & ingenuity of man was not able to improve on a new technology? Fire v1.0?
Bitcoin's contributions are many . . . but anyone can copy & improve on them.
How do you know if you're reading a worthwhile response to Dimon? Does it make a distinction between the blockchain - available for copying and improvement by all - and the overpriced semi-used payment tokens of the original bitcoin network? Does it discuss the early days of the Internet but without making the distinction between Internet-the-technology and early websites that were thought to be extremely valuable but have long since vanished?
The technology - or a future version of it - may well turn out to be priceless! The early versions of it, the half-baked ideas, a high percentage - in any past novel industry (airlines, electronics, computer hardware, internet websites) have turned out to be unprofitable. Picking the winning version or two or three out of 100 or 500 approaches? Good luck with that. Read about Geocities . . .
Dimon's been around the block a few times. In case you don't know his bio too well, he pulled JPMC away from subprime early enough to avoid the crash that destroyed Citi and BAC and ML and BSC and LEH and AIG.
The blockchain tech is an incredible innovation, and incredibly valuable to .... the world. During the run up, when it is still not clear what works and what doesn't, there are speculative profits to be made in many or all versions. But this doesn't give any investor "equity ownership in the internet". It is an option - if the profits materialize in a sustainable way, the value can go up 100 times. But most options? Expire "out of the money" and lose 100% of their value. That's the core of Dimon's warning. You're not getting equity in something that will maintain some value over the long run - you get a share in a dream, a rumor, a possibility. In prior cycles, there were a few surviving versions and if you didn't spot those among the crowded field? You lost your investment, unless you took some of the profits off the table while prices were still going up.
Dimon's warning is a useful one - not just to uninformed investors tempted to make a quick profit, but to the cryptocurrency community itself. The future is not from projects that simply add "electronic" or ".com" to their name or business plan. The lesson that "page views" were not a useful guide to internet profitability or sustained valuations is recent enough and close enough to what we are seeing today that it should not be just dismissed.
Don't confuse your greater knowledge of recent technological developments with wisdom about investment cycles, bubbles, profitability, or what it takes to build a business that beats the competition. The inventor and the best invention? Unfortunately, they usually don't prevail in the marketplace. It's an unpleasant truth - don't let wishing it wasn't so blind you to indicators of what's working and not working in the real world.
Success requires seeing the world clearly - as it is - and not how we wish it to be.
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