BITCOIN DIARY: Like Katy said, we’re living in a bubble, bubble
‘I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said’
Let's start with a soundtrack. The words come from Katy Perry's Chained to the Rhythm.
So comfortable, we live in a bubble, a bubble
So comfortable, we cannot see the trouble, the trouble
Aren't you lonely
Up there in utopia
Where nothing will ever be enough?
(A special request: Please don't play this loud in your second hand Porche with your chiskop/bald head/peroxided blonde mane glinting in the sun.)
Once again, pop music has called it right. We’re living in a bubble, a bubble. The evidence is right there before your eyes. Now you need to be on high alert. As Alan Greenspan observed:
Fear and euphoria are dominant forces, and fear is many multiples the size of euphoria. Bubbles go up very slowly as euphoria builds. Then fear hits, and it comes down very sharply. When I started to look at that, I was sort of intellectually shocked. Contagion is the critical phenomenon which causes the thing to fall apart.
Then again, it was Greenspan who said: “I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said.”
Well, the Bitcoin bubble has been building. It was slowed by the potential “hard fork” of August 1 2017 (did someone say “buying opportunity”?) and now it’s on the march again. The big news is that Bitcoin breached the US$4,000 barrier this week.
Take this, add a dodgy rand following the airing of the latest episode of Zuma Survivor, and these appear to be good times.
The difficulty with Bitcoin is, however, immense. How do you call the top of this market? When will the bubble burst? Not even Katy Perry knows.
As observed before, this is an asset with very few fundamentals and only a handful of Russian hackers understand those, so don’t bother trying.
It has no intrinsic value other than scarcity and the possibility that it might be used for transactions on the “dark web”, where you can buy pimple cream without your BFFs knowing about your affliction.
Then again, what does have predictable intrinsic value in the age of disruption? Gold? The Trump Dollar? The Amorphous Stock Markets? See, nothing, Nothing, NOTHING, is certain anymore.
The hardcore Bitcoin news hacks are, of course in fits of excitement at the rising price.
Take Stan Schroeder, for example:
The reason for Bitcoin’s latest price surge is easy to pinpoint — investors are encouraged by the recent software upgrade and the split into two currencies, Bitcoin and Bitcoin Cash, both of which were complex and risky processes but went without a hiccup.
It’s harder to say, however, why the price of Bitcoin has reached these unprecedented highs, and where the rally would stop. The price of one bitcoin has more than doubled since it dipped to around $1,900 in July and is now at $4,132 according to Coindesk, having at one point soared as high as $4,225.
For now, the only rule is: Don’t be greedy.
Know that the bubble will rise. Go with the flow. But don’t get too chained to the rhythm. At some point you are going to have to disrupt yourself and sell.