Bitcoin: crypto battleground

What is a Bitcoin worth?

I read an article the other day in which the writer asked, “what is bitcoin’s real value?”. I wasn’t sure if it was one of those “questions for the ages” or a more genuine piece in which a price to buy or sell it could be determined.

It turned out to be the latter, so I read on concerned that it was going to be just another encouragement to the uninitiated that Bitcoin is the path to millions.

The article made some valid points but one that really caught my eye was its effort to convince me that the cost of mining bitcoin (which, incidentally, is a subject for another day) should be a determinant of its price, since those who own “virgin coins” can relate the cost of producing the coin to how much they sell it for.

But, value, like beauty, is in the eye of the beholder. Why would I pay someone for something that is of no use to me once I own it? It isn’t particularly rare like a truffle. The effort to extract or create it is difficult, but once that process is complete it doesn’t taste good like, (a matter of opinion) Beluga Caviar. It is not pleasing on the eye like a Renoir or a Picasso.

It all about the blockchain

In and of itself a Bitcoin is worthless but that is where it is similar to a fiat currency. A pound coin or a dollar bill or a fifty euro note has no value until it has some guarantee.

And that is why bitcoin is valuable! It is means of access to the blockchain which may be priceless in the future.

Until about six months ago I really struggled with the concept of the blockchain. Then, I found a TED talk on Youtube, in which the presenter apologized to his audience then proceeded to explain the blockchain in a way a kindergarten teacher describes letters and numbers.

Eureka! I finally understood. I couldn’t explain it to other people, other than to point then towards Youtube but surely, that is the way we (I say we as if I am a member of some enlightened race) are going to achieve the goal of this new financial paradigm.

It is a fantasy to say that it is going to happen without the involvement of Governments. But, does Government have to be another word for regulation.

I delivered my view on regulation last week so won’t dwell on it. Fintech entrepreneurs need to understand what they are dealing with. Governments then need to change and accept that they need to be forward looking and dedicate entire Ministries and budgets towards the solution, as it isn’t going away.

And in Fiatland

Inflation!

Nothing else matters anymore.

Now that the global financial crisis has been “put to bed” (just don’t mention bad loans in the Eurozone). Every analyst, every economist and every academic told us that inflation, Zimbabwe style, was coming once the global economy started to grow at close to trend.

G7 Central Banks had also taken a back seat allowing their monetary policy to take effect. They had given every ounce of assistance to their economies and that more than anything has led us to fully appreciate just how serious the recession was.

The Fed is still gung-ho, raising rates because they believe that actions speak louder than words. Their President certainly believes that. He would much rather slap tariffs on Chinese imports than get around a table to understand the issues involved.

In the UK the Bank of England doesn’t know whether to twist or stick but you can only kick the can so far down the road! Brexit is coming and so is a rate hike next month. Inflation? Oh, that’s falling! Go figure

And, the Eurozone. Unless you are German, Mario Draghi is everyone’s best friend! Rate will almost certainly now not be raised at all during his eight-year tenor. Inflation across the entire Eurozone is less than 1.5% year on year. There is a whole generation of Italians and Spaniards growing up who can’t imagine what it was like to have inflation at 10%+ during the days of the Lira and Peseta.