No. Next question.
Are Cryptocurrencies generally in a bubble?
No. A bubble is when investors drive a stock’s value beyond its actual value, distorting the market through their cognitive biases, and the inexorable market forces inevitably reveal this to be a sham, which plummets the value of the stock back to its market value. There are a few considerations to be addressed here, because a bubble is the result of “believers” recruiting people to the investment in speculation, and an ultimate correction that causes most people to lose lots of money. The 2007 recession was caused by the bursting of a housing bubble that was brought about by low interest rates as decreed by the Federal Reserve, which gave the illusion of economic strength and created easily-received credit. This was illusory because most people did not have the economic strength to purchase a home on the credit they received, defaulted, and caused banks to lose large amounts of entirely made-up money. Not to get too out there with it, but banks didn’t actually lose any money during the Great Recession, because when people take out loans, banks just invent that money out of thin air (no, really, that’s what they do–they just add the money to their ledgers). Then, when you pay back the loan they gave themselves or another bank in your name, you’ve converted that imaginary money into real money. It’s stupid, counterintuitive, and an obvious ripoff for us. But anyway.
It’s true that crypto believers are attempting to recruit new people to cryptocurrencies, but there are a few things to this that are exceptional and worthy of taking notice. First, this is part of a global battle against globalized tyranny, which we are seeing take place with Brexit, threats of withdrawing from NATO, the Catalonia independence referendum, Kurdistan, and even the Californian possibility of secession. Throughout the world, people are rising up and stating unequivocally that they do not want to be controlled by others. Since the western world is dominated entirely by the USD and by state control of the economy, we in the west have decided to attack the power structure that allows for this tyranny, rather than trying to eliminate the tyranny itself. Bitcoin, Ethereum, Litecoin, and DASH have done more to challenge government authority than 40 years of the Libertarian party. This will only continue going forward.
Because that’s what cryptocurrencies are–they are currencies just like any other, except decentralized and created directly by We the People. Although Spain sent police forces dressed in all-black to beat the hell out of people who advocated independence for Catalonia, we in the United States have… different methods. And we know that we cannot survive a direct fight with our government. We’ve learned this lesson from the Afghans, from Al-Queda, from DAESH, from Iraq, and from countless others. The American military machine has simply become too powerful to fight directly. It’s true that the military machine would probably be unable to ultimately defeat us all, but the resistance would be decimated very early on, and there would be no realistic chance of ever defeating the American military machine, just as DAESH has no realistic chance of ever doing so. This being the case, we must all rely on subterfuge and strategy. It is in this vein that cryptocurrencies were invented (and other reasons).
Rather than throwing away our lives in violent revolution against the state (which would only produce a new state in its place), the anarchist and libertarian communities (because there is a strong overlap between libertarian/anarchist communities and the crypto communities) went one layer deeper: to the currency that funds the monstrous beast. Naturally, the leviathan that inflate our currency to avoid taxing us into oblivion, relying instead upon the hidden tax of inflation, which not even one in ten thousand people is capable of identifying as the reason they are poorer, is not going to take this lying down. This is why other features of cryptocurrencies are so important. They can be held anonymously. The state has made it virtually impossible to buy cryptocurrencies anonymously (though it is possible on the Onion network, but you have to be careful not to throw your money away), but, once you have them, there are several ways to store them securely, safely, privately, and anonymously. The state cannot tax what it cannot find.
In that sense, cryptocurrencies and anonymous wallets like Jaxx (which, if I recall correctly, screwed people over with the BTC/BCC split, and may do so again come the SegWit2x hard fork in November, but I actually do avoid Bitcoin, so I didn’t follow it closely) function as offshore bank accounts for the masses. There’s a digital trail, sure, but even the best hackers and NSA spies will find it nearly impossible to track cryptocurrencies as they move across the digital space. In New Hampshire, to where I am moving (hopefully around January! Yes, that soon! You can help the effort to help me move from bum-fucked Mississippi to the Free State by buying my book from Amazon, for only $2.99 for the eBook or $7.49 for the paperback), you can go an entire day, buying your cigarettes and dinner and whatever else, without ever using a USD. It’s not untraceable, but it’s damned close. Other cryptocurrencies are rising specifically to be completely untraceable.
Just as importantly, the ledger, which contains all BTC transactions, is kept in full on every BTC miner. Just as importantly, just about any noteworthy wallet will have non-American servers. Remember when the government tried to shut down The Pirate Bay? Well… Remember, the one time they actually succeeded for a few months? There were copies of TPB’s full server data all over the place. TPB themselves even have servers in multiple countries, many of which don’t give a shit about piracy or the U.S. government. Cryptocurrencies are like that, except even less centralized–there are miners and servers everywhere. If it became necessary, the entire history of BTC could be rebuilt from a single mining node.
Consider the German hyperinflation of the early 20th century that led directly to Hitler’s rise. Overnight, the German government wiped out everyone’s wealth. Imagine going to bed a millionaire and waking up unable to afford a loaf of bread. While it wasn’t quite that drastic, it was extremely severe, and it has happened with every paper currency that we have a record of. If the government attempted to wipe out everyone’s digital wealth, they would fail, because even a single copy could be used to restore all of it. Let there be no doubt on this note: every single day, we are relying on the goodwill of our government to not wipe out our wealth in USD, and they could do so in minutes. If they did, there would be no way to restore that.
The only real correlation between the rise of crypto values and “market bubbles” is that crypto believers are recruiting people to convert their money from USD into BTC, ETH, LTC, and others. This is very, very different from convincing people to invest their money in one specific stock or another. It is true that people who convert their money now into crypto currencies are likely to see remarkable gains to its value–BTC has gained 19,000% since Bitcoin China first opened–meaning a $1 conversion at the time BTCC first opened became $19,000 today. That’s true, but it won’t be true forever. People who get in early enough (probably a period of time within the next 2 years) stand to make a lot of money, but the gains will level out as more people convert their wealth into crypto currencies.
By the typical standards, crypto currencies are certainly in a bubble, but the real question is whether it’s an artificial or real bubble, and whether it will burst. The answer is “No.” Cryptos are here to stay. Like so many other things, they represent Pandora’s Box–once opened, they cannot be undone. The abortion issue is another one. AI is yet another. Mind reading technologies are still another. Blockchain and digital currencies are certainly one, as well. There’s no going back now, and it was designed to resist state authority.
The crypto bubble isn’t going to burst because Brexit happened, Kurdistan happened, California secession demands happened, Catalonia happened. All throughout the world, people are resisting centralized control of their lives, and the most powerful control any government wields is its direct control of our lives through the very means we use to secure our lives and sustenance. Cryptos will certainly continue to fluctuate, but their general trend is an indisputable up. This isn’t some new market; it’s a currency. It’s meant to be a store of value for your money. I understand that people don’t like risk and uncertainty, especially, when it comes to their wealth, so even though the USD has steadily stolen wealth from them since its inception, has defaulted at least three times, and has been inflated to the point that we have a twenty trillion dollar debt, it feels less risky to most people to simply continue using the USD.
I’ll be honest with you, though. Your money is a lot safer in ETH and LTC than it is in USD.
And congratulations to Catalonia on their vote, though I suspect its too soon to congratulate them on independence. They haven’t won independence yet. They’ve simply declared war on Spain (well, to be accurate, Spain declared war).