Why I Bailed on Bitcoin
Even if you don't believe this e-currency is a game of monetary musical chairs, it still has issues. Bitcoins are untraceable--so is the service level. And for a currency to work, there's got to be a lot of it.
CEO, 1871@tullman
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JPMorgan Chase CEO Jamie Dimon just called Bitcoin a fraud. Dimon is known for being blunt, but I wouldn't go that far at this point. Let's just say that Bitcoin is merely a financial farce based on something akin to a warped version of musical chairs. It's pretty much the same deal-- you don't want to be the bozo left holding the bag of booty or the guy without a seat at the table when the music abruptly stops. Or you could think of it as a version of the greater fool theory-- you want to be sure there's at least one bigger sucker than you willing to buy your goodies when you finally get over your growing greed and decide that it's time to go. I don't have to outrun the bear chasing us. I've got to outrun you.
So, you better pray that there's still someone left who's willing to hit the bid when you want to say bye-bye and get out. No one knows exactly when the opera is gonna end, but it could be any day. That's one of the reasons that I bailed on Bitcoin. Trying to time any market is never smart and catching a falling knife is almost always going to turn out to be a painful experience.
But, for me, Bitcoin had some bigger problems as well. There are scale issues and other structural shortcomings that will eventually undermine this particular house of cards. Decide for yourself, but here are a few of the concerns I had:
1. I Forgot I Owned a Bunch
I know--shame on me. But I got these things years and years ago on a lark and put them into some digital wallet on a phone that I no longer own with a number I last used in the last century and didn't remember. You might ask: how do you find an untraceable currency? When I recently went looking for my bitcoins, because the prices kept going up, it was just dumb luck that I had installed Coinbase, the digital currency trading platform, on one of my desktop machines for convenience. That program got moved forward onto each new computer mostly because I'm a lousy housekeeper and never delete stuff.
1. I Forgot I Owned a Bunch
I know--shame on me. But I got these things years and years ago on a lark and put them into some digital wallet on a phone that I no longer own with a number I last used in the last century and didn't remember. You might ask: how do you find an untraceable currency? When I recently went looking for my bitcoins, because the prices kept going up, it was just dumb luck that I had installed Coinbase, the digital currency trading platform, on one of my desktop machines for convenience. That program got moved forward onto each new computer mostly because I'm a lousy housekeeper and never delete stuff.
But, of course, I didn't have any way to sign in and Coinbase insisted on communicating with and sending info to a phone number I no longer owned. Eventually, I re-identified myself, waited a few days for the system to approve the new "me", and then I was able to see my account. Good thing I wasn't in a hurry or trying to do something real time. But my journey had only just begun.
2. There's No There There
Mainly for the sake of my sanity, I had also connected my Bitcoin account to a real bank account (again, it was one from years and several businesses ago), which is the only reason I ever got started with this whole crazy system. I figured that, if you could turn the bitcoins into real money at a real bank, then maybe the downside risk wasn't so bad. I could always sell (even at a loss) and get some of my "investment" back. So, in the excitement and thrill of regaining access to my account and my bitcoins, I pressed the sell button and sat back to wait the three days for my somewhat ill-gotten, but massive gains to settle into my account.
2. There's No There There
Mainly for the sake of my sanity, I had also connected my Bitcoin account to a real bank account (again, it was one from years and several businesses ago), which is the only reason I ever got started with this whole crazy system. I figured that, if you could turn the bitcoins into real money at a real bank, then maybe the downside risk wasn't so bad. I could always sell (even at a loss) and get some of my "investment" back. So, in the excitement and thrill of regaining access to my account and my bitcoins, I pressed the sell button and sat back to wait the three days for my somewhat ill-gotten, but massive gains to settle into my account.
Little did I know or remember that I no longer knew what account the Bitcoin system was gonna send my money to and my Coinbase dashboard (undoubtedly for my security) wouldn't show me the full account number. And that's when I realized that it is absolutely impossible to speak to a human being at Bitcoin and maybe that there aren't any human beings there at all. Their bots are useless, their support and customer service is non-existent, and God help anyone who really needs timely answers from these people about anything important. Because there's nobody home.
Weeks passed with no answers and no results and then amazingly a statement arrived from one of my long-dormant bank accounts saying that a whole boatload of money had just appeared in the account. No thanks to Bitcoin, which still hasn't responded, but the mystery was solved and the deal was done. Suffice it to say, I won't be back buying in again. It feels like I dodged a major bullet as it is. But the insane processes and the lack of people are just more reasons to think twice about the whole deal.
3. There's Not Enough Coins to Make A Currency.
3. There's Not Enough Coins to Make A Currency.
The final nail in the Bitcoin coffin has to do with scale. Not simply the rapid scaling to date-- which has made it impossible for the system to keep up with the volume of users and transactions or offer even a modicum of support. It's that once we reach the alleged end of the rainbow and all the bitcoins have been "mined" and circulated, it's going to become painfully obvious that there simply aren't enough coins in circulation to make a viable currency. You need lots and lots and lots of these things and 20 million or so just won't cut it. The U.S. Mint can finally kill the penny if it wishes (won't change my life), but what would the world be like if the minimum unit of U.S. currency was worth $4,000? Pretty hard to buy much of anything with that tender. Harder yet to make change. Gold and silver lasted a century or so (so far) and Bitcoin's in trouble in less than a decade.
So, if the stuff isn't usable in our daily lives, who's gonna want to pay a fortune for the bitcoins? This should drive the price of the things right through the floor because it will become increasingly clear that they have no intrinsic value apart from being used in a rigged game by a bunch of speculators. It's a little like the fancy chips you get in the casino. Maybe good for a souvenir, but basically worthless as a means of exchange outside the casino.
Once the creation cap is reached and there are just a bunch of morons passing these digital chits around, it's hard to imagine why anyone would pay up for these things any longer. Looks to me like a race to the exits will shortly ensue. I'm already out; can't wait to watch the stampede.