Bitcon

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 I never did catch up on the Bitcoin. Being in the IT sector professionally, I do understand some of the technical principles of how bitcoins are produced, validated and recorded. But the utility and the pricing of it - is not something that I could understand.

From the coindesk.com at end of 2020 the Bitcoin price is going up very steeply:


With friend we were discussing this move. With this blog I want to summarise my initial thoughts


Upside

The most obvious to me is that the coronavirus 2020 year showed that big and powerful countries would print money more and more to try to stimulate their economy - US, EU and Japan come to mind. So they are inflating the fiat currencies they issue. It seems they could get away without massive inflation, because oil and gold transacts wordwide in US dollars, and because the reserve currencies in most word countries is US or EU issued money. So gold and bitcoin is perceived as store of value, since bitcoin generation is very well layout and limited. So the world might at some point decide that bitcoin is much better than currency controlled by specific country with their economic, political and military agenda behind that currency.

Downside

The downside, that I could think of,  are much more than then the upside
  • Regulatory: Governments might decide to outlaw
  • Competition: From other cryptocurrencies or powerful IT companies like Facebook/Google/Apple, or big banks
  • Utility: I have yet to hear in my wife of a person that uses bitcoin for something else than speculation. I.e. receive salary, buy stuff, etc.. I hear transaction clearing is quite slow in the order of minutes instead of the millisecond expectations that we have.
  • Security breaches: possible breaches in mining, verification of store of bitcoins could erode the value/utility of this to nothing. China/Russia has invested a lot in mining and infrastructure behind the blockchain for the bitcoins - would that be possible vector of control?
  • Not producing asset: Bitcoins are limited. And the price of the bitcoin is purely in the eyes of the speculators. No way to say where it will go, unless you know the psychology of the speculators willing to participate in this around the world. Like "Van Gough painting - it could cost 1 million of 23 million - depends on who shows at the bidding. If the economic environment is after Word War 2 - not much money around - the price would be one. If economic environment is 2020 where central banks print money with trillions - there are certainly a lot of people with a lot of money that want to convert it to some form of store of value - painting, gold or bitcoin.

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