The Bitcoin Bubble

Today (Dec 16, 2017) Bitcoin price hit $19K. $19K x 21 million bitcoins equals a valuation of $400 billion, with Microsoft's market cap around $500 billion. In the simplest terms, Bitcoin is a computer program which generates and cross-references 21 million public/private key pairs. A competent mid-level programmer could

Today (Dec 16, 2017) Bitcoin price hit $19K. $19K x 21 million bitcoins equals a valuation of $400 billion, with Microsoft's market cap around $500 billion.

In the simplest terms, Bitcoin is a computer program which generates and cross-references 21 million public/private key pairs. A competent mid-level programmer could write that in a few days. So what's the intrinsic value of Bitcoin?

I've seen several financial bubbles up close. I lived in Los Angeles during the California real estate bubble, up 100% from 1986 to 1990. I had stock options in the Dot Com bubble which rose to $480K in two years. And I sold my Phoenix house a few years before the 2008 real estate crash, the buyer flipped it for a 100% gain in 2007.

What is the intrinsic value of 21 million public/private key pairs that can't even be used as a currency because of inevitable scalability problems? It's sure not $400 billion, I know that much. When this crashes, it's going to be huge.

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addendum 1-17-2018 - Bitcoin hit 9200 today, a 53% loss, making this one of my more accurate predictions.

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addendum 2-05-2018 - So I called the Bitcoin top almost exactly right, yay. And today the NYSE crash (-1,175) confirmed my Dec prediction ("a huge crash"). Bitcoin is now trading at $6K, a 65% loss.

Although data from Google, Apple, Facebook, etc. must be viewed with suspicion these days, Google Trends tool confirms "bitcoin" and "blockchain" memes peaked simultaneously.








I expect the Bitcoin crash to mimic the 1990 Nikkei crash, i.e. a couple of dead-cat bounces, extended period of seesaws within a narrow trading range and a final collapse to 10% or so. The Nikkei trading range was 30-50% of peak but I expect Bitcoin to be less, perhaps the 10%-30% ($2K to $6K) range.





The larger picture is harder to predict. The crypto-bubble may have triggered a serious NYSE crash, just as the homebuilder stocks did in March, 2006, eventually leading to the 2008 Great Recession.

Blockchain is easier. It's peaked and the rate of blockchain projects will diminish, while many current projects will be discarded as inappropriate.

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