Skip to main content

Bitcoin getting it wrong and seeing a price correction

 When Bitcoin hit $3,000 some years ago a friend said to me this was a great trade, and I should invest.  I told him, that to me, for now, Bitcoin was a purely speculative play and not an investment.  The same way a Picasso at $100 million was not an investment it was speculation, speculation that someone else would pay more for an asset that has no function -- sure its pretty but so is a poster!

Bitcoin made it all the way to $60,000 or thereabout. my friend who had bought 500 coins at $250 in 2016 would be worth $ 90 million if he had sold at the peak -- he didn't sell at the peak he sold at around $10,000.

Now Bitcoins are going down based on nothing, except that investors have soured to the instrument -- by the way, it's not only bitcoin that has seen a massive drop in price, it trades around $38,000 today down 37% from its peak in early April 2021, all other cryptos took a hit.

My point was always the same if there is no reason for the price of a financial instrument to go up, then there is no reason for it to go down.  Good investments are when there is an asymmetry in the ups and the downs.  Tesla is a good example, it trades at insane multiple, and it's easy to see how a short of that stock makes sense if you can short the company via the option's market by buying puts.  For those interested in GameStop that's what undid the brokers, the options market where traders had to cover positions that were out of the money.

There is no way that the price of Bitcoin dropped because of what Elon Musk said on SNL over the weekend, but then again why not.  That makes just as much sense.  The weakness of cryptos has always been the same, they reject a payment system controlled by "the Man" yet at the same time are dependent on the same legal system to ensure that their claims against real assets are respected.

Personally, I think that crypto and the blockchain technology underlying it are important tools but they are immature and need a more institutional bend to make them work.

As someone said to me over the weekend, will you buy your newspaper with a bitcoin...no you will not!

Comments

Popular posts from this blog

Ok so I lied...a little (revised)

When we began looking at farming in 2013/14 as something we both wanted to do as a "second career" we invested time and money to understand what sector of farming was profitable.  A few things emerged, First, high-quality, source-proven, organic farm products consistently have much higher profit margins.  Secondly, transformation accounted for nearly 80% of total profits, and production and distribution accounted for 20% of profits: Farmers and retailers have low profit margins and the middle bits make all the money. A profitable farm operation needs to be involved in the transformation of its produce.  The low-hanging fruits: cheese and butter.  Milk, generates a profit margin of 5% to 8%, depending on milk quality.  Transformed into cheese and butter, and the profit margin rises to 40% (Taking into account all costs).  Second:  20% of a steer carcass is ground beef quality.  The price is low, because (a) a high percentage of the carcass, and (b) ground beef requires process

21st century milk parlour

When we first looked at building our farm in 2018, we made a few money-saving decisions, the most important is that we purchased our milk herd from a retiring farmer and we also purchased his milking parlour equipment.  It was the right decision at the time.  The equipment dates from around 2004/05 and was perfectly serviceable, our installers replaced some tubing but otherwise, the milking parlour was in good shape.  It is a mature technology. Now, we are building a brand new milk parlour because our milking cows are moving from the old farm to the new farm.  So we are looking at brand new equipment this time because, after 20 years of daily service, the old cattle parlour's systems need to be replaced.  Fear not it will not be destroyed instead good chunks will end up on Facebook's marketplace and be sold to other farmers for spare parts or expansion of their current systems. All our cattle are chipped, nothing unusual there, we have sensors throughout the farm, and our milki

So we sold surplus electricity one time last summer...(Update)

I guess that we will be buying an additional tank for our methane after all.   Over the past few months, we've had several electricity utilities/distributors which operate in our region come to the farm to "inspect our power plant facilities, to ensure they conform to their requirements".  This is entirely my fault.  Last summer we were accumulating too much methane for our tankage capacity, and so instead of selling the excess gas, that would have cost us some money, we (and I mean me) decided to produce excess electricity and sell it to the grid.  Because of all the rules and regulations, we had to specify our overall capacity and timing for the sale of electricity (our capacity is almost 200 Kw) which is a lot but more importantly, it's available 24/7, because it's gas powered.  It should be noted that the two generators are large because we burn methane and smaller generators are difficult to adapt to burn unconventional gas, plus they are advanced and can &qu