In my two previous articles There’s no use arguing BitCoin versus gold and When non-tech savvy people talk about BitCoin, is it a sign of a bubble at its peak? I asserted that BitCoin behaves like a commodity, like gold, and public psychology ultimately determines its value. If the public perceives it as worthless, its value will drop to zero.
A main takeaway from the articles was that central banks and corrupt governments have all the power to move these markets. Like clockwork, China’s central banks and government have done exactly that shortly after the time of my article’s writing:
Two Chinese business newspapers say regulators in Shanghai, the country’s financial centre, have ordered exchanges that trade the cyber currency bitcoin to shut down.
China Business News and 21st Century Economic Report said Thursday regulators gave verbal instructions to operators of platforms to close but gave no other details. That followed a report last week by a business news magazine, Caixin, that regulators had ordered a halt to trading.
The Chinese central bank has not responded to questions about the future of bitcoin in China but last week banned initial offerings of new cyber currencies. Central bank officials have warned that bitcoin trading could be associated with fraud.
The Associated Press
Published Thursday, September 14, 2017 7:18AM EDT
JP Morgan has also stepped in with their persuasion tactics:
Cryptocurrencies cannot be reliably valued and they have significant ‘tail risk’ that could come in the form of a regulatory ban […] Moreover, the whole cryptocurrency market exhibits some parallels to fraudulent pyramid schemes.
While initial mining requires a negligible effort, the benefits for subsequent participants start diminishing. Mining becomes progressively more difficult, and eventually unprofitable, marking the likely end of a scheme.
This can work as long as there are enough willing and uninformed buyers.
JPMorgan strategist, Marko Kolanovic
You can argue all you want against the technical accuracy of Kolanovic’s comments. However, because BitCoin’s value is as much as the public perceives it to be and non-technical folk have entered the cryptocurrency market, his comments will have a significant impact.
The use of language like “scheme”, and “willing and uninformed” will resonate more with the non-technical folk than any discussion of blockchain technology and decentralization. Show Kolanovic’s choice of words to people like my parents, and they will stay far away from cryptocurrencies until the “mainstream” changes their attitude. They don’t want to be clumped in with the suggested group of losers left holding the bag.
My previous article already explained the technical shortcomings of cryptocurrencies, establishing that there is no intrinsic growth to their value. What remains is a battle of persuasion between cryptocurrency advocates and big government/big media.
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