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A BIT OF BITCOIN

As they now say, “if you read it in Facebook, it’s   probably too late. ”

And so, according to my FB newsfeed, Bitcoin just recently passed USD 15,000.00 a few days ago and has the whole galaxy (exaggeration intended) mesmerized by this meteoric rise in its price.

Indeed, we are barraged with “facts” of how Bitcoin has made people rich beyond their wildest dreams. The most interesting one for me is that one from CNBC that said, “If you invested a hundred dollars in Bitcoin seven years ago, it should be worth $393 million dollars today.” How’s that for a product tag-line.

But what is Bitcoin actually, or crypto-currency for that matter?  Is it currency as we know it, or an asset, an investment or a fraud?

Well, I’m no expert, but from where I sit, Bitcoin is really a good example for how humans can create something out of nothing.

Indeed, as a currency, it is not legal tender. At least, not yet, and inspite of what we’ve heard, I still have to personally meet a store, a company or a bank that would accept bitcoins as payment for goods and services, or to convert to traditional currency.

As an asset or investment,  it’s a rather weak one. It has no fundamentals to study, no passive income or cash flow, no yield or dividends, no regulation, no sovereign or corporate guarantee.

So what does Bitcoin have that makes it so desirable? In simple terms, it’s got price action.  It’s one of the purest forms of speculation that I’ve seen, whose price movement is based solely on conditioning more and more people to jump in and buy something they really have no idea of.

We are drawn to it because it’s a easy almost lazy way to make tons of money.  Or so they say.  That is, for as long as the price action is exponentially positive.

And this is what bothers me about Bitcoin. What it does, in my opinion, is create envy and promote greedy behavior.   I mean, we were happy when we didn’t know about it, and now that we know a bit about Bitcoin, we suddenly feel anxious that we’re not part of it.  It’s our behavioral tendency for loss aversion and our aspiration for immediate prosperity that creates that bandwagon effect. In other words, it’s all in our head.

I don’t really know where all this hype about Bitcoin is going, or whether block-chain – the technology that’s behind crypto-currencies – will legitimize their use in my lifetime. In the meantime, its best to check our behavioral tendencies so we can act rationally.  Caveat Emptor.

by: Jj Atencio