Having a discussion about cryptocurrencies with some investors is like discussing polygamy with some followers of Islam or homosexuality with some Christians. It is a place that you do not want to go, especially if you are talking with a “religious fanatic.” And cryptocurrency is a religion for some.
Again, let me state clearly. Bitcoin (or any other crypto) is not money and not because it is not widely accepted for purchases. Even if BTC were accepted at every one of more than 38,000 McDonald’s locations in over 100 countries, it would still not be “money.” Further, Bitcoin is a fiat currency just like any of that paper stuff you carry in your wallet because BTC is backed by the US dollar. How do I know that?
Ask any BTC holder the price of a kilo of pork pigue at ShopWise. In order to give you an answer, you must first check the BTC to US dollar exchange rate. Next, check the Philippine peso to dollar rate and then compute for the local BTC price of pork.
There has not been a non-fiat currency since before World War One when one ounce of 99.9 percent gold would buy you the finest men’s suit in New York, London, Paris, Berlin, and Shanghai. There was no need to compute any exchange rate. Globally, one ounce of gold to one suit.
The last 18 months have been exciting for crypto holders since BTC began its ascent from $10,000 to $60,000 and back down the rollercoaster to $30,000. The best and most profitable speculative investment in this century.
But that does not change the fact that cryptos have also been an unequalled financial disaster for some. The closest similarity might be “Tulip Mania” in the 1600s when bulb prices fell 99.999 percent in one year.
From Fortune magazine: “The world’s largest crypto exchange, Binance, had the potential to reap mega earnings from Terra’s UST stablecoin before it crashed last week, along with its sister cryptocurrency Luna. In 2018, Binance put $3 million into Luna.” At Luna’s price peak in April, those tokens were worth $1.6 billion. At Luna’s current price, the tokens are worth less than $5,000.
Warren Buffett said this at the April Berkshire Hathaway shareholders meeting. “Now if you told me you own all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it because what would I do with it? I’d have to sell it back to you one way or another. It isn’t going to do anything.” One man’s opinion, and that man never speculates.
Nonetheless, no one wants to see this kind of negative volatility. It is not good. Cryptos definitely have a place in modern finance. In September 2021, El Salvador adopted BTC as an official currency, but the government has lost money on the decreasing BTC to US dollar rate.
The launch of El Salvador’s national Bitcoin wallet, the Chivo, has been a flop, with the majority of users having ditched it already even with a $30 “sign up” bonus. Around 60 percent abandoned it after withdrawing the $30 dollar incentive.
But the ‘Chivo’ for all its faults and missteps gave a useful financial tool to a huge number of Salvadorians who, like Filipinos, never had a bank account. The Bangko Sentral ng Pilipinas’ 2017 Financial Inclusion Survey showed that the 15.8 million bank account owners represented 22.6 percent of the total adult population.
While not giving a complete picture of actual usage rather than just signing up, mobile wallet company GCash had an average of 51 million “users” at the end of October 2021. It is not crypto yet but is a critical banking “tool.”
As I said last time in regard to stocks and horse race betting, and now cryptos: If you do not know what you are doing and are too lazy to learn, go buy Lotto tickets.
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.