How to eliminate digital currency bubbles
Not long ago, the total value of bitcoin in the world exceeded one billion US dollars for the first time. For a pure virtual currency without the support of a central bank or other authority, this is a remarkable achievement. But this is also temporary: we are experiencing a bitcoin bubble, and the bursting of bubbles is only a matter of time. P>
says bubbles are doomed to break down for several reasons. The first is: because it is a bubble, no matter what charts, if it grows into the above picture, it will usher in tears at the end of a certain moment. but there is a deeper reason - bitcoin is a strange mixture of goods and money. The commodity value of bitcoin is generated by its monetary value, but as its commodity attribute becomes more and more significant, its use as currency becomes smaller
the distrust of existing financial institutions by these people, including Nakamoto, is no exception. What makes Nakamoto different is that he turns this distrust into a philosophy, which is the most important driving force behind the bitcoin project. When he introced bitcoin to the world in February 2009, Nakamoto boasted that his new currency had achieved "complete decentralization and there was no credible party". Moreover, he explained in great detail the problems that he thought should be solved urgently:
"the fundamental problem of traditional currency is the trust needed to make it work. We must trust the central bank not to devalue the currency, but the history of fiat money is full of betrayal of this trust. We have to trust that banks will save our money and transfer them electronically, but they still lend money without reservation in the rising credit bubble. We have to trust them with our privacy and trust them not to let impostors take money out of our accounts. "
Nakamoto is not paranoid: what he said here is the same as Warren; What Mr. Buffett said in his letter to shareholders in 2012 doesn't make much difference
" under the current monetary system, known investment types include money market funds, bonds, mortgage loans, bank savings, and other forms. Most of these money based investments are considered "safe.". In fact, they are among the most dangerous assets "in the past century, these investment methods have destroyed the purchasing power of investors in many countries, even if they can continue to harvest principal and interest in a timely manner. In addition, this terrible consequence will reappear again and again. Governments determine the final value of money, and systemic factors occasionally bias them toward policies that trigger inflation. From time to time, such policies get out of control "even in the United States, which strongly appeals for currency stability, the depreciation of the US dollar since I took over the management of Berkshire in 1965 has reached an alarming 86%. What you could buy for a dollar back then costs as much as seven dollars today. " if you hold dollars, you have to trust the US government not to destroy your wealth. By contrast, bitcoin is built on distrust - it's designed to be a "everyone for himself" currency. In vain, because of his stupidity, he was criticized by many people in the bitcoin world: what did he think of storing his e-wallet on an Internet connected windows machine but even when using bitcoin, people have to trust others in the end - and the objects they trust often turn out to be unreliable zero trust this degree of distrust is not only a feature but also a loophole compared with the special coin - in fact, most of us are willing to outsource the task of hoarding wealth to a large trusted organization, rather than hiding $1000 under the black volcanic rock in the stone wall of the old oak root, Or a $90000 100 dollar bill wrapped in aluminum foil and hidden in the refrigerator. Managing bitcoin yourself is risky and requires high computer skills. But the trust needed to entrust one's own bitcoin to others is exactly what bitcoin aims to avoid bitcoin's inherent suspicion of financial institutions not only distinguishes it from legal tender, but also makes it different from other virtual currencies, such as Facebook coin in the United States, Q coin in China and linden coin in the world's largest virtual game second life. All of these virtual currencies are closely monitored by the company that invented them, and are of little value outside these particular economies some of these virtual currencies are about the same order of magnitude as bitcoin in scale, although it is difficult to compare them in the same sense for example, the annual revenue of Facebook coin is about one billion US dollars, and the market of Q coin in 2007 was so big that the people's Bank of China intervened and called on companies to stop trading with Q coin. In the recent bubble, bitcoins traded for more than $30 million a day, and most of the time they traded more than $5 million a day. The annual turnover will be about $2 billion, so long as the bubble will not burst. strong>
actually, I am not clear about the technological development of bitcoin, but its financial logic can still be followed by rules, that is, the history of modern paper money
judging from the development history of modern paper money, it first originated from European financial banks or bank notes of early banks. Its issuance is based on the savings of users, and the holder can cash it at any time with the bank notes (exchange the bank notes for gold, silver and other precious metal currencies). However, only the banks can really grasp the information of the real reserve amount. Therefore, under the condition of asymmetric information, banks often issue bank notes in excess of the reserve amount for external borrowing and investment under the condition of good capital turnover, and recover the principal and interest when the debt matures, which can be described as a typical "white wolf with empty hands". In this process, the maintenance of banknotes depends on two aspects: one is the material basis of bank reserves, and the other is the public trust in the bank. The relationship between the two is complementary: imagine that a bank with poor credit can not attract deposits. The bank with good credit can attract deposits, and the more deposits it can attract, the more reserves it will have, The more banknotes that can be issued, the greater their financial influence, and in turn, the better their credit. However, with the deepening of social and economic control of bank vouchers, the degree and risk of bank bond bubble based on credit are increasing. Therefore, the risks to the macro economy and society are increasing day by day, and the potential risks posed by the political power authorities are also improving. As the first central bank in history, the Bank of England was born, and its significance is also in this. Legal money (current paper money) can be issued and circulated through the central bank. Of course, as in the era of banknotes, on the one hand, the issue of legal money is based on the reserve of the central bank, but it is also frequent that the issue of legal money exceeds the reserve in order to achieve a certain purpose of the government (such as stimulating social and economic development, making up the government deficit, etc.). Therefore, in the long run, inflation is an inevitable economic trend in a stable and developing normal society. It should be noted that with the development of the legal currency system, the state has stopped cashing legal banknotes in the form of legislation, and precious metals such as gold and silver have changed from the original functions of both currency (gold and silver currency) and commodity (gold and silver crafts) to the function of commodity for investment and value preservation in modern society, The legal paper money issued by the central bank has become a value symbol based on the authority's credit
therefore, we will examine the financial logic of digital currency led by bitcoin
the issue of bitcoin does not depend on a specific organization, but on the mining behavior of miners, that is to say, its issue is not controlled by an indivial organization, which determines the public attribute of the issue of bitcoin. Similarly, because of its public nature, no institution or indivial can provide reserve for its issuance. From this point of view, bitcoin is a symbol without value basis. However, e to a wide range of social participation, the public's trust in the special currency has formed the value base of its symbols. When the social participation is higher, the wider the scope of participation, the stronger the foundation, and even become a value symbol beyond a country or a region or even the whole world. Its complete credit attribute determines its complete bubble attribute. From this point of view, the risk is far greater than that of banknotes hundreds of years ago. There are two sources of credit in the inspection period. One is the public participation in investment, that is, the so-called "speculation", which shows great instability; The other is the strong belief of technology circles and some people in the currency circle in the technology behind digital currency, and this part of credit is relatively stable. From the current situation, the former constitutes the main body of the current bitcoin credit. Therefore, with the changes of government policies and investment market activities, the price of bitcoin presents great volatility. It is right to define it as investment goods rather than money
but is this bubble necessarily broken? This is not the case. As the former said, its credit base comes from two aspects, and at present, the first aspect is the main body. In the short term, the constant hype on the topic of bitcoin and the popularity of the blockchain technology behind it will further stimulate the public's participation and belief in technology, thus stimulating the improvement of bitcoin's credibility and strengthening its credit foundation. However, as time goes on, the price of bitcoin will continue to expand, and the entry threshold will also increase, which will largely limit the public participation of bitcoin. Finally, the participation of bitcoin will be limited to a small scope. That is to say, the trend of its development itself will damage its first aspect of credit base, Therefore, it is very likely that the price of bitcoin will reach the peak at a certain price in the future, forming a very high investment threshold. The price will hover at a certain high level, and its profit margin as a means of investment will be reced. Of course, if we consider the inflation of the French currency, we can think that the price of bitcoin will continue to rise slowly after a certain high. However, in the first place, credit expansion will also affect the development of credit technology in second aspects, which will probably lead to changes in its credit composition, and its price will graally stabilize, and its bubble attribute will also graally decrease, but it will not disappear absolutely, nor is it bubble burst. It always maintains the function of investment procts.
however, as in the history of banknotes, bitcoin's deepening influence on social economy will inevitably attract the attention of the authorities, thus forcing the authorities to take measures for control. The general direction of these measures depends on the degree of development of the concept and technology of digital currency, that is, the higher the degree of acceptance of the concept and technology, the more likely the authorities are to take compliance measures, so as to promote competition between legal digital currency and current digital currency through various means (economic means, financial means and legislative means), This is just like the competition between banknotes and banknotes hundreds of years ago. It can be predicted that if the value form of digital currency is recognized by the authorities and put into practice, it is likely to stimulate the overall rise of the price of digital currency in the short term to a certain extent; The implementation of legal digital currency (some people call it digital legal currency) is endorsed by the authorities, which will attract more funds and credit into the field of digital legal currency. As a result of these changes, the credit pattern of digital currency has changed and the inevitable digital legal currency has entered the circulation field, it is very likely that in addition to a few digital currencies with strong and firm credit will be transformed into "the role of precious metals in the era of digital currency", other digital currencies, especially the so-called digital currencies of ICO nature, Like the mixed banknotes issued by various banks hundreds of years ago, it is very likely that they will basically withdraw from the market and eventually form a digital currency pattern of "digital legal currency digital precious metal currency". This process will finally complete another transformation of monetary development in human history.