Dr. Keith Ablow: There’s Nothing Fake About Bitcoin

Weeks ago, on this very site, I recommended that people buy Bitcoin.  My recommendation was based on the fact that Bitcoin had enjoyed such spectacular gains since 2010 that $1,000 invested at that time would be worth over $30 million. My argument was that no one could know whether the gains would continue in astronomical ways or whether Bitcoin would crash to zero.  And the psychological pain of losing a little money would pale in comparison to the psychological pain of having lost out on what some experts predict will be a 100X (or more) rise in Bitcoin value over the next 5 years.

Well, since my advice those weeks ago, Bitcoin has approximately doubled in value, with one Bitcoin worth $9,752.80 as I write these words.

One year from today, I think it is possible one Bitcoin will be worth $50,000.

By the way, that more than 500 percent increase in Bitcoin would pale in comparison to its nearly 1300 percent rise over the past 12 months.

I say one Bitcoin could be worth $50,000 on November 27, 2018 because Bitcoin isn’t fake, at all.  And the people who assert, otherwise, don’t understand it.

Bitcoin was created by an anonymous person or a group of people using a pseudonym.  It is ingenious software that yields a unique code that is assigned to each Bitcoin.  Finding a new unique code using the software requires a massive amount of computational work (called mining), making the codes inherently rare.  And once 21,000,000 Bitcoin codes are mined, no more will be available—ever.

What’s more, the system is maintained by thousands of computer centers around the world, which verify the legitimacy of every Bitcoin and record every transaction conducted with every Bitcoin (or even one one-hundred-millionth of a Bitcoin), forever.

Who needs Visa or Mastercard or American Express or Western Union or a checking account or gold bullion when people can simply buy Bitcoin on their computers and trade it with one another for goods and services?

Answer:  Just maybe, nobody.  So, which is nearly value-less?  Bitcoin?  Or, say, Visa?

Just because people created Bitcoin doesn’t make it fake.  People created the U.S. dollar.  People decided that yellow, shiny metal called gold is worth $1,291 per ounce, as of this writing.  People decided that a sparkly, faceted crystal that includes no impurities, called a diamond, can be worth up to about $26,000 for 200 grams (one carat).  And people decided, while I wrote this Op-Ed, that one Bitcoin was worth not $9,752.80, but $9,760.00.  Nope, $9764.01.  I just looked, again.

Well, I would assert that owning a little piece of a monetary system that deserves the first Nobel Prize in Economics awarded to an unknown person is worth more than $9,760.00.  No, I can’t hold the Bitcoin in my hand and admire it, but I can’t, at this moment, touch the money that I now believe sits in my bank account or the money I believe sits in my brokerage account, either.

Who is the primitive star gazer—the human being who will work half a year for a shiny, faceted rock called a diamond, or the human being who will work half a year for three money codes generated by one of the most important financial software systems the world has ever known?

 

 

 

 

 

 

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