Call Eric Peters Bitcoin skeptical. From Peters at ericpetersautos.com:
One of the problems with “crypto” is just that – no one seems to know exactly what it is.
Or at least, no seems able to explain what it is.
Somehow, a digitized online representation of a “coin” has immense value, though what gives it any value is difficult to understand. It is not backed by precious metals. It is not issued by a bank.
It’s just there, on the screen.
The willingness of a sufficiency of people to accept that it has value is what gives it value. Dirt could work on this principle. To be fair, crypto is not materially different from U.S. dollars, which have value chiefly because people accept them as having it.
The pieces of paper themselves, have no more intrinsic value than the digitized representation of a “coin” online.
And that of course is the primary danger of both. They have value only because someone (speaking figuratively here) assigned it to them and because others agree to that estimation of value, which isn’t moored to anything, really.
We all pretend the “dollars” – or “coins” – themselves are things of tangible value. That works just as long as it does. Which probably won’t be for very long.
Now, the pieces of paper issued by the private cartel of banks that control their supply are “backed” by the “full faith and credit of the United States,” for whatever that’s worth. And it is probably worth something. Not much, given the value of a “federal” dollar has declined by more than 90 percent since the “federal” reserve began issuing these pieces of paper more than 100 years ago. The value of “crypto” has generally tracked in the opposite direction, a phenomenon that has made it very attractive to people trying to figure out a way to staunch the seemingly unstoppable bleeding out of the value of their money. It’s tempting to transfer “dollars” into “coins” when “coins” seem to hold rather than hemorrhage value.