98°F
weather icon Clear

Though popular, bitcoin not wave of future

Bitcoin. It’s everywhere. You see it in the news. People talk about it around the water cooler, and it appears on almost every internet ad. I wouldn’t be surprised if it started appearing in local paper opinion pieces.

My own involvement with bitcoin started in November 2013 over Thanksgiving dinner, when my brother announced he had bought some at $200. He praised it, spoke of the “wave of the future” and how someday it would be the most common currency. My advice was simple: Sell, sell, sell. He refused, stating that it would one day be worth over $10,000 per coin.

I thought he was crazy. I was somewhat justified when a short time later it fell from $1,000 down to below $300. However, he was anxious to text me when recently it hit $10,000. (It’s now worth over $14,800.) This has made my brother a considerable amount of money.

He is not alone. Much of what is driving the current news is the talk of teenage millionaires and bitcoin billionaires who have made a fortune.

So why am I writing an article on bitcoin? Is it to admit I was wrong and to tell you I am joining the bandwagon? No. Rather, as talk of bitcoin billionaires continues, we may ask, “What if I had bought early?” And there is always the danger that we decide, “Better late than never.” My goal is to keep you from making or even thinking about such a mistake.

Here are the reasons why:

1. Security. No potential gain can compensate for a 100 percent loss. I am not talking about the value of bitcoin going to zero. You can lose all your bitcoin investment without that happening. This can occur by simple fraud. Every day new sites pop up claiming you can get a good deal on bitcoin only to disappear a few days later after they have swindled people.

But even with reputable dealers, there is risk. Mt. Gox, the biggest name in the business, handled about 70 percent of all bitcoin transactions until it went bankrupt in April 2014, stating it had lost $480 million in bitcoin investments. There is no FDIC for bitcoin. Indeed, you might be saying, “If only I had bought bitcoin in 2013?” Well, if you had, there is a decent chance you would have lost it all as part of the Mt. Gox failure.

2. Regulation. A study came out in November of this year titled “Sex, Drugs and Bitcoin” by an Australian research team. It found that half of all bitcoin transactions are for illegal activity. The problem with that is that the value of the currency is based on demand. As bitcoin is used more and more for illegal activity, governments will find ways to regulate, restrict and limit the currency. This will limit criminals’ demand for it. If half of the demand dries up, you can expect a big fall in the price.

3. Competition. Bitcoin is not the only cryptocurrency. There is litecoin, Ethereum, zcash, ripple and over 900 others. So even if cryptocurrency is the currency of the future, no one truly knows which one or ones will catch on and which ones will flare out.

After all, it’s not always the first big player to market that wins. Otherwise you would be checking your AOL email after posting to your MySpace page, all while yelling at the kids to stop fighting over the Atari.

4. A bubble? The term bubble is used a lot, but I think it applies to bitcoin. What is driving the demand for bitcoin? Is it its great utilitarian use as a currency or speculation?

I think demand for its use as a currency is increasing but not nearly as much as the demand from pure speculation. Demand that relies on more people speculating on it begins to look much like a pyramid. The problem is at some point all pyramids run out of people at the bottom.

The proof that most demand is speculative? I don’t see signs all over town saying, “We now accept bitcoin.” I don’t hear the guy next to me in line asking the barista if they accept bitcoin. Even people like my brother who praise the utilitarianism of bitcoin don’t use it. My brother’s bitcoin wallet is mostly an electronic mattress for holding his money. Ask anyone you know who owns bitcoin and see if they actually use it as a currency.

If you are considering buying bitcoin … why? Do you really wish you could pay for your burger and fries with it, or do you only want it to get more of the currency you actually use, American dollars?

Nathaniel Kaey Gee resides in Boulder City with his wife and six kids. He is a civil engineer and enjoys writing any chance he gets. You can follow his work at www.thegeebrothers.com.

Don't miss the big stories. Like us on Facebook.
THE LATEST
Facts over fear

After reading last week’s lead article about the Boulder City Wastewater Pipeline proposal, I knew that it was incumbent upon me to defend both my support for the proposal as the city’s representative on the Southern Nevada Water Authority board and my honor. This proposal is an opportunity to divert over one million gallons a day (peak flow) of our wastewater (effluent) back to Lake Mead at no expense to Boulder City and was recommended by the Integrated Resource Planning Advisory Committee on which we, as a city, also have representation.

Nature’s wonders abound

Call me crazy, but Friday night I convinced my husband and parents to go out to a remote area of the desert in the blackness of night to see a comet.

Nation does not need groups the espouse division

“Black Lives Matter.” The statement itself is true; of course they matter. Brown lives matter. White lives matter. All lives matter. We all matter. It is important to understand that the group that calls itself “Black Lives Matter” has very little to do with black lives. It has virtually nothing to do with a skin color or race.

Summer heat makes us want to (s)cream

To say that summer arrived with a vengeance would be an understatement. On Sunday, the mercury topped out at 115 F at the official weather station at the municipal airport, and it reached 120 F when I was driving in my car that afternoon.

Sharing knowledge part of identity

Did you ever wonder who you are and what your life is about?

Congress appears to be absent

This is what I have observed from a number of open sources regarding congressional sessions.

Recalls not effective way to govern

Elections have become increasingly ugly affairs. Even in, “Be Kind, Boulder City,” we can be wonderful to our neighbors and very tough on our politicians. A certain level of this is needed to keep politicians in check, but perhaps we are taking it too far. There is so much negativity that no matter who wins we often feel less than thrilled.

Defunding police an ‘insane idea’

One of the countless things I have learned as a columnist is many folks do not understand the difference between a columnist and a reporter. Not to worry, apparently several New York Times reporters don’t know the difference either.

Celebrate our freedom

Saturday is our nation’s 244th birthday, and that’s something worth celebrating.