Understanding the Cryptocurrency Boom: A Ground-Level Assessment

I recently came across a December 1996 San Jose Mercury News article on tech pioneers’ attempts to carry the pre-browser Internet’s bulletin board community vibe over to the new-fangled World Wide Web.

In effect, the article is talking about social media a decade before MySpace and Facebook and 15 years before the maturation of social media.

(Apple was $25 per share in December 1996. Adjusted for splits, that’s about the cost of a cup of coffee.)

So what’s the point of digging up this ancient tech history?

  1. Technology changes in ways that are difficult to predict, even to visionaries who understand present-day technologies.
  2. The sources of great future fortunes are only visible in a rearview mirror.

Many of the tech and biotech companies listed in the financial pages of December 1996 no longer exist. Their industries changed, and they vanished or were bought up, often for pennies on the dollar of their heyday valuations.

Which brings us to cryptocurrencies, which entered the world with bitcoin in early 2009.

Now there are hundreds of cryptocurrencies, and a speculative boom has pushed bitcoin from around $600 a year ago to $2600 and Ethereum, another leading cryptocurrency, from around $10 last year to $370.

Where are cryptocurrencies in the evolution from new technology to speculative boom to maturation? Judging by valuation leaps from $10 to $370, the technology is clearly in the speculative boom phase.

If recent tech history is any guide, speculative boom phases are often poor guides to future valuations and the maturation trajectory of a new sector. 

Anyone remember “push” technologies circa 1997? This was the hottest thing going, and valuations of early companies went ballistic.  Then the fad passed and some new innovation became The Next Big Thing.

All of which is to say: nobody can predict the future course of cryptocurrencies, other than to say that speculative booms eventually end and technologies mature into forms that solve real business problems in uniquely cheap and robust ways no other technology can match.

So while we can’t predict the future forms of cryptocurrencies that will dominate the mature marketplace, we can predict that markets will sort the wheat from the chaff by a winnowing the entries down to those that solve real business problems (i.e. address scarcities) in ways that are cheap and robust and that cannot be solved by other technologies.

The 'Anything Goes' Speculative Boom

Technologies with potentially mass applications often spark speculative booms. The advent of radio generated a speculative boom just as heady as any recent tech frenzy.

Many people decry the current speculative frenzy in cryptocurrencies, and others warn the whole thing is a Ponzi scheme, a fad, and a bubble in which the gullible sheep are being led to slaughter.

Meanwhile, tribalism is running hot in the cryptocurrencies space, with promoters and detractors of the various cryptocurrencies doing battle in online forums: bitcoin is doomed by FUD (fear, uncertainty and doubt) about its warring camps, or it’s the gold standard; Ethereum is either fundamentally flawed or the platform destined to dominate, and so on.

The technological issues are thorny and obtuse to non-programmers, and the eventual utility of the many cryptocurrencies is still an open question/in development.

It’s difficult for non-experts to sort out all these claims. What’s steak and what’s sizzle?  We can’t be sure a new entrant is actually a blockchain or if its promoters are using blockchain as the selling buzzword.

Even more confusing are the debates over decentralization. One of the key advances of the bitcoin blockchain technology is its decentralized mode of operation: the blockchain is distributed on servers all over the planet, and those paying for the electricity to run those servers are paid for this service with bitcoin that is “mined” by the process of maintaining the blockchain.  No central committee organizes this process.

Critics have noted that the mining of bitcoin is now dominated by large companies in China, who act as an informal “central committee” in that they can block any changes to the protocols governing the blockchain.

Others claim that competing cryptocurrencies such as Ethereum are centrally managed, despite defenders’ claims to the contrary.

Meanwhile, fortunes are being made as speculators jump from one cryptocurrency to the next as ICOs (initial coin offerings) proliferate. Since the new coins must typically be purchased with existing cryptocurrencies, this demand has been one driver of soaring prices for Ethereum.

As if all this wasn’t confusing enough, the many differences between various cryptocurrencies are difficult to understand and assess.

While bitcoin was designed to be a currency, and nothing but a currency, other cryptocurrencies such as Ethereum are not just currencies, they are platforms for other uses of blockchain technologies, for example, the much-touted smart contracts.  This potential for applications beyond currencies is the reason why the big corporations have formed the Enterprise Ethereum Alliance (https://entethalliance.org/).

Despite the impressive credentials of the Alliance, real-world applications that are available to ordinary consumers and small enterprises using these blockchain technologies are still in development: there’s lots of sizzle but no steak yet.

Who Will The Winner(s) Be?

How can non-experts sort out what sizzle will fizzle and what sizzle will become dominant?  The short answer is: we can’t. An experienced programmer who has actually worked on the bitcoin blockchain, Ethereum and Dash (to name three leading cryptocurrencies) would be well-placed to explain the trade-offs in each (and yes, there are always trade-offs), but precious few such qualified folks are available for unbiased commentary as tribalism has snared many developers into biases that are not always advertised upfront.

So what’s a non-expert to make of this swirl of speculation, skepticism, tribalism, confusing technological claims and counterclaims and the unavoidable uncertainties of the exhilarating but dangerously speculative boom phase?

There is no way to predict the course of specific cryptocurrencies, or the potential emergence of a new cryptocurrency that leaves all the existing versions in the dust, or governments’ future actions to endorse or criminalize cryptocurrencies.  But what we can do -- now, in the present -- is analyze present-day cryptocurrencies through the filters of scarcity and utility.

In Part 2: The Value Drivers Of Cryptocurrency, we analyze the necessary success requirements a cryptocurrency will need to excel on in order to become adopted at a mass, mainstream level. Once this happens (which increasingly looks like a matter of "when" not "if"), the resultant price increase of the winning coin(s) will highly likely be geometric and meteoric.

Sadly, the most probable catalyst for this will be a collapse of the current global fiat currency regime -- something that increasingly looks more and more inevitable. This will destroy a staggering amount of the (paper) wealth currently held by today's households. Which makes developing a fully-informed understanding of the cryptocurrency landscape now -- today -- an extremely important requirement for any prudent investor.

Click here to read the report (free executive summary, enrollment required for full access)

Editor's Note: The above is a guest post by Charles Hugh Smith with PeakProsperity.com.

Somebody might want to check the temperature in hell, it might be just a tad chillier than normal.

If you missed Friday's episode of The Glenn Beck Program, you missed something you probably never thought you'd see in this timeline or any other. Glenn actually donned President Trump's trademark red "Make America Great Again" hat and laid out the case for why he thinks Trump will win in a landslide in 2020.

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Bottom line: Nancy Pelosi and the mainstream media may have pushed Glenn to this point, but believe it or not, Trump's record will make this next election a walk in the park for number 45. At this point, the sitting president has done enough to earn even Glenn's vote.

Glenn broke down what he thought were the 10 biggest campaign promises that — unlike those made by most politicians — Trump actually kept.

10. Impose a 10% repatriation tax to bring jobs back to America

Not all of Trump's promises were good ones, but regardless of what the consequences may be — he did keep this one.

"Now, I think this one is dangerous," Glenn said on radio Friday. "He did it. Ten percent. Bring all of your money back into the United States. It will create jobs. Yes. It will also create inflation. But it's creating jobs."

9. Withdraw from the Trans-Pacific Partnership (TPP)

This has been one of Trump's most passionate issues.

"The stop the TPP. Uh-huh. Right. Sure you are. Uh-huh. Yes. He did," Glenn admitted.

8. Withdraw from the disastrous Paris Climate Accord

Glenn found himself eating crow on this.

"I'm on record saying he will never do that because his daughter is a huge global warming person and he only listens to the family. Eh. Wrong," Glenn said with a puff of crow feathers coming from his mouth.

7. Bring North Korea to the table and rein them in

This looked impossible. Not so.

"'I'm going to bring North Korea to the table.' Are you? Everybody has tried to do that," Glenn said. "Now, they're at the table. We don't know what's going to happen. So the result of that is unknown. But has anybody else done that?"

6. Stop over-regulation and jump-start the economy

It's the economy, stupid.

"Does anybody feel like America is beginning to get on track somewhat economically? You know why? Because he fulfilled another promise," Glenn said. "Stop over-regulating the American people. Give them their money. Give the companies the opportunity to expand and bring their money back into the country, and maybe they'll build buildings. Maybe they'll build offices. Maybe they'll build new products. Maybe they'll build new factories. Maybe they'll hire a bunch of people."

Glenn went on.

"Now, I know Seattle is trying to do everything they can to make sure everybody in their city is homeless and unemployed, but the rest of the country is enjoying the feeling of, wow, maybe things are going to be okay."

5. Reverse Obama's executive orders

If you're like Glenn, you've gotten used to politicians promising "no new taxes," but you can really tell they're lying if their lips are moving. Guess what? That's apparently not Trump.

"The executive orders? Yeah. He's reversed a lot of Obama's executive orders," Glenn said. "These are outrageous promises."

4. Pull out of the Iran nuclear deal

No big deal...

"'I'm going to cancel the Iran Deal.' Yep. None of these are small. You know, I've got maybe ten minutes. I think we can get that done in the first term. And they did," Glenn said.

3. Give tax cuts to middle-class Americans

Maybe this could have been better, but we'll take it.

"I don't like the tax cut. I think he could go a lot further," Glenn said. "But that's not even his job. His job is to sign things that Congress puts in front of him. Not to design it. You Republicans in Congress, you disgust me. You disgust me. 'Imagine what we could do if we had the House and the Senate and the White House.' I can imagine what you'll do — nothing. You'll do nothing."

2. Change strategy and defeat ISIS

The mainstream media have been radio silent on this.

"How about the president's — well, I know I can defeat ISIS. I know I can do it. I'll defeat ISIS. He did," Glenn said. "And did you notice no one in the press even talked about it? All of a sudden, we're not talking about ISIS anymore. How come? Oh, I know. President Trump. That's why."

1. Recognize Jerusalem as the capital of Israel and relocate the US embassy

This one is a true game-changer.

"Now, every president will say to you, when he's running, 'I'm going to make Jerusalem the home.' Well, really? The home of the embassy. Really, are you? Because everybody says that, nobody does it. He did it," Glenn said. "And I think that's going to go down as the biggest game-changer possibly in my lifetime. This is going — it already is — it is changing the game in Iran."

Glenn continued.

"And when it does, this president is going to come out and say something directly to those people, that we support them," he said. "And that's going to add fuel to the fire. And you might see a regime change and a collapse of the Islamic regime in Iran. And it will be 100 percent Donald Trump that made that responsible. One hundred percent. You're going to see changes because of this. He kept that promise. A promise I said, he's not going to do that. Nobody is going to do that. He did."

One chapter of ISIS has ended, but another may be starting

AHMAD AL-RUBAYE/AFP/Getty Images

For the most part, ISIS has fallen in Syria and Iraq. But before we celebrate the demise of this awful terrorist group, before we let our guard down, we should zoom out a bit, because ISIS is spreading. ISIS has largely just scattered out of the region as if someone turned on the kitchen lights and they scrambled.

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The Wall Street Journal spoke with Rohan Gunaratna, head of the International Center for Political Violence and Terrorism Research at the Nanyang University in Singapore. “Although Islamic State's ideology has suffered, it still has a huge potential," he told them. “Islamic State has entered a phase of global expansion, very much the same way al Qaeda extended globally in late 2001."

ISIS has spread into West Africa, and throughout much of Southeast Asia, and, as is typical of ISIS, they have done it violently, with a sick venom.

The world is their potential rubble, and their fight is endless.

Again, from the Wall Street Journal: “One chapter of ISIS has finished and another is beginning," said Hassan Hassan, a specialist on Islamic State at the Tahrir Institute for Middle East Policy in Washington. “Their resurgence is coming sooner than expected."

The world is their potential rubble, and their fight is endless.

'The Handmaid's Tale' got it right, just with the wrong religion

Alberto E. Rodriguez/Getty Images

Just in case The Handmaid's Tale's heavy-handed message wasn't already heavy-handed enough, a recent episode made it clear there's always room for further hysteria. Particularly, in relation to depictions of a “patriarchal society" run by Christian doctrine and determined by men — oh those dastardly men.

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The show appropriates Margaret Atwood of the same name, depicting a totalitarian society led by Christian doctrine in which women's bodies are controlled, and they have no rights. The story sounds familiar, but not in the same way Atwood and the show's creators have so smugly assumed.

Just as tone-deaf as 4th wave feminism itself, and tone-deaf in all the exact same places. Most notably, the show's heavy-handed indignation toward Christianity. Toward the patriarchy. Toward conservatives and traditional values. And just like 4th wave feminism, the show completely overlooks the irony at play. Because there is a part of the world where women and children are being raped and mutilated. In fact, in this very real place, the women or girls are often imprisoned, even executed, for being raped, and they are mutilated in unspeakable ways.

Theirs is a cruel, bloody, colorless life.

There is a place, a very real place, where women are forced to cover their entire bodies with giant tarp-like blankets, which is all the more brutal given the endless heat of this place. There is a place where women literally have one-third of the rights of men, a place where women are legally, socially and culturally worth less than men.

They cannot drive cars. They cannot be outside alone. They cannot divorce, they cannot even choose who they marry and often, they are forcibly married at a young age.

They are raped. A lot. Theirs is a cruel, bloody, colorless life. This is the life of tens, perhaps hundreds of millions of women. And, I'll tell you, their religion isn't Christianity.

Science did it again. It only took 270 million years, but this week, scientists finally solved the mystery that has kept the world up at night. We finally know where octopuses come from: outer space. That explains why they look like the aliens in just about every alien movie ever made.

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It turns out octopuses were aliens that evolved on another planet. Scientists haven't determined which one yet, but they've definitely narrowed it down to one of the planets in one of the galaxies. Hundreds of millions of years ago (give or take a hundred), these evolved octopus aliens arrived on Earth in the form of cryopreserved eggs. Now, this part is just speculation, but it's possible their alien planet was on the verge of destruction, so Mom and Dad Octopus self-sacrificially placed Junior in one of these cryopreserved eggs and blasted him off the planet to save their kind.

This alien-octopus research, co-authored by a group of 33 scientists, was published in the Progress in Biophysics and Molecular Biology journal. I'm sure you keep that on your nightstand like I do.

Anyway, these scientists say octopuses evolved very rapidly over 270 million years. Which sounds slow, but in evolutionary terms, 270 million years is like light speed. And the only explanation for their breakneck evolution is that they're aliens. The report says, “The genome of the Octopus shows a staggering level of complexity with 33,000 protein-coding genes — more than is present in Homo sapiens."

Lucky for us, they landed in the water. Otherwise, we might be octopus pets.

They mention that the octopus' large brain, sophisticated nervous system, camera-like eyes, flexible bodies and ability to change color and shape all point to its alien nature. Octopuses developed those capabilities rather suddenly in evolution, whereas we're still trying to figure out the TV remote.

These biological enhancements are so far ahead of regular evolution that the octopuses must have either time-traveled from the future, or “more realistically" according to scientists, crash-landed on earth in those cryopreserved egg thingies. The report says the eggs arrived here in “icy bolides." I had to look up what a “bolide" is, and turns out it's a fancy word for a meteor.

So, to recap: a long time ago, in a galaxy far, far away, an alien race of octopuses packed their sperm-bank samples in some meteors and shot them toward Earth. Lucky for us, they landed in the water. Otherwise, we might be octopus pets.