Home Cryptocurrency Altcoin Another day, another critic. Economist calls Bitcoin a “con”

Another day, another critic. Economist calls Bitcoin a “con”

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If you look at a lot of big companies, it normally is the case that the bigger they get, the more enemies they get, too. Booking.com, Uber, Facebook, all were applauded in the beginning, but as soon as they started getting bigger, things changed. Booking.com is charging too much commission (according to hotels), Uber is not good for taxi drivers and Facebook doesn’t care about your privacy. It happens, and not only to big corporate companies. While Bitcoin only had a few critics till the beginning of 2017, a jar full of critics has been opened since then. 

Bitcoin is a highly speculative, experimental new type of digital asset. Therefore, there is substantial uncertainty around its future evolution and potential. Especially by ‘older’ generations. Warren Buffett and Bill Gates are among the most well known Bitcoin critics. This week, a lesser known economist, Gary Smith, has shed his light on Bitcoin. Smith is an economics professor at Pomona College in Claremont, California. 

According to Smith, Bitcoin has no fundamental value and can be considered a “con”, even calling it “Bitcon”. With this, Smith is joining a long line of critics and unbelievers who have thrashed virtual currencies. The Econ professor said:

“The fundamental value of an investment is the amount you would be willing to pay to hold it forever and be satisfied by the cash it generates. Businesses that make profits have investment value. Bitcoins generate no cash and have no investment value. No sane person would buy bitcoins and say, ‘This is a great investment. I will never sell my bitcoins because I am happy just owning them.”

It has to be said that Smith his statement is shaky at best. Regardless if you believe in Bitcoin or not, history has shown that previous “hoddlers” have gained a lot of wealth because they did not sell their Bitcoin. The Winklevoss twins and Tim Draper are great examples of this. This, of course, doesn’t mean that current “hoddlers” will see the same gains as the Winklevoss twins, but it also doesn’t mean that they won’t. Nobody can predict the future.

Smith also mentioned that he doesn’t believe in “buying the dip” when it comes to Bitcoin, stating that is not attractive to buy Bitcoin when the price is in decline, unlike “real investments”. According to Smith: 

“Bitcoin speculators count on selling their bitcoins for higher prices than they paid for them. When bitcoin prices are rising rapidly, this is a tempting assumption. When bitcoin prices are falling, there is no longer any reason to “invest” in bitcoins. Real investments are different. When prices fall, they become more attractive.”

Again, looking at the history of Bitcoin, the argument from Smith is not particularly true. Although Bitcoin has only been around since 2009 and therefore less than 10 years of historical data is available, still, we can clearly see that “buying the dip” in regards to Bitcoin has not been a bad decision in the past.

Anyone familiar with Bitcoin’s history knows crashes happened already multiple times and that buying the dip then has paid off. This, of course, does not have to mean that buying the current dip will again give you big profits, but it is strange that Smith is stating that “buying the dip doesn’t exist with Bitcoin”, when he clearly didn’t look at the history of the digital currency. 

Funny detail: Bitcoin dies and comes back to life on a regular basis. One website estimates Bitcoin’s death toll stands at 322 and counting, dating back to 2010. In 2018 Bitcoin already died 76 times and we still have 6 months to go! Bitcoin goes through repeated cycles of boom and bust.

Everybody is entitled to have his or her own opinion. It is however sad to see that so many critics keep calling Bitcoin a con, a bubble or stating that Bitcoin is dying, without having a real look at what Bitcoin actually is or what it can mean to the world. That said: only time can tell who is going to be right in the end, the critics or the believers.

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