I have been waiting for a graphic that could put Bitcoin in perspective. As a visual learner, these kinds of images provide a clear view of the relationship of this "new" financial instrument and the rest of the financial world.
I say financial instrument because BitCoin and the other more recent cryptocurrencies don't share many important features of an investment or currency. There is clearly no price stability or predictable exchange rate. There is no claim on cashflow or note/instrument, no contract for future delivery and no "intrinsic" value, per se.
Jeffrey Dorfman from Forbes Magazine writes...
"Given these drawbacks, the only reasons to own Bitcoins are not to use them as a currency, but to either speculate on their asset value or use them to shield transactions from others. Without a stable value Bitcoin cannot truly be a currency. Rather it is a commodity asset that one trades, like gold or silver, in hopes that its value will rise and yield a trading profit. There is nothing wrong with speculation; the actions of speculators help to add market liquidity and to determine the market value of assets. However, usually the asset being valued also has an actual underlying use: you can invest in gold or use it to make jewelry or electronic components. Bitcoins have no uses other than allowing people to hide wealth, conceal (often illegal) transactions, and make and lose money by trading them."
Bigger than Bitcoin is the rapidly emerging technology called the BlockChain.
Once developed and adapted blockchain technology will certainly change the world in ways we cannot imagine.
These changes will not be limited to banking and finance, but they are clearly changing these industries already. And as every wave of technology disrupts unprepared businesses, expect to see casualties of this technology.
Back to Soren K at MarketSlant...
"We see Blockchain as totally changing Banking (and a ton of other industries) face in the next 10 years. The "How" is dependent on the people at the helms of the industries affected...
For now lets briefly focus on the immediate developments in Blockchain and what they broadly imply the potential paths are ahead for the groundbreakers (Bitcoin, Ethereum) and the lurking Tech Behemoths (Google, Amazon).
When, not if, those behemoths are up and running they will immediately have an embedded network of both customers AND service providers at their disposal in the form of search eyeballs (Google) and buyers (Amazon). They will be set up to crush the opposition if they choose to create their own currency. Imagine Amazon offering Amazon Money for Amazon purchases. Now imagine them offering 20% discounts if you use their money. The choices at this point boggle the mind.
Blockchain is the railroad. Amazon and Google have the oil. Like Rockefeller, the railroad will be made "exclusive" to their products.
The bottom line for the big tech companies is how they can lever their networks more efficently and add scale without increasing fixed cost. That comes in the form of levering existing networks with new products geared to cement loyalty. What better way to do this than to have your own money ? What will Home Depot do? WE HONOR AMAZON CASH? meanwhile the plumber, pipes, and sump pump you buy next month will all be through Amazon. And you'll get a discount by using Amazon cash on your Amazon Credit Card.
Amazon and Google are just a big cash register with all their products at point of sale. Gum, Mints, and People magazine will become Disinfectant, Steam Cleaners, Rugs, and a Local Handy Man. And instread of asking for your loyalty card they will actually take blockchain driven Amazon currency. Remember ATMs? After everyone was on them, they stopped being free.
We feel that BitCoin is going to have problems going forward. They are also best positioned to overcome those problems. But if they do not increase computing power their client base will eventually be relegated to people trying to export their wealth from oppressive regimes.
Meanwhile you and I will be buying Nike sneakers on Amazon for 20% off because we are now using Amazon Cash on our Amazon Credit Card.
Google will also offer similar concepts if you click on one of their paid advertiser links. "
We certainly live in interesting times.
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