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What ever happened to Bitcoin?

February 4, 2019

So what ever happened to Bitcoin? “Its going to change the world. Its the greatest thing in History. How have we ever lived without it?” Thats what everyone kept saying.

For me, when people say that kinda stuff, that means there is too much hype. I dont like hype. I think, if you have to hype something that much, it probably is not worth it to begin with.

So what is Bitcoin anyway? As I understand it, Bitcoin is a currency that is completely online and total electronic. Nobody prints any bitcoin notes. There is something called blockchain that is the programming that keeps it all accounted for. Your amount of online currency is kept track of by the blockchain technology.

Bitcoin is a currency just like the dollar. You should be able to buy, sell, whatever you want and live life in this world by only using Bitcoin. We would never need Pounds, Francs, Yen, Yuan, or Euros because we should be able to use bitcoin. One world currency with super efficiency to be used world wide. The theory is great.

The problem is that the currency is NOT accepted almost anywhere. There were some places that were thinking about accepting it, but it just never quite caught on. How can you get behind a currency if no one accepts it?

Also, the value of bitcoin is so unstable. There has been just too much speculation. When you have so much speculation there is no stability. And you need stability with a currency. Can you imagine if you bought bitcoin when the price was at $15,000 to 1 bitcoin and now its at $3,000ish to 1 bitcoin?

I know people made money on the speculation and good for them. Some paid several hundred dollars and came out with several thousand. WOW. I just dont want my currency changing in price so much. Just remember you could have all your money in bitcoin and the value drops to almost nothing!! Not an ideal situation.

I am not scared to try new things. In all regards I am kinda adventurous, but when it came time to do something about bitcoin, I thought this just seems like a fad.  It reminded me of the Beanie Baby Craze of the 1990s. If you are too young to remember that time period, let me tell you about it.

There was a company that made stuffed animals called Ty Inc. These animals were really cute. They made a number of different animals with some really cool colors. There were bears, ducks, dogs, cats, fish, bulls, and even crabs. People, greedy as we are, began to hoard these cute lovable little animals.

Because people wanted the bears and ducks and crabs more and more, the price was driven up. Pretty soon these beanie babies were being sold on the open market through EBay for instead of the retail price of $8 or 10, but for $50, then $100. Some “RARE” items were being sold for $1,000s of dollars. Craziness took over. Retailers got in on the act and started to sell “NEW” Beanies for $50 to $100.

Now think about this for a second. These were cute little stuffed animals that cost about $2.00 to make were being sold for $100. I am all for a free market, but Geez. People were getting crazy. They were saying that the value of these little stuffed animals was going to be worth $1000s, not $100s anymore. Buy now, because they were going to be worth more very soon.

Everybody wanted to get in on the craze as well as the profits. As always, there are inefficiencies in the market. Someone needs rent money, they sell their beanie under market for $50. You buy it and sell it on craigslist for $100. People were doing this all over the place. There were afficianados that could tell you which ones were worth more because of limited production.

I always thought that stuff was just plain ridiculous. I remember buying a few for the kids because they were cute, but never as an investment. Shortly afterwards, my “net worth” supposedly increased by several $1,000s. I knew it was just stupid at the time and never put it on my net worth statement.

By now, the craze has mostly faded. There are still some crazies out there who will tell you that some beanies are worth $5k or $10k and will tell you why they are worth that much.

The main reason that people thought that they were worth so much was that there was a limited number being made. Of course, that limited number was usually in the hundreds of thousands. After a while, the beanies were “Retired”. This meant that they were not going to be made anymore and that they would become collectors items.

The company would announce a beanie was retired. How could they NOT sell all of their inventory if a item had been discontinued and was about to be collectable? They slowly retired and came out with new beanies. This meant that there were always more beanies that were retired. They kept making their own limited supply.

It is this limited supply that got everyone to get on board. Selfishness is one of those really ugly, ugly traits that drove the prices crazy. “I have something that you dont have, Nanny, Nanny Boo Boo!!!”  “I paid $20, but if you want what I have, I will sell it to you for $50.”

The owner of the company, Ty Warner became a billionaire. People sold books about the prices of beanies. People sold little cases for the beanies and made millions. Lots of people made money in the beanie craze. There were also many many people who bought beanies for hundreds or thousands that are now worth about $5 bucks each.

The creator of beanies was the one who made over $1billion. The creator of bitcoin is said to be worth over $5billion. The creators of many of the cryptocurrencies made huge amounts of money.

Greed is another way to describe the beanie baby craze. Here is where the parallel is made with Bitcoin.

Everyone had FOMO or fear of missing out. They all wanted to be on the train to riches. Over the last eight or nine years people have been getting on that Bitcoin train.

Around 2010 until about 2013 the real estate market was in the tank(great time to buy real estate). Bitcoin was worth under $50. As more people started to hear about it and since the stock market was not really that great a place to be at the time, why not?

The word got out that bitcoin was the next “IT” thing. People were buying it like crazy. There became trading houses that would make a small commission if you bought or sold your bitcoin with them. If there were trading houses, it must be legit, right?

As real estate began to take off in 2015 and 2016 people began to take profits. The stock market began to take off too. They looked for something new and exciting to do with all this new money that they had. They thought what about bitcoin. It is a limited supply, they are not making any more it (thats what they say about land also), so it must go up in value.

When we got to 2017 it was worth almost $1,000. This was up from under $50 just a few short years earlier. People had made a crazy amount of money from the popularity. And it was only going to get crazier. When people buy something cheap and all of a sudden it is worth more, they think they made a great investment.

If I bought 10bitcoin for $500 and now its worth $1,000 each. My $500 turned into $10,000 in 2 years. That makes me a smart investor. Now at the end of 2017 it was worth $14,000+ each. Now the value would be over $140,000 from a $500 investment.

As the price ramped up in 2017 from $1,000 to over $14,000 people thought it would go up forever. This was going to take the place of the dollar. People would throw $100, maybe $10k, some people 100k at bitcoin. Because, who knows I might be able to retire in a couple more years.

So as of this writing the price is under $4,000 per bitcoin. All fads fade. The price is still kind of a high price to pay for speculation. It has tumbled throughout the year. All of a sudden, nobody wants to talk about all the money that they just lost. Everybody thought they were the smartest, badass”est” people in the world for the return they made.

Here is the current price of bitcoin on google. Maybe in a few years it will be worth millions, but I think it will be worth about $100 by 2020 or 2021. When you have some time on this earth you will have seen plenty of crazy stuff that people will do to make some money.

Do some research on popular things that we have done over the years. When you see some of the things that people will buy and do, you will see that Troll Dolls, Cabbage Patch Kids, Pet Rocks and hula hoops are not that far off from the craziness of Bitcoin. I remember people were paying $100 for Cabbage Patch Kids back in the 1980s. Talk about Consumerism run amok.

Some things to take away from your beanie baby and bitcoin discussion:

People are fickle. People get tired of beanies, bitcoin and everything else if they are not making crazy amounts of money quick. They will tire and the price will drop before long. People seem not to get bored with Real Estate as easily, but they do in fact tire of it about every 10 years or so. This is called a market correction.

There is always something newer, faster and better. People are jealous, evil and selfish(well, some people). They want to have more widgets than anybody else. They also want to have a better return on them than anyone else. If not, they lose interest and want to invest in something else. Dont be like everyone else. It is ok to make 5% on something, 10% on something else and 15% on another investment. It is called diversification.

Just because there is a limited amount does not make it valuable. There may only be several hundred thousand of a certain beanie bear, but there are many substitutes for a plush bear. Nowadays with the popularity of bitcoin, there are many other “cryptocurrencies” around. Now there are many of these “limited quantity” currencies.

Bitcoin is backed by nothing. At least beanies are a cute soft animal. Real Estate is something that you can live in, rent, mortgage, or create a note on.  Bitcoin is an electronic entry in your computer. It is accepted at some online stores, but now it is worth a small fraction of what you probably paid for it. Just think if you paid $15,000 for one bitcoin and now you can only buy a 15 year old car with 200k miles on it with your bitcoin. It can go up crazy in value, but it can come crashing down like crazy also.

If you are the first to get in on a fad, also be the first to get out. When people started talking about bitcoin back in 2012 and 2013 I kinda thought it sounded interesting. Never did I think about buying some even though it could have made a boatload of money. But when people were starting to have classes on it, people on facebook were saying how they made so much money, thats when I knew it was about to boil over into a big mess.

Just over a year ago the price was 5k and 6k and people were saying that it would double in a few months(and it did), thats when I knew it was getting ready to pop and then fizzle. When you do nothing but buy something and wait for it to go up in value you are just gambling.

Bitcoin reminds me of Las Vegas. It is fun to see all the glitz and glamor. And in the end you end up paying for the excitement. Some people paid a little too much for the amount of excitement that they got. Especially if you paid 10k or more for a bitcoin. Will it take over the world? Probably not.

The technology that has been developed for it is being used in other fields. But I dont think that there will ever be one world currency. Even in the crypto world, there are now over 1600 different online cryptocurrencies. I just dont see how there is a limited number of coins but there are always more coming out all the time. The problem is that anyone can create one.

The creator of a new cryptocurrency seems to be the only one making the big money. There are so many different ones and you can make new ones so easily.

I guess I could create the Pozo. One Pozo is worth $1.00. There will only be 7.7Billion of them, one for every person on the planet. This is a very limited amount if there is only one per person. I will start selling them online tomorrow. But since they are so rare, I might start selling them at $2.00 each. As people start buying them, they might be worth $20. Man, I am going to be rich!!!

Dont forget to buy your Pozo’s at your local Pozo exchange. Wouldn’t that be cool???

You can learn all you want about the beanie baby craze on an article I found here.