Popular finance writer Lawrence Meyers argues that Bitcoin is for suckers, in a post that has been shared widely and disturbed a lot of crypto enthusiasts. He starts off by saying that there are many reasons why Bitcoin is one the world’s biggest financial bubbles, and why Bitcoin is a dumb investment.
He went on to discuss Bitcoins volatility using standard deviation; noting that the S&P 500- a stock market bellwether- had delivered an average annual return of 11.5 percent with a standard deviation of 11.25 which means that in any given year, the S&P has a 95 percent chance of returning between -11 percent and +34 percent. On the other hand the Grayscale Bitcoin investment trust has given an annual return of 60 percent average with a standard deviation of 81, meaning that the fund has a 95 percent chance of returning between -100 percent and +222 percent.
The Bitcoin numbers are quite staggering to him because he went on to stress that in any given year, Bitcoin holders have a 95 percent chance of tripling the value of their holdings and a similar chance of losing all the value. He therefore favors the S&P numbers which he finds more reasonable and therefore a better investment. To him an 11 percent chance of loss in the stock market annually with a probability of a 34 percent return sounds way better than the probability of tripling your investment, or losing it all.
Meyers then compares Bitcoin returns to a night in Las Vegas; he argues that you are better off tricking your money away there than holding it in Bitcoin. According to him, one is better off gambling away their money than putting it into Bitcoin because in the long run, the expected return will only be -1.41 percent. Meyers made this point to explain just how easy it is to lose your money by holding it in crypto-currencies.
To further drive the point home, he shared a tweet posted in February 1 by Nathaniel Popper of Quadriga, who posted that the firm had lost $150 Million worth of crypto assets because the firm’s founder had died and he was the only one that had the passwords to the firm’s wallets. Meyers also challenged crypto merchant adoption, by wondering why anyone would accept payment in Bitcoin bearing in mind how volatile the crypto-currency is.
According to him, merchants could easily sell something for $9,000 in Bitcoin only for its value to drop to $8,200 the next day. He does also take into consideration that the value could also go up sharply; he does not fancy the risk though. He closes by making a case for the dollar over BTC, stating that the dollar’s volatility hovers around the 1 percent mark while BTC’s volatility has been at 15 percent just over the last month. He reinforces the point by stating that merchants can trust the dollar because if they sell something today for x amount of dollars, they can be sure that the dollar value will remain roughly the same for a quite some time which is not the case with BTC.
My brief take on the article is that his argument is quite on point based on the receipts he provided. The volatile nature of Bitcoin has been a concern for many that’s why stable coins are becoming more popular. People that saw the value of their Bitcoin holdings drop by a staggering 80 percent in the 2018 price slump will definitely agree with Meyers. The article will, however, be a tough sell for people who made millions almost overnight in the 2017 Bull Run.
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