Bitcoin: Boon or Bubble?

It seems like Bitcoin is reaching new highs daily. But is all of this growth sustainable? The short answer is maybe. It all comes down to whether the price is being driven up by speculation or by real world value provided to users. While speculation is definitely a factor, Bitcoin's decentralized and anonymous nature make it incredibly useful to entrepreneurs and investors of every stripe. Bitcoin and other cryptocurrencies allow all of us to transmit wealth and conduct commerce without the fear of state interference. For the sake of maintaining 'legitimacy', most large cryptocurrency outfits do not tout the technology's ability to circumvent state authorities. However, in my opinion, this is Bitcoin's main advantage. Commerce becomes orders of magnitude easier without taxes and regulation.

The average person does not realize how much the government fucks with small business and everyday commerce. In the United States this is mainly due to the lobbying of big business and special interest groups. It baffles me how people pushing for ever increasing regulation in order to 'reign in big business' never pause to wonder why big business is also pushing for this regulation. Google and Facebook pushed for net neutrality. Hillary Clinton, a known Goldman Sachs shill, campaigned on the greatest Wall Street regulations ever. The reason for this is quite simple: big businesses can weather burdensome regulation, while their upstart competition can't.

Let me illustrate with a personal anecdote from my old business professor. Years ago, while he was in charge of regulatory compliance at an upstart investment firm, SEC bureaucrats decided unilaterally that they were going to require a new exam to be taken as part of the yearly licencing process. My professor drew up the paperwork to apply for this, but his assistant forgot to fax it in. They missed the application deadline by one day. When he called up the SEC to explain their predicament the only response was, "You guys are fucked". Because of one minor screw up the firm was fined $150,000 for failing to obtain the proper licence. Unelected bureaucrats arbitrarily rewrote regulations, and then robbed them of One Hundred and Fifty Thousand Dollars for missing the new filling deadline. Now, for the Goldman Sachs of the world, $150,000 is a microscopic rounding error. To an upstart company, that kind of fine can be deadly. Similarly burdensome regulatory agencies harass business in every segment of the economy. This is why it is monumentally helpful to circumvent the state entirely.

I realize that cryptocurrency alone will not allow us to operate without state interference. However, with Bitcoin we can can conduct commerce in a true free market and starve the state of tax money. As more and more people adopt this technology, a free market counter-economy will begin to flourish. If enough people adopt this model, the state will be powerless to stop us. With people free to compete in the market, I expect that this counter-economy will produce unprecedented growth and innovation.

This brings us back to our original question: Is this growth sustainable? I, for one, am very optimistic. Bitcoin has had many bubbles in the past, but each time stabilized at a price higher than ever. The long term outlook for Bitcoin, and other innovative currencies such as Ether, is very good. One point of concern I have is the simultaneous skyrocketing of seemingly every random altcoin on the face of the earth. This suggests that the rising prices are caused by newcomers hoping on the bandwagon, trying to make it big. It's quit likely that these people will just as suddenly jump ship, resulting in a crash that will lead to some heavy short term losses. I won't pretend to know how this will all play out. However, in the long run I think Bitcoin still has a very long way to go up. If you want my advice, you should keep most your wealth in cryptocurrency and hard assets such as precious metals. I would also encourage you to do as much commerce as possible within the new counter economy. I may not have a fancy finance degree or SEC licence, but I have made personal capital gains of more then 400% in the past year (and will never pay one penny of tax on it). I would love to hear what everyone has to say in the comments bellow. Good luck everyone and God speed!

BTW, in the time it took me to right this Bitcoin has gained around $40.