The Blob backs Bitcoin

(cause nothin’ else does)

Bitcoin was “invented” in early 2009, in midst of the turmoil of the 2008 financial collapse. There have always been rumors that a US intelligence agency was involved in the creation of the Bitcoin concept. What I noticed about Bitcoin, and cryptocurrency in general is, that someone decided to create a “financial instrument” that was not based on underlying assets. In fact, the mortgage-backed security fueled crash of 2008 began as the underlying securities, the home mortgages and associated revenue streams, failed in spectacular fashion because so many of the mortgage holders were unable to make their monthly payments.

Fascinating then that Bitcoin springs from the shadows in 2009 as a “financial instrument” that is not backed by anything. This means that Bitcoin can’t “fail” due to a failure of the underlying assets. The only thing that makes Bitcoin worth anything is the psychology of the investor. As long as that fiction can be maintained, then Bitcoin will not collapse. It is almost as if someone decided the problem was having to back up a new type of security with an asset. So why not make a security that isn’t backed by anything? But how do you get investors to invest? Well, you could make up stories like it “gets the government out of the money business”, or “Bitcoin is untraceable!”, or “Bitcoin is anonymous”. Even if these things were true (which they aren’t) it still seems like a tough sell to get anyone to jump aboard the Bitcoin Express.

So, there was also additional talk of how this was the future of money, and how it was going to be stupendous to get in on the party early. Whatever the best-selling point turned out to be, the spiel definitely worked to bring in small and big investors alike. As long as investor confidence remains high, so will Bitcoin’s price. Even better, there isn’t anything backing Bitcoin up, so there is no chance that underlying assets could jeopardize the valuation. It is all up to investor confidence, and therefore investor psychology. This is a relatively easy thing to manipulate in the financial news outlets, and so far, it has worked to keep Bitcoin somewhat stable and highly valuated.

Bitcoin supporters will of say that “the blockchain” makes crypto into an “asset” in itself, but of course this is simply declaration by fiat. Saying that a “computerized system that is a distributed ledger of securely linked records that are irreversible and verified by a peer-to-peer network” is an asset is, well… all in the mind of the investor. But with so many large investors still in the game, Bitcoin will remain highly valuated, as well as volatile, and that’s just how gamblers like it.

But it seems to me that all it would take is for one bad story to hit the news, and it could all fail quickly. If one very large investor cashed in early in a bad news cycle, that could start the ball rolling downhill, fast. Some other big investors would no doubt buy the dip in order to stabilize the price, but it might end up being too little too late. Without the positive psychology propping it up, the panic will turn Bitcoin into Shitcoin, and that’s all she wrote

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