On this week’s episode, we bring back for a bit of history, free market solutions, and the latest news on the cruise to Alaska in 2019 (use code Tatiana and get a free download of one of my albums). The last one was a lot of fun, but Alaska is a once in a lifetime kind of place to visit, so I know I will be there! Tom has a free E-book called ” that we talked about, which was especially cool since when I learned about the Fed back in 2011, that is when I “woke up”. I wish more people would learn about the terrible impact that central bank has had on the world! He’s really one of my favorite guests, and certainly one of the most knowledgeable. Tune in, learn something, and have a few laughs!
About the Guests:
is the author of 12 books, including the New York Times bestsellers Meltdown (a free-market treatment of the financial crisis, with a foreword by Ron Paul) and The Politically Incorrect Guide to American History. He holds a bachelor’s degree in history from Harvard and his master’s, M.Phil., and Ph.D. from Columbia University. For more books, click here: .
Woods is a senior fellow of the Ludwig von Mises Institute and host of the weekday Tom Woods Show.
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In a recent report sent out to clients, Morgan Stanley analyst James Faucette that the “true” value of bitcoin might actually be zero.
Zero. Zip. Nada.
The report, titled bitcoin Decrypted, discussed the difficulty in ascribing value to the digital currency, noting that it behaves like neither a currency nor a store-of-value commodity like gold, silver, etc… Examining several key factors, Faucette points out:
bitcoin can’t be valued as a currency because it has no associated interest rate;
It may be likened to digital gold but, unlike gold itself, which is used in electronics, jewelry, etc.., bitcoin has no inherent use*;
While it is technically a payment network, bitcoin is difficult to scale and charges no transaction fee*;
bitcoin’s average daily trade volume over the last 30 days is only $3 billion* compared to $5.4 trillion in the FX market;
The estimated daily purchase volume for bitcoin is less than $300 million compared to Visa’s $17 billion
All of these facts, according to Faucette, underscore the fact that the digital currency has “virtually no acceptance, and shrinking.” In fact, he provides a handy chart (above) to illustrate his statement. Because of this, he maintains that “If nobody accepts the technology for payment then the value would be 0.”
Hold On There, Speed…
I hate to burst your bubble, Mr. Faucette, but some of your facts are…shall we say…less than factual. Mind you, I am no financial analyst, but then you don’t need to be to pick out these errors.
This one is a little tricky to refute, but I’ll give it a go. Playing devil’s advocate, let’s say that bitcoin as a cryptocurrency has no inherent use. It’s underlying architecture, the blockchain, has a wide range of applications. I know…”But blockchain and bitcoin are two separate things…” True, but without the blockchain, we wouldn’t have bitcoin to begin with, so one could conceivably argue that – in this instance – they are two sides of the same coin.
bitcoin has other uses too – especially in a socioeconomic sense. Consider the current economic conditions in . These people have been utterly failed by their respective governments. Inflation is through the roof, their native currency has about as much value as one-ply toilet paper, and people – families – are starving. So where are they turning? bitcoin. People are mining bitcoin and other cryptocurrencies so that they can survive. That’s pretty useful if you ask me.
Um…hello? There is absolutely a transaction fee, and right now, we’re paying it out the wazoo. It’s part of those “scalability issues” you mention in your research report. Now, if by transaction fee, you mean a centralized service provider collecting a fee that goes into its own coffers, then I guess maybe you’re technically correct, but you’ve still missed the point. Kind of like tech support at a software company whose name will not be mentioned here.
FACT 3 – bitcoin’s average trade volume over the last 30 days is only $3 billion
What rock have you been living under? Go look at the historical data for the last 30 days on . It’s okay. I’ll wait. Second column from the right. The one labeled Volume. If you take the average of all 30 days, as of this writing, it works out to $11.8 billion – just a wee bit more than your $3 billion estimate.
I respect your experience and your financial acumen, Mr. Faucette, and it even looks like we both believe in the same old adage, “Forewarned is forearmed,” but if you’re arming your clients with inaccurate information, what purpose does it serve?
What do you think of Faucette’s claims? Could the true value of bitcoin actually be zero or is this just more wharrgarbl? Let us know in the comments below.
