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I do not understand Bitcoin but my good pal Dominic Frisby does and explained the investment case in full at Gold & Bears
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Comments
Simple Moving Avarice
A few things he failed to mention:
Your bitcoin wallet does not contain your bitcoins. It contains ‘keys’ to access your coins. If someone gets a copy of your wallet they can steal all of your coins. Almost every company which based its business on bitcoins has suffered the theft of all or most of their bitcoin assets. It is completely untraceable and bitcoin transactions cannot be reversed.
Individuals can also lose all their bitcoins in the same way and often do. But for a company, any employee who has access to your keys can bankrupt you any time they choose. Any hacker who manages to access your ‘hot’ wallet can steal the entire contents of that wallet. (The hot wallet is the one which is used to allow your site to do online transactions with customers.)
As an investment case it is worth remembering that bitcoins have no intrinsic value at all apart from scarcity. They are just a recording on a ledger of how many you own and their value stems entirely from whether anyone wants to buy them from you. There is no NAV; no backing assets. You can’t even plant them and grow a nice tulip!
So the price action of bitcoin is a fascinating study in how sentiment drives prices, because only sentiment is driving bitcoin prices.
And all that without even mentioning the insanely wasteful way that bitcoin transactions are distributed and recorded – an approach which will fail to scale long before it gets big enough to be even marginally useful.