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Bitcoin: The Decline Is Fundamental, Unsolvable, And The End Of BTC

Dec. 18, 2018 8:45 AM ETBitcoin USD (BTC-USD)299 Comments
Anthony Garcia profile picture
Anthony Garcia


  • From a fundamental view of BTC the currency has nothing backing it and thus it literally has no value, either intrinsically or "agreed upon."
  • The technology isn't perceived as trustworthy or a good investment.
  • It will not achieve widespread adoption due to that perception, technological challenges, and preference for government currency.
  • All of these issues combined will cause it to eventually fail and its price will fall to or near zero.

Bitcoin is literally worth nothing

Bitcoin (BTC-USD) has no chance of success because it's worthless. It has nothing backing it but an illusion; no gold or silver or even a decree that it's legal tender. It has no intrinsic value and no one needs it.

The dollar, despite being a fiat currency, is worth something because the government says it's worth something and so does most of the rest of the world. I understand the argument that fiat is worthless as well - however until everyone else in the world agrees with that argument then fiat is indeed worth something. Gold is worth something because it's shiny, rare, and non-corrosive, and people around the world will buy and trade gold without a problem. The same reasons support the rest of the currencies in the developed world.

Bitcoin doesn't actually have any intrinsic value of any sort backing it - only vague assertions of its potential usefulness in the future. Your currency is only worth what other people believe it's worth and I'll present a few reasons why Bitcoin will never be generally agreed upon as something of worth.

It's valued by its supporters for a few abilities of Blockchain technology; for example about a third of its purchasers said they bought it to avoid government regulation (Source). However with the government currently looking very hard at ways to regulate it (SEC Chairman Jay Clayton recently noted that every initial coin offering he's seen qualifies as a security), 84% of respondents to a recent poll (Source) wanting regulation for ICOs, and in the same poll 68% wanting ongoing regulation - I believe it's most likely only a matter of time before the government starts enacting broader regulations and deteriorating the reason that a third of its purchasers bought it for.


This article was written by

Anthony Garcia profile picture
Almost 20 years in the markets. Investor, algorithmic trader, programmer, money manager, and stock analyst. I proudly taught myself everything, and very proudly have zero big fund Wall Street bonafides - I focus almost entirely on the DIY investor who is just like me. I also manage and advise private equity funds who wanted nothing to do with the big boys on Wall Street. My book is launching in August! Sign up for my FREE weekly newsletter with market and economic analysis, as well as a stock pick at https://www.investingisntcomplicated.com/free-newsletter

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (299)

six-oh profile picture
Since this "strong sell" recommendation was published, BTC is up 534% versus 60% for SPY.

Please comment.
@six-oh Looks like someone got it wrong.
six-oh profile picture

Yep. A “strong sell” recommendation after am 80% drop, and nearly at the bottom. Whoopsee.
Well... I guess that someone got all carried away by that hype created by the lows last year... Who is listening to the hype then? Maybe the reason for this article is the difficulty in understanding the whole concept and premise behind BTC, the power of it. "The horse is here to stay but the automobile is only a novelty, a fun" - President of Michigan's Savings Bank advising Henry Ford, 1903.
jimbo162 profile picture
Wow just ran across this, well written but pure nonsense. Misses on every premise.
Is the title of the article intended to be facetious? As is, it's an oxymoron .... (WHAT decline?) You have to pick specific date ranges to find a decline in Bitcoin value. Start when Bitcoin hit the market or start anytime in the last year. Start ANYTIME except for a brief excursion into the teens ($10K and up) that lasted for a few months, and Bitcoin is up many fold for most of the time periods you could select.

If a stock does the same, (WMT went to $110 back in Jan 2018 and is still 9% below that top), do you declare the decline "fundamental"? Not when its inherent value continues to climb. For Bitcoin, that value is defined by usage. And usage continues to climb.

The problem was simply that, like WMT investors, the Bitcoin speculators got ahead of the value. Those folks who bought in at $19K will just need to wait for the true value, as determined by real utility and usage, to catch up. Buyers of WMT stock at $109 will make money as well, assuming they are sufficiently patient. One day it will sell far above $110, but that a lot longer in the future than the Bitcoin speculators will need to wait.
The Dividend Dog profile picture
Here's the pitch....SWING AND A MISS! Strike three, you're out.
Well, it seems to me that "strike 3 and YOU are out". BTC continues to climb and will likely set a new record this year. Are you WATCHING (not listening) to what the financial markets are doing? No matter what they SAY, they are intending to participate in the BTC instrument. (Creating Futures, Options, and ETfs).
Gotta enjoy these old articles. Who knows where BTC will be in a month?
HamishMacEwan profile picture
They're fun. Here's another from someone who thought they had a good chance of predicting: seekingalpha.com/...
soajustice profile picture
Bitcoin below $3K in 3 months? Seems likely given the overall technical set up. Fundamentally, nothing has changed since Dec-17. Everyone that bought that dead-cat-bounce (started 12/17/18) are about to look for the exit right. Early buyers will be tested next (I suspect many of them sold already as they knew how lucky they got).

Welcome to revisit this post in 3 months.
six-oh profile picture

Price today 8200ish. I look forward to hearing your "revisited" thoughts.
soajustice profile picture

Lucky for me I'm not an idiot and remind nimble in my views to capture the most gain.

I went long BTC at the exact level I stated long ago - $4.5K (got in at $4.6K).

Strange huh, I can be bearish in my views but could also be long:


Also, BTC YTD gain isn't remotely close to what I've captured in the month of May alone.

six-oh profile picture

Wow. Did I strike a nerve? :-)
Definitely remain nimble in your views. Your polemic nature demands it.
Just because you spent real money buying a server and electricity to "mine" yourself a spot on a virtual ledger doesn't mean it's worth that cost... you're not transferring any intrinsic value to a hash.
BohusPollak profile picture
Its value is for the revolution it caused and for people who understand the fundamentals of the principle. Is like you are talking about internet 18 years ago to a pensioner in soviet union state.
zintips profile picture
Bitcoin will skyrocket when the debt facility finally collapses:

is that why it skyrocketed at the end of 2017?? or was that just the Greater Fool Theory in action.
Bitcoin to me reminds me of Tulipmania which happened in the 1600's where people irrationally bid up tulip bulbs to the price of a house back then. Then it all crashed as all manias do. Bitcoin has no backing, no worth. Someone created it out of thin air. Its the mania that has it going up. People hoping to get rich quick. Anyone can create a Crypto currency in their basement if they have the equipment to do so. its a total sham in my opinion.

The U.S. dollar, although no longer backed by gold, does have the backing indirectly of the U.S. government land holdings, and U.S. workers and the tax base.
There’s a limited supply of elephant shit too. Does that make it valuable? Bitcoin was always going to head back to zero because it is not capable of becoming a usable medium of exchange. Let me repeat that for the blockheads - Bitcoin fundamentally, structurally, technologically cannot ever become a usable mainstream currency. Transactions are too limited and too slow, supply is too low, and the dirtbags that control it are completely untrustworthy. Even more untrustworthy than your average issuer of fiat currency, and that is saying a lot my friends. It was an exercise in geekdom that spun out of control and made some people fabulously and unexpectedly rich, and it made many more other people a lot poorer. Congratulations to the winners and tough luck to the losers, maybe you’ll know better next time.
six-oh profile picture

Price is 8000ish today.
How would you USE elephant shit for anything OTHER than nearby fertilizing needs? In addition to limited supply, you need UTILITY and ease of use. Elephant shit has only limited supply. It's fertilizer utility is very restricted in range (it costs too much to ship and there are many alternatives) and since it has only one use, it can't be used very easily to barter.
That make this comparison poor. Take a look at the cost for a migrant worker to send money home; typically, it costs them between 3% and 10%, depending on a host of factors, including whether they are customers of the transacting bank, the means used to transmit the money and the destination. This doesn't even count the currency exchange fees.
Using BTC, the percentage would be about 0.25%. As adoption becomes more and more widespread, the BTC price will begin to stabilize. Traditional finance companies will provide the access to BTC investment AND (very importantly), utilization. The increased access to both will drive the price much higher.
Those who don't see this are like Kodak or Blackberry investors, thinking what WAS must BE. It's a new world. This is a whole new paradigm. There is some risk, but it is HIGHLY asymmetric. Looking at BTC history over the last decade, it is very unlikely to go to zero. It has enjoyed higher highs and higher lows throughout that decade. I expect that trend to continue but with smaller fluctuations as traditional investment vehicles become available, mitigating risk. (Options and futures help to serve this role). Time will tell, but a small bet could result in a handsome reward in these early times. That is the asymmetry.
HamishMacEwan profile picture
wrote: "I expect that trend to continue but with smaller fluctuations as traditional investment vehicles become available, mitigating risk. (Options and futures help to serve this role). "

Acting Man profile picture
There is no such thing as "intrinsic value". All value judgments are subjective. Economists know this since 1873, by now one would imagine it has made the rounds, but apparently not.
From a fundamental view of US Dollar the currency has nothing backing it and thus it literally has no value, either intrinsically or "agreed upon."

Since "the currency has nothing backing it " is false and the USA is backing it, everyone is buying US Dollar including US Hater Iranian who demand a jet load of US Dollar from Obama.

Hindsight 101, if US hater Iranian pick US Dollar over BTC, BTC traders must be dumber than Iranian.

Imagine how much more money Iranian can get with zero weight BTC from Obama.
You write english like new immigrant. Are you Iranian?
Money has no feeling and dollar has no emotion.
How so? Except for very narrow window (a couple of years, max in duration), holding money in BTC has resulted in FAR more retained or appreciated value than the dollar.
Glenway Fripp profile picture
What the bears are missing is this. Even with no use or no so called 'intrinsic value', BTC and cryptos are hard to kill. There will always be an attractive coin at an attractive price. They are a decentralized casino, open for business 24/7, that will be here for a thousand years. A gamblers paradise!
User 49145782 profile picture
Perhaps, but not at $20,000. There are better investments and attempts to dress this pig up with some lipstick are laughable.
six-oh profile picture
@User 49145782

How about at 8000?
streets have no name profile picture
sophomoric editorial is sophomoric
O.K. so I'll assume that most of those reading here are employed somewhere - somehow.

Your employer sends out an email to all employees:

H.R. Compensation
Jane Doe, Chair

Today, we are embarking on an exciting new journey in keeping with our desire to stay one step ahead of the competition. We are aligning our workforce with tomorrow's challenges and we want everyone to understand this as we roll out the changes. Effective 1/1/2019, your paycheck will be denominated in bitcoin rather than dollars. We've established that your rate of pay (in bitcoin) for 2019 will be the same rate as your end-of-year 2018 pay established at the exchange rate effective close-of-business (COB) 12/31/2018. You may need to adjust your auto-deposit with your bank or credit union. When deducting Federal and State taxes (including FICA) we will need to deduct these at the same percentage in bitcoin and pay them (in USD) at the exchange rate COB the date of payment. If you have any questions about this please contact HR compensation. "

O.K. guys - be honest. What's your reaction? Would you stay working there?
User 49145782 profile picture
I love working for randomly fluctuating rates. It makes budgeting and saving for the future a breeze.
Brunelleski profile picture
Beautiful job imitating corporate lingo :)
Since I receive a good portion of payment for services in bitcoin and a couple of other crypto currencies I would say most of the bears need to look at the overall world economy. Talk to a computer scientist, talk to those working in Internet Technologies, Gamers. I receive payment in crypto because it's fast, it's cheap to transact in and I rarely work in the country that I'm being paid from. I use crypto daily to transact, yes I need an intermediary, and their is many out there. Maybe the price of bitcoin is too high today, maybe it's not high enough. I don't care about the price of bitcoin. But for me, all I need is a laptop, an internet connection via my mobile and a crypto wallet with an intermediary to exchange it and I can work in Argentina from Burma, France wherever. If your working in an office everyday btc is not so useful to you, but if your a gig employee crypto is pretty damn useful.
User 49145782 profile picture
I want to take a moment to laud the advantages of bitcoin to convince other investors to join the crypto movement:

1) Easy for hackers to steal.
2) Easy for exchanges to suddenly find the money "missing" and close up shop, never to be heard from again.
3) Manipulated by a small group of whales.
4) No longer "limited" quantity because every 3 months there is a new split which duplicates the coins.
5) High fees for any transactions.
6) Transactions take forever, even for small things.
7) Price changes frequently making it difficult to set prices for merchandise and thus facilitate commerce.
8) Has lost many early commercial adopters due to aforementioned problems.

Yup, I want to buy some bitcoin now!
> 1) Easy for hackers to steal.
If it's so easy why isn't it happening... Do you think cash should be banned considering I can pick your wallet?

> 2) Easy for exchanges to suddenly find the money "missing" and close up shop, never to be heard from again.
Exchanges just need to be regulated like stock exchanges. Besides, I don't store my wealth with exchanges... except for my stocks.. which I cannot do anything about as I need a third-party broker to hold them for me. I store my bitcoin in my own unhackable wallet.

> 3) Manipulated by a small group of whales.
Like everything.

> 4) No longer "limited" quantity because every 3 months there is a new split which duplicates the coins.
This is not what you think it is. You cannot duplicate bitcoin. There can never be more than 21 million bitcoin, it doesn't matter if you duplicate the blockchain an infinite number of times... only 21 million bitcoin units can exist.

> 5) High fees for any transactions.
I've never paid more than cents for a transaction in crypto currencies. You're probably referring to that 2 month period a year ago before the update.

> 6) Transactions take forever, even for small things.
Bitcoin takes 10 minutes to confirm, alternatives are faster. It will very soon be instantaneous - and already is for many other crypto currencies. "Wahhh, it takes 20 seconds to download a jpeg, this internet thing will never take off..."

> 7) Price changes frequently making it difficult to set prices for merchandise and thus facilitate commerce.
Not difficult at all. You set your price in bitcoin to the fiat price, with the bitcoin price adjusting automatically. This is what people do now.

> 8) Has lost many early commercial adopters due to aforementioned problems.
Teething problems.
User 49145782 profile picture
@GregScotts Let's assume for the sake of argument that I agree with all of your rebuttals. What would I want to use bitcoin for when I have dollars, or a visa card for when I'm traveling?
When you travel, dollars and visa cards can be taken, or confiscated. Bitcoins cannot, since they only need to exist in your head.

Once people figure out how bitcoins work, they will finally understand that bitcoins don't even exist on their own PCs, but rather they only exist on the blockchain, which is everywhere the internet is.
Glenway Fripp profile picture
Intrinsic value is an annoying term which actually means the person using the term knows more about the value of something than the person who they are talking to. I, for one will be happy when the term goes out of fashion.There is no such thing as some objectively quantifiable ' intrinsic value',..... intrinsically. Something is worth exactly what someone will pay for it. It is that simple.

As for Bitcoin going to $20,000 because of hype? The only law that dictates price is supply and demand. Anything else you can say about what moves prices is theory and conjecture. Supply and demand setting price is a force of nature. Bitcoin went up to $20,000 because the supply was squeezed. At the time it spiked (like anything that spikes), there were plenty of buyers and no one wanted to sell it. VERY SIMPLE. Then it crashed and everyone wanted to sell it and no one wanted to touch it with a thirty two and a half foot pole. Volatility is the result of fluctuations in supply and demand. Supply and demand equilibrium/stability ends volatility and stabilizes prices. Things pertaining to Supply/demand are basic market dynamics and one should bear that in mind if one is to write intelligently about economic subjects.

Supply and demand is the only thing that is measurable that moves the price of Bitcoin. BTC is the purest supply/demand trading platform in that there is absolutely nothing material, (you might say. 'No intrinsic value.'), there to confuse the issue of what its value is and what controls the price! Only Supply/Demand effect the price of BTC.

The author of this article thinks he is right and can therefore decree the true value of BTC at zero! Ha Ha! When it is traded at zero it will be worth zero; never before that..
alectric profile picture
One of the points that you did not touch on was the fact the BTC had a limited supply, thus when demand exceeded supply, its price skyrocketed. But does it really have a limited supply? No, it does not. Apparently, if the rules of the game cannot be agreed upon, there is always the option to fork. Or other cryptocurrencies come into being. Thus, there is no real advantage to BTC other than the underlying blockchain technology.

Ether has some utilitarian value in smart contracts. Others such as XRP for currency exchange. I think those that leverage the anonymity of the blockchain with some utilitarian value will survive and eventually thrive. But relying on them as an investment is problematic because what you want is an increase in value but if it comes with increased volatility then it becomes less useful for transactions unless the transaction rate increases fast enough to overcome the volatility. And since the blockchain derives its creibility from 51% of the network validating the transaction, it will always be slower that a single trusted authority.

Quite often disruptive technologies take about 3 iterations to get right. We probably have one more to go, then blockchain cryptocurrencies will become mainstream.
"From a fundamental view of BTC the currency has nothing backing it and thus it literally has no value, either intrinsically or "agreed upon."

The price is the agreed upon value. Maybe what you mean is that it doesn't have long term, bankable, algorithmicly predictable value.
Almost no currency has "intrinsic" value beyond the current price of it's constituent metals. So maybe the Krugerrand has some meaningful intrinsic value.
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