TJ Walker argues Bitcoin's massive price swings prove it's speculation, not money. He cites a $35,000 drop from peak, notes Paul Krugman's skepticism, and lists problems: illicit use, huge energy costs, no consumer protections, and no real-world adoption beyond trading.
Bitcoin's volatility and the case against crypto. Bitcoin is back in the news for the same familiar reason, extreme and unpredictable volatility. Today and this week it's trading around $91,000 after dipping as low as 85,000 earlier this week. That's roughly a 30% drop from its October peak. November alone saw more than 18,000 thousand dollars in losses. Now, economists like Paul Krugman say the core problem hasn't changed. Crypto still isn't real money. It's too volatile for everyday use, too easy to manipulate, and far too often tied to fraud, hacking and criminal finance. And what crypto advocates insist that, or when crypto advocates insist that fiat money is backed by nothing, they're simply wrong. The dollar is backed by the US Government's taxing power, the courts that enforce contracts, and a central bank that keeps the finance system functioning. Crypto has none of those supports. And 15 years after its invention, it still hasn't produced a widely adopted real world use case outside of speculation and illegal activity. Okay, what's the real message? Bitcoin continues to be wildly, wildly volatile and it's showing there's only one real purpose. Speculation. It's not real money. If you think it is, go buy your milk or groceries with it today you can't really do it. You think it's a hedge against inflation? Well, inflation's up and it's now down. Bitcoin is down. 30% is a giant hole. The only one really making money off of this is people who got lucky buying when it first started and continue to prey upon more and more suckers willing to pay a higher price. Let's dig a little bit deeper here and check out what's going on with bitcoin. As I mentioned, it's down from its $126,000 peak. Now there are many who say, well, TJ, I agree with you. Crypto coins in general are a horrible scam, waste of money. But bitcoin, oh, that's the one true deal. That's the one real deal. Okay, but it went from $126,000 to $91,000. That's a huge, huge drop. Lost over 18,000 just in the last month. That's the worst drop, four years. So we continue to hear that, oh, it's only going to get better. It's only going to get more stable. It's not, it really isn't. So I make no bones about it. I happen to be a huge fan of the Nobel Prize winning economist Paul KRUGMAN. By the way, it's no longer with the Times. That's shame on you, New York Times, but is available as a substack newsletter, and he gives most of it away for free. I would highly recommend the Paul Krugman substack Letter. So let's look at it. The studies have shown that around 25%, and I think that is a low number, is used for completely illicit transaction. Drug deals, extortions, ransoms. It's used for that sort of thing. It uses tremendous amounts of energy, contributes to global warming. The emissions are just awful. There's no fdic. There's no government backdrop. You lose too bad, you lose your password. That's it. If imagine you put $10 million, you're pretty successful. You put $10 million into a Bitcoin account. You're 40 years old, you're in perfect health, your family is set for life. And you don't want to just put this password anywhere where people can find it. It's right up here. You get run over by a car tomorrow, guess what? Your family, your children, they got no money. They got nothing. They're out panhandling in the streets. They're washing windows for a living. And you thought they were wealthy and taken care of. That's the problem with passwords. It's great until you lose one or you forget one or your memory gets fuzzy or you just die randomly. It's gone now. If you never told a family member what your Chase Count password was, eventually, you know, they can go to Chase and they can show your death certificate, power of attorney, legal documents. They will be able to get your money as they should because it's probably in your will. Not like that with bitcoin. Bitcoin doesn't care about your will. You lose the key. It is gone forever. Okay, so there's other things that just continually gnaw away at me with this whole bitcoin debate because people say love. They love, say, oh, it's not fiat money. There's nothing backing up the United States dollar. It's simply not true. The United States dollar is backed up by the United States government, which, whether you like it or not, has the power tax, it has the power to pay its debts, it even has the power to go to war. It, if need be. Not saying that's always a good thing, but that is one of the reasons why the dollar has value, why it is the default currency of the entire world. So to say that just because there's not gold behind it is absolutely nonsensical. You could make the case that that crypto is fiat currency, more so than the US Dollar, because it's really just something someone says, well, this is valuable because we say it is backed up by gold either. So I've always found that these arguments are very circular. Other problems with it, dollars have demanded, taxes must be paid in dollars. That's one of the strength of a dollar. Now, you might not like paying taxes. I don't like paying taxes. But if you get paid entirely in bitcoin, you're still going to owe taxes. Sorry to say that. So here's some of the other big problems with crypto. It's not a new technology. I mean, you look at how quickly ChatGPT took off. People were using it. 100 million people used it in just a few months. It skyrocketed. Here we are, 15 years, 16 years into Bitcoin and good luck actually trying to use it as money and pay for things. Unless you're buying drugs, it's not really a usable money source. That's the problem with it. An old technology that really never took off for anything other than speculation and crime. Those are the big things. So, yes, it's valuable to you if you buy something for a dollar and you find a sucker tomorrow willing to pay $2 for it. These are my earbuds. If I buy these for $2 and I sell it to you for $4, even though you could still get it for $2 anyplace else I made money, you're a bigger sucker because you paid $4 for something you could get for $2. If I keep doing this all day long, I'll be a billionaire. Okay? But at some point, people can say, TJ, these aren't worth $4. I can get it right over here for $2. I'm not going to buy anymore. Everything becomes worth at that point. Although I still get to use earbuds. If your bitcoin becomes worthless, you get nothing. You don't even get a shiny gold coin. That's just an image they use. So blockchains are permanent and crypto is on the blockchain. But what that means isn't necessarily good. It means mistakes and thefts cannot be undone. So everyone likes to talk about how great having everything on the blockchain is. Not necessarily, not necessarily at all. So here's the big problem. I have tried to have an open mind on this, and I've had countless, countless conversations with people who are big fans of crypto in general and bitcoin in particular. And every time I ask them this one question. I've never gotten a satisfactory answer. The question is simply, what problem does the existence of Bitcoin solve? Because any other product, you know this, the product, this earbud solves the problem of how do I hear stuff without it blaring out of a speaker? An autonomous car solves the problem of needing a driver. Amazon solves the problem of having to drive to a store. Businesses solve problem. New creation solve problem. And the only thing I've ever gotten is basically gives you privacy, which is great if you want to commit crime. And it can't. It's not as volatile as a dollar because you can't have inflation. Well, as we've just seen, it deflated by 30% this week, so that rings hollow.
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