How absurd are cryptocurrencies these days?

Have they gone full South Seas?

There’re some 1,500 of them out there. There are exchanges which list some to many of them.

Cross exchange rates are going to have margins in them. Arbitrage.

No one wants to put actual money in of course.

But.

Invent a new currency. Give some of it away. Get it listed on a few exchanges (for some this is a function of giving the exchange some invented money).

The retained portion is now capital to do arbitrage with.

So, why won’t it work?

13 comments on “How absurd are cryptocurrencies these days?

  1. I’ve also found exchanges to be pretty slow. You place an order and it might not go through or it might take minutes. This might make arbitrage difficult.

  2. As long as government fiat currency is constantly loosing value, Bitcoin or a competitor stands a great chance of becoming a store of value. We only imagine the bit of paper in our pocket with $5 or £5 has any value because we trust the brand. How different is a crypto-currency to that really?

  3. @itellyounothing
    Crypto-currencies can (and do) halve or double in value overnight. Government-backed currencies tend to be much more stable and (unless you’re dealing with a Venezuela or Zimbabwe) unlikely to become valueless. Though if Corbyn gets in and gives that magic money tree a good shaking, all bets are off!

  4. Buy a specialist printing press to enable you to print unforgeable tickets. Give most of them to the local music venue. Keep a few back to make money from the ticket touts. Why wouldn’t it work?

    A cryptocurrency is a product whose essential selling point is that it is hard to forge and in limited supply. Someone with a product to sell that will only be available at a later date can use them to sell their own product now, and redeem them later. That in itself is a valuable service. That’s what a cryptocurrency provider is selling.

    When demand for that service is met by supply, then the price will drop to equal the cost of managing the service. So long as demand exceeds supply, the price goes up and that motivates and pays for more people to jump on the bandwagon and supply more. It works fine, up until the point when enough producers have done so to meet demand.

  5. I have a crypto currency.

    It will achieve amazing things. But I cannot tell you anything about it, as the amazing things are so amazing that others would rush to take advantage of the amazing opportunities if they knew what they were.

    So invest now! Before others beat you to it.

    ***********************************

    The above was, (more or less as crypto currencies weren’t in vogue back then), the pitch one businessman made at a fund raising at the height of the South Sea Bubble.

    Apparently quite a lot of people invested. They never saw the businessman again.

  6. AndrewC,

    “For carrying on an undertaking of great advantage; but nobody to know what it is.”

  7. I’m part of an initiative looking at electronic currencies in Syria. High street banks don’t fare too well there because they get hit so often. Install an ATM today and tomorrow there will be just a hole in the wall. As a result cash is valued very highly, but because banknotes wear out so quickly, you need a wheelbarrow to carry your coins when you go shopping. Contactless and scan-to-pay would seem to be the answer, if only the damn network wasn’t down so often. As I wrote elsewhere on this blog, the size of the blockchain ledger grows as a factorial exponent of the number of participants. An electronic currency using smartphones could work in a small town of a few thousand people, but as soon as you try to take it nationwide, it would outstrip the storage and processing capabilities of even a high-end phone. This is a major stumbling block.

  8. “I sneeze in threes

    January 30, 2018 at 9:23 pm

    AndrewC,

    “For carrying on an undertaking of great advantage; but nobody to know what it is.””

    Indeed. Thanks. I was winging it entirely from memory.

  9. “…an undertaking of great advantage; but nobody to know what it is”

    Last week I tried to use that as the strapline for an event I’m organising where we haven’t quite worked out what we’re doing, but I was over-ruled by fellow organisers who didn’t recognise the reference and thought it would put people off 🙁

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