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Why David Stockman Thinks Cryptocurrency Investors Are “Stupid Speculators”

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In a statement made earlier this month, former Director of the Office of Management David Stockman stated his distrust for investors of the cryptocurrency market. In his view, the cryptocurrency market is filled with “stupid speculators” and that a “spectacular crash” is imminent.

Let’s take a look at the whole statement from Mr. David Stockman himself:

“It’s basically a class of really stupid speculators who have convinced themselves that trees grow to the sky. It will burn out in a spectacular crash. All of these latter-day speculators will have their hands burned to a crisp, and they will learn the proper lesson.”

Now let’s break down the statement and explain what he actually meant by “stupid speculators” and “spectacular crash”.

Analyzing Cryptocurrency Mass Adoption

The trend of investing huge financial resources into the cryptocurrency market was triggered by the recent surge in bitcoin, the original blockchain that has revolutionized our concept of value. This has attracted several investors towards blockchain-based digital currencies, which have sprung up almost like mushrooms in recent years. Of course, bitcoin is not the only game in town. It isn’t even the best, according to many industry insiders. Coins like Ethereum, Ripple, Dash, Litecoin, Monero, bitcoin cash and others also offer compelling value propositions and use cases.

Analysts have cited bitcoin’s fluctuating and highly unstable price as the reason for Stockman’s comments. According to some views, bitcoin’s volatile price swings over a short period makes it practically useless from the standpoint of credible currency alternative. As seen recently, the “bears” have been influenced by the launch of bitcoin futures contracts on mainstream regulated exchanges like CBOE and CME. Backers of bitcoin futures hope that, with more institutional money flowing into cryptocurrency, the market will eventually stabilize. At the very least, it will be less prone to wild fluctuations. In this vein, exchanges and fund providers are scrambling to list the first bitcoin ETF, something that will take a lot of convincing at the Securities and Exchange Commission (SEC).

However, it is worth bearing in mind that bitcoin alone does not dictate the whole of the cryptocurrency market. In fact, altcoins currently account for roughly two-thirds of the total market.

Figure 1: Stockman Bitcoin- Bubble Comparison

Stockman’s Opposing Views

There’s no denying that bitcoin surged to meteoric levels throughout 2017, reaching a high near $20,000 in the final month of the year. However, in Stockman’s view, price is hardly an apt indication of value. Value is what one gets, whereas price is what they pay. According to him, derivatives such as the bitcoin ETFs do not legitimize the market but have quite an opposite effect. The introduction of bitcoin derivatives would only embolden predator firms on Wall Street, which can take advantage of an ordinary investor’s fascination with bitcoin’s rapid appreciation. In short, he believes that every cryptocurrency on the market will fall in value in the near future.

Figure 2 The “Bubble” Cycle for Cryptocurrencies

Arguments against Stockman

Even though elitist economists and professionals like David Stockman express a bearish stance on the global stock market, there are various loopholes in this argument. Firstly such economists fail to provide any substantial argument against cryptocurrency adoption being favorable.

Bitcoin is a “bubble” according to them, with price not reflecting the actual value of the instrument. This would make them unfit for widespread adoption. However, even though the statement is partially true, the lack of intrinsic value is true for any currency, including fiat currencies. In faulty economies, especially in nations having significant political instability, fiat currencies are not stable in value, even though they are controlled by their respective governments. This is because their valuation depends on the market and demand from investors, which ultimately revolves around the use of the U.S. dollar. Hence, if businesses, investors and individuals, shy away from utilizing the U.S. dollar, the values of all other related financial instruments will also fall.

If we take the example of bitcoin, the value revolves around the people’s acceptance of it as a means of exchange. The value of bitcoin and indeed several other cryptocurrencies are backed by the value of electricity, as well as the infrastructure and equipment required to mine it. This draws the comparison to the value of Gold, which is also based on the average difficulty of extracting it from the ground. It should be noted that not all cryptocurrencies should be bundled up into one category and considered at par. The market also experiences frequent movements in small periods of time.

Closing Thoughts

Even though the cryptocurrency market is still prone to experience short-term bubbles, the term cryptocurrency is not synonymous to the term “bubbles”.  It is one of the most liquid markets in the world, with bitcoin still leading the way in terms of market capitalization. It is already proven to be more liquid than the stocks of Apple itself.

That Stockman’s claims have hinted that cryptocurrencies are not actually “real money” is also flawed and up for debate. In fact, barring bitcoin, transactions on leading public blockchain systems like Ethereum, Litecoin, Dash, Ripple, etc. use a stable network with a well-thought-out fees structure and consensus protocol algorithm.

While bitcoin is certainly unpredictable, the core concepts of decentralized ledger, blockchain technology, and the larger scope of censorship resistance or “decentralization” are certainly worth looking into. Technology companies and MNCs alike have started investing in their own prototypes of cryptocurrency systems. All said and done, the emerging cryptocurrency craze revolving up and coming coins have driven the investing community towards widespread awareness and adoption. All the signs point towards this digital revolution gathering speed in the coming years, especially in 2018.

Featured image courtesy of Getty Images. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 9 rated postsHira Saeed is a tech geek girl with a passion to write on latest technology trends. She is the Founder of Tech Geeks community in Pakistan and also runs her copywriting and social media agency, Digital Doers. Follow her on @heerasaeed.




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2 Comments

2 Comments

  1. Chris G

    January 20, 2018 at 11:24 pm

    nailed it!

  2. mvppvm_07

    January 21, 2018 at 10:02 pm

    In his interview, Stockman has a point. In this article, Saeed has a point. Both are intelligent; neither is stupid. Neither, though, hits the nail on the head. Stockman’s arrogant statement about stupid speculators creates headlines (it’s why I read this article and why I listened to the Stockman interview). Saeed’s rebuttal has its valid points but argues bits and pieces and seems to miss several of Stockman’s other points. Wall Street greed, the marginal value of a futures market, the concept of supply and demand, of the Fed’s “money printing” model for liquidity (equal to Saeed’s commentary about liquidity of the total market), even this: “bitcoin may go up two or three times its current price [in 2018]”. Why is that not a headline? “Stupidity and Crash” make headlines but the context of the interview offers some real chance to dig into monetary policy, into the globalization of markets, into the differentiation of fiat to assets and into the nature of regulatory involvement in the crypto space. We miss when we respond to emotion, which is what Stockman tends to do in his proclamations toward monetary markets.
    Saeed, thank you for writing the article but the meat is in the context of what Stockman says and seems to imply, not in the “headliner” we instinctively respond to when we’re called “stupid”. We know we’re smarter than that. You prove it with your article but I think we have better ways to attack, if we want to. Actually, not responding to these sorts of attacks seems better to me. Invest, speculate and earn well. This will earn the trust of the skeptics who will fight hard to prove themselves right.

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Altcoins

Monero Price Analysis: XMR/USD Marching Higher amid Large Reduction in Fees

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Kovri Bulletproofs Monero
  • Monero community members are sharing their delight with the instant impact of the recent update.
  • XMR/USD bulls will be looking at another retest of the breached Aug-Oct ascending trend line.

Latest Update from Monero Developers Sees Huge Reduction in Fees

The Monero community are sharing their excited observations of the benefits from the Beryllium Bullet update. Earlier this week, the foundation had another hard fork going live. The release was known as, “Monero 0.13.0 “Beryllium Bullet,”. The goal was for greater efficiency of their protocol, to facilitate stronger privacy, faster and more cost-effective transactions. In addition, more resistant ASIC miner protection, as previously reported via the last Monero article.

The update has instantly demonstrated its enhanced performance and new features. Monero users have been taking to the social space to express their delight, with the changes being very noticeable.

Members of the Monero community via the Reddit social page were sharing their photos, providing examples of how low the fees are for processing transactions are now.

Technical Review – 60-minute Chart

XMR/USD 60-minute chart

XMR/USD can be seen moving within a triangular pattern set up, via the 60-minute chart view. This coming after much stabilization has been seen with the price since the overly aggressive movement on 15th October. That’s when prices spiked higher in line with the rest of the market, before quickly retreating. The price behavior would suggest another breakout is very much imminent as it is currently moving within an extremely narrowing nature. Looking to the upside, resistance can be seen just ahead at $108.50, or the upper part of the pattern. Further ahead, a choppy supply area is seen running from $110-112 region. In terms of support this can be eyed not too far below, $106.50, lower part of the triangle.

Technical Review – Daily Chart

XMR/USD daily chart

Looking via the daily chart, there is room for upside and another retest of the breached ascending trend line. This had originally been supporting the price from 13th August up until early October. XMR/USD bulls could run up the price to $124 territory, before being met with a test of hard sellers. During the big spike on 15th October, the upper wick can be seen having attempted to break back above the mentioned trend line.

If the bulls can maintain their course of upside momentum and break back above the original supporting trend line, a price towards $150 could again be reclaimed.  In terms of support on the daily, this looks firm around $104, a secondary running ascending trend line. Further south, a demand zone is seen sub-$100, running from $86 – $76 region.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 33 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Altcoins

Cardano Price Analysis: ADA/USDT is Eyeing a Big Move Out of Current Technical Setup

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  • Positive update from IOHK audit of Icarus by Kudelski Security.
  • ADA/USDT is moving within a pennant pattern formation, subject to breakout.

Solid Icarus Audit reported by IOHK

IOHK recently announced in their forum that an audit was conducted by Kudelski Security, which is an independent and third-party security audit firm. The audit conducted demonstrated that the Icarus project implementation for Cardano looks all good and set to go, without any major problems. However, a few changes may need to be executed. IOHK developed the Icarus code as a reference implementation, for Cardano light portfolio.

The important of “independent audits, like this one was stressed by IOHK. Stating “they are critical for identifying security issues in the Icarus wallet, that may not have been identified by internal audits”.

Furthermore, IOHK has elucidated Icarus as an open source code base serving as a reference for the creation of safer and easier mobile wallets for Cardano. They said, “this guarantees our customers and clients the safest portfolio we can offer.”  Given the benefit of an external audit, the developers can resolve any problems identified during its product launch audit.

Positive Updates from Cardano Founder

Cardano’s founder, Charles Hoskinson, was recently commenting on Cardano’s future. He said “We have so many amazing things coming out.”

Mr Hoskinson further added that one of their scientists has flown in from Switzerland. They will be doing a video, which will be the first time they have ever talked about their sharding design that we have for Cardano. Further commenting on other updates, including videos about Shelley and the Rust project.

Technical Review – Daily Chart

ADA/USDT daily chart

ADA/USDT is moving within a triangular pattern or a pennant formation, as seen via the daily time frame. It is narrowing, moving closer to a breakout. Ranging ahead of another drop to the deep south. Although, fundamental developments coming out from the Cardano foundation, remain very much upbeat currently.

Over the past 8 days, the price has been grinding higher, after receiving support at the lower trend line of the above-mentioned pattern. In terms of resistance to the upside, this can be seen at 0.08310000. The upper tracking trend line. Further north, a supply zone is running from 0.09000000-0.09500000. ADA/USDT  last traded here on 23rd September. Finally, support is tracking at 0.071800000, lower part of the pennant, also within a demand area. Another strong buying territory is observed from 0.06500000-0.06000000.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 33 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

Ethereum Price Analysis: ETH/USD Coming Towards the End of Triangular Pattern, Breakout is Around the Corner

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  • Ethereum’s Annual Devcon is just under two weeks away, to be kicked off from 30th October – 2nd.
  • ETH/USD price action has been narrowing within a triangular pattern, subject to a breakout.

Ethereum’s Blockchain Upgrade Faces Delay

Just a few days ago, Ethereum’s software upgrade, had a failure, as Constantinople – proposed hard fork did not activate on the test network Ropsten. Ethereum has been planning to implement the Constantinople upgrade in November. However, given the failed attempt seen in the testing stage of the upgrade, this appears to have now shifted plans. The Ethereum infrastructure organization, Infura tweeted: “Due to a consensus issue with the Constantinople fork, Ropsten is currently not usable. The Ethereum dev community is investigating. Until further notice please utilize one of the other Ethereum testnets.”

As a result, the developers at Ethereum had released a patch, to fix the bug problem. An independent developer working on the project, Lane Rettig, commented on the delay, noting that they are investigating the failure to upgrade. Rettig said: “I would expect it to get delayed to 2019.”

Wave IV of Grants Program Distributed for Ethereum Development

Millions of dollars have been distributed by the Ethereum Foundation to projects that are contributing to the development of Ethereum. A full breakdown of the grants distributed can be viewed in their latest blog post. The funds totaling over $3 million, were sent out to 20 individuals and groups, that are working on the Ethereum blockchain.

Ethereum Annual Developer Conference

It is not long now until Etheruem’s Devcon 4, which will be held from Oct 30th–Nov 2nd in Prague.

Devcon is Ethereum’s “family reunion.” It is hosted to educate and empower their community to build decentralized applications, bringing Ethereum protocols, tools, and culture to the world.

The annual conference is for “builders: designers, UX researchers, smart contract devs, blockchain researchers, client implementers, test engineers, infrastructure operators, community organizers, and even artists in the community.”

Technical Review – 4-hour Chart

ETH/USD 4-hour chart

ETH/USD has been stuck trading within a triangular pattern, since mid-September. The price has swung between a low seen around $170 up to a high within $255 territory, within this period.  Over the past three weeks price action has been narrowing. As a result, ETH/USD is moving closer towards the end of the pattern, looking very likely of a breakout. On 15th October, the price saw a large surge in volume, which as a result saw a quick upper wick spike outside of the pattern. However, on the close of that candle, the price was back within the triangle.

Furthermore, resistance to the upside is eyed at $215, the upper trend line of the pattern. A break north will likely see the above supply zone tested again, $250-255 region. Finally, in terms of support, this can be seen at the lower part of the pattern, just below the $200 mark at $197. Consequently, should bearish momentum push for a breach, a below demand zone will likely come into play at $180-165 area.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 33 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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