How Market Will Tame Bitcoin, Cryptos


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The great economist John Maynard Keynes had it right when he said in hisGeneral Theory “a large proportion of our positive activities depend upon spontaneous optimism rather than mathematical expectation, whether moral or hedonistic or economic.”

As I write this, Bitcoin is down more than 50% from its peak last year. Is its “spontaneous optimism” run-up over? Will regulation and the futures markets tame it in a big way?

I’m loath to predict price movements, much less market tops and bottoms, but there is some logic to the argument that true market forces will pop Bitcoin’s bubble.

More than $200 billion of cryptocurrency value has been wiped out since the beginning of the year. As South Korea and other countries move to regulate this market, we could see more declines.

What Keynes was referring to in the mid-1930s, when he was investing in stocks — and making a fortune — was that speculation is fueled by what he calls “animal spirits.” We generally invest in things because we’re optimistic the value will go up. It’s human nature.

But sooner or later the market decides what something is really worth, whether it’s a start-up or commodities. And a true market is composed of professional and amateurs with diverse interests. Some are just short-term traders while others are saving for retirement.

What’s the force behind Bitcoin and other cryptos? According to a recent study, it could be just a handful of people who own a lion’s share of virtual currencies.

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Shutterstock

The great economist John Maynard Keynes had it right when he said in hisGeneral Theory “a large proportion of our positive activities depend upon spontaneous optimism rather than mathematical expectation, whether moral or hedonistic or economic.”

As I write this, Bitcoin is down more than 50% from its peak last year. Is its “spontaneous optimism” run-up over? Will regulation and the futures markets tame it in a big way?

I’m loath to predict price movements, much less market tops and bottoms, but there is some logic to the argument that true market forces will pop Bitcoin’s bubble.

More than $200 billion of cryptocurrency value has been wiped out since the beginning of the year. As South Korea and other countries move to regulate this market, we could see more declines.

What Keynes was referring to in the mid-1930s, when he was investing in stocks — and making a fortune — was that speculation is fueled by what he calls “animal spirits.” We generally invest in things because we’re optimistic the value will go up. It’s human nature.

But sooner or later the market decides what something is really worth, whether it’s a start-up or commodities. And a true market is composed of professional and amateurs with diverse interests. Some are just short-term traders while others are saving for retirement.

What’s the force behind Bitcoin and other cryptos? According to a recent study, it could be just a handful of people who own a lion’s share of virtual currencies.

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