The bitcoin price is soaring this week, but don’t expect the rally to last because the original cryptocurrency is fugazi and “fundamentally flawed.” That’s the brutal assessment of yet another of Motley Fool’s anti-crypto reporters.
In a blistering June 25 column, the Motley Fool’s Sean Williams attributes the latest bitcoin bull run to several factors that are unrelated to its underlying fundamentals:
According to Williams, a major catalyst driving the latest bull market is the forthcoming May 2020 halving, when BTC block rewards will be slashed in half. As CCN.com reported, the halving is expected to buoy the price of every single cryptocurrency.
Similarly, speculation that the SEC could approve a bitcoin ETF within the next few months is also propelling its price forward, Williams claims.
“The SEC has delayed its decision on a bitcoin ETF on multiple occasions, but announced in early April that it wanted to hire a cryptocurrency specialist to help with implementing regulations,” Williams said.
“This move, along with the SEC currently taking comments and rebuttals on a bitcoin ETF, suggests that the prospects of a bitcoin ETF hitting the U.S. major exchanges are improving.”
Finally, Sean Williams says the media buzz surrounding Facebook’s over-hyped Libra cryptocurrency is imparting a halo effect that’s temporarily pushing all crypto prices up.
However, Williams insists that none of these factors diminishes the reality that bitcoin is a flawed investment because he says:
“One of the more common arguments from bitcoin bulls as to why it’s worth so much is its perceived scarcity,” Williams explained. “But there’s a catch…There’s no hard cap on the number of tokens that are in circulation. Rather, it’s computer code and community consensus that determine this cap. Although it’s unlikely that consensus would be reached to increase the 21 million token cap, the possibility of this happening is not 0%.
In contrast, Williams says a physical store of value like gold is a truly finite asset. The gold that’s currently in existence is all the gold that will ever be on Earth.
“That’s in stark contrast to bitcoin, which could have its token cap adjusted based on community consensus,” Williams notes.
Moreover, Williams says BTC will never achieve mass adoption because it’s so volatile. And this makes it toxic for retailers.
“Bitcoin’s volatility is a big reason why most retailers won’t accept it,” Williams said. “Even with blockchain-based transactions that can potentially validate and settle faster than payments on traditional banking networks, the lag in settlement times can still allow for wild vacillations in the price of bitcoin.”
Williams’ Motley Fool colleague, Kevin Godbold, has made similar arguments. Godbold claimed that bitcoin’s May 2019 rally was a dead cat bounce caused by speculators who went on a buying spree during the recent bear market.
A dead cat bounce is a temporary recovery after an extended bear market that’s followed by a prolonged downturn. Like Williams, Godbold says crypto prices are being manipulated by whales and pump-and-dump scammers.
The Motley Fool is a website that provides financial advice for investors. It has generally been anti-crypto, and that makes sense because its business model is stock-centric.
Despite the continued naysaying of a long line of critics, some bitcoin skeptics are coming around, as CCN.com reported.
Crypto entrepreneur Antoni Trenchev says haters are having a hard time finding a reason to maintain their anti-cryptocurrency animus.
“The doubters are having a really hard time continuing their cause,” Trenchev said. “It is really about institutional support and the implication that it has in terms of mass adoption. We see Facebook developing their stablecoin Libra, we see JPMorgan developing their coin later on this year. We see Fidelity joining the space. People are starting to notice that bitcoin is here to stay.”
Last modified: March 4, 2021 2:37 PM