by Chris Black
The problem is seeing any commodity as an investment, instead of something used as a product for consumption by those who can actually use it.
What is the percentage of oil contracts traded by those who can actually refine a barrel? Is it even 1% today?
So who is setting the price? Obviously not the producer or the consumer.
Supply and demand fundamentals don’t exist.
It now goes across all commodities. There isn’t demand for the actual product, only the contract that represents it.
The vast majority of traders only make money if they can sell the contract for more than they paid., thus always putting massive upward pressure on the price.
If you add a million speculators to a market, the price skyrockets far above any rational level.
When oil first went from $20 per barrel to $50 in the early 2000s, all of the investment houses tried to rationalize the price spike on supply fundamentals.
Claiming extraction costs went up.
Despite Exxon engineers saying it would be profitable to build drilling platforms on the ocean floor if oil hit $50 a few years before.
Mass speculation drove the price to $147 per barrel. There was never a supply problem with the actual commodity, just too many people going after a limited number of contracts.
And here’s a short take on BTC: back in 1995, MIcrosoft launched Windows 95. At the time less than 20% of Americans had a computer in their home. Within two years the number jumped to 40%. Prior to Windows 95 less than 3% of people had internet access and by 1998, the number was 38%.
In five years the internet went from a playtoy of newsgroups and random hacking sites, to a ubiquitous platform with a few billion people using it daily.
Bitcoin has been around for nearly 13 years and can barely make a use case for a minority of the population. If Crypto was really a revolutionary idea that would change the world, it would have already done so.