'As an investment, a bitcoin is no better than a woodpecker scalp or a Yap stone,' writes Gary Smith.
Money is the lynchpin of modern economies. We do not need to grow our own food, make our own clothes, and build our own furniture. We can specialize in what we do well and use the money we are paid to buy what we want.
Which brings us to bitcoin BTCUSD, -0.65% and other cryptocurrencies. Unlike electronic money that flows through the banking system and is monitored by central banks, bitcoin uses cryptography and decentralized control maintained by blockchains. Here is a quotation from the original paper that launched bitcoin:
As an investment, a bitcoin is no better than a woodpecker scalp or a Yap stone. As an investment, a bitcoin is no better than a woodpecker scalp or a Yap stone . Real investments — like stocks, bonds, and apartment buildings — generate real income: bonds pay interest, stocks pay dividends, and apartments pay rental income. Bitcoin generates no income whatsoever.
Bitcoin is a modern-day nitvender, in that the price of bitcoin is no more related to economic fundamentals than was the price of the South Sea nitvender stock. Bitcoin prices are supported by nothing more than the faith that greater fools will pay higher prices.
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