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The Tulips are Blooming

13 Sep 2017

September in Perth is a wonderful time of the year to enjoy the beauty of tulip blooms.  The best place to view them is at the Araluen Botanical Gardens.

 

Some very astute and famous investors have compared the exuberance around the development of bitcoin and crypto-currencies to the exuberance around tulip bulbs in 1634. 

 

Given that it is tulip season I spent most of this week reading the reports, statements and analysis of the most respected names who have called bitcoin ‘rat poison’, a ‘ponzi scheme’ and a ‘fraud’. I refer to Howard Marks, Jamie Diamond and Robert Shiller.  

 

All three individuals are rolled gold names in the world of economics, banking and investment and they are passionate in their views that the irrational exuberance around bitcoin and crypto will end with a crash. Their views get good traction in mainstream media because of who they are so I was curious to read their analysis and reasons for their opinion.  

 

However, in my research of publicly available material, I was unable to find any technical analysis of the level I would expect.  There is plenty of commentary around the characteristics of bubbles and how the crypto markets are displaying some of those characteristics, and they are adamant that ‘if it looks like a duck and quacks like a duck…’, and how ‘the Government’ may not like it and close it down, but I could not find any technical analysis of the type I have seen in reports issued by, for example, the Central Bank of Finland, or the Bank of England or the European Parliament.

 

As I have written elsewhere in this blog, the bitcoin project is still in a very early stage. The last bitcoin will not be mined until the year 2140, so we are only 7% of the way (from a time perspective) through the experiment.  So rather than think of bubbles and tulips, I read technical papers that explain the issues and challenges and try to understand the solutions that are being proposed.

 

For the next twelve months (at least) the issue continues to be the development of an energy efficient and economically effective consensus model which provides for scaling so that transaction process speeds can be at the level of Visa (circa 50,000 transactions per second). 


Time to go and see the tulips.

 

 


 

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