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Doug Kass: Why I Still Don’t See Value in Bitcoin and Other Cryptocurrencies

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Recently, the price of many cryptocurrencies fell by almost 20%.

Bitcoin had dropped by 38% from its recent high — that’s the third correction of greater than 30% in the last 12 months. Since then prices have continued to fluctuate.

Here is a history of the major corrections in Bitcoin over the last 11 years:

Mark Twain taught us that history doesn’t repeat itself but it often rhymes.

The same applies to market history.

Four years ago Bitcoin futures started trading — the euphoria was short lived and the price of Bitcoin eventually dropped by over 80%. Since the start of the first Bitcoin futures ETF (BITO) in October 2021, the price of Bitcoin is down 38%:

What are digital currencies, if they can be created ad hoc — like monetary presses — and produce an endless supply?

Why are digital currencies better than fiat currency if their supply is really not fixed.

What value do digital currencies have if:

They provide no protection from rising inflation seen in the last few months. They have provided no protection from deflation in the past. They have provided no protection from geopolitical events. Most cannot be seamlessly used as a currency or as a medium of exchange of trade. The lack of price stability and consequences of price volatility make digital currencies unsuitable as a medium of exchange for trade. They are tax inefficient. They are vulnerable to regulation. They are vulnerable to the competitive threat of sovereigns creating their own digital currencies. They have no intrinsic value nor do they provide any cash flow.

I recognize that many very intelligent investors that I respect (like Paul Tudor Jones, Elon Musk, Anthony Scaramuuci) and even some countries have confidently made large commitments to digital currencies.

I am not a luddite, but, sorry, I just don’t “get” digital currencies and I don’t see the value proposition.

There… I have said it.

For several years cryptocurrencies have taken the oxygen out of the gold room — and many long-term and strongly committed investors in precious metals have begun to lose confidence in gold and silver.

Gold has been around, though thick and thin, for thousands of years.

Bitcoin is only 13 years old and other digital currencies are still infants.

But we don’t know what Bitcoin and other digital currencies will look like when they grow up.

There… I have said that also.

(This commentary originally appeared on Real Money Pro on Dec. 6. Click here to learn about this dynamic market information service for active traders and to receive Doug Kass’s Daily Diary and columns from Paul Price, Bret Jensen and others.)

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