Tuesday Links: Why Holding Bitcoin is Pure Speculation

Good, straightforward analysis of bitcoin and the blockchain infrastructure operating behind the scenes (Willow Street Project)

— “Bitcoin has no intrinsic value. You can’t eat it, use it to build things, or even look at it. It’s a virtual currency that exists in a virtual space—a decentralized ledger called blockchain. Its price is determined entirely by the market, and there is no government or central bank that can influence it. If people want to exchange bitcoin for $10 each, they can. If they exchange it for $1M each, so be it.”

— “Blockchain, the distributed database bitcoin uses, is a useful payment system. It is anonymous, secure, and fast…Many people confuse bitcoin (the currency) with blockchain (the database). Because blockchain is a great payment system, people say, bitcoin must be valuable.”

— “I hear plenty of good reasons for the merits of blockchain, but never the merits of bitcoin as a currency. As far as I can tell, the only reason to hold bitcoin for any length of time is the belief that its price will rise. This is absolutely fine, if you want to speculate. If you think bitcoin will trade for $1M in five years, it might make sense to own some. But I wouldn’t bet the farm. It’s an asset with no intrinsic value, no physical form, and no mechanism for price stability. Blockchain gets well-deserved hype, but this does not mean Bitcoin has any predictable value. Maybe bitcoin will trade for $1M someday, but not for any reason other than human behavior.”

If Canada’s easy money party is over, the debt hangover looks brutal (Financial Post)

— “In his recent book The Rise and Fall of Nations, Ruchir Sharma, Morgan Stanley’s chief global strategist, concludes that the single most reliable indicator of periods of economic weakness was ‘the kiss of debt rule, which shows that a major economic slowdown has always materialized when a nation’s debt has grown more than 40 percentage points faster than GDP over a five-year period.’ If he’s right, we’ve got a big problem: Canada’s ratio of debt to GDP rose from 294.9 percent in 2011 to 354.5 in 2016 — an increase of 59.6 percentage points in the last five years.”

Excellent graphic: How to spend your money (Origin Wealth Advisers)

How to spend your money