Bitcoin - Boom or Bust?

Rodolfo asked:

What's your take on cryptocurrencies? Bitcoin in particular. From what I've read and heard, blockchain might be a phenomenal technology. I'm following Jeff Berwick from The Dollar Vigilante and few other anarcho-capitalists and libertarians including Doug Casey. Berwick is very optimistic of Bitcoin as in his opinion crash of fiat currencies (especially US dollar) is looming.

My opinion is that the underlying blockchain technology is what Bitcoin will be remembered for, but I have my doubts that first mover or originator Bitcoin will be the ultimate winner in the battle for cryptocurrency supremacy. 

History shows that it is "fast followers" who have a significantly lower rate of failure than first movers, and my limited personal experience with Bitcoin is that it is not easy to use. As for fast followers, this report claims there are 800 and counting!

"The price activity and manic sentiment that led to present prices have dwarfed even the Tulip mania of nearly 400 years ago," he said. "The success of Bitcoin has spawned 800-plus clones (alt-coins) and counting, most of which are high-tech, pump-and-dump schemes."

The hoops you need to jump through to first open a wallet, (one wallet - Airbitz / Gildera - asked me for my bank account username and password, which seemed like a recipe for disaster, so I stopped there), and the charges to purchase Bitcoin (at least those via Coinbase) were not cheap. If any readers can suggest less invasive and cheaper options, please let me know.

Bitcoin (XBT) is also incredibly volatile, which is not good for the heart for someone of my vintage. In just the past week it has closed at $3,014.65 (on Friday 15th September), and then on Monday 18th, closed up more than 36% at $4,109.57. A fun speculation and diversification if you have money you can afford to lose.

When considering Jeff Berwick's published opinions on Bitcoin, it should be remembered that he is an investor so has a bias towards espousing positive views about its future prospects. I'm also curious as to how long he has been warning of a $USD crash? At some point he will be right, but no one can time these things. Looking at the web site, and it appears to have been since at least 2009, and coincidentally I found an unrelated Forbes article from March of that year, where the author was predicting another bear market: 

Thus, most likely, we can brace ourselves for new lows on U.S. and global equities in the next 12 to 18 months. Eventually, a more sustained recovery will occur once we are closer to clear signals that this ugly global U-shaped recession is not turning into an L-shaped near-depression, and that the global economic recovery is clear and sustained. Until then, expect very volatile and choppy U.S. and global equity markets–with new lows reached in the next months and the year ahead.

We're still waiting, eight and a half years later. The S and P 500 Index closed on 11th March 2009 (the date the article was published) at 721.36. Yesterday, that index closed at 2,502.22, up 247%. 

To his credit, Doug Casey is an atheist, and the ability to think independently and logically is always a positive, but his newsletters are out of my price range. 

It's always interesting (amusing?) to read contrarian views, but don't get swept up in the dramatic headlines since most of the articles are full of 'coulds' and 'mights' and rather light on substance.

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Baldrick: I think he looks like a bird who's swallowed a plate, my Lord.

Blackadder: No, that's what I think. What do you think? Try to have a thought of your own; thinking is so important. What do you think?

Baldrick: I think thinking is so important, my Lord.