Why Beanie Babies make for a better investment than bit…

‘At least Beanie Babies have the alternative use for kids to play with.’


David Merkel

Safe to say the Aleph blog’s David Merkel is not a fan of digital currencies.

In his latest bearish slam lobbed at bitcoin

BTCUSD, -0.24%

“Where money goes to die,” he explained why he believes most of the players in the crypto market will eventually disappear along with the fortunes of late-to-the-party speculators.

“The lure of free money brings out the worst economic behavior in people,” Merkel wrote. “That goes double when people see others who they deem less competent than themselves seemingly making lots of money when they are not.”

He says that digital currencies have three primary weaknesses: They’ve got no intrinsic value, can’t be used to settle all debts — public and private, and are less secure than insured bank deposits.

While bitcoin, as is typically the case these days, managed to shake off the declines brought on by an announced crypto crackdown in China, Merkel didn’t back away from his grim outlook.

In fact, he gave China credit for trying to limit the emergence of new cryptos.

“A good argument could be made that they all should be made illegal,” he wrote in his blog post. “It’s almost like we let any promoter set up his own Madoff-like scheme, and sell them to speculators.”

Of course, there’s no shortage of fervent bitcoin backers who’d quickly dismiss Merkel’s argument, like one crypto exec who recently said he sees bitcoin potentially reaching $250,000.

To get an idea of just how explosive the growth in cryptocurrencies has been, check out this chart from Visual Capitalist:


Sure, it’s certainly been an amazing ride for those getting in at the right time, but pain awaits those chasing similar returns, according to Merkel.

“New asset classes that have never been through a ‘failure cycle’ tend to produce the greatest amounts of panic when they finally fail. And, all asset classes eventually go through failure,” he wrote. “Ultimately, most of the cryptocurrencies will go out at zero. Don’t say I didn’t warn you.”

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