How and why bitcoin will plummet in price. There’s a lot of thinking in this piece and, unfortunately, a lot of econo-jargon, which Cowen is wont to do from time to time.
For purposes of argument, let’s say that a year from now Bitcoin is priced at $500. Then you want some Bitcoin, let’s say to buy some drugs. And you find someone willing to sell you Bitcoin for about $500.
But then the QuitCoin company comes along, with its algorithm, offering to sell you QuitCoin for $400. Will you ever accept such an offer? Well, QuitCoin is “cheaper,” but of course it may buy you less on the other side of the transaction as well. The QuitCoin merchants realize this, and so they have built deflationary pressures into the algorithm, so you expect QuitCoin to rise in value over time, enough to make you want to hold it. So you buy some newly minted QuitCoin for $400, and its price springs up pretty quickly, at which point you buy the drugs with it. (Note that the cryptocurrency creators will, for reasons of profit maximization, exempt themselves from upfront mining costs and thus reap initial seigniorage, which will be some fraction of the total new value they create, and make a market by sharing some of that seigniorage with early adopters.)
Next is a neat Cochrane piece commenting on a WSJ article on alternative lenders springing up to fill in for banks that don’t want to lend. Here’s the key bit:
But there is nothing that stops a bank from using new sources of information, streamlining loan approvals and so forth. So if regular banks are not doing it, and if new businesses that want to serve this market are organizing as something other than new “banks,” it raises the interesting question, what’s wrong with regulation or competition in banking?
There is a lot of talk about how banks “don’t want to lend”. Why? Cochrane’s my favorite blog these days.
Lastly, Felix Salmon with a great piece on Netflix’s pivot:
…the studios can watch the Netflix share price as easily as anybody else, and when they see it ending 2013 at $360 a share, valuing the company at well over $20 billion, that’s their sign to start raising rates sharply during the next round of negotiations. Which in turn helps explain why Netflix is losing so many great movies.
As a result, Netflix can’t, any longer, aspire to be the service which allows you to watch the movies you want to watch… if you give Netflix a list of all the movies you want to watch, the proportion available for streaming is going to be so embarrassingly low that the company decided not to even give you that option any more.
…Netflix, then, no longer wants to show me the things I want to watch, and it doesn’t even particularly want to show me the stuff I didn’t know I’d love. Instead, it just wants to feed me more and more and more of the same, drawing mainly from a library of second-tier movies and TV shows, and actually making it surprisingly hard to discover the highest-quality content.