February 26, 2018

From The Economist:

An equity is a claim on the assets and the profits of a firm; a bond entitles the investor to a series of interest payments and repayment on maturity. Bitcoin brings no cashflows to the owner; the only return will come via a rise in price. When there is no obvious way of valuing an asset, it is hard to say that one target price is less likely than another. Bitcoin could be worth $10 or $100,000.

One argument made by bitcoinnoisseurs is that it is a type of “digital gold”. Stores of value are supposed to keep their value; bitcoin, by contrast, is extremely volatile. Its code ensures that no more than 21m coins can ever be created; that sets bitcoin apart from fiat money, which central banks can create at will. Yet being limited in supply is a necessary, but not sufficient, condition for having value; signed photographs of Economist journalists are rare but, sadly, of negligible worth. Nor is supply really limited. Plenty of other cryptocurrencies exist.

If the bitcoin boom looks like a mania, calls for it to be banned are also over the top. Regulators are right to watch “initial coin offerings”—attempts by companies to raise money by issuing digital tokens of their own. They are right, too, to warn retail investors about the dangers of a thinly traded market for an asset with no inherent value and scant recourse if things go wrong. But it is hard to see how the currency is a source of systemic risk; by one measure, the value of bitcoin is less than half that of Apple’s market capitalisation. Real economic damage occurs when a plunge in asset prices is combined with the widespread use of money that has been borrowed, particularly by banks. These elements are not yet present.

For those who believe that cryptocurrencies could be the next big thing, buying bitcoin is like an option contract: it might just pay off. For everyone else, the wise course is to watch.

From The New York Times (Brian Selznick on "Which recent children’s books would you highly recommend?"):

Anything by the mysteriously named French illustrator Blexbolex is an event. One of my favorites is called “Ballad” in English. Kelly Bingham and Paul O. Zelinsky’s “Moose” books are great for a laugh, and “Toys Meet Snow,” Paul’s book with Emily Jenkins, is one of the most beautiful picture books published in the last few years.