Suppose there is a war between you and your enemy. You have engaged your enemy for a long time and both sides have suffered casualties. Maybe, in the beginning, you decided to fight your enemy because you had estimated your opponent to be predictable or weaker than you. You thought that it would be an easy win. Unfortunately, nothing worth winning is ever easy. Over time each side becomes wary of fighting and you start to get a little afraid of getting hit. Your enemy suffered losses too and they don't want to get hit. The fear of taking a hit is taking over on both sides and it is making an impact on decisions that are being made.
Economics is war.
In the past week or so, there was news about Jamie Dimon of JP Morgan talking negatively about bitcoins. Soon after, combined with fears from China, the exchange rate of bitcoins took a huge dive. In a panic, may people sold their bitcoins at a loss. Interestingly, in a matter or a few days, bitcoin made a come back. Is the price stabilizing? Maybe. But more importantly, I think there's a lesson to be learned from all this.
Now I'm not saying you should not buy bitcoins. I don't really care. But I do care about people not losing their money to bad players that take advantage of poor people. If you are getting into bitcoins, know that you are in for a fight.
If I was Jamie Dimon or the big banks, and I was engaged in a war with bitcoins, here's what I would do: I would make a scathing comment about bitcoin, buy it when there's fear, ride the price back up and dump it all to drive the prices down. Rinse and repeat this even at a loss. Buy why? Because I'm patient and I have tons of money and because I want to win. And I would know that I would win because after so many ups and downs, people would be too scared to buy any bitcoins.
You hit a guy once, he might come back. But once you hit him enough times, eventually they know better not to come back.
With low demand, the price of bitcoins would plummet, the big players would buy it all up and take control of it so that no common man would ever be able to buy it ever again. Ultimately I would have killed bitcoins. Wouldn't you say that winning is the most important outcome in a war? I would rather lose several hundred million dollars now than lose several hundred billion dollars later.
Does this make sense?
