Speculation and Markets: louisthomas
I recommend that you follow the videos on Cryptocurrency by louisthomas
He presents thoughtful analysis of issues and has a pleasant demeanour. He speaks clearly, grammatically and simply.
He seems to be mildly socialistic but he is still young and has probably not had the chance to read Hayek’s “Road to Serfdom” or anything by Milton Friedman. I am not worried about him . He is smart enough to realise the truth ....some day.
No, what struck me is his video on markets and speculation. He (I think correctly) believed that his audience needed a lesson on these subjects . A lot of young people in the crypto sphere seem to believe that speculation is evil. It is in fact a required component of a market and the argument can be made that it is not only necessary but is moral. Certainly free markets are essential to maintaining freedom. Anyway Thomas deals with this in a manner worthy of Adam Smith. No problem.
While I was watching I realised something that I think is important. As Hayek and others point out , the reason that markets work so much better than a ´´rational’’ central authority in determining value/price, is that the market integrates all of the knowledge of every player in the market space. No central entity could hope to possess all this knowledge, all of the ‘’gut’´ feelings, all of the data possessed collectively by the individuals in the marketplace. All true. However in the crypto currency markets I suspect that most of us know next to nothing. Thomas and a few of his friends aside, I suspect that most of us have no idea whether Bitcoin is truly a ´´store of value ‘´ or whether or not the use of crypto currency will ever be widespread. Many of us hope that it will free us from the tyranny of government control of the money supply...but that may just be wishful thinking. No other market I can identify has so many ignorant players ( and I certainly include myself in this category).
Most of us have at least a superficial understanding of what the future prospects of any given bank or manufacturer might be. Our guess could be wrong but it is based on something ...a track record...a knowledge of how the product or service might be useful and marketable. I submit that most of us in the cryptocurrency markets have no such knowledge. We depend on the opinions of people like Thomas. He is an undeniably honest and intelligent person, but he is just ....well....one person.
The implications are important. All the assumptions about markets become of questionable validity if no one ( or very few) in said marketplace have any pertinent knowledge.
Even if Bitcoin and Ethereum do what I hope they do, and succeed in making governments deal with their finances the way we simple individuals have to deal with ours; there is no way of knowing what said currencies will be worth. Thomas’ sunny and refreshing optimism aside, as an investor, I remain a crypto-agnostic. I am going to continue to watch louisthomas and I suggest you do too.