Hi all, as an introduction I am an ex-commodity trader with IT skills dating from the dot com bubble. My user handle contango means a situation where forward prices are higher than spot prices for a commodity. Bitcoin futures are currently trading in backwardation meaning traders believe the future price will be lower. Rest assured that the majority of traders are always wrong - this is why a small minority makes all the profits whilst the majority loses money.
Anyway, I am trying to understand the long term value of Ethereum. As a crypto currency I understand it has not been coded for rarity value like Bitcoin i.e. there is no finite amount and new Ethereum will always be minted every year. This is then similar to fiat currencies which are printed and burnt every year i.e. the M1 money supply. So Ethereum's value will then be linked to its use, which is ultimately a much more valid argument. I mean, who today really believes that Bitcoin is useful as a transaction mechanism, with transaction fees and times being completely ludicrous? The question then becomes, is Ethereum really worth more than the world's default fiat currency, the USD? Sure, it can be tracked via the blockchain and that tech is useful in itself. But then, if that is the only issue, then surely the US Fed's only logical response, to preserve jobs, maintain stability in global markets etc. is to issue a crypto-dollar and legislate that to be used instead?
We are in an exciting new world here but I caution people to really think about things before simply jumping in to chase price higher. Speculators and the "greater fool" theory has been driving prices higher and that is all people seem to care about right now. This could ultimately end up destroying any actual utility value that crypto-currencies bring. How many "greater fools" are still out there to buy crypto with fiat currencies at these lofty prices? Will exchanges be able to cope with sudden massive downturns in price? There is a great saying in trading that says "the bull walks up the stairs but the bear jumps out the window". Catching a falling bear, or falling knife, is not pleasant. You either get flattened or end up with bleeding hands. One can only hope, for the future of this exciting experiment to really play out, that volatility will come down. However, I suspect it's getting close to exploding. When everyone rushes for the exits in a packed movie-house, people get trampled.