Fools Gold

Artificial Scarcity

Scarcity or the hype of scarcity has been at the centre of most asset bubbles in history.

The fear of missing out (FOMO) due to limited supply (or artificial limited supply) drives frenzied and irrational behaviour.

South Sea Bubble, The Tulip bubble and countless housing bubbles have been driven to extremes due to scarcity scare mongering.

“If you don’t get in now, you will miss out”,

are often the worst words to hear before allocating capital.

Ideally you want to hear the phrase:

“you’ll never make money from this ever again”.

The study of crypto currencies is a fascinating look into scarcity versus artificial scarcity. The belief and faith that some have formed on limited information and lack of historical reference is astounding. There is a lot we don’t really know about Bitcoin and other crypto currencies. Who owns most of the coins? How many have truly studied the code and maths behind Bitcoin? Can it be hacked? Can you trust the exchanges?

Creating an artificial scarcity in a crypto currency is a brilliant way to drum up FOMO, but is there really scarcity?

A new coin can start tomorrow and dilute the amount of coins in the world.

This logically suggests that crypto currencies do not have any scarcity.