Wednesday, 28th November 2018
The real issue with cryptocurrencies….
I’m concerned about Bitcoin….
Not about the recent price crash. That is what it is….
I’m concerned about what is happening behind the market action that grabs the headlines….
I’m concerned about why it is happening….
And about what it could mean….
But before I get onto that, Bitcoin’s nose-dive cannot be avoided. It is a major feature of the developing story….
- This time last year….
This time last year, Bitcoin rode high. The price had burst through the $10,000 ceiling and was on-course for a mid-December high-point of $19,783….
This time last year, Bitcoin promised to make all of us rich. No man left behind….
All you had to do was figure out how to buy some, put your cash down and watch the price head for the moon….
There was no limit to where Bitcoin might go. $10,000 was just the beginning….
Bitcoin proponents were in a dog-fight for headlines. No prediction was too optimistic or too outlandish. It was like a no-limit poker game with every player thinking he held the winning hand….
$40,000 said Mike Novogratz. Ran Neuner said $50,000. Tai Lopez said $60,000. Tom Lee said $91,000….
Roger Ver raised it to $250,000. $400,000 said Mark Yusko. John McAfee raised the stakes further – $500,000 and he’d eat his genitalia on television if proved wrong….
Then along came James Altucher. He trumped them all….
On this day last year, and with a completely straight face, Altucher insisted Bitcoin was going all the way to $1 million by 2020….
- Headline grabbing….
Altucher might yet be proved right. There’s still time….
But the way things are, it will require a turnaround rivalling the one enjoyed by Lazarus….
Bitcoin trades at $4032 this morning. It’s been as low as $3716. It is a whopping 80% off the all-time high. The tide has turned spectacularly – as we warned it would….
We could amuse ourselves and delve into what motivated Altucher and co to make such fanciful predictions….
Were they sucked into the mania? Were they genuinely fooled by what they saw? Did they lose their minds? Did they really believe what they said? Really?
Or were their statements made to serve some other self-motivated end? To ramp up the price of a crypto asset they held, for example? Or to get into the headlines? Or to generate buyers of how-to reports?
We haven’t heard too much from these guys of late. None is clamoring to be heard. None is selling a report. None seems particularly keen to repeat his foam-at-the-mouth assertions….
We will let sleeping dogs lie….
- What I want….
Let me be clear about something….
I want Bitcoin specifically – and independent cryptocurrencies generally – to survive and thrive. I want to see mainstream uptake….
My desire has nothing to do with price. It is based entirely on function….
I support cryptocurrencies because they have the potential to provide a viable alternative to the fiat money system. They might even replace it….
…. A fiat money system that is centralized and entirely under the control of government and central banks….
…. A fiat money system that produces high-fees and inflation that devalue and erode personal wealth….
Bitcoin (the largest market cap crypto) has the potential to provide a mainstream system for people who wish to exert control over their own money – storing it and sending and receiving payments outside the fiat system….
Of course, governments and central banks don’t like the idea of an alternative money system. They like the current fiat money system – the one they have full control over….
Bitcoin and other independent cryptocurrencies represent a real and direct threat to their monopoly….
And one of the reasons the Bitcoin price is where it is right now is that governments and central banks – wrong-footed by last year’s surging interest in the sector – are now back on the front foot and out protecting their turf….
- The government are moving in….
Earlier this month the International Monetary Fund set the ball rolling by telling the world that governments could set up their own cryptocurrencies – in partnership with central banks….
In other words, there’s no need for independent and (as yet) unregulated cryptocurrencies like Bitcoin and its competitors….
Not when your old mate government and your old muckers in the central bank can use the exact-same blockchain technology to produce the same thing – a digital currency for mass (probably enforced) adoption….
I mean, you can trust the government and the central bankers. Can’t you? You don’t need to step over onto the dark side to use the independent digital currencies that criminals favor – the ones government and central bankers have no control over….
That’s the message from the top. That’s the direction the establishment wants to go. That’s the plan….
And the markets heard it loud and clear. The Bloomberg Galaxy Crypto Index (BGCI) measures the performance of the largest cryptocurrencies traded in US dollars. It is down 38.3% since the IMF announcement….
Pessimism pervades the crypto-sphere. Government is moving in. Government and central bankers are taking over. It looks like it’s we’re headed back to business as usual….
Independent cryptocurrencies like Bitcoin are not required. They never were. They’ve had their day in the sun. Now it’s over. That’s what the jungle drums say….
- Ill-informed and wrong-headed beliefs….
And it’s a good thing say the Bitcoin detractors and the government’s flag wavers and the folk who swallow whole whatever some guy with an official title tells them….
And that’s what’s got me worried. That silly argument is gaining traction….
The public is largely crypto-illiterate and thinks a government-issued cryptocurrency is just a safer, more trustworthy and better-regulated version of Bitcoin that works in the same way, does the same things and delivers the same benefits….
But they couldn’t be more wrong. And their ill-informed and wrong-headed beliefs ae dangerous….
The key feature about Bitcoin is its independence. It is outside government and central bank control. It is outside the fiat money system. It can’t be messed with or manipulated by policy-makers or bureaucrats….
By contrast, any form of government issued cryptocurrency is centrally controlled. It is just a digital version of the current fiat system – open to the exact same manipulations, controls and abuses….
- No brave new world….
A government cryptocurrency won’t usher in a better and braver new world….
Instead, it will herald a strengthening of the government’s grip over the individual. It will be the means through which policymakers can introduce the cashless economy – where hard cash is replaced by digital money….
You won’t be able to hide any digital pound you earn. You won’t be able to spend a digital pound without the transaction being stored on some permanent electronic record….
And if the government wants to implement negative interest rates – a tax on savings – a cashless economy would make it impossible to avoid or escape. And your money could be frozen or confiscated at any time – for whatever reason – whenever some bureaucrat pushes a button….
That’s what I’m worried about. Forget about values. Forget about price moves. Forget about speculation. That’s all smoke and mirrors. Secondary considerations….
The real issue here is freedom. Freedom from over-arching government control and manipulation….
Independent cryptos can deliver that freedom. Government-backed cryptos will deliver the exact opposite – totalitarianism or the closest thing to it. You can rely on that….
People are talking about Bitcoin being over. Dead. Face down in the water. Finished. Never to return….
I really do hope that isn’t the case and that Bitcoin bounces back. The alternative is terrifying….
That’s how it looks from here….
All the best,