Disclaimer – I am long silver/miners and have a small position in a gold/silver/BTC/ETH backed crypto called Kinesis. The intention of this writing is NOT for investment purposes – but for education and discussion purposes.
Purpose – I plan to refer to this article many times in the future to point out risks of Bitcoin. As my understanding of bitcoin evolves, so will this post. It is a living document. I wrote this over the course of a week, and will add more as time goes on.
Background – I’m 45 and have worked in IT since I’ve been 18. I have seen a LOT of tech come and go.
Prologue – while it may not sound like it in the piece below, I’m on your side. I WANT you to make LOTS of money and stick it to the man. You have come to the bitcoin space because you are searching for sound money. To me, bitcoin has “upside risk” but also commensurate “downside risk”. Much of what bitcoin people discuss ONLY the upside risk. My goal here today is to address some of the downside risk. If you STILL feel comfortable with your investment, then hold the line!! What many folks on Twitter will do is just label this “fud” and say I’m not educated enough. One principle I have with my exploration mining stocks (also high risk/high reward – and also speculative) is that I don’t put a large portion of my investment portfolio into it. I may have 10% of my portfolio in this area, and this 10% is probably between 5-10 miners.
Additionally, on highly speculative plays – if I get a double, I take half off of the table. I’ve had a situation where I have had two triples – it hit a 3x before I could ever sell off on the 2x. In that case, I sold a third to get my full position back out of it. I then let it ride for free. Additionally, with lots of my HR/HR mining stocks, I may set stop losses at 10% or 20% below my purchase price. I try my best to time entries, but sometimes if you don’t cut your losses early, you can lose all of your investment. This would mean that if you got in at BTC at $10,000 and it’s at $50,000 – what you CAN do is sell 1/5 of your BTC to get your $10,000 back. You then have the rest to let run to $1m or let it burn to zero. By doing this, you can minimize your losses. If you got your $10,000 back, then the rest of that is FREE and it could go to ZERO and you lost NOTHING.
What I have not heard with any form of bitcoin investment is any form of taking profits, exit strategies, or stop losses. Everything appears to be geared towards HODL for a million. So maybe you hold a $50,000 BTC position. If it gets up to $60k, perhaps you sell $10k and put it into cash. If it goes to $40k, then take that 10k and buy more. Or – take that 10k and put into dividend stocks. This can help you grow this position over many years – and take profits.
What I WANT is for all of you bitcoin owners reading this to enjoy success to a million, cash out in fiat, and pay off your houses, debts, and invest in things that grow.
What I DO NOT want you to do is drink a lot of kool aid, stick your head in the sand, and banish me from your Twitter because I sanely point out risks in a highly speculative investment instrument.
The reality is that this may not be everyone’s fate, and this piece is about trying to pose downside risks to a speculative investment in technology.
Bitcoin has risks? Please tell me, oh wise one…
With the recent “correction” of 25% in a few days, it got me telling one of my close friends that he’s playing with bitcoin fire. He comes back at me with the usual bitcoin lines many of you are familiar with now. But during this conversation where we were roasting each other – he got pot shots in on gold, and I took some on bitcoin. We were in a fraternity together 25 years ago, so we are close enough that we can completely ridicule each other for hours and still drink a beer at the end of it. I have recently joined Twitter, and this is a mean…mean…mean place. I have joined for the awesome PM and investment community, but there’s something to be said about how mean anonymous people can be on the internet when there’s no blowback.
Mind you, I think bitcoin is interesting. I think it is a store of value, but I see it as speculative property – which offends many of you to your core. This angers many bitcoin people, but you still have a staunch metals and sound money guy recognizing it as a store of value.
I listened to about 35 minutes of the debate last week, and Saylor starts off with what I have been talking about for about a month with “financial energy”. I’m like, “does this guy read my shit?” Then I’m like…yeah…no. But during the debate, there were some things that I think weren’t said.
I have heard there is a 12-hour course to learn more on bitcoin. If anyone wants to send me the link, I’d like to review – I can use this crypto education towards my professional CISSP credits I believe. At the crux of all of this from MY perspective – I don’t see it as a problem with my education on bitcoin, rather your misunderstanding of what bitcoin actually is. And I’m open to being wrong. Send me your literature. I have worked for over 27 years in information technology, have an advanced degree in IT, and you are trying to sell me to put my life savings into an Atari 2600. Don’t worry, if you are too young to understand that reference, that’s the point.
I am COMPLETELY open to being wrong. But let me ask you something. If you are stuck on an elevator with someone for 3-5 minutes, and somehow bitcoin comes up – what is your selling points? Here is a summary of the selling points I recall that I hear from most of you.
- it’s going a LOT higher. First, 100k, then $1 million!
- It’s a store of wealth. With the problems with our financial system, this is a superior way to store wealth than precious metals
- It’s the network, man!
- Blockchain is a revolutionary technology!
- It’s scarce – there will ever only be 21 million bitcoin made, unlike our dollar that is infinite.
The one thing here that stands out amongst the other items are – “it’s going to a million dollars!”. This makes you sit upright in your chair and pay attention. Hell, there are cryptos I cannot even mention here by name that are up 600%.
The rest – well, maybe we can dissect a little and look at risk?
I believe, in my heart of hearts, that bitcoin is interesting as a technology. But I’d like to peel back what I see the risks are, that perhaps never made it into the elevator conversation. One of these below is what sparked the idea for me to write this – the thought that over a given period of time, bitcoin will be useless. You’ll see why.
One thing you may not understand. This is actually bitcoin:
Not as sexy as a gold colored coin now, is it?
So again – wise one – what FUD do you have for me today?
If you are to accept the premise that bitcoin can go 20x up from here to a million, you have to understand that also means a 20x downside risk – if not more. To the moon! Or….to $2,000. NO ONE KNOWS, NOT EVEN THE GREAT MICHAEL SAYLOR what the future holds for bitcoin. But – are there some things you have not considered here?
Pyramid scheme? – one thing I did hear Giustra mention was that apparently bitcoin people are supposed to recruit people? 3 per month or per year he said? This works out well if you bought 10 bitcoin at $1,000 each. But what if you are late to the party and you bought in at $65,000? You have to accept that there is a possibly, that at some point, the last person to buy at the top is the mark for all of those who got in early to cash in off of. There is no tangible good here like a hunk of metal. It is an address space. “It’s the network, dude”. Well, what if you own this slice of the network for $65,000 and everyone else sells? The premise here is no exit strategies are discussed because to do so would slow the inflation of this “coin”. It’s also quite possible you get in now at $50k and hustle 20-50 more people in to dump in money to buy at $100,000 or $200,000. So when you cash out at a 4x at $200,000 and your friend is left holding the bag – that is the scheme that MAY be going on here. IDEALLY, it’s “big institutions” and “central banks” buying in. These are nameless, faceless entities – that if they bid the price up to a million, and you get your 20x, you can cash out!! And so will others. And then what’s left is central banks and institutional funds who now are down 95%. This is your transfer of wealth. Until you realize that the taxpayer (you) has to bail out the pension funds because you just took your million out at the expense of a wounded cop who gave 20 years to the force and retired with a bum leg from being shot. Or the teacher who put in 25 years who now sees he pension payments stop. You assume $1m bitcoin is fairy dollars. No, whoever the people are who buy at the top, those who bought in lower will sell and take the legs out from those who bought at the top. Someday – everyone who wants to buy bitcoin will have bought it. It cannot go up from there. Only down. Then the question is, how quickly. And who gets hurt at the expense of you getting rich.
I can tell you with the PM community, the markets are always relatively fair due to pull backs, corrections, consolidations, profit taking. Yes, we HODL a portion of our stuff for doomsday, but if we are up big, we use common sense and take some profits. If there are no healthy corrections in this market, you are looking at collapse someday from the exit velocity being so fierce that no one can catch a bid on the way down.
20% of bitcoin users forgot their passwords – it’s so secure, that apparently 20% of the 18.5m bitcoin ever mined are locked out due to their passwords being locked. That article stated that over $140b in bitcoin was locked out. It also mentioned how it’s up 50% from it’s previous month at $20,000. Someone please tell me where the helpdesk number is so I can call and get me password reset? What happens if you forget your passphrase or lose it? Think about the people early on that may have bought 1,000 bitcoin for $1 in speculative money and have no ability to retrieve it? Think about that mental anguish daily those people are going through. 4.5 million bitcoin are lost forever. Could you be on that list someday? Why not? Bad car accident and you knock your head around and forget it?
Overvalued – the article above, just 3 months old, had bitcoin double from there. So at one point, the amount of bitcoin locked out was almost $300b. With a B. This is deflationary for the currency, and many people think this is a good thing. I hate to break this to you, but every bitcoin out there is not worth $52,000. Or perhaps $60,000 by lunch when you read this. The value of that is determined by buyers and sellers and you are seeing what the last trade was made at. If there is an event which turns people off from bitcoin, there will be a flood of selling and no buying. This could crater price to $5,000 in hours or days. At issue is – bitcoin price ONLY gets higher if there is more fuel to the rocket ship. This requires sophisticated recruiting techniques. The same people that tell me I’m not smart enough to understand bitcoin will block me if I try to say one bad thing about it. It’s not a conversation. It’s not a debate. It’s indoctrination or banishment. That’s pretty scary. I risk losing friends writing things like this. But I do it because I put my analyst hat on and look at the situation from the outside. I’m not vested in this. I said, “I’m probably a buyer at $2,000”. While this may have insulted a lot of people, I also have recognized that as an investor – this “asset” has dropped 90% three times in its 12 year history. And – could any day now again. Or not. Maybe it does go to a million! Remember, I want any and all people who invest to get stupid rich on the man. If you can find a hustle get that – great! Remember – until you are able to cash it in, it’s only “unrealized gains”. This can go up to $200,000 and all the way back to $2,000. Smart investors also find ways to take profits at times. So – HODLing is essentially the only way to preserve value of bitcoin – if no one ever sells, it decreases the market and increases value. But those holding forever aren’t actually realizing these gains either. To be fair, the same can be said for gold and silver – but many involved in that game also realize if you have stupid gains, it’s ok to take some off the table and perhaps put into real estate or stocks. The bitcoin mantra appears to be to HODL forever. OK. I just think it’s a speculative asset – by definition, so if it does come down 90% again, I’ll buy some at the low – as a pure speculative play. If not, and I missed the move up – I can live with that too. But one rule I have with investing is not chasing and trying to buy at good entry points. This isn’t one. Now – if this was a “healthy” market, you would have seen more selling with profit taking to slow the ascent. This is not a community that wants to take profits. Which is also kind of dangerous if all decide to run for the exits at once.
Eventually becomes useless – One thing here I want to build on is the top item with 20% of people who have forgotten their passwords. I’d like to ask an honest question. Each day, how many people forget their passwords? How many people have bitcoin, don’t share out their passwords, and then die? Their loved ones can never retrieve this. Just using the same principle of math that founded bitcoin – over a long enough timeline, there will be no one using it because most bitcoin will have been lost over time. Think about that. It’s not a year out. But what about 100 years from now if 63% of all bitcoin can’t be retrieved? 200 years from now it’s 86%? 400 years from now 96%? This could mean that only 1 million bitcoin are in use? Think about how I could hold an ounce of gold in my hand that was money 5,000 years ago. I can probably show you on a chart how statistically it’s impossible that bitcoin, as you know it now, would exist in 10 years, let alone 100. Or 1,000.
Scarcity – the argument here is the weakest of all arguments. While there are only 21m WHOLE bitcoins out there, there are something like 4 quadrillion satoshis. Imagine a day, 400 years from now, where you are down to 1 million bitcoin and the emperors that rule then allow satoshis to be divided more by another 6 decimal places. Maybe then you go from 1 million bitcoin (which won’t change) but you now have another trillion or so mini satoshis. At issue what people don’t seem to grasp is that you can continue to add 0s forever, making it more and more divisible. All you do in that situation is “inflate the currency”. This is similar to playing monopoly. Later in the game, the 1s are worthless, so you turn them into $1,000. It’s the same principle with bitcoin scarcity. If each bitcoin gets high enough in price, you simply add a zero to the level of division. This encourages sales of fractions of bitcoin and brings down the price and allows for more liquidity.
Moore’s law – While Saylor talked about Moore’s law, I’m not sure those writing the cards for him understood the full implications of Moore’s law. It’s not just processing speed that doubles every 18 months, it’s technology as a whole. It’s drive space. Software memory needs. Graphics. Remember, I’ve worked in IT my entire adult life. And when I started working in IT in the “mail room” so to speak, I was working on 286, 386, and 486 processors. I remember a 66Mhz 486 where you had to buy the math co-processor separately. I even got to see the 8086s. When I was 11 years old, I took a community college class on BASIC programming in 1986 from Reading Area Community College. That was when I learned to make the MacGuyver theme song in beeps and write games with using your imagination. I used the Apple 2 in 4th grade. Floppy disks. What many of you reading this cannot really comprehend, at this moment, is that any technology created evolves rapidly and is replaced with better technology. Saylor’s point about Moore’s law – mostly referring to processor speed is also flawed. In 2011, Michio Kaku on the science channel talked about a processing wall we will run into. At issue was that to make faster processors, we have to get smaller and smaller – but we are approaching the limits of what we can do in this respect. Meaning, rather than processors doubling in speed every 18 months – they have added more core CPUs to do a lot more work. But the speed of processing is approaching a wall. And, we are currently going through a chip crisis. So you then have those who want to mine bitcoin not able to upgrade their hardware.
Mining costs – There’s a whole discipline with this right now that talks about the amount of energy needed to mine bitcoin. At what point do those of the younger generation who support bitcoin then look in the mirror and understand this is against their “green” beliefs? How long until this story reaches a lot of the bitcoin people? Right now, there are major bitcoin mining operations in China. China has no interest in using Bitcoin. They mine it, and sell it, so they can then buy gold. Additionally, as some people eventually see bitcoin not rising, they may get skittish with the markets rolling over and go to cash. As bitcoin prices go down, these mining operations may stop. If it costs them $30,000 to mine and bitcoin is being sold for $20,000, why mine it? This could then mean perhaps the last 2.5 million bitcoin to mine – either may never be mined or maybe take 50 more years to do so. One can then go back to the deflationary argument as less are being created, that can drive price up – but again, this is predicated on the scarcity argument.
Central banks are not coming – Central banks hold gold. Many of you say “central banks are buying this in secret because if they don’t, they risk being third world countries”. No. You are dealing with the people who make the rules, not those who bend the knee to the mob. The rhetoric coming from Legarde and Yellen is not one of capitulation. You are now seeing more and more central governments making attempts to “ban” it. China, Russia, India, Turkey, Myanmar, and probably many others coming behind this to ban it. You see, there’s a currency war going on many of you have no idea about. Marin Katusa put out a thought-provoking piece last summer where he talked about essentially those countries friendly to the US versus those who aren’t. I am seeing this unfold with my own eyes. The western countries have printed fiat to oblivion, and you can see the BRICS+16 countries – one by one – embracing gold and hard money over fiat. I believe to them, unbacked crypto is another means of extracting their resources for nothing, and they are fed up with it. I believe the big currency war coming in 5-10 years has to do with gold. The west, who has either leased out all of their gold or sold it, is fighting back on this and trying to push some sort of new world order with MMT and SDRs. Then, you have ancient cultures who are like…”nah, go pound sand”. Mike Maloney even documented in one of his videos how there has been a move over the last 10-15 years where the east is taking all of the gold. In the west, we are now being programmed to believe that spaces in digital memory are “value”. Meanwhile, the Chinese have been rebuilding their silk road and buying up ports left and right. Most of this country at the moment is having a “where lambo” moment with the crypto of the week, where ancient cultures have been building an arsenal of gold for a showdown about to happen.
Institutions are not coming – Many bitcoin people talk about institutional money coming in. The truth here is that a lot of these pension funds need like 7% return to make their nut. And they aren’t doing it. Pension funds are now on the list of wanting “bail outs”. In order to get 7% returns, they need to buy junk bonds and speculative assets, but by law, they aren’t allowed to do this. So if you are running a pension fund (my mom used to administer the teamsters of PA pension fund) there’s NO WAY they are going to put any sizable amount of money into something that lost 90% of value 3 times in 12 years. I’m sorry. You have millions of teachers, cops, firefighters – and you cannot put their life savings into something that can drop 90%. These funds MAY have held gold over the years in some way – perhaps as a hedge. And this might have been .5% or 1%. I argue that bitcoin is NOT a defensive asset – but something that has worked in tandem with the S&P 500. If we DO see David Hunter’s prediction of an 80% drop in the S&P, one can make an argument that BTC is the NUGT of the S&P 500 and if you remove the liquidity from the system by letting rates run higher, you can see a deflation of speculative asset bubbles. So no…I do not see pension funds buying BTC. COULD you see one maybe putting .1% into a BTC ETF? Perhaps. But you need to realize what you are investing is in NOT GOLD – it is a speculative asset, at least how those who evaluate risk see you. You may see it as a revolutionary technology. Financial people see the volatility of this and put it into their own high risk category.
Not backed by anything – the argument here is that no government on the planet has made this legal tender. No tanks are backing this up. There’s no gold backing this up. So your argument is that this is worth a million because someone will pay a million. I would contend that at some point, everyone who wants to buy bitcoin will have bought it. And when the orgy of this is over, you have massive sideways movement for many years. The price going up relies 100% on selling a narrative of more adoption. IF all those who wanted it, bought it, then by definition – it cannot go up in price on its own. The only thing then left to do is to make laws to force adoption. This is another means of making a speculative asset increase in value. This is not sound money.
Governments make illegal – I touched above on the governments making it illegal part. I believe that IF this ever does threaten a nation’s currency, they WILL make it illegal. India has given it a few months. Turkey just did it. The problem is, you feel that this is bigger than governments, and governments cannot stop you. Well, we’ll see who wins that one. The rhetoric you are seeing is that this is being used for money laundering and illegal activities. We all know cash is king of this. But cash will be also lumped into the BTC pile to then go after for using a digital currency backed by the country. In the US, there was talk of “FedCoin”. They will tell you it makes it easier to then send stimmy checks out – they can instantly put money into your digital wallets and get around the banks. No checks. That is the allure. What they can also do with this is track your every purchase. Perhaps they do not want you buying cigarettes anymore with FedCoin because they feel it is bad for you. Not to go too far down the FedCoin route, but you have to see the rhetoric they are putting out that all of these governments are saying that they view it the same as money laundering. What if I wanted to buy a toy for my kid at a neighbor’s yard sale? I pay cash. With bitcoin – it provides the same shield from government taxing that transaction. They want to get their beak wet on all transactions, and bitcoin prevents that. What can they do? Block access to banking. De-list coinbase. Serve coinbase or any other exchange that uses these cryptos with cease and desist orders. Block internet traffic to sites. You aren’t aware of this, but you as a bitcoin holder are the BEST means of hiding money from the governments. How long do you think that can last? Bitcoin massive drug deals – no cash you need to launder. Arms deals. Trafficking. It’s THE perfect money for it. And you are going “where lambo”. I can tell you, that Columbian drug lord has your Lambo.
Hacking – most people don’t realize that hacking is extremely difficult. As part of my Certified Ethical Hacker training, you see all of these tools that people use. Many who use these are called “script kiddies”. You are taking existing tools you might find and then use on networks to do bad things. The “good guys” are using the same tools to probe their networks to hide issues. But the biggest danger you may run into is Phishing and SpearPhishing (or even whaling – targeting high net worth individuals). Everyone has seen the Nigerian prince emails, but these things have become more and more sophisticated over the years. What I can tell you is just about anything can be hacked given the right tools and the right amount of time. I have nothing of value on my laptop. Many of you will write down your passcodes to bitcoin somewhere. Many may put on your laptop, or perhaps under your keyboard. Maybe on a shared service in the cloud that is hacked. Grandmom can have a phishing attack easily get her to sign into something to take from her. But what are you doing with your passphrase? What happens if you die? Have YOU taken steps to ensure your bitcoin is passed down to others? Many haven’t. But with hacking, right now a super computer might take 40,000 years to hack some of the most sophisticated algos out there. With advances possible in quantum computing – some of these things might take seconds or minutes to hack. Maybe you somehow report your crypto as stolen and the exchanges don’t redeem it. But what if someone accuses YOU of stealing THEIR crypto? This can be a form of denial of service. Who do you appeal to? What if some of these exchanges are hacked? There’s just a lot of questions I have right now for the whole space.
Electricity outages – this can be minimal. Or, it can be cataclysmic. Remember, I’m trying to point out ALL risks – I’m not discussing likelihood. In Texas a few weeks ago, there was a deep freeze and power went out everywhere. Some people had 8 days without power. This means no internet. No crypto. Phones die. Maybe this is a small chance of occurring for you in Arizona. However, what about Puerto Rico a few years ago when a hurricane wiped out their power infrastructure. Many months without power. In this case, having some cash in the house is king. This is still transient for months – to eventually pass. What about a Venezuela where I had read they have power rationing. I cannot remember if it was 20 minutes a day, week, or month – but they have significant problems here. Lastly, you could have something called a “Carrington Event” which may occur once every 500 year or so, but in the case of our current society – we are extremely vulnerable to electromagnetic storms. The last one happened in the 1860s I believe and telegraph machines caught fire. Imagine that now being power generation stations in the entire country. Imagine 1-2 years until we can get back up. Millions will die. Gold and silver may also be worthless at first – but over time – it consistently comes back in history as the best forms of money. If you WANT sound money, you need to diversify from crypto into PMs as well. I would suggest unbacked crypto people NEED PMs as an emergency backstop, but PM people do NOT need unbacked cryptos. For the convenience that physical metals do NOT have – PM people are actually using a metals-backed crypto called Kinesis and another called Lode. THIS is your crypto sound money. So PM people DO have the metals in their hand AND the ability instantly transfer their gold/silver in payment to others using crypto.
Something better comes along – Remember Moore’s law above? Yeah, now we get back to the Atari 2600. This was a revolutionary gaming system. My parents bought us something called “Intellivision”. DEAR GOD my gaming system was far superior to the Atari 2600. And the controllers had this disk interface which was far superior to the joystick and single button. However, Atari 2600 had mass adoption and Intellivision when out of business. The 5200 came along, and I loved that. The 7800? Terrible. What my suggestion here is that Bitcoin COULD be the Atari 2600. Maybe it evolves into the 5200? But what if a Nintendo comes along? What many in bitcoin talk about is “revolutionary” technology. That is what Pac man was in 1978. For you younger people out there, I did that again intentionally. I made reference to an old technology that you had to look up. The latest and greatest is something called Hash Graph. I don’t even pretend to know these things. But what I DO see is more scrambling to these things as their growth is accelerating. They claim transaction speeds far superior to bitcoin by orders of many magnitudes. Meaning – bitcoin may be a great “ledger” but perhaps this hash graph may make more sense as a payment system.
If you have something like a kinesis, the VALUE of your crypto is the conversion of metals, not what someone else wants to pay you for your address. Meaning, if 50% of the people want to sell their Kinesis KAG today, it doesn’t affect the price of my KAG one bit. If 50% of bitcoin people want to run to ETH 4.0, then bitcoin will drop off of a cliff. IF there was a Kinesis 2.0 that comes out, in theory we could convert all of our KAG to metals, then import those metals into Kinesis 2.0. Kinesis 1.0 can be sunset. This allows THIS platform (and others backed by metals) to evolve over the next 100 years. If Bitcoin has an issue where something better is found, it’s a race out the door. This is a REAL RISK when the value is speculative. The values of PMs are relative to other tangible goods within a range of about 25% over thousands of years.
Taxation – Maybe they cannot make it illegal because Elon Musk has enough political influence to prevent this. But make no mistake, they will tax the ever living hell out of your gains. And if you don’t want to pay on those gains, it’s ok, they will just send you to prison. In Japan now, I just saw the highest tax bracket pays like 54% on gains from cryptos. I think the low end I saw was 42%. In this country, maybe they don’t make it illegal, but perhaps they do an 80% tax like Yellen was rumored to say.
Futures market – The government doesn’t even have to do this. Rumors of this alone could tank the price 90%. Remember the 3 times I talked about a 90% drop in price? The last one was due to the US government talking about a Bitcoin futures. Just the TALK of this led to a 90% drop. Why? Because they know how important a futures market is to suppression of price. They even bragged about “popping the bubble”. So what if Bitcoin hits $100,000 and they decide that the market needs an ability to have people bet against it? This is what they have done to most commodities for nearly 50 years. And every so often these price schemes break when true supply/demand fundamentals are at play like with Palladium.
Regulation – What Deso talked about in an interview with Rob at GoldSilver Pros is that when these things break and millions of people lose their money, that people will come to the governments and DEMAND regulation. Essentially, the governments have stepped aside and allowed the wild west. We now see in Turkey that they banned bitcoin, then a CEO of another crypto took billions off of the exchange and fled Turkey. Immediately, calls for regulation started coming in. With 9200 cryptos and virtually no oversight, all is well when there is liquidity everywhere from stimmies. All of stimmy stuff keeps inflating these bubbles more and more. What happens when sell offs happen and real pain begins to be felt? a very popular crypto is dealing with prosecution issues with New York. What happens if a lot of fraud is found with these and a lot of the CONfidence in the system is lost? Mad runs out the door happen as stimmy checks stop and the markets start to tank? My guess is tighter regulation the inserts the government up the rectums of every one of these companies. If they don’t want to comply, they can be black balled from exchanges. What regulation currently exists with all of this? How can government find ways to get their beaks wet? This might then force exchanges to report on customers (Know Your Customer or KYC), transactions, profits, who bought what – and perhaps who sold to who? If you were in the DEA, wouldn’t you like to know who made exchanges with associates of drug lords? If you do not comply, we will banish you. Bitcoin and an open ledger? Who is perusing this to find who bought and sold what? Do you want the government tracking what you bought and sold with your bitcoin? you sure this open ledger is THAT great of an idea for privacy?
Crypto backed by gold/silver – As mentioned, I do have a very small stake in Kinesis. I plan on doing my research with them more and more. For MY personal investment, I look towards things backed by “money”. Perhaps you do not share my view. That’s ok. You do you. However, I feel one of crypto’s biggest weaknesses is that the entire value system of it is a speculative movement – and this also creates instability. I have written and will continue to write how gold has relative value to just about everything going back 5,000 years. It is a sine wave, of sorts, where gold as a money supply is about the same rate as population growth. It is steady over time, with ebbs and flows. What you can then do is have this monetary metals in vaults and these cryptos are actually digital representations of gold or silver. I think Saylor’s best point of the entire debate dealt with perhaps 2.5 billion ounces of investment grade gold and silver (each) and with 8 billion people on the planet, you can’t slice out .4 oz of gold and .4 oz of silver per person. A gold and silver backed crypto gets its worth on the metal, not on speculative buying/selling. This could then have people literally paying in gold and silver grams, nanograms, etc. I called this “financial energy” something I refer to as “jewels” of energy.
The risk with this is that those seeking “sound money” leave Bitcoin for the convenience of crypto and the sound money of gold/silver backing it. What was missing from the debate was the question that should have gone to both Saylor AND Giustra is – “how do you feel about the best of both worlds with a crypto backed by gold/silver?”. I believe MANY in bitcoin have NO IDEA such a thing exists. And, by me recruiting them to Kinesis – it doesn’t increase my KAG one cent. Meaning, I have no financial gain from recruiting you to the crypto I feel is better. What financial gain do you have if I buy bitcoin? A lot. I believe through the years, attrition from these 9200 cryptos will find a gold/silver backed crypto and marginalize a lot of the cryptos that are only valued on other people buying them in an auction type of situation.
Perhaps down the road, the gold to silver ratio gets back to 15:1. If an ounce of gold is $45,000 and an ounce of silver is $3,000, this means you would be dealing with fractions of ounces. Now, you might balk at those valuations, but IF they want to peg currencies to metals ever again, this is the ballpark it has to be in. You can make the argument they will never do such a thing again – but remember what I was saying about the BRICS+16 getting fed up with the west’s money printing? Yeah. The Chinese are said to have 25,000-40,000 tons of gold, and are to be testing a gold-backed digital Yuan. Now, someone like me would not buy that due to not wanting to have them track my purchases or the like, but on a nation state level, if you are exchanging oil for a digital gold backed crypto, this makes sense. Perhaps you have a country like Switzerland who has a lot of some of this gold and holds it on behalf of central banks. For example, maybe each country puts 500 tons of gold into Switzerland. This gold is all backed by digital gold-backed currencies. THIS is used for international trade. This “slush fund” a country has in there guarantees the crypto transfer. So Russia can buy oil from the Saudis with digital gold and no country can sanction this or block that transfer. Those with the crypto would then buy other things with it. This could also have the effect of balancing world trade between nations.