Don Durrett just asked this on Twitter. I’d like to first start off and classify my feelings…
- Laser eyes and Saylor level investment in bitcoin – this is cult-like behavior that, as part of the business model needs to get more people to join in order for the value of something to go up.
- People who are trying to ride a wave up and are just trying to not be left behind due to rising costs and this is their only lifeboat
- Speculators who see a possible rise in an unproven asset class and can play the action going up and make money – and can see a place where this might be successful. I can put Don Durette and Lawrence Lepard in here. They see value, but they also put speculative money in it, and are not like the number 1 group above.
I needed to really put this out there, FIRST, because when you attack bitcoin, in any way, you evoke a lot of emotions. My article here will be geared towards door number 1. The people in the second one I feel terrible for, I don’t hate them. I hate their investment, but am pulling for them to get their 10x so they can buy a home and raise a family. I feel those in door number 3 have been the BEST representations of bitcoin, as they see the technology currently as a speculative investment – they are prudent in their analysis and pragmatic in their amount they have bought.
Many of these people who got in early with a spec investment have come wildly rich and perhaps converted to door number 1, like Max Keiser. For him, a $5,000 or $10,000 initial investment has perhaps led him to being able to buy an island now as it appears his BTC assets are over $100,000,000 given current prices.
So let’s look at door number 1, shall we?
I never liked bitcoin, cryptocurrencies, or “cryptoassets” as Saylor calls bitcoin. Anyone invested in bitcoin is quick to try and point you to the differences – as bitcoin cannot be added to, at the moment. My initial “gut feeling” when I saw a lot of this going back to maybe 2012 or so was “this is too complicated for people to understand”. I remember actually tinkering with the idea of buying a few, but money was tight with a 4 year old. I had an old server and I thought, heck, maybe I can mine bitcoin with it. I then looked into that and realized my business-class server didn’t have the right processing type, and that’s when I gave up on it. I had recalled maybe $50-$100 or so at the time for them. But my impression was, “this is far too complex for people to understand”.
My background at this point was just completing a master’s degree in cybersecurity in 2012, working within IT security in the DoD (hardening of systems), and passing the CISSP to manage cybersecurity teams. You learn a lot about how hashes come to be, PKI, types of encryption, ciphers, how to crack things, etc. My point is, that while I was not at the front of the class at MIT writing these calculations on a white board, I understand how this stuff works. Some things that concerned me:
- Complexity. Consider a gold or silver coin. Most 4 year olds on the planet understand that. 95% of the people who hype bitcoin understand the need for hard money, but actually don’t understand even the surface level IT backend of this thing.
- Security. I was worried about losing the bitcoin. While the encryption seems good – you have weaknesses with just about anything if you look hard enough. First was exchanges. Second, losing keys if you put it into a cold wallet, of sorts. The ability to lose access to this asset is far greater than anyone wants to let on to. Some had even called it a “feature” of deflationary money. I’m not talking someone hacking your bitcoin and stealing it – I’m talking the equivalent of you storing your gold in a Burger King walk in freezer on an exchange. As we have seen recently, these exchanges are falling apart. People can lose keys, and there’s no 1-800-IAM-FCKD number to call if you lose your keys.
- Off-shore. I had interest for 5 mins on Theta with listening to Bix. But you could not buy it here. You’d have to be on a foreign exchange and perhaps VPN in there. Yeah, not shady at all. Theta went from $.25 when he was talking about it to $16. So people made a shitload. But it was really sketch when I heard this.
- Money laundering/crime. The KYC of a lot of these things are suspect, at best. How easy would it be for drug dealers or human trafficking people to be paid in (name your shit coin here). In this case, it makes no difference if it is BTC or ETH – it is now currency to enable bad things. If you are a bank and you enable this, the bank is closed and assets seized. I didn’t like this, at all.
- Ways to pass it on – I was a little turned off that if I had passed away and had all of this, the level of difficulty to pass this on would be extraordinary. So I put it on a cold wallet. I have to write down something, and store it somewhere, and hope someone doesn’t get access to this and my USB drive. If I had a million on this, and put it in my safe, if I’m robbed, I am giving them access to the USB and ways to access it. So – there’s levels here of how to pass on.
- Education – in 2020, I took a leap. I was genuinely interested in trying to understand what they think I was missing with this. I went to the “Saylor academy” and put in maybe 4 hours. Nothing is straight forward at the bit and byte level, and a lot of their recruiting and marketing material is either incorrect or misleading. Anyone who doesn’t know their shit at the bit and byte level could easily be fooled by people who assert they know what they are doing. To me, it was “RUN”.
- Comparisons to gold – the logo for bitcoin was a gold coin. They have misled people into believing it is the same asset class as gold. It is most certainly not, as 21 months ago I was one of the first, if NOT the first, to point out that BTC is an amplifier of the stock market, like NUGT is to gold. I then also went on to Citizens for sound money to try and properly classify asset classes as if I was a biologist. My conclusion was that bitcoin was the equivalent of beach front speculative property yet to be developed.
- Better mouse trap. My main issue with BTC was that it sells you an empty parking lot on the ledger. When I discovered Kinesis (you can also substitute Glint, CACHE, LOAD) I loved the idea of using the blockchain to then associate the parking space with ownership of a tangible asset. The BTC main argument against gold was that you can’t walk into a grocery store and buy a loaf of bread with an ounce of gold. That is a fair point, and Kinesis solves this problem by having tokens associated with ownership of metals – where you can salami slice gold into fractions of fractions of a gram. You can also use the debit card to spend it at the grocery store. So, yes, you can buy gold with a debit card via blockchain technology, today. The metals are audited and 1:1 with tokens. As metal is added, tokens are created. As metal leaves, tokens are destroyed. The system is paid for by friction of gold in/out and transacting in gold.
- Cultists – the hard core BTC people you cannot have a conversation with. Each one of them has more or let been gaslit into this reality, and are eager to constantly try and put down gold and replace it. THEY declared war on gold as an asset class, and gold/silver people, like me, fought back. They would march out a 10 year gold performance chart where gold was even or down 5%. They then compared this to BTC over that same time and thus used this argument literally hundreds of thousands of times on Twitter to attack PMs. You could not tell them anything about a cup and handle pattern, or the fact that gold/silver have been around for 5,000 years and are in the Constitution. Nor could you tell them of the 58x gold did from 1972 until 2011, the consolidation – and now an eventual march up to happen as currency is debased into infinity.
- Market caps – I can tell you I think with this inflation cycle, all of this $2T that went into cryptos most likely significantly hurt the performance of precious metals, by a lot. I did a chart, below, which shows how the monetary policy that enables more money/credit into the system is sopped up to prevent price inflation below. My assertion is that the cultists took trillions away from PMs and with this, directly negatively affected my “sound” investment with their speculative nonsense. It is also possible this was by design to prevent gold from signaling the dollar is worthless. If you would have seen gold hit $3,000 and silver at $100, it would have signaled stupid levels of asset inflation. But under the radar, when you see BTC go from $100 to $69,000 – it is clear that the overflow in the system was sopped up by wild speculation and this is the first place the liquidity in the system will be drained from.
The article I wrote on the above is here – which might be one of my most interesting articles yet. You can perhaps see a delicate balance between asset inflation, energy inflation, and wage inflation. As measured by percent gains, if these are in imbalance, you can see a % increase in price inflation to Joe Sixpack. For example, if houses went up 10%, energy went up 10%, and wages went up 10% – all of these sopped up excess money. The reality then to Joe Sixpack are that wages are keeping up with price increases so there’s no net change in his/her quality of life. But when houses double in price and costs of everything skyrocket due to turning off energy production, you can see that wages did not keep up and thus the NET EFFECT to the citizens were to get squeezed. In order to fight this, one could see low unemployment would then put pressure to increase wages – instead of doing that to ensure Joe Sixpack can keep up, the Fed is reversing the flow of money to drain the system. It is a deflationary pulse meant to quash demand, reduce asset prices, and reduce energy prices as not as much is needed to be built, mined, or transported. The Fed is doing DEMAND DESTRUCTION – which could also spiral out of control into a massive deflationary depression. Maybe it never gets there, but it is clear to me now that the spec nature of beach front property is the first to get sold off.
I think there are really good people that have been sold a bill of goods with cryptos (both shit coins and BTC), and with this – I champion the speculators who could get a 50x and got out and rolled those profits into gold/silver. I feel terrible for an entire generation who needs to roll the dice on things like this just for the hope of a down payment for a house and my WISH is for them to have their lottery ticket get punched. But for the dirty, rotten, snake oil salesmen constantly hyping something they have no understanding of to find more people to hop on the ride so they can hold your bags, there’s a special spot in hell for you.
That all being said, I find BTC to be worthless – but at $3,000 or so, I would be willing to light $3,000 on fire as a lottery ticket in case it went to $1m. But at $69,000 for a hope for $100,000 or $200,000? There’s a LOT of risk (which many of you don’t understand) for not enough torque for an upside. I SPECULATE with mining exploration plays. I know there’s risk, but I look at these as a 5-10x upside with a 50% downside before I hit a stop loss. The idea though is I know it is a speculation and I try and de-risk these as much as I can with newsletters of people who are smarter than me and talk to the CEOs and geos of these properties.
If you own bitcoin now, it might be a good time to get the hell out and run for the hills. If you stay in it, I hope you make millions and your perseverance pays off. But if you look at that chart of money flows right now with the fed, it’s taking money back out of the system and that is not exactly a great time to be in ANY speculation. VC money will dry up as interest rates are too damn high. Leverage is breaking, as margin calls are hitting everyone and forcing sales. It is POSSIBLE they want to completely break the will of crypto people as they plan to roll out a CBDC soon and what better means of doing it than by destroying all cryptos and exchanges privately held. IF you have a BTC, and no exchanges exist, and no businesses take it any longer, what is the value if that network is now gone?
May the odds forever be in your favor. This is what BTC people look like to me – and I’m not “mocking” them. It’s a sign of desperation by a middle-class society that has been eroded for decades.