Bitcoin’s Inconvenient Truths: The Silence Is Deafening

Gold is instantly and optically recognizable as money. You don’t have to explain it. Bitcoin and Special Drawing Rights (SDR), like a bad joke, have to be explained. Many “cryptologitsts” from the start gave up trying to explain Bitcoin and just sell it as virtual gold, which is de facto fake gold.  – Dan Popescu, investment consultant

Numerous inconvenient truths are conveniently ignored by Bitcoin/crypto-currency promoters.  Not the least of which is that the fact that the original concept for cryptographic currency was envisioned by the NSA.   I guess it’s convenient to assume the NSA developed this concept and then put it out there for the private sector to develop.  Sure, that makes sense.

A rapid rise in price does not validate an investment concept.  Dozens of dot.com stocks went from simple websites to multi-billion dollar market caps and back to zero in the late 1990’s. Until proven otherwise by the long test of time, Bitcoin could be another product of a fiat money printing bubble that is 100x the size of the money bubble that fueled the dot.com bubble. Gold and silver have withstood the test of 5,000 years. Bitcoin has less than 3,000 days of time-testing.

Be leery of the serial promoters who have dropped their previous advocacy of gold and silver like a hot potato to become religiously zealous salesmen of Bitcoin.  These were often among the most raucously vocal in their protest of the use of Comex gold and silver futures to manipulate the market price.  Yet, their silence on the introduction of Bitcoin futures hurts my ears.

The bulwark promotion of Bitcoin is that it is a de-centralized form of money that exists outside of Government control. But is it really?  I dare say the roll-out of CME Bitcoin futures, as “regulated” by the CFTC, certainly smells like the implementation of official intervention.  Those who previously protested gold/silver futures must not deny this fact. Perhaps more troublesome is the embedded forms of counter-party risk endemic to the system which creates Bitcoin.

Anything that exists in cyberspace is vulnerable to hacking.  This is a fact that has yet to be invalidated.  Circling back to the NSA white paper referenced above, can anyone out there truly claim the expertise required to deny that the NSA, or any other major sovereign intelligence agency, does not have the ability to corrupt the block-chain?  To be sure, cryptocurrencies are subject to network or infrastructure risk during a crisis.  Unequivocally, crypos are subject to government regulation.

Speaking of which, if I were a Bitcoin advocate, it would bother me that western governments go out of their way to hide their interest in gold as a monetary asset, yet they openly embrace cryptocurrencies.   Perhaps when the BIS declares Bitcoin or Ethereum to be a Basel 3 Tier 1 Central Bank asset like gold, I’ll have a change of heart.

The price of Bitcoin has experienced a remarkable run in price this year. Of course, the same could have been said for Dutch tulip bulbs from late 1636 to late 1637.  Most of the traders are chasing the price higher, with little to no understanding of the object they are chasing with their money, in hopes that someone at a later point in time will come along and pay a higher price to them.  Even worse, these price-chasers have placed undying faith in the analysis of Bitcoin coming from the  same con artists with whom they placed religious faith in the analysis of precious metals.

Also, up to this point there’s been  an absence of two-way price discovery for Bitcoin. Once the CME futures are rolled out, it will introduce – albeit in an unwelcome format – a provocative method to sell Bitcoin on margin.  The use of margin is the hallmark of a fiat currency-based fractional banking system – the very nature of which Bitcoin supposedly repudiates. The Bitcoin longs will face the same unlimited supply potential of paper Bitcoin that precious metals investors have endured for decades.

Make no mistake, I’m not trying to derail anyone’s interest in Bitcoin or cryptocurrencies.  And I’ll be the first to admit that it’s likely the price will go a lot higher from here.  But if the issues I raise here are indeed legitimate, how do you know when it will be the right time to sell?  That is to say, while the parabolic rise in Bitcoin has been largely continuous, any number of events could occur that would force the price re-discovery to be a step-function.  It’s all wine and roses on the way up, but at what price will there be a bid for you relieve yourself of your position?

47 thoughts on “Bitcoin’s Inconvenient Truths: The Silence Is Deafening

  1. Well, well, well, another $200 billion bubble. Ain’t that special.
    What does this mean in relationship to $225 trillion in global debt, 350% of the global GDP?
    Nothing!
    Cryptos might rise another 1000 fold, thus be able to pay off the world’s entire debt load but I’m not betting on it unless the government can confiscate BTC and pay its bills.
    Gold could rise to $500,000 an ounce and do the same thing.
    And homogenized unicorn horn might be worth $500,000,000 an ounce, around the same value as that Da Vinci painting that hammered down for $450,000,000 two weeks ago
    You never know what some old dude would pay to get wood. But ground Rhino horn is so yesterday. Unicorn horn in the next best afrodizzyak in my opinion and I’m long on unicorn horns
    To my 50 years of watching speculative bubbles, Ponzi schemes, pump and dump stocks, OPT seaside real estate and pixie dust traded on the Zimbabwe bourse, I regard crypto currencies with the same eye as a herpetologist views a heretofore undiscovered species of amphibian.
    After 250,000,000 years of evolution, that newt best hurry up and evolve to something useful, like sprout wings and do deliveries for Amazon or crap Tesla batteries that actually work.
    Until then I think I’ll stick with my gold and silver. Who knows, maybe gold will hit $5,000 an ounce. I’m cool with that too.

  2. Bitcoin at the time of writing hit $9300.00 in Asia(Sunday afternoon).
    About a month ago Jamie Dimon said “anyone buying Bitcoin is an
    idiot” and “any of my traders caught buying Bitcoin will be terminated”.
    Last week Jamie Dimon said “J.P. Morgan Chase is looking at Bitcoin and
    will try and assist the banks customers in acquiring Bitcoin” I own a few
    Bitcoin’s as a diversified investment. I cannot believe how quickly they have
    appreciated. The problem with Bitcoin is that it is an experiment in my
    opinion. Blockchain technology is going to be the way that central banks
    and Governments will seize control. This entire crypto currency delusion
    is an end around to eliminating cash and eventually the debt. Sound crazy ?
    Think Paul Krugman and his billion dollar coin idea from a few years ago.

  3. Bitcoin for me is Ponzi scheme owned mostly by Masters of Universe.
    If you missed the station don’t try jump from train.
    We maybe missed Bitcoin price below 1000$ , but now it’s too late.
    It’s very , very overpriced. Stick to Gold , one day will be very handy to have it.
    Maybe their plan is to upset gold investors with Bitcoin price going up or they trying to fool us to sell Gold and buy Bitcoin. That’s trap. They can stick their Bitcoin in their asses. It’s like running for 5km and stopping before finish line? very silly.

  4. > The Bitcoin longs will face the same unlimited supply potential of paper Bitcoin that precious metals investors have endured for decades.

    What bitcoin exchanges are saying :

    “GDAX is proud to provide CME with price data for their newest index. As the largest U.S. based bitcoin exchange, GDAX believes this is an important step for the development of future financial products.”

    “We are excited to work with the CME …”

    “Digital currency has long-needed participation from a company such as CME Group to elevate the asset class to a new level. We are thrilled to be a member of the oversight committee.”

    “This is an exciting initiative and brings the asset class to a new level.”

    http://www.cmegroup.com/trading/cf-bitcoin-reference-rate.html

    Translation : we are thrilled to welcome the wolf in the sheepfold.

    1. It’s as I and many others have said, the exchanges LOVE this scam the most because they risk nothing by skimming each transaction for it’s fiat value. They do not base their balance sheets on Cryptos, and for good reason (here we go again, Google, with the auto-capping! Just proving my point!).

      And who else loves it ? Governments. Talk about a fresh source of taxes; they don’t care about the scam! They see the exchanges as being easy targets. Compare that to a completely different (and stable) monetary system. It would be impossible because such exchanges would not exist (no one, not even the state, would hold exchange for fiat $&#%).

      The public has been indoctrinated to confuse gambling for investment by mafia-casinos, and this is no different. Casinos historically have had local governments in their pocket, hire thugs to shut down competitors, rig games and try all their might to prevent cash-outs. The difference here is that the big-boys have bigger guns.

  5. Dave, your points ARE legitimate, and far more so than the hacks peddling this crap at least. These are the same shills who say, “Gee! You can’t trade gold long-distance! The costs are too high relative to Bitcoin! Hardy har har!”

    The idiots don’t seem to understand that interest rates and discounts serve to correct these challenges with any commodity. You’d think that in their world, it’s also better to transact images of food when you’re hungry instead of ordering the REAL thing!

    And for the record, you know it’s a bubble when freakin Google is auto-capping the word “Cryptos” in their search engine. Oh, excuuuuuuuuse me Langley!

  6. Has anyone noticed that whenever BC plunges, it immediately catches a bid? Does anyone really think that this is by accident? All heil the BC plunge protection team. They WANT you in BC for a reason, and rest assured, that reason does not serve your interests. BC is the cartel’s best friend, which means that it is my worst enemy.

  7. BitCoin is a closed loop trading Ponzi, thin markets with small amounts of actual owners are trading back and forth jacking the prices up with marginal amounts of capital.

    The 1929 stock market saw something similar, as margin accounts created fake money on the brokerages that lead to the bubble, so too is the psuedo fiat that is amassing in Wallets.

    It’s a massive bubble waiting for a pin

  8. Here is my 2c for bitcoin. Today (happening now) gold starts to get a breath and is immediately smacked down. Bitcoin – can go as high at it likes. My guess is that the Feds care about keeping gold under control but dont care about bitcoin, perhaps because, in the end, bitcoin wont matter.

  9. Leave Bitcoin have its currency space- just don’t call it money! I hope it does destroy the banksters- but then again with a 300 billion market cap whats to keep the banksters from buying every coin in one foul swoop (or step by step). Bix says there isn’t enough gold in the world to be used as money but then claims there are thousands of tons in the grand canyon and the 21 million Bitcoin can do the job- EVER HERE OF DIGITALIZED BLOCKCHAIN GOLD -Bix (well your gonna)? This is all such a joke -who needs money or currency when the governments can just create with the push of a button all we need -THEY HAVE MADE A MOCKERY OF THE FINANCIAL SYSTEM WITH THEIR KEYNESIAN WET DREAM!

  10. My opinion, which isn’t original, is that Blockchain technology will allow the creation and spread of gold and silver-backed cryptocurrency, which will be used to settle trade accounts, globally. From there it might migrate to everyday consumer use. It’s collateral that counts, not ethereal bubble values.

  11. Mr. Rory has a nice disrespectful add-on to Dave’s article over at The Daily Coin. He is basically stating that it’s nice to have Dave’s opinion on cryptos, but that his points have all been proven wrong. Don’t let slow Rory get away with this Dave.

    From That Daily Coins article “TDC Note – While I truly appreciate Dave showing up to the party and voicing opposition to cryptocurrencies all of these issues have researched and reported on here for the past several months. We are still very grateful for another voice of dissent in the crypto space. If you read this one article it becomes clear we have addressed all the issues below, and a few others, beginning in 2013.”

    ####

  12. I love that little bar scene where the Bitcoin millionaire can’t afford to buy the ladies a drink. IMO that’s Bitcoin’s key weakness. You can get into Bitcoin, but the doors to get out are much much smaller. If someone yells fire..you’re stuck with Bitcoin which as of today is not something universally accepted as money.

  13. The “greater fool” theory has been elevated by now from “theory” status to FACT.

    No greater fool is he then the one who pays another for validation.

    A life lesson worth learning at as young an age as possible.

  14. Well, assuming a bitcoin market cap of 160 billion, this would translate into roughly 3800 metric tons of gold, roughly 1.5 years of mine supply. But these 160 b are trapped in the electronic system; once bitcoin gains are “realized” and pour back into metals (as gold starts to move up) there will be a lack of phyzz and gold (and silver) will themselves pull a BTC move, but most “hodlers” will not, cannot be future holders. So I will keep my fingers from BTC and just watch the current system unravel; BTC is just a harbinger of more crazy things yet to come. GLTA

  15. I love it when they say, “It’s not a bubble because the people I know don’t know about it!” As if the world revolves around their social network.

    Well, I didn’t know anyone who was buying into beanie babies in the 90s…but that was still a bubble anyway. Funny; us kids at the time collected many things, but usually for their own sake (like Pogz or cards) but buying something with no or little utility just to sell it later…it was always the adults who got involved in that stupidity. Now, I can’t imagine kids buying this crap either, because they already play enough video games that give you the chance to buy virtual tokens as a way to buy virtual goods! In fact, you can even sell those tokens in many cases for cash without needing Cryptos in the first place (and these games have a set limit of tokens, BTW).

    So maybe…just maybe, Satoshi was a child-gamer who came up with this idea, and his pop at the NSA thougt about it some more. Hey, tulips may also had been a child’s curiosity in the beginning too, you know. Why not?

  16. This Bitcoin bullshit IS BEYOND FUBAR…

    …and “FUBAR” was a World War Two acronym – in my American Father’s war! Meaning: Fucked Up Beyone All Recognition! LIKE THIS!:

    https://www.youtube.com/watch?v=NSRr7wUjLxw

    …so recognises and says, me your American-born commenter “JB”, son of an American combat veteran of WW II who KNEW what FUBAR means!

  17. I was shocked that with all this negativity about Bitcoin,
    Miles Franklin the company that sells gold and silver now
    accepts Bitcoin for sales transactions. Gold and silver for
    Bitcoin, imagine !

    1. Todd,

      No, it is not gold and silver for Bitcoin, it is Gold and silver for dollars, with Bitcoin as a method of payment [like a credit card or bank wire]

      1. David, With your comment you just legitimized Bitcoin.
        It is air with a subjective value only validated by those who
        want to jump on the greed band wagon. Miles Franklin has
        just joined the mass hysteria. When the value of Bitcoin starts
        to have really large intraday swings, come back and tell me it
        has the stability of a credit card or a bank wire.

  18. Crypto is literally the pie in the sky. The blockchain is being developed by the financial elite criminals to separate the sheep from their tangible wealth. As the current debt based fiat ponzi scheme is winding down it is important for them to have a replacement at the ready. They want a smooth(er) transition as opposed to a crash and panic reset. Behold the future, same as it ever was.

  19. You can’t buy anything with gold either. You can’t pay your taxes with gold. Both Bitcoin and Gold are envisioned as stores of value, as reserves. They’re not day-to-day currency.

    As I see it the only concrete difference between gold and bitcoin as asset classes is that gold can’t go all the way to zero, while Bitcoin certainly can and eventually will. But so what.

    1. Then you don’t understand gold as a form of money or as an asset. Bitcoin is a de facto fiat currency with several sources of counterparty risk. If you’re okay with counterparty, then lash in, mate. Gold has zero counterparty. Spend gold or silver? I’ve used and accepted gold and silver transactions. I’ve used gold to pay rent buy taking a coin to the local coin shop, selling it and delivering cash to the landlord. I know the owner of my building does not accept Bitcoin and I’ve heard some horror stories about people selling Bitcoins to get cash and experiencing delays receiving the electronic transfer. There’s so much more…

      1. It’s sort of true about the counter party risk. I think of a bitcoin (or whatevercoin) as a piece of equity. It’s vaguely like owning shares in the Fed. Yes, it will go to zero eventually for sure. But again, So what? As long as you understand things clearly it’s not a very strong argument against the asset class. I don’t own any crypto and own a decent amount of gold. The anti-crypto arugments just never seem to make very much sense to me. No, it’s not a gold equivalent. Yes, I understand that.

        If the cryptography behind the blockchain tech is broken and can be compromised then the entire economy and internet would be thrown into crisis. I guess in that circumstance you better have some hard assets like gold, because your bank accounts and brokerage accounts would be screwed. So singling out bitcoin for hypothetical hacking vulnerabilities doesn’t make much sense. Everything else would be vulnerable too.

        1. Everything IS vulnerable and HAS been hacked. The NSA is logging everything you do now. I can’t wait until
          the IRS comes down HARD on Bitcoin/Ethereum traders.

          1. Just ask the guy who operated the Dark Web Silk Road drug dealer website. He accepted Bitcoin. It’s all he took. He’s in jail now.

          2. Bitcoin is not inherently anonymous and was never supposed to be a way to dodge taxes. There are ways to shuffle things around and achieve some level of anonymity (same as with banking), but that was never the point. So I’m not sure what you’re getting at. By “hacked” I would mean that the cryptography or protocol are broken in such a way that transfers can be made from one wallet to another without authorization.

            The Silkroad guy got busted by old fashioned gumshoeing. It had nothing to do with hacking whatsoever. The FBI figured out who he was entirely from public activity on the internet, because he was very careless.

          3. Bitcoin and Special Drawing Rights (SDR), like a bad joke, have to be explained. Many “cryptologitsts” from the start gave up trying to explain Bitcoin and just sell it as virtual gold, which is de facto fake gold

  20. This “gold-backed cryptocurrency” meme is so dumb. To have a gold-backed cryptocurrency you need to have a corporate authority somewhere with a gold warehouse and a gold window. This entirely obviates the point of a decentralized blockchain. Once that corporation and warehouse exist, you might as well just use an old fashioned ledger that doesn’t require large amounts of electricity. Bitcoin has fairly high fees by design. Why have those fees on top of gold storage and audit fees? The entire point of the blockchain is that it’s entirely distributed and cannot be physically or legally attacked in a straightforward way.

    If you think a “backed” cryptocurrency makes sense you don’t even understand the basic idea.

    1. Not sure you need a corporation. You would certainly need a centralized organization to hold the gold and apportion the amount of electronic currency that can be issued against the metal. That would require frequent and strict independent audits of the metal and the electronic credit issued. I’m sure something could be worked out. HOWEVER, the idea itself is impractical because most people are not interested living their lives on the internet. A recent survey of Americans showed that nearly 70% prefer to shop in brick/mortar stores rather than online.

      By the way, are you saying that Bitcoin isn’t backed by anything? If so, it’s therefore definitionaly fiat. It still has not been proved that the algorithm and architecture of the Bitcoin system is impervious to hacking. I assume we’ll know in good time. We know for fact that the total amount of gold on earth is finite. Although maybe over the course of 10’s of millions of more years more can be created by nature.

      1. I think the potential of gold or silver-backed cryptos, coupled with block chain is disintermediation of the gangsters aka banks monopolizing the payments system. Peer to peer account credit and settlement should at the least provide an alternative, hopefully at a lower cost.

  21. I once walked into a fast-food chain and asked the cashier a hypothetical question: “Would you pay for my meal in exchange for this silver ounce in my pocket?” Her answered “Yes” and she never saw one before! She just thought it looked cool and instantly saw its value as being a collectible of some sort. So bobbybobbob, you’re really not trying that hard, buddy. If you can barter with someone with a can of beer, you can certainly spend your metal for everyday goods.

    That’s the thing about REAL money; it’s utility is inherent immediate to whomever views it. Gold and silver are used in jewelry for example; hard to overlook THAT value when you see it. So even if someone didn’t care for bullion as money per se…an inherent usefulness acts as a natural value-floatation device when times are good or bad.

    Can’t exactly say that about BETcoin…because that’s all it is; a bet that it’ll be able to trade for something more useful than absolutely nothing.

    But I digiress. bobbybobbob, you’re okay in my book; just a little confused about why Dave and others like myself decry the cryptos so much. We really don’t care about whether you or anyone else decides to get into it…but we have a big problem with false-marketing of any supposed “asset class”. For one, it’s not an asset and even if it was…misleading terms like “asset class” gives buyers a false impression that it’s somehow scarce. It’s not; anyone can create a digital ledger on their home computer.

    The list goes on..but suffice to say, human beings have always been tempted to justify gambling by calling it an “investment” or worse…fooling others into getting into it by calling it things it’s really not.

    1. Well said Darkwing. Whenever I give someone who’s never held real bullion in their a 1 oz gold coin or a roll of ASE’s to hold in their hand and tell them what it’s worth their face lights up and the go “wow.” It’s like they instantly recognize that it’s something of value and substance. How the heck to I hold Bitcon in my hand?

  22. “Fiat” means by legal decree, so no Bitcoin is not definitionally fiat. There is no decree and it is backed by the decentralized network on which it exists, which has great utility. As I said earlier, a Bitcoin is better thought of as an equity. As a holder of a Bitcoin you have a claim on the processing power of the network. One day the network will cease to function and your bitcoin will be worthless, but So what? That doesn’t mean it can’t be a big deal for a long time.

    In theory some sort of hack to the cryptography or the protocol might be engineered. But at this point that concern is roughly equivalent to the risk that all personal treasury holdings are defaulted on, or private gold possession is outlawed again and you get cuffed for blabbing that you own it. I mean, yeah, something not reasonably foreseeable can nuke any asset class.

  23. Everyone here misses the point.
    Gold and Silver are manipulated to stay just above the mining cost; therefore the gold and silver stocks will go nowhere as long as that is occurring.
    ( why can’t gold and silver stock promoters see that….hmm, who would buy their newsletters then? )
    I still hold my physical gold and silver but DUMPED my PM Stocks and bought cryptos instead. That was the best decision of my life.
    …OR…..I could have just kept complaining about how dumb cryptos were and kept loosing money on the PM Stocks…………
    ” Improvise, Adapt and overcome…….

  24. I think the optics and context around bitcoin are very telling.

    By optics, I mean calling it a “coin”, picturing as a gold coin, saying it’s “mined”, that it’s kept in “wallets”, why they’re even forked off a clone called Bitcoin gold. Why the constant portrayal and comparison to gold coins?

    The context and timing in which bitcoin was introduced is suspect as well. Is it just a coincidence the roll-out of cryptos occurred when metals were appreciating and threatening fiat. Could bitcoin be just another tool in suppressing (in this case diverting) interest from gold and silver.

    Plus the fact that the tech behind bitcoin meshes perfectly with central banks aims to go cashless is the major red flag. Many birds with one stone – release the blueprint for what you want to eventually see, have the R&D done for you for free, then capture and control the final product… plus divert attention from the real threat to your plans, and everyone on the inside in the know gets a big bonus by buying in early.

    I don’t buy for a second that cyptos are a threat to central banks.

  25. Plus, all the reasons concocted by NWO statists as to how we could never go back to a gold standard seem to be advantages when it comes to bitcoin.

    They said there wasn’t enough gold to replace fiat, yet the fixed number of bitcoins is huge plus? They said metals would be too anonymous, fostering a black market, tax evasion, and money laundering. But with bitcoin it’s ok. They said gold was to expensive to mine and refine, yet all the gigawatts of electricity to “mine” a bitcoin only adds to it’s scarcity?

  26. Maybe the capture and control end-scenario for bitcoin will look like this:

    A decree that a fork be adopted embeding an official govt electronic signature in each coin. And not a single bitcoin holder will complain, because now their holdings will become official legal tender. Trouble is, who exactly are the existing holders. Can’t hand over all global wealth to a bunch of speculators, so maybe they will be offered 10cents on the dollar. Or nothing at all. And even those who hold no bitcoin prior to conversion, will prefer the new official coin over the old Bitcoin, because the decree will say taxes can only be discharged by tender of new official coin.

    And in the end, what has been done, we’ve gone from Fiat to (bitcoin experiment) to bitFiat.

  27. I can’t believe you guys are still FUDing bitcoin. It has been around for 9 years. NINE YEARS! And after everything that’s happened it is still going strong. What has to happen for you to realize bitcoin is legit money?

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