Bitcoin’s Inconvenient Truths: The Silence Is Deafening

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by Dave Kranzler, Investment Research Dynamics:

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.

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