Doug Casey on What Will Trigger Bitcoin’s Collapse

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by Doug Casey, Casey Research:

Justin’s note: Central bankers are losing sleep over bitcoin.

And they should be. It’s a direct threat to their monopoly on money.

Because of this, they’re trying everything they can to crush bitcoin.

They’re urging people not to buy it. They’re calling it a bubble. They’re even talking about launching their own rival digital currencies.

Regular readers know that I think these efforts will fail. But I couldn’t help but wonder what Doug Casey thinks of this. So, I called him up a few days ago to get his take…

Justin: Doug, governments around the world seem to be waging a war on bitcoin.

Do you see expect to see more of this in the years ahead?

Doug: Absolutely. You can plan your life around governments doing everything they can to discourage not only bitcoin, but all the other private cryptocurrencies as well.

It will be for pretty much the same reasons they hate gold, and other hard moneys. The State believes the issuance of currency is one of its major prerogatives, like making war and levying taxes. It’s critical to them not to have alternatives, competition, when it comes to money.

For one thing, almost every government in the world is running deficits—gigantic deficits in many cases. They’re financing those deficits by printing money. It’s national policy everywhere because they believe deficits “stimulate” the economy as a bonus.

Most of that newly created money is flowing into the stock, bond markets, and real estate markets. It’s making everybody feel much wealthier. Except for the bottom 50%—they’re getting poorer.

Government and central banks don’t want to give up that monopoly on money. Least of all the US, since our major export isn’t wheat or airplanes—it’s dollars. So, they’re going to do what they can to quash bitcoin and the others. For a myriad of reasons.

Justin: But will they succeed?

Doug: Well, they could certainly illegalize it. But would that eliminate it? About as well as their laws eliminated drugs or prostitution today. Or alcohol during the ‘20s. Fat chance. Although illegalization would certainly make cryptos inconvenient and risky.

But could they destroy cryptos? Who knows what kind of computing power the National Security Agency (NSA) has. They might be able to destroy any computer network or digital product at this point.

This is a huge argument against any kind of purely electronic currency—anything can happen in the ether.

Bitcoin is evidence of a worldwide distrust in government fiat currencies, though. And they’re right to be distrustful; I don’t doubt that we’ll experience monetary chaos in the future.

At some point, they’ll try to ban bitcoin, though. They’ll tell people it’s the law that they have to use the national e-currency. Plus they’ll use moral suasion and propaganda. You know the drill. They’ll say if you use bitcoin you’re a money launderer, a drug dealer, a terrorist, a tax evader, and/or a child pornographer. Actually, the morality involved in all those activities is worth a separate discussion… it’s perverse they’re always classed together.

But this is what we can look forward to.

Now, that doesn’t mean that bitcoin won’t still be valuable. That’s because, as I’ve said before, three-quarters of the people on earth live in the Third World. These people use currencies that are worth little within their own countries. Outside of their country, they’re worth nothing. They’re “blocked” currencies. So, these people will continue to use bitcoin, or other cryptos, to a growing degree. There’s trouble brewing.

And let me add something else. I’ve said for some time that bitcoin is a wonderful thing. But what happens when somebody develops bitcoin 2.0? I’m talking about a digital currency that uses a considerably better or different technology. What happens then to the value of bitcoin? It will likely collapse.

But these aren’t even the main reasons to be concerned about bitcoin.

Justin: So, what would be?

Doug: The development of quantum computing power poses a huge threat to bitcoin.

The little computers that are making bitcoin today will be obviated.

Now, I don’t know when quantum computing will be become commercial or practical—although it seems quite soon. But when it does, no code will be uncrackable. So any alteration of blockchain may be possible. Who knows? It’s been said that any sufficiently advanced technology is indistinguishable from magic.

But, entirely apart from that, the owners of quantum devices will be able to create bitcoin or its look-alikes in gigantic quantities almost instantly. Of course, at that point we’re living in the world of the Singularity—and the price of bitcoin will be the least of our worries. Or opportunities.

There are all kinds of X-factors that most people haven’t considered.

But there’s the biggest one. Cryptos have gone hyperbolic. At $18,000 a Bitcoin, I no longer have the nerve to play the game. After all, it’s gone up about 18,000% this year. I’m happy to leave something on the table for the next guy.

Justin: What about governments that are trying to launch their own digital currencies?

Doug: A certainty. And it’s happening as we speak. We’re living in the digital age. Everybody has a smartphone today. And governments are developing their own digital currencies to take advantage of that fact…

In the U.S., they’ll call it FedCoin. In Japan, it will be called JCoin or something. The Russians will come up with their own digital currency too.

Even the Venezuelans are trying to go digital with Petrocoin. Of course, they’ll fail miserably. That’s because digital currencies only work if there’s an element of trust. And there’s zero trust with them. But there should be zero trust with any government.

Still, governments around the world will try this because they want to eliminate paper currency completely.

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