Bitcoin Price Rebound and Risk

Mark Cuban thinks Bitcoin could become a thing. As does Facebook (NASDAQ:FB) CEO Mark Zuckerberg. In fact, almost everyone below 40 thinks it is well on its way to displacing traditional government currencies.

With small problem: it won’t.

Bitcoin has, despite representations to the contrary, proven itself to be easily hacked, stolen and debased as well as tracked. All of these features were promoted to be built-in bullet-proof.

What programmers and advocates fail to comprehend is that Bitcoin will never replace the national money supply in any nation, because as they saying goes, control the money and you control the government.

Also quite visibly wrong is this idea that “Bitcoin is controlled by no one.” Oh really? What about the legion of programmers and sysadmins upon every cryptocurrency is ultimately dependent? What about the government agencies who are insisting access to all cryptocurrency movements worldwide? Bitcoin and related cryptos are arguable already under the control and scrutiny of governments globally.

Bitcoin’s multiple Forkings has resulted in an exponential explosion in the sheer number of potential bitcoins and associated derivatives. Now individuals involved have awarded themselves and early adopters twice the number of coins, representing one new one for each old one held. How is this supposed to prevent dilution and debasement?

And here’s the reality Bitcoiners: Governments and banks are already moving the vast bulk of the world’s monetary instruments via electronic means. And the systems and servers upon which this trade is conducted is very broadly distributed, rendering the argument for Bitcoin’s distributed ledger arguably moot.

Let’s try a thought experiment: Take the word “dollar” and replace it with “bitcoin”. What just happened there?

If a single monetary unit is called a Bitcoin or a dollar, who cares? In fact, we can safely conclude that a single bitcoin with a value of $7,000 renders it rather unsuitable for daily use. The limited number of coins is thus a hindrance.

And as Mark Zuckerberg is finding out, nobody is comfortable with a monetary instrument that is controlled by a single individual. His corporate partnerships evaporated as industry titans declined to expose their businesses to the enhanced regulatory scrutiny that trading in Facebook’s Libra Coin would entail.

There are 1,517 different cryptocurrencies quoted at That is up from a few hundred just last year. All of these cryptocurrencies are quoted at CoinCap in USD. And do you know why?

Because Bitcoin and all cryptocurrencies are now, and can only ever be, proxies for the currencies from which they originated, and into which they must all ultimately be converted back into, in order to act like money.

With that simple reality, the entire argument for Bitcoin collapses. The problem is that there are a large number of believers in the cult of coin who prefer not to encumber the thought process in cryptocurrencies to be encumbered by something so trivial and inconvenient as truth and reality.

Not the conduct of our existing monetary supply managers can be classified as exemplary. In fact, with the monthly fantasy €20 billion being conjured into existence by Christine Lagarde and her co-conspirators at the European Central Bank, the existing monetary system provides more than just a modest amount of inspiration for would-be money programmers to continue trying to foist their imaginary money on an unsuspecting and gullible world.

There is a point on the timeline in the future where the only real monetary standard in existence is recognized for what it is: gold is now, and always has been, the standard by which all currencies are measured. That, in a rational world, would suffice.

James West

Editor and Publisher

James West founded Midas Letter in 2008 and has since been covering the best of Canadian and US small cap companies. He covers global economics, monetary policy, geopolitical evolution, political corruption, commodities, cannabis and cryptocurrencies. As an active market participant, James is not a journalist and is invariably discussing markets...
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