- the source for market opinions


June 24, 2018 | The Classic

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Hundreds of millions? Nobody knows. Maybe it was a billion or two. Whatever, the amount of money put on credit cards (mostly by moisters) to buy cryptos a few months ago was unprecedented. Just like the losses. A Bitcoin today’s worth 70% less than last Christmas. This has been a lesson in bubbles. A classic. For the history books.

Fortunately those who read this pathetic blog got the advice early – as BTC was rocketing from $10,000 to almost double that. Get out, we said. Run. This thing will eat you. And here we are, with Bitcoin lurching its way back, eventually, to zero. The only people who have scored were those who invented a crypto then cashed out (like the fool who bought a $28 million condo last week in Toronto), day traders who knew enough to harness high-vol, plus the marketers, scam artists, charlatans and thieves who so densely populate the world of digital currencies.

Bubble behaviour doesn’t change much, even when people tell you ‘it’s different this time.’ But it never is. And never will be, until human nature alters.

The froth starts when prices jump, catching people’s attention. Smelling profits, others pile in, pushing prices rapidly skyward. The greatest buying binge almost always happens at the top – peak price and peak demand. The smart money exits as the dumbass money flows in. Values may fall sharply, at which point promoters scream ‘buying opportunity’ as they did on this blog last winter. But it’s a trap. Then it all disintegrates. People who bought high are terrified to sell on the way down, unable to admit or accept losses. So they’re crushed.

Bitcoin is done. Kaput. So is Ethereum, Tether, Ripple and all the other kiddie cryptos which people have been mining in their bedrooms and selling on unregulated, undisciplined, unsecure, immature and unstable exchanges. The entire notion of digital currency is being refuted and proven impractical. There can be no currencies without a regulator to ensure the medium of exchange is reliable, non-volatile and backed with something that actually exists – like a central bank and governments possessing the power to tax. Those who thought BTC was cool because it was cowboy, alt and stuck a finger in the eye of The Man just learned something fundamental. The system works. It protects you. Stray outside the wire and risk having your legs blown off.

Still doubt it? Don’t.

Cryptos will never be money, says the BIS (Bank of International Settlements) in a new report. They are inherently unstable, suck off enough electricity to be an environmental disaster and are subject to massive fraud and manipulation. The decentralized nature of the blockchain technology behind cryptos is not a strength, but a fundamental weakness. Plus, it’s all so unwieldy that if BTC ever replaced the existing payments system, the entire Internet would grind to a halt.

There’s more. The regulators – as forecast here last year – are up BTC’s butt and never coming out. Last year’s bubble behaviour was caused not only by investor panic, greed and FOMO, but also systemic fraud and criminal trading activity. The US Securities and Exchange Commission is now squishing new coin offerings and investigating the players who pushed Bitcoin from a few bucks to $20,000, sucking in those Mills who used credit card bills to get in. (The credit card companies have all now banned digital coin purchases.)

A study by US academics found a concentrated campaign of price manipulation accounted for at least half of the spectacular Bitcoin advance last year – when advocates on this blog said the crypto would hit $100,000 or beyond. At the heart of that scam was an exchange called Bitfinex, operating out of the Caribbean and Asia. Meanwhile another crypto exchange – Coinrail in South Korea, lost about $40 million in digital currency the other day when hackers walked off with it. This follows on the stellar example of Mt Gox, an exchange which was raided for $480 million in 2014, and Coincheck, which had $400 million stolen a few months ago.

Are you getting the point? Crypto currencies are not a step forward. They’re a giant leap backwards – at least so long as they’re unregulated monetary outliers backed by duct tape and faerie poop. If you still own some, bail.

Digital money will come. As I wrote here a few weeks ago, the revolution is almost complete now. The folding stuff is rare. Banks deal in credit, not cash. Soon everyone will buy everything with their phone. But it will be central banks backing cyptocurrencies, which will be regulated, controlled, supported by economies and stabilized through interest rates and careful money supply. Yup, just like now.

So suck it up, kids. We got this one.

STAY INFORMED! Receive our Weekly Recap of thought provoking articles, podcasts, and radio delivered to your inbox for FREE! Sign up here for the Weekly Recap.

June 24th, 2018

Posted In: The Greater Fool

Post a Comment:

Your email address will not be published.

All Comments are moderated before appearing on the site


This site uses Akismet to reduce spam. Learn how your comment data is processed.