Von Mises described a revolution where new technologies are brought to us by markets – not by governments. Jeff Tucker’s article about Bitcoin references this, but omits the important foundation for von Mises’s thinking: that sound money by definition is of enduring value, and that maintenance of value must be the basis for such markets.
Tucker and all other Bitcoin disciples claim that the transactional capability of blockchain – which is undeniable – can be attributed a discrete market value based on that which is decreed by governments to have value. So a computational solution to a mathematical problem, encrypted with its public key entered into a ledger, can be attributed a dollar value set by the market for that ledger entry due to its uniqueness, and the transparency of such infallible ledger.
As such, we layer one limited virtual construct, BTC, on top of an unlimited virtual construct, Central bank and governmental fiat currency. A limited number of computational solutions to mathematical problems (blockchain) are layered over the by-decree virtual monetary system which is unlimited. Thus a limited number of mathematical solutions (blockchain, encrypted) are layered over fiat currency, which diminishes in value over time.
In other words, ongoing governmental currency creation over time causes fiat to lose its value, and the limited amount of non-governmental “crytpo” represented by the blockchain reflects that diminishing value by (theoretically) increasing in value over time. (As simply as possible, the decrease in fiat value is proportional to an increase in BTC value.) That defines Bitcoin. But there is one problem, a fatal one. The fiat “by decree” governmental and Central Banking monetary system is the corrupt foundation for this entire structure. More on that later.
Larry Fink must consider these competing models: unlimited fiat currency losing value, vs limited crypto-currency gaining — and require BlackRock to adapt to crypto-currency or die (rhetorically speaking). But Mr Fink is not stupid. He knows that there is only one true store of lasting value. Physical Gold. But what Max Keiser, the Winkelvoss twins, Raoul Pal and all evangelical Bitcoin Disciples preach is that bitcoin is the new gold. However bitcoin-as-gold is a flat-out, bald-faced, abject lie.
Raoul Pal takes the above argument one step further and states: “After all, (Bitcoin) isn’t just a currency or even a store of value. It is an entire trusted, verified, secure financial and accounting system of digital value that can never be created outside of the cryptographic algorithm..” Of course Mr Pal shoots down his own argument by attributing ‘value’ to that which, by his own admission, is not a store of value.
By design, Bitcoin will only exist until 2140 assuming the protocol remains unchanged. Under what circumstance might that protocol change? Perhaps Satoshi Nakamoto will wondrously re-appear like the true Messiah in 2140 and save the world’s Bitcoin. According to the Disciples of BTC, that’s one possibility.
On the other hand, physical gold holdings have endured as a medium of exchange and lasting value for thousands of years. Physical gold holdings are not subject to crypto exchange failures. Physical gold is not subject to electrical or internet outages. Bitcoin and electronic gold are. Electronic (COMEX) gold is controlled by the financial Evil Empire that bitcoin was intended to defy, but does not, and from whence the twisted mantra comes that bitcoin has replaced gold. In the crypto currency case, it’s an admission by defeated people that they are held hostage to the very corrupt system that they are powerless to influence or change. And any such power they believe they have — for example with bitcoin — is either illusory or will eventually be usurped. And while physical gold has been stable in its purchasing power for millennia, bitcoin has not come close in its decade or so of existence.
That one form of virtual currency (crypto) should have its valuation set by another (fiat) presents an issue. The virtual crypto currency system is then dependent for valuation on the system controlled by central banks. That’s just a fact of valuation, and limits the ability to manipulate bitcoin in price and volume. Here’s the rub. The very manipulation Bitcoiner’s decry, regarding central bank control of paper precious metals, M2 etc, must be employed and is employed by crypto currency market makers.
How? USDT Tether. Paxos. Dai Digix… among others. Being the questionable and artificial ‘stable coin’ derivatives that drive crypto value as it relates to fiat currency. Stable coins are not part of the blockchain, they simply drive crypto markets in a direct analogy to the way highly criminalized bullion banks are well known to game the gold and silver markets.
It’s amusing indeed that Tether, Paxos, Dai Digix etc derivatives claim to be backed by gold. In the Wild West of crypto such claims can neither be proven or disproven. But it’s like saying that fiat currency is backed by paper gold, where the truth is that COMEX digitized gold is used to suppress gold and prevent the increasingly worthless fiat dollar (that Bitcoiners ironically deride) from failing. Despite claims by stable coin proponents, stable coins may be created out of thin air to game crypto markets, just as fiat dollars are created to game US and global financial markets. The irony is more than rich.
Next there are primarily two ways to trade BTC, disregarding ‘stable coin’ tokens and Globex-traded European futures. In a rather twisted version of the ‘free market’ only crypto exchanges and derivatives called CFD’s provide the main entry unless you are a so-called miner (it’s not really mining) resolving blockchain equations required to acquire crypto. Now at least 15% of all crypto exchanges have failed as we examined in Why Bitcoin? Why Now? And the majority of crypto exchanges engage in a criminal practice called wash trading to some extent. See: https://www.bti.live/news/bti-verified/
CFD’s provide a highly speculative and risk-on method for shorting bitcoin where the main exchange for doing so rather suspiciously warns that 90% all BTC CFD derivative contracts are call options, or long, meaning the price is projected to rise. Recall again that CFD’s are products of the FINTECH Wild West, the highly suspect folks that bring us other highly suspect derivatives invented by Wall Street and their cohorts. Bitcoin Messiah’s say that the long standing on BTC futures is proof that BTC is set to skyrocket.
But if it looks like a duck, walks like a duck, and relies on stable coin and wash trading to set the price, then it’s a fraud of Biblical proportion that is driving BTC and related crypto derivatives for now. It’s a fraud which will be exposed just like the criminality of the Federal Reserve’s primary dealer banks has been exposed because FINTECH is playing the same game that fiat bankers play, but on wild west steroids.
That’s not to say that blockchain as a fiat medium and method of financial exchange is a fraud. It is not. The financial future belongs to blockchain as it will be implemented by states. Ecuador, China, Senegal, Singapore, Tunisia, and Venezuela already have their own crypto standards. Estonia, Japan, Palestine, Russia and Sweden will follow. But they will intersect in a regulated environment to enforce a cashless society — or adjunct to it — as digitized transactions marginalize cash.
State exchanges will be guaranteed, backed by the state, and currency exchanges will operate virtually and digitally much as they already do, via central bank control. Regardless of what Max Keiser may say, Bitcoin will not alter the inevitability of state-run blockchain. But how state crypto exchanges will intersect with reputable independent exchanges like, for example, Gemini is unknown, and it’s likely that some independent crypto exchanges inclusive of BTC will remain speculative plays. Until time runs out in 2140, barring an appearance by the ghost of Mr Nakamoto to change the protocol, of course… agreed, not in our lifetime!
Like all good cons, including the monetary scam behind the $ US, “It’s complicated”. But time will run out for bitcoin one day… while physical gold holdings will remain.
Steve is an antiwar activist, a published scholar on the US monetary system, and has appeared as contributor to The Duran, Fort Russ News, Herland Report, Lew Rockwell Report, The Ron Paul Institute, and Strategika51.