If you have been following this series on bitcoin then you should have a pretty good handle on this cryptocurrency by now. Part one gives a brief history of bitcoin and talks about some of the risks. Part 2 talks about why bitcoin will never be a viable currency. It also covers the limitations it has functioning as a legitimate currency. Read part 1 here. Read part 2 here.
If you have invested in bitcoin and made money then you are fortunate. If you invested in bitcoin when it was at an all-time high then you learned a valuable lesson about investing in assets like this. The truth is you take an enormous risk every time you invest in an asset that is at an all-time high and it is smashing records at an incredible rate. Yet somehow new investors are always drawn to these types of investments. Many of these people are first time investors. Let’s review why the risk is high.
For our example we will look at gold. Gold’s all time high was hit in August of 2011. It was going for $1,917.90 an ounce. It pulled back that same day to $1880.00 an ounce. It’s all time high is officially 1889. 70. Later in that same year gold began to drop. Eventually it bottomed out in 2013 as we saw a drop by 28 percent. By 2014 gold hovered around $1140 to $1180 an ounce.
Many gold experts blamed the fall in price on bitcoin. At the time bitcoin was just starting to become popular. The story is that most people were pulling their money out of gold and buying bitcoin. This hype helped those that sold precious metals for a while. Then these gold merchants began to spread a false narrative of a Global Currency Reset. The more they attacked the dollar, the more sales they got. Now the hype was going to be that the dollar was going to crash any minute. This seemed easy to believe simply because the 2008 meltdown was still fresh on everyone’s mind. Many people were still hurting from those events, but the real truth about gold’s fall in value is much different.
The thing that drove up the price of gold was the fact that the world went through a financial global meltdown in 2008. This meltdown was produced in large part by government intervention into the housing market, and triple A rated mutual funds acquiring junk CDO’s that represented bad debt. Insecurity in the dollar caused the price of gold to skyrocket dramatically creating a gold bubble. As the dollar recovered the price of gold came back down. By 2014 gold was below the $1200.00 mark. It turns out that 2014 was the best year the dollar had since 2005!
https://www.marketwatch.com/story/dollar-index-on-track-for-best-year-since-2005-2014-12-31
Here we are at the beginning of 2018 and gold is just now at the $1,305.60 as of this writing. If you purchased gold close to its high in 2011, you watched your investment dwindle in value. If you spent over $1,800.00 for an ounce of gold, and many people did, you now had two choices to consider. First you can get out and take a loss, or you can ride it out until the price of gold goes back up.
Even if gold recovers in 2018 and passes it’s all time high your investment was still tied up for over 6 years making you no money at all. Breaking even actually means you lost value when you factor in the rate of inflation. During this time you could have profited from mutual funds or other investments. This is the danger of investing in assets that have gone through historic and drastic price increases.
Bitcoin start out in 2017 trading between $930.00 and $978.00. Throughout the course of the year it rose to almost 20,000.00. Just a few days later it dropped by 30% percent. That drop alone took billions of dollars away from the total cryptocurrency market capitalization. It was a big market correction. It was responsible for sending bitcoin’s price falling below $11,000.00. Over the next few days, the price of bitcoin would rally, climbing back beyond $16,000 and higher on other cryptocurrency exchanges worldwide. However, bitcoin’s value has begun falling as it fell to the mid-$13k’s area after opening the day above $15,000 on December 28 2017.
This is extremely volatile, and it represents the classic bubble scenario that many first time investors don’t understand. It you purchased bitcoin close to its all time high then you’re stuck holding on to your investment until it recovers, or you can sell it and take a loss.
When will bitcoin recover? Nobody knows for sure, but typically with these things, you will hear a lot of hype and blame from those responsible for selling bitcoin, and from those holding bitcoin. They may blame other cryptocurrencies, and there might be some truth to that. They may make claims that the dollar crash is emanate. They may even spread some of the same global currency reset nonsense that was used to hype precious metals and foreign currencies from third world nations!
https://www.globalcurrencyresetfacts.com/
The truth is bitcoin is a bad currency. The currency gets its value from demand. So if demand is high the price is high. If demand drops, the price comes down. Standard currencies like the U.S. dollar has contraction measures in place in case demand drops. This makes these types of currency much more stable. Cryptocurrencies have no contraction measures. When demand drops investors suffer. Demand is also created through the use of taxation. It has been historically proven that when governments tax their people, and then requires them to pay that debt in the government’s currency, it creates demand. Because of the volatility of bitcoin it is not a stable store of value. This is the most basic function of a currency. This was covered in greater detail in part 2 of this series.
Not only is bitcoin an unstable currency, it is also a very unstable investment. It seems that there have been times in the past when the servers were down for days because they could not handle the volume of traffic. This means that if the investment begins to fall rapidly, it will be hard to get out creating an even bigger loss. See the link below
https://finance.yahoo.com/news/heres-big-bitcoin-problem-just-discovered-211912644.html
GBL is a Chinese bitcoin trading platform. Many subscribers were unable to log in creating a loss of up to $5 million worth of bitcoin. The server suddenly shut down on October 26, 2013. In September of 2017 China has banned cryptocurrency exchanges. This also caused bitcoin to drop temporarily. The People’s Bank of China ruled that these unregulated sales violated Chinese law and must stop immediately.
http://www.businessinsider.com/china-ban-bitcoin-exchanges-2017-9
Tether is an online company which backs bitcoin cryptocurrency with fiat currency. They were hacked on November 21, 2017. The hacker took $30,950,010 in USTD from their primary wallet.
In February 2014, cryptocurrencies made national headlines because the world’s largest bitcoin exchange was declaring bankruptcy. The company called Mt. Gox stated that it had lost nearly $473 million of their customer’s bitcoins likely due to theft. This amount was approximately 750,000 bitcoins which equals about 7% of all the bitcoins in existence. Because of this crisis the price of a bitcoin fell from a high of about $1,160 in December to under $400 in February.
As of September 2017, there were over 1100 digital currencies in existence. As more of these currencies become popular it will likely pull revenue from those who invest in bitcoin. This action will decrease demand for bitcoin thus driving down prices.
Bitcoin could also recover sooner than expected. Who knows for sure? The main point in all of this is the fact that bitcoin was never a sure thing, and the investment is much more volatile than it seems! This investment is always presented by investors and cryptocurrency markets with great bias.
In part 1 of “The Bitcoin Phenomenon” we covered all the background about this currency. We covered a brief history of cryptocurrencies, and we covered some problems associated with them. We also covered some of the risks. If you have not read part 1 then 
However, I do see something that disturbs me. There seems to be a lot of hype based on fiction with bitcoin as well. Because of the potential to make money, common sense has left many investors. Reasoning and understanding is left in the dust as people rush out to buy it. Some of the same patterns we have seen in the dinar world are starting to emerge with bitcoin. This cryptocurrency has acquired its very own set of gurus, and information is made up. Nothing is vetted or verified, and total fictional fabrications are made up to make the investment more attractive. This causes many people to over-leverage, and they are not aware of the risks.
Let me explain a few things and give my analysis. First, “fiat” does not mean “no intrinsic value”. Fiat currency is currency that is used by a government because of decree or law. Outside of that decree or law it has no intrinsic value. When gold was used for money it had value outside of any law or decree, whereas our paper currency does not have value. The law that gives the U.S. dollar value is the Federal Reserve Act, and a series of laws were passed during the early 1930’s which modified the act, making it even stronger. These laws serve to protect the dollar against counterfeiting and declare that it is the official currency of the United States. When you pay your taxes it must be in dollars!
Dinar gurus constantly made the claim that the definition of “fiat” is ‘no intrinsic value”, as if to imply that the dollar really has no value and it was all based on faith, even in regard to the law of the land. This is where some of the GCR propaganda comes into play. I now see bitcoin gurus making the same arguments that we debunked when the dinar was popular! The reason for this is to hype bitcoin so investors can make more money.
While bitcoin expands due to mining, there is no built-in contraction mechanism should demand drop. This is probably the main reason bitcoin has been so volatile in the past. This is why all cryptocurrencies are subject to pump and dump schemes. Cryptocurrencies will almost always have massive imbalances in supply and demand, because there is effectively an unlimited supply of them but a clear demand ceiling. The fatal issue for cryptocurrencies is that the supply can only go up! There is unlimited upside to the supply of all cryptocurrencies.
Another key feature of a currency is that it acts as a store of value. This means you can put your money into it and be reasonably sure that in normal circumstances its value will not fluctuate on a massive scale. Cryptocurrencies cannot do that. Bitcoin has had many hyperinflation episodes. In a few cases it has dropped as much as 80 percent in value. In some cases its ability to purchase goods has dropped more than 25% in the course of just one week. That is not a stable store of value.
In the early days, Nakamoto is estimated to have mined approximately 1 million bitcoins. In 2010, Nakamoto handed the network alert key and the control of the Bitcoin Core code repository over to Gavin Andresen. This man became the lead developer at the Bitcoin Foundation. Nakamoto removed himself from any involvement with bitcoin. Gavin Andresen stated that he wanted to decentralize control, saying: “As soon as Satoshi stepped back and threw the project onto my shoulders, one of the first things I did was trying to decentralize that. So, if I get hit by a bus, it would be clear that the project would go on.” This statement allowed speculation and controversy over the future development of bitcoin.
Jordan Kelley is the founder of Robocoin. On February 20th, 2014 Kelly launched the first bitcoin ATM in the United States. The kiosk was installed in Austin, Texas. It is similar to a bank ATM, but it also has scanners installed in order to read government-issued identification. This kiosk will scan a driver’s license or a passport. This is done in order to confirm a users’ identity. By September 2017 1,574 bitcoin ATMs have been installed around the world with an average fee of 9.05% per transaction.
In 2015, the number of merchants accepting bitcoin exceeded 100,000. Instead of 2–3% typically imposed by credit card processors, merchants accepting bitcoins often pay fees between 0% to 2%. Firms that accepted payments in bitcoin as of December 2014 included Dell, Newegg, PayPal, and Microsoft. More local businesses also started excepting bitcoin.
Merchants accepting bitcoin ordinarily use the services of bitcoin payment service providers such as BitPay or Coinbase. When a customer pays in bitcoin, the payment service provider accepts the bitcoin on behalf of the merchant and then converts it to the local currency! These bitcoin services will send the obtained amount to the merchant’s bank account. They charge a fee in return for the service. We are led to believe that merchants accept bitcoin and then later on use it in other transactions, but this is not the case! Merchants around the world who accept bitcoin will get a government currency immediately deposited in their account during the course of the transaction.
The big question then is this. Has bitcoin ever been involved with pump and dump schemes? There are wild price swings in bitcoin’s history. The price of bitcoin has gone through many cycles of appreciation and depreciation. Many people refer to this as bubbles and busts. Here are a few notable examples. In 2011, the value of one bitcoin rapidly rose from $0.30 USD to $32.00 USD and then it fell to $2.00 USD. In the second half of 2012 , the bitcoin price began to soar once again on April 10th, 2013 it reached a high of $266.00 USD. Then it came crashing down to around $50.00 USD. This event is known as the 2012–13 Cypriot Financial Crisis. On November 29th, 2013, the cost of one bitcoin rose to a peak of $1,242.00 USD. Then in 2014, the price sharply fell creating heavy loses with investors. As of April of that same year the price of bitcoin remained depressed. It was little more than half of 2013 prices. As of August 2014 it was under $600.00 USD
As of 2014, bitcoin has volatility seven times greater than gold, eight times greater than the S&P 500, and 18 times greater than the US dollar. This is the analysis of Mark T. Williams. However, Forbes claims that there are some uses where volatility does not matter, such as online gambling, tipping, and international remittances.
Recently I sat down with Sam I am and we started to discuss the global currency reset. One hour and twenty minutes later we finished our conversation. We went into many aspects of this belief system. We covered a lot of the same information that is in the book and we talk about other areas of our websites where you can go and find much of the same information that is in the book. I put together a new website that promotes the book and it has links to the articles on ICW that contains much of this information. The link to the new site will be posted below the podcasts.
We recorded this conversation because we wanted to bring out areas of this belief system that are seldom talked about. I wanted to bring you the conversation in its entirety without chopping it up into weekly segments. Therefore I made two parts. If you are short on time then this should allow you to take a break. You can listen to the second half at a later time.
Iraq Currency Watch 