Until the end of January, the virtual currency Bitcoin was up around 5000% in the past year. That means if you had invested $10,000 a year ago in bitcoin, you’d be up almost half a million dollars.
So it’s no wonder so many people are talking about bitcoin these days.
I also understand the reasons why some people like bitcoin. For some businesses it saves them money to accept bitcoins as they pay no exchange fees when transferring money. Some people see it as an alternative to the US Dollar and other “government currencies”.
But as far as a currency or an investment goes, sorry but bitcoin does not cut it for me. Here’s why:
When I choose to put my money into a currency, my top 3 concerns would be acceptability, safety and stability.
Does bitcoin meet any of those 3 concerns? Let’s see:
Very few businesses are accepting bitcoin as a currency or medium of exchange. It is very difficult to carry out a transaction with bitcoins. But that problem (even if it gets resolved) is just the tip of the iceberg…
Bitcoin is extremely volatile in its price movements. The crypto-currency has gone up and down by approximately 5% or more 116 times in the past year. The U.S. dollar has not done that even once.
This instability means I wouldn’t know how much my money would be worth tomorrow, let alone a month from now.
And what about safety?
Recently one of the larger bitcoin exchanges, Mt. Gox, stopped all customer withdrawals.
Now, this problem may be temporary, it may not be. But so what? Why would you want to take such huge risks with your hard-earned cash by putting it into an account where you may never see your money again?
It seems pretty clear to me that bitcoin fails on that basis too.
As an investment, I always choose markets which are ignored and hated by the crowd. As Warren Buffett once said, buy when others are fearful and sell when others are greedy. On this basis, bitcoin fails this test as well.
There are better things out there to have one’s money in. Something with actual intrinsic value: like gold, silver, platinum – and let’s not forget stocks in top quality businesses.
In the last few days Bitcoin broke its December support at its $450 lows. This is very bad as it has triggered more selling pressure, and probably more to come.
Back in May of 2013, in an interview with Max Keiser and Brian Rose of London Real, I made it clear why I did not trust bitcoin and why I considered bitcoin to be risky.
Like all bubbles in history, this will be no different. It will end ugly…
Lets take a long hard look at our current monetary system. Central banks increasing the money supply robs people of their hard earned wealth and gives it to directly to governments and central banks who get the immediate rewards of spending this ‘newly’ printed currency, which required no effort or work on their part. QE is done without your consent or and in most cases without your knowledge. The reason that this is even possible is because the money supply is controlled by corrupt government and central banks.
We are about to see ‘bail-ins’ in many countries around the world in the very near future where people will have money taken directly from their bank accounts to ‘contribute’ to towards paying for the debt crisis. People’s pension funds are likely to come under attack as well. This is criminal and should never be allowed to happen.
So what can people do? We can start by remembering what money is supposed to be, a store of value over time. Let us now take a quick look at BITCOIN.
Here are a few facts:
1. The money supply is finite and cannot be increased or decreased. This way your purchasing power is preserved. The more markets adopt Bitcoin the less volatility we will see.
2. Transactions can take place peer-to-peer, from one mobile to another or via a laptop without the use of any banking institution. No banks are required to send money, even internationally.
3. The cost of sending money overseas is so small one could almost say it is free.
4. The encryption levels used by the network make your money a lot more secure than any security currently used by the banks.
5. The network is decentralized which means it is spread over thousands of computers all over the globe and is therefore outside of the control of any one government. The network can therefore NOT be seized or taken over or shut down.
6. The network code is open source, this means it is open for everyone to look through to satisfy themselves that there are no hidden ‘back doors’ or anything malicious. It operates on a glass house policy. (Compare this with banking today).
7. The ‘blockchain’ records every transaction so the flow of funds is available for everyone to see which should actually help law enforcement as no court orders are required to obtain financial records. It should also discourage criminal activity as the records of every transaction will always be able to be revisited at a later date.
8. No personal details are required to carry out a transaction. All that is needed is the account address and your authorization key to make a transaction. Compare this to credit cards that require your name, address and so on.
9. Your funds and account cannot be frozen or seized by any government. Lets see what people think of Bitcoin when the bail-ins start taking place.
10. Transactions are completed in 10 minutes, that means the person you are paying has their money in 10 minutes or less irrespective of where they are on the globe. This is a secure, global currency designed for the internet.
The most important point is this, almost everything that is wrong with the world today can be linked to governments, central banks, and corporations ignoring the voice of the voting public at the expense of people and the environment. These abuses are directly linked to their ability to control the money supply. Bitcoin makes all banks redundant and puts the power of money back in the hands of the people. When governments are forced to come to the public to ask for money we will again see a government that fears the people, and for the first time in a long while we will see a true democracy. You cannot have democracy without democratic money.
The US dollar has lost 98% of it’s purchasing power since it was created. Every fiat currency (paper money backed by nothing) that has ever existed has gone to zero. All of the global currencies today are on the same path and this economic crisis is accelerating that trend.
Based upon the number of bitcoins available by 2020, if Bitcoin were to make up only one thousandth (1/1000) of the global currency market then a single Bitcoin should be worth around $28,000. When one considers it’s current value of around $600 it is easy to see the enormous up side potential.
Many people prefer gold as a store of value, and I have to say I agree that gold is a good investment. Some people even say they want to see a return to a gold standard, however the one problem I see with gold is that it leaves those people with the most gold in positions of power, and they are generally the same people that got us into the financial mess we currently find ourselves in. Gold is also a physical commodity and can be confiscated, desperate governments do desperate things in desperate times.
The banking community now realises what Bitcoin means for them and they are doing everything in their power to make people afraid of it, create volatility and so forth. I think what we are going to see is that Bitcoin, despite coming under this unprecedented attack, will prove to be resiliant. Bitcoin has a future, but history tells us that fiat currency does not. I think a world with both gold and bitcoin co-exist are probably where we are headed.
Where is Max Keiser and why isn’t he saying anything? Good article by the way.
I think it’s a conspiracy to make bitcoin fail so that world governments win. That’s how I see it Alessio.
All good points Alessio, and you’re right there is no value to back bitcoin up. Having said that I bought at 260 target 800 ish — stupid but I couldn’t resist.
Bitcoin, like the fiat $, £, Euro, Yen, etc. has no intrinsic value, however, reputedly, it does have fixed supply, unlike its fiat currency competitors.
Alessio also said back in May on the very same London Real podcast that the bubble had already burst, that bitcoin was dead and that we had heard the last of it (judging by the chart). Something along the lines “a year from now nobody will be talking about bitcoin”. Bitcoin then went on to make new highs 5 times higher than the old… http://youtu.be/_onv9-fHoEc?t=1h5m4s
To see the benefits of Bitcoin we first need to take a look at what money is. It may interest some of you to know that the first shares purchased in the Bank of England were bought with a pieces of wood known as a tally stick. These pieces of wood served as money for a surprisingly long time, over 700 years in fact. As most people now know the most successful forms of money however have been gold and silver and they have served as money for over 4,000 years.
‘Economic growth’ is one of the greatest lies propagated in the world today, simply put it does not exist. When we work we trade our labour and time for natural resources, like property, oil, food and so forth. These resources have not increased since the time of early man. There is the same amount of land, water, and air today as there was five thousand years ago. Resources are forms of energy which nature recycles continually, and the quantity of which is finite. Money represents the value of all these finite resources on planet earth, and we trade our labour and time to obtain it so that we can swap it for the resource of our choice later on.
QE is theft. QE causes inflation and robs the purchasing power of people’s savings. Money should be a store of value over time, instead today savers who are afraid their life’s earnings will be eaten up by inflation, are forced to take their money out of their bank accounts, partly due to banks offering interest rates below the inflation rate, and essentially ‘gamble’ their life savings by investing it in the stock markets.
Increasing the money supply robs people of their hard earned wealth and gives it to governments and central banks who get the immediate rewards of spending the ‘newly’ printed currency which required no effort or work on their part. QE is done without your consent or knowledge. The reason this is even possible is because the money supply is controlled by corrupt government and central banks.
We are about to see ‘bail-ins’ in various countries in the very near future where people have money taken direct from their bank accounts to ‘contribute’ to towards paying for the debt crisis. People’s pension funds are also likely to come under attack as well.
What can people do? We can start by remembering what money is supposed to be, a store of value over time. Let us now take a quick look at BITCOIN.
Here are a few facts:
1. The money supply is finite and cannot be increased or decreased. This way your purchasing power is preserved.
2. Transactions can take place peer-to-peer, from one mobile to another or laptop without the use of any banking institution. No banks are required to send money, even internationally.
3. The cost of sending money overseas is so small one could almost say it is free.
4. The encryption levels used by the network make your money a lot more secure than any security currently used by the banks.
5. The network is decentralized which means it is spread over thousands of computers all over the globe and is therefore outside of the control of any one government. The network can therefore not be seized or taken over or shut down.
6. The network code is open source, this means it is open for everyone to look through to satisfy themselves that there are no hidden ‘back doors’ or anything malicious. It operates on a glass house policy.
7. The ‘blockchain’ records every transaction so the flow of funds is available for everyone to see which should actually help law enforcement as no court orders are required to obtain financial records. It should also discourage criminal activity as the records of every transaction will always be able to be revisited at a later date.
8. No personal details are required to carry out a transaction. All that is needed is the account address and your authorization key to make a transaction. Compare this to credit cards that require your name, address and so on.
9. Your funds and account cannot be frozen or seized by any government.
10. Transactions are completed in 10 minutes, that means the person you are paying will have their money in 10 minutes irrespective of where they are on the planet. This is a secure, global currency designed for the internet.
The most important point is this, almost everything that is wrong with the world today can be linked to governments, central banks, and corporations ignoring the voice of the voting public at the expense of people and the environment. These abuses are directly linked to their ability to control the money supply.
Bitcoin makes all banks redundant and puts the power of money back in the hands of the people where it properly belongs. When governments are forced to come to the public to ask for money we will again see a government that fears the people, and for the first time in a long while we will see a true democracy. You cannot have democracy without democratic money.
The US dollar has lost 98% of it’s purchasing power since it was created. Every fiat currency (paper money backed by nothing) that has ever existed has gone to zero. All of the global currencies today are on the same path and this economic crisis is accelerating that trend. Based upon the number of bitcoins available by 2020, if Bitcoin were to make up only one thousandth (1/1000) of the global currency market then a single Bitcoin should be worth around $28,000. When one considers it’s current value of under $600 it is easy to see the enormous up side potential.
Many people prefer gold as a store of value, and I have to say I agree that gold is a good investment. Some people even say they want to see a return to a gold standard, however the one problem I see with gold is that it leaves those people with the most gold in positions of power, and they are generally the same people that got us into this financial mess. Gold is also a physical commodity and can be confiscated, desperate governments do desperate things in desperate times.
Bitcoin is a game changer, and it is necessary now more than ever. What good is wealth in a world without freedom. If we allow governments to become our masters then they will take away our wealth either through taxation or direct confiscation.
Why would any government who has the power to issue it’s own currency give that power up to a privately owned institution only to borrow it back again at interest and then tax it citizens to pay for that interest? Crazy as it sounds that is exactly what happens. Money should merely be a store of value to facilitate trade, there should never be interest attached to money.
The volitilty of bitcoin will decrease over time, but it will I think prove to be resilient. If you want to live in a world with democracy and truly free markets then Bitcoin is the only choice. Fiat money is guaranteed to become worthless and gold puts those that created this crisis back in charge, and our liberty will then truly be gone for good.
Hi John – yes it is true that I underestimated the bullish sentiment behind bitcoin. But what I said to Keiser still stands. By the way, I did not say that the bubble had burst when I talked with Max Keiser, I said that there simply was a bubble and that it would eventually burst. I said that bitcoin was extremely risky and that I considered it unsafe for an investment. That aspect is still true and the recent events have proven me correct on that. My comments were made in May of last year, so we shall see whether Bitcoin will survive the next few months or not. It probably will. But that does not change the fact that bitcoin is a very risky and terrible investment. Many thanks!
Hi Alessio.. Long time since we had a Queens Pussy drink together..
BITCOIN.. You say..”bitcoin was extremely risky and that I considered it unsafe for an investment” but I ask ask you what IS a safe investment at the moment? If I were a Cypriot last yr I would have considered my deposits with my bank safe.. If I owned physical Gold in 1933 I would have felt safe..until the President issued Executive order 6102
http://en.wikipedia.org/wiki/Executive_Order_6102
When new paradigm comes into human existence..ie Cryptocurrencies it is unsafe + volatile.. but I will always remember what so called ‘advisors, said about the Internet..and a few other things too..
“I think there is a world market for maybe five computers.” — Thomas Watson, chairman of IBM, 1943
Be lucky Alessio 🙂
David again.. this is the other reason Bitcoin will succeed ‘Rival business people lend a hand to MTGox to sort their ‘problem’ out..’
Cannot ever imagine JPM helping Barclays sort a difficult issue really..!
http://www.coindesk.com/mt-gox-bitcoin-withdrawals-will-resume-soon/
Be well Alessio 🙂
Cheers David!