How the US Central Bank Will Pop the Crypto-Bubble

No unregulated cryptocurrency is safe from the Central Bank, and it never was - not as a alternative currency at least. This may seem like bold statement, especially to most self-proclaimed anarcho-capitalists and die hard crypto-currency fanatics, but you should be warned that there are several ways in which the big banks can take everything down, including your profits. I created this post to illustrate signs and tactics which may signify the end, but as an investor, I sincerely hope that none come to fruition.

To understand this article, one must view Bitcoin & altcoins as a commodity, like gold, rather than a currency. This is probably easy for most since their evaluation depends very highly on their market acceptance, and some (like Ethereum) hold intrinsic value.

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In the beginning, bitcoin was used almost exclusively by the tech-savvy and capable entrepreneurs whom became savvy after seeing it’s potential. As more and more people begin to believe in the value behind bitcoin and other alt-coins, demand is increased and profits are realized. Herein lies the core of the problem. It has been argued that, like gold, most the crypto market consists of speculators whom believe that they are sitting on a commodity which could potentially represent a large source of wealth. As soon as a large enough portion the population (I would estimate roughly 25-30%) of perceives something of the same (in an unregulated commodity, no less) they have gained the attention of their local government and have entered a commodity war, for which the main objective of the defensive party(government) is to maintain its control of their citizens via faith in their fiat currency.

Like most commodities, the United States Federal government has a lot of influence over these markets in ways that average consumers may not understand, and thus, the ability to drive down acceptance of these commodities which in turn, devaluates the crypto’s all together.

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Media outage

As demonstrated during the 2016 US Presidential election, 2017 Netherlands & French elections, as well as state emergencies in Sweden, United Kingdom, Venezuela – and pretty much any time – governments can censor content which does not agree with their agendas, with very little or no effort. Lately, they’ve even taken it a step further by creating a malicious ‘boogie man’ type character, known as fake news, to justify their censorship. Though this process starts with social media outlets like Facebook, Twitter & reddit silencing or banning both content and users, enough internet buzz eventually catches the attention of televised media outlets, whom do their best to ridicule the opposing party – sometimes, in person.

The reason that we have only seen half-witted attempts by the mainstream media to ridicule crypto-currencies (like this November 2013 interview with Jeff Berwick on Fox Business) is because there hasn’t been high enough volumes of acceptance in the mainstream market. That said, I suspect that we will see higher levels broadcasted opposition as value, demand and acceptance increase.

BTW Great interview, Jeff @dollarvigilante

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In USSA, people are accountable to government.

As evaluations soar, exchanges increase user volumes and use cases (exchange for material goods etc.) stories of bitcoin billionaires (and millionaires) will start flooding the internet. This is where the news will begin to step up their opposition, and we will (as we already have) start to see large government officials meet, and smaller governments (in terms of GDP) begin to accept bitcoin as legal tender. As I mentioned, this has already happened to some extent. In Venezuela, people we using Bitcoin to buy food and clean drinking water while Malta, Australia and Japan decided to embrace BTC as legal tender. The United State congress began to hold several meetings on the topic as well.

Though it is unclear to me which of the following will happen first, both are inevitable if the US and Central bank decide not to accept unregulated cryptocurrencies as legal tender.

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F*dCoin

I was going to see if I could write a full article without dropping an F-Bomb, but it had to be done. FEDcoin is coming, and it will probably have the logo “Keep calm, carry on”. Personally, I like to observe other western countries in policy, tax, and political agenda for use as a litmus test in what may come the United States. From what I’ve heard, Australia, Norway, Sweden, Belgium, France and the UK are already =/>90% cashless. They’ve even gone so far as calling the pro-cash citizens “activist”. While some sources claim that the US is roughly 60% cashless, there are a lot of economic reasons that the federal government may choose to make the switch. These include tax collection, P2P exchange tax, oversight, regulation and, yes – control of where citizens can spend their money. Being that ‘terrorism’ is the new ‘communism’ of the 50’s, they will probably use that as justification as well.

Like most Austrian Economics students, I could go on all day about the problems associated with a cashless society, but as relevant to bitcoin and other unregulated cryptocurrencies, a cashless society will allow the government to track every single purchase made from its citizens, as well as ban those which are in that shade of gray - instantly. Although they won’t ban these currencies immediately, they may choose to limit the crypto/fiat exchange volumes – like Coinbase.

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State Mobile OS

In-Q-Tel claims to be a non-profit strategic investor[firm], that accelerates the development and delivery of cutting-edge technologies to U.S. government agencies with the goal of keeping the US safe. While I will not begin to argue about the distance between their definition of ‘safe’ and morality, I will mention that it is widely known that IQT was one of 4 investors of Googles initial funding in 1998, and again in 1999 when Google announced a $25 million round.

Why is this important? Because google owns and maintains the android operating system (which makes up 81% of the global users as per data released in 2016 by Morgan Stanley Research) as well as the google play store. If the west decides to treat bitcoin and other altcoins as illegal contraband in effort to restore faith in the USD & EUR, they can very easily ban all applications from the play store, and flag all software wallet applications for removal as the updates roll out. From there, it is likely that they will use the excuse that they’ve discovered numerous bugs in the OS, and roll out updates several times over the course of 90 – 180 days, defeating the will of the die hard users.

Apple is no exception when it comes to state influence, and although they consistently perform media stunts to earn their consumer’s trust, most can see their ‘disputes’ with the CIA and FBI as choreographed plays, much like WWE wrestling. Like Google, they are likely to follow the laws (whether right or wrong) and ban all software wallets from us in iTunes.

Microsoft is another massive software provider whom consistently works with the federal government. The difference between MSFT and AAPL, however, is the massive revenue streams generated for Microsoft via large US govt contracts, as well as total private users. Unwilling to lose these, it is likely that Microsoft will assist your local government in banning these products. Below image utilizes data conducted by Morgan Stanley 2016

The main threat that this section presents is that it will drive up the level of proficiency required to partake in cryptocurrency markets and exchanges, forcing the common retail investors out of the picture. Additionally, many investors may simply choose not to partake based on the perception that they might be doing something illegal.

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Conclusion

So can you keep your coins? Sure, you can grab yourself a copy of Ubuntu, Mint, or several other open source operating systems which and trade away. But without mass acceptance and severely limited liquidity back to accepted cryptos, there is no real value behind them. As the central bank makes moves to push the masses out of the crypto markets, we may see the sad day that bit coin is valued at $200 again.

So, all of this is for nothing?! No, actually. Like the dotcom crash of the late 90’s, there will be few investors whom get out with their skin (and hair). Those will be millionaires while the rest will suffer massive losses. Again like the dotcom crash, we gain a massive step forward in technological advancement: the blockchain. Evolution hurts the masses but is great for overall advancement.

When will this happen? Well, that depends, but I would guess that it would happen slowly over the next 4 or 5 years for the following reasons:

• US Debt:GDP ratio rising, (Debt rising:GDP falling) and we’ve just voted to raise the ceiling.
• 68% of US treasury bonds (from 2008 housing bubble) mature in 2019.
• Many of the BRIC countries (whom have been stock piling gold as the US spends it) have already accepted Bitcoin and other decentralized currencies (or expect to). This would offer an avenue of crypto to fiat liquidity outside of the dollar.
• EU GDP will be absolutely devastated by cultural enrichment policies.

I plan to write articles on all of the above points over the coming months, but each could build pressure on the World Bank and US Government to take steps which help preserve it’s supremacy in the financial markets (which they call democracy).
So for now, be safe with your investments, do you own diligence and stay cognizant of anything that may threaten your freedom. This is probably the most interesting time to be alive in man kinds brief history.

Also, let me know what you thought in the comments below. This is only my 4th article so please excuse the formatting errors, and I hope you enjoyed the read.

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