WRITER’S NOTE: Neither Miles Franklin nor its principals specifically advocate the purchase of Bitcoin, given its highly speculative nature and numerous political and financial risks. Nor, for that matter, do they discourage it. That said, given my personal belief in Bitcoin, and its rising importance on the global monetary scene, I believe it highly relevant – if not necessary – to discuss its evolution in real-time. Moreover, whilst Bitcoin shares many monetary characteristics with Precious Metals, it is an entirely different asset class – with as many differentiation’s, both practically and investment-wise, as similarities. That said, while investment in Bitcoin is highly speculative in nature, so are many “paper PM investments.” In other words, no matter how you choose to invest, caveat emptor!
It’s Christmas Day, and given the break from news the world has given us for 24 hours (other than the recently nationalized Bank Monte Paschi already requiring twice as much near-term bailout funding than believed two days ago), it’s the perfect time to discuss my latest epiphany about Bitcoin – timed perfectly with its surge to $800 on Tuesday, and $900 Thursday. The latter, representing its all-time high market capitalization; albeit, at the still modest level of just $14 billion, excluding the million or two Bitcoins permanently lost from “times yore”; i.e, 2009-13, when early Bitcoin owners either didn’t realize its potential value, or how to properly store them.
As long-time readers know, my opinion of Bitcoin has morphed from anger, in watching its price temporarily exceed gold’s in December 2013 – amidst a particularly egregious Cartel attack; to mania – yes, I lost roughly $1,000 to the Mt. Gox hacker in February 2014; to smug indifference in 2014 and 2015 – as it crashed, and subsequently consolidated between $100 and $300.
When I look back at my comments about Bitcoin over the years – from this April 2013 interview; to November 2013’s “are Bitcoins money?”; I’m quite proud of the objectivity I displayed in the face of the aforementioned emotions; a lack of technological expertise; and at the time, what I viewed as gold’s first realistic “competition.” I mean, when history’s longest-standing, proven store of value is being subjected to relentless government suppression (as is still the case today); whilst the “new kid on the block” is not only surging, but garnering the media attention; it has a tendency to make one lash out, perhaps irrationally so. Let alone, someone in my personal position, both financially and professionally. To that end, whilst all such factors were omnipresent in my “early days” Bitcoin commentary, much of what I suggested turned out – like my “2016 predictions” – to be spot on.
In the past year, things in the Bitcoin world have dramatically changed – as have, naturally, my views. Coincident with it finally re-taking the $300 level in November 2015, many of the things I had initially feared about Bitcoin started to dissipate. For one, it has clearly started to build a “track record” as a storage of value. Secondly, it’s utility as a transactional currency is growing exponentially. Third, most investors are growing savvy to the issues related to investing in, and storing, Bitcoin. Fourth, the understanding that Bitcoin’s “monetary policy” is in fact irreversibly programmed – i.e, there is NO WAY more than 21 million Bitcoins will ever exist – is becoming universally understood. And last but far from least, the “final currency war” I warned of for the prior three years went nuclear – particularly in China, where the massive Yuan devaluation I predicted in August 2015 started to accelerate. To that end, given that more than 90% of Bitcoin trading occurs in China; and likely, at least three-quarters of Bitcoin ownership; it was becoming increasingly likely that the most important monetary invention since gold itself was ripe to see its market cap rise from its then piddling amount of just $5 billion. Which is why I started buying it back then, and haven’t stopped since.
Throughout 2016 – during which, Bitcoin essentially tripled – countless investment hurdles have been overcome; from August’s Bitfinex hack (ironically, because the U.S. Commodity and Futures Trading Commission prohibited Bitfinex, one of the few Bitcoin exchanges offering margin trading, from using “cold storage”); to the ongoing, extremely contentious “scaling” debate; and relentless rumors of potential Bitcoin “bans” – which in reality, would be less enforceable than even Precious Metals bans. And yet, Bitcoin’s price has kept rising, accompanied by commentary describing “why” as clueless as MSM coverage of the rigged “Dow Jones Propaganda Average” and paper gold and silver markets. To that end, some of the reasons proffered for Bitcoin’s rise are the Yuan’s devaluation; “political and monetary chaos”; the Fed rate hike; Trump’s victory; the Indian cash ban; increasing transactional utility; technological advancement; rising usage as “digital gold”; increased demand from money launderers; an escape from rising global capital controls; and plain and simple, “supply and demand.”
Of which, the “answer” likely includes a bit of each, given the underlying reality that the world is dramatically changing – politically, economically, socially, monetarily, and…technologically. To that end, Bitcoin’s immutability, scarcity, and inability to be hacked is no longer debatable. Instead, its most pressing issues relate to scalability; worldwide uptake; and its ability to “compete” with fiat currencies – both practically, and in light of the increasingly official challenges it will receive. Which, like those gold and silver are currently facing – in the manipulated paper markets, and highly propagandized media – will undoubtedly explode as governments start to view Bitcoin as the threat gold and silver were identified as in 1971; and more importantly, and vehemently, since the historic fiat Ponzi scheme that commenced in 1971 permanently broke in 2008.
Given the cataclysmic ramifications of the collapse of history’s largest, most destructive fiat Ponzi scheme – as commenced in 1971, and broken in 2008 – I expect 2017 to not only be the worldwide “year of money printing, “ but “draconian government actions” – such as, for instance, exploding capital controls, and an all-out war on cash. Which is exactly why the powers that be have attacked Precious Metals with such a vengeance in the wake of Donald Trump’s historic, world-changing victory; and why they know the financial market “honeymoon” they fabricated in its wake – inflating the largest equity bubble in history – will not last long, particularly given the simultaneous collapse of the majority of worldwide bond and currency markets.
And now that Bitcoin’s “coincident” surge is becoming mainstream news – to the point that CNBC itself hyped it on Friday – you can bet the world’s top money-printing governments are taking notice, too. To that end, many governments have pretended to be interested in Bitcoin whilst it rose modestly, and turbulently, over the past five years – simultaneous with their relentlessly supported (i.e., rigged) stock, bond, and real estate markets. That said, in most cases the word “Bitcoin” was never mentioned – in lieu of the more generic, non-investment-specific term “block chain.” As frankly, “they” simply wanted to appear technologically “with it” – in much the same manner as Obama did by, LOL, creating a Twitter handle.
Like the Borg in Star Trek, my guess is governments will shortly start to view Bitcoin’s inexorable, recently accelerating rise as a more dangerous threat – particularly, given the fact that waning confidence in fiat currencies and governments are being specifically cited as “reasons” – just as they have viewed gold and silver from time immemorial. And thus, we will unquestionably see heightened “attacks” on Bitcoin in 2017 – even if it can’t physically be slowed down, due to the scarcity of supply; an inability to naked short it with impunity; or generate widespread, believable propaganda campaigns. Thus, don’t be surprised if you see more “rumors” of potential “Chinese bans” – as if this is practically possible; and other inevitably futile attempts to slow Bitcoin’s emergence, such as the IRS’ recent “John Doe” subpoena to Coinbase, America’s largest Bitcoin exchange, demanding personal information about all its clients. That said, given the intensity and organization of such attacks – dependent in many ways on global political, economic, financial market, and monetary circumstances – it is not inconceivable that dramatic short-term price declines will be as commonplace as dramatic surges. That said, in my very strong view, the trend remains up – and will continue to be indefinitely.
Importantly, what governments do not yet understand – particularly as they know next to nothing about Bitcoin, and crypto-currencies in general – is that whilst Bitcoin and Precious Metals are both “competitors” to fiat currency, they are not necessarily competitors to each other. To the contrary, whilst both Bitcoin and PMs in many ways “compete” for some of the same dollars, Euros, Yen, and Yuan, they are in the big picture co-existing, inadvertently, as “allies.” Which I first realized in May, when I penned “Bitcoin and Precious Metals, Twin Destroyers of the Fiat Regime”; followed by June’s “it’s official, Central banks are dead – and here’s the real end game.” In which, I postulated that whilst gold, silver, and to a lesser extent platinum would continue to be the immutable stores of value they have been from the dawn of human history – more so than ever, as history’s largest, most destructive fiat Ponzi scheme implodes – they are unlikely to be used as “money” again; other than in primitive barter societies, or the worst-case scenario of a “Mad Max” monetary collapse. Which is exactly what I espoused in July 2014’s “Is gold money? Who cares!” – at a time, I might add, that my anti-Bitcoin “anger” was at its peak, given that I had just lost money in the Mt Gox scandal four months earlier.
The reasons I believe Precious Metals will never be day-to-day “money” is that they are not divisible into “micro-payments”; portable; or generally speaking, practical. And equally impractical would be a “gold standard” – in which fiat currency is “backed” by government-held gold – as not only are few, if any, Central banks and governments trusted today – but once said historic fiat Ponzi is destroyed, the only money that will be trusted, in my very strong view, will be decentralized. That is, completely uncontrolled by government decree, Central banking whim, or the Wall Street criminals that administer and manipulate its use. Conversely, I believe Bitcoin – and perhaps, one or more other crypto-currencies – is the most logical replacement of fiat currency; potentially, far sooner than most can imagine. And while Bitcoin certainly “competes” with gold and silver as a storage of value asset, there’s no material “competition” to speak of, given just how much fiat currency will be fleeing into the equally scarce Precious Metal and Bitcoin sectors. To the tune of tens, if not hundreds of trillions of dollar, Euros, Yen, Yuan, etc.
Which brings me to today’s key theme – which not only could turn out to be one of the most important Precious Metal themes of 2017, but the coming decade. Which is, that I believe Bitcoin’s rise in the public view of opinion – and financial markets – may well be so powerful, it causes governments to shift their manipulative focus 180 degrees. In other words, I believe it not just possible, but probable that governments – and the global population at large – will start to view Bitcoin as the primary monetary competitor of fiat currency, instead of Precious Metals.
Not that investment demand for gold, silver, and platinum will decline – as to the contrary, they will likely rise parabolically as fiat currencies are relentlessly debased, given the aforementioned, time-tested storage of value function they have always had; and likely, always will. Not to mention, in an environment of record low above-ground, available-for-sale supply; and, as discussed in last week’s “most important, and gold bullish, chart you’ll ever see,” declining supply for gold, silver, and platinum for potentially the next decade. This, at a time when, care of the aforementioned, historic post-Trump price smashing, Precious Metal prices are more undervalued than at perhaps, any time in history.
I believe Bitcoin’s “use cases” are so powerful; in a world where its technology is so far beyond the rapidly obsoleting world of fiat currency – as highlighted by negative interest rates; quantitative easing; the “war on cash”; government, financial, and corporate conflict of interests; and of course, plummeting purchasing power; that it will shortly become not only the government’s primary “monetary enemy,” but a dominant theme of the mainstream media. Not to mention, the rapidly exploding “alternative media” where the Miles Franklin Blog resides.
And as this occurs, at a time when Precious Metal fundamentals are already historically strong, it may well prove the catalyst for finally breaking the gold Cartel. Which frankly, “they” may not even view as a major failure, given how fearful they will be of their true monetary enemy, Bitcoin; as opposed to the “tortoise” that is Precious Metals – which slowly but surely, will continue to plod along in its “barbaric,” unstoppable, historic role as the one and only naturally-recurring (albeit, in increasingly scarce amounts) storage of value asset class. In other words, my fellow Precious Metal holders, Bitcoin is decidedly NOT your enemy – and in the big picture, may well be one of the key catalysts to gold and silvers’ inevitable liberation!