Last week saw a dramatic “correction” in cryptocurrency prices:
This incredible volatility was primarily due to excessive speculation with leverage and borrowed capital. During last Wednesday alone, positions worth more than US$8 billion were closed by forced liquidations on numerous exchanges within just a few minutes.
By long-term standards, the 55% pullback is the sixth steepest dip the bitcoin market has had to endure since its inception. It is very likely that Wednesday’s low at US$29,500 will hold for some time and will not be undercut for now. …
Past Bitcoin bull markets also saw sharp pullbacks time and again, but in retrospect, all of them turned out to be nothing more than excellent buying opportunities and entry points. …
Conclusion: Above US$30,000 the uptrend is still intact.
Bob Moriarty, cryptocurrency skeptic:
We hear from the people who have made money in the scam but not from those who lost money. In my view there are a lot more of those.
In any interview I do, what people respond to with the most negativity is me talking about how much money is going to be lost in a bubble of an asset of zero redeeming qualities other than FOMO [fear of missing out].
The cliptocurrencies aren’t limited. In December of 2017 when I called that top back then there were about 1,300 of the creatures. Today there are 5,379 as I write. Limited? I doubt that. I may have turned old but I didn’t turn stupid.
And we hear that they are anonymous. Yea, right. Tell that to the IRS who are busy collecting the names of everyone who do a transfer of over $10,000. That is going to bury the IRS in papers with tens of thousands of required forms submitted every day. And that you can buy your drugs without anyone knowing. Yea, sure.
There is the ever-popular FOMO. It’s not the very best reason to invest in anything. It’s the worst. That and Elon Musk ran the price of Dogecon up to $.725 two weeks ago. Now it stands at $.335. It had a market cap of over $90 billion. …
Does anyone seriously believe the Central Banks are going to allow 5,379 independent electronic currencies to break their rice bowl? China has already put the word out. No trading in the cliptos. The rest of the world will follow. …
Some brave but clueless souls were trading the [cryptocurrencies] on margin. When Elon Musk yanked the rug out from underneath them, 733,706 accounts containing originally $8.15 billion went to Bitcon heaven in 24 hours. That’s a lot of money to lose and ¾ of a million investors got wiped out. Do you really still think FOMO is a valid trading plan?
The average life of a paper currency, historically, is about 50 years. The current ones started technically (in their current form) in 1971.
I live in a tiny cottage that is over a stream. Long ago it was a water mill and has been rebuilt. To remind me of what happens to all currencies, I have framed and hung a dozen or more of what used to be money. I have several $1000 Confederate war bonds. At the time they would have been worth 50 ounces of gold. Now you can get a nice one on Ebay for $50 or so. I’ve got Assignats from the French Revolution, a 50 trillion dollar Zimbabwe bill, some MPC that I used to use in Vietnam, a couple of Revolutionary War payment certificates and some Confederate money.
My very favorite is a payment receipt from the South Sea Company dated 1724.
The cliptocurrencies may be the biggest bubble in history, but are still just one of many others where con men drag in the greedy and clueless and extract all their money. In 1720 it was the South Sea Company founded in 1711 and peaking in 1720 before collapsing and destroying the finances of tens of thousands of English investors.
The US dollar (and all the current paper currencies) have entered a death spiral, and they too will go to currency heaven before long. Money is debt, and the amount of debt keeps skyrocketing, well above historic norms. We have passed the point of no-return, when the debts might have been paid back in a meaningful (non-inflated) way, so we’re traveling down a one-way street now.
All that debt requires servicing with interest payments, so interest rates have to be kept very low or many people (including most western governments) will go bust. For example, if the interest rate on Japanese bonds gets to 2% then the Japanese Government has to spend all of its tax income just to pay interest on its loans.
So interest rates must remain near zero. But low interest rates just encourage more debt and money manufacture (new money is created by the act of bank loan formation) — so there is no tool to rein-in the eventually-undeniable inflation.
In 2011, I predicted in a speech that gold would reach 50,000 USD per ounce in 2028, at which point the USD would cease to exist in its current form. But the calculation behind that prediction required that by 2017 the central banks begin running a 10-15% inflation rate (like the 1970s, to whittle away the real value of the unsustainable debt). It seems they are only just beginning now, in 2021. So maybe the end of the USD will come in 2032.
Precious metals and cryptocurrencies are two ways out of today’s doomed paper currencies. Cryptocurrencies are more convenient, because they can be exchanged over the Internet. Only created by fusion in the Sun, some gold splashes back and lands on the Earth, so it is intrinsically rare on Earth.
(Whatever backs a currency, everyday transactions will of course be transacted over the Internet or at point of sale just like they are now. Talk of long bitcoin transaction times or heavy bags of gold being lumped around is just scaremongering.)