A Thing Or Two About Bitcoin Investing

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

1. Warren Buffet, the billionaire wall street investor and founder of Berkshire Hathaway, Inc. once said, “I will tell you the secret to getting rich on Wall Street. You try to be greedy when others are fearful. And you try to be fearful when others are greedy.” This school of thought is totally contrarian to the general sentiment in the stock markets. He invested in Goldman Sachs and General Electric at the peak of the financial crisis in 2008, when there was a fear that the markets will never get up. What he meant in his statement was that it is the only right time you get stocks below its intrinsic value. The Goldman Sachs investment paid off in a big way making him richer by $5.64 billion and Buffett’s $3 billion crisis-era investment in General Electric generated a profit of more than $1 billion.
2. In his book, The Big Short: Inside the Doomsday Machine, Michael Lewis mentions of an investor called Michael Burry who discovers that the United States housing market is extremely unstable, being based on high-risk subprime loans. What does he do next? He envisions an opportunity to profit by creating a credit default swap market that would allow him to bet against market-based mortgage-backed securities. He didn’t follow the general template rules of the wall street, and after the 2008 crash, his fund’s value was increased by 489% with an overall profit of over $2.69 billion. Sometimes success means we break the rules if they go against our personal beliefs.

These are just the two of the many many examples that says a lot about wall street’s broken and outdated mindset. The brats of the wall street, the guys who think they control the financial world, the same guys who blessed us with the great depression, the flash crash of 2010 and many other to come. So when JP Morgan’s own Jamie Dimon makes comments calling Bitcoin “a fraud” using words like “someone is going to get killed” and going as far as calling out his daughter in a spiteful tone,“my daughter bought bitcoin, it went up and now she thinks she's a genius” and , of course the naysayers are going to circle around in unity to bash the cryptocurrency world. Let’s delve into some history and facts about JP Morgan, shall we?

1. JP Morgan, under the leadership of Jamie Dimon, is the same firm that was found guilty of fraud in the financial markets during 2008 and has negotiated a tentative $13 billion deal to settle many of the U.S. investigations. Well, this coming after the Federal Reserve’s $12 Billion Bailout in ‘08 that came from the taxpayer’s pockets doesn’t sound very convincing)
2. The City of Los Angeles (A whole city) sued his company in 2014 for a decade of predatory home loans. “In a lawsuit filed in U.S. District Court, the Los Angeles city attorney alleged the nation’s largest bank “has engaged in a continuous pattern and practice of mortgage discrimination in Los Angeles since at least 2004 by imposing different terms or conditions on a discriminatory and legally prohibited basis. These loans would quickly become unpayable and lead to foreclosure. The family would be evicted and JP Morgan would resell their home through another predatory loan.”
3. He had criticized bitcoin in 2014 during an interview with CNBC calling it “a terrible store of value”, so this is nothing new. (Read how the blockchain technology and bitcoin’s value has advanced in the past three years.)
4. Even Dimon’s own bank, JPMorgan, has reportedly begun a trial project using blockchain as it tries to cut trading costs. Blockchain is the technology behind bitcoin.

(Author’s Note: Not wanting to start a smear campaign against JP Morgan, but these are all the actual facts and figures that doesn’t make JP Morgan a credible financial institute. JP Morgan and Jamie Dimon are respected by other bankers with regards to how they managed to fool the federal agencies and stay afloat even after losing billions of taxpayer’s money)

Jamie Dimon’s statement coming after the China’s big ICO ban made the already volatile Bitcoin’s value to fall more than 30% since its all time high of over $4500 with the total market capitalization falling by more than $63.6 billion(Update: Bitcoin is reported to fall below $3000 mark).

Credits: charts.bitcoin.com

The one week downward trajectory of BTC value. Credits: Coindesk

On China

This plunge happened following an announcement from China that they are planning to ban the domestic Bitcoin Exchanges. The gravity of the ban is such that one of the biggest of china Bitcoin exchanges announced that it will suspend trading. BTC china was the first exchange that officially announced that they will stop the trade to all china customers from September 30. A similar kind of ban by China happened in 2013 when China banned its banks from handling transactions involving the Bitcoin virtual currency and Bitcoin lost more than 10% of its market cap in a day. Here’s a two-point rebuttal to China’s move on Bitcoin:

1. Bitcoin is a global currency exchange, not limiting to one region or country. Chinese currency Yuan is heavily controlled and monitored by the regulators. If Bitcoin becomes the standard currency all across the world, it may cause Yuan to fall down as the foreign investors in China may opt to use Bitcoin instead of USD or Yuan. This is one of the reasons why China is panicking right now. The ICO ban in China does not cover mining the cryptocurrencies. That means anyone can still mine bitcoins in China without any interference from the regulators. It is still a positive step that makes everyone think that eventually China will understand that it’s better to be a part of the game of the new economy than outside of it and will soon let the exchanges reopen.
2. For the past 2–3 years, China has been accused of fabricating their GDP data and the 7% figure does call for suspicion. Major news agencies such as BBC, Bloomberg, Telegraph and Economist has questioned the authenticity of China’s GDP data and gave plausible explanation why it might be manipulated so as to prevent a slower industrial growth rate due to lack of investment interest. You can read all about it in these articles: Economist, BBC, Telegraph, Bloomberg.

Alright, so to summarize the current situation in the Bitcoin world, we first need to ask the important question.

Does enough people believe that Bitcoin is doing a financial disruption and is taking the power from the authorities and putting it back in the hands of the people?

Here are some facts and technical advantages that a cryptocurrency has over its predecessor.

1. The supply is unlimited for Fiat currencies and can be created out of thin air, without any backing. The conservative currency is minted by the central banks controlled by MNCs and Corporations and is trickled down to the general public. Compare this to Bitcoin, the network is decentralised, peer to peer and no one controls the system. The nodes (computers/Miners running the bitcoin protocol to create a ledger of all transactions happening) connect together to create this network. New coins are not created out of thin air but are created when the miners solve mathematical problems to validate a transaction block. It’s not distributed top down, but created and exchanged between people.
2. Jumpy headlines about price fluctuations help the bad guys. One strategy among bitcoin heavyweights is to wait until bad news hits (like the China ICO ban), then sell off just enough bitcoin to spark a consumer and media panic, then rebuy to inspire a rally. The biggest losers in this scheme are new investors who haven’t been properly educated.
3. The blockchain is the next iteration in finance. Triple ledger accounting. A trustless system. This means that we no longer need to trust paper trails or a banks books. We can look at the blockchain and see what happened to our money. And that blockchain cannot be altered. It’s immutable. Bitcoin has the necessary characteristics for currency: fungible, divisible, limited supply, useable.
4. The day-to-day price of bitcoin doesn’t matter. Invest in the blockchain if you think it will one day replace gold or power infrastructure. Don’t if you’re looking for stable, short-term gains. Bitcoin is a 0 to 1 bet, closer to a seed investment in a startup than a publicly-traded stock.
5. Decentralized. Secured. Transparent. Accountable. Fast. You wouldn’t find these terms thrown around when you go to a bank. Instead, you’ll find a wall poster that says, “Your money is safe with us” with a man with an evil smile on his face.
6. Billionaire Venture Capitalist Tim Draper, early backer of Skype and Baidu, has embraced ICO and has personally poured in a lot of money in Bitcoins.

Conclusion

To quote Bane’s famous Blackgate Prison speech in The Dark Knight Rises, “We take Gotham from the corrupt! The rich! The oppressors of generations who have kept you down with myths of opportunity, and we give it back to you… the people.” That is exactly the point of the blockchain technology, the Bitcoin, the Ethereum. It is a project that is meant to decentralize the currency exchange, it is a war against the fiats and the central banks. It is a technology that may, one day, substitute banking.

What do you say when your kid is in the cusp of becoming a teenager and starts acting weird? “It’s just a phase”. That’s right, it’s just a phase in the bitcoin world that soon shall be over and Bitcoin(hopefully), will be back on track. The entire point of the blockchain technology is to disrupt financial companies like J.P. Morgan and Goldman Sachs. Hearing these guys rant against bitcoin is like hearing an oil executive badmouth Tesla.

Update[source not confirmed]: It seems like JP Morgan allegedly bought a lot of dips in Bitcoin just moments after $BTC went below $3000 mark as can be seen in the tweet below.

If you’re happy and you know it, clap your hands (clap, clap). While I still figure out Medium’s new Clap feature, if you enjoyed reading this article, or think someone else might, please show some support by clapping and sharing. Please feel free to drop a comment voicing your opinion on this situation. You can reach me on my personal email — madhav_sharma28@hotmail.com or tweet to me