When is BitCoin finally banned?
The everything bubble is moving to ever higher highs and risk is being mispriced accross the bank. When will it all falter? That is one big question everyone is pondering about. But even more puzzling is BitCoin.
So what are the benefits of BitCoin?
- Very low transaction cost.
- No KYC or any kind of restrictions associated with banks.
- No trade restrictions.
- Impossible to “kill”. Even one single node on somebody’s laptop can store the chain for an infinite amount of time.
Who are the beneficiaries of BitCoin?
- The miners get decent ROI for their mining infrastructure.
- “Poor” people with access to the internet and a computing device can pay for services and run a bank account. We call them the priorly excluded.
- Hoddlers and hardcore believers are turning millionaires if not billionaires.
- Daytraders can use leveraged positions to ride the volatility train and become millionaires and billionaires.
- Institutionals can use the “alpha” and unique correlation of BitCoin to hedge market risk.
- A large ecosystem of crypto currencies is all paid by offering infrastructure, services, conferences, books and more to feed of the BitCoin ecosystem.
- Influencers like Elon Musk can drive the bitcoin value.
- Companies likes Tesla can hedge their overvalued valuations against a crash, assuming that BitCoin will do a moonshot if markets crash and can be liquididated to use in share buybacks.
- People living in hyperinflation environments and facing trade and banking restrictions — Venezuela, Turkey, China — can free their capital from their home currency.
That all sounds great. But what is really behind BitCoin?
- It is making redundant all the efforts put into KYC and AML and capital controls to work against dark money pools.
- It gives drug dealers and a large part of the illegal economy a way to avoid being traced or taxed.
- It literally creates value out of thin air by operating like a Tulip bubble.
- It costs extensive amounts of energy, produces an immense amount of heat and dust, and fixes immense amounts of capital into the mining infrastructure that is socializing the true cost of Bitcoin.
- The free capital flows can destabilize real currencies and markets.
- The liquidity in BitCoin — which is not really liquidity but just changing a way of changing currency for a potentially worthless token — is taking money out of circulation by putting it into the hands of people who invest e.g. in mining infrastructure, luxury real estate or just sit on their cash in offshore havens.
Is there a large risk of capital loss?
Yes, if the market starts to abandon BitCoin, all this mining infrastructure needs a new business model. It will likely be in AI. In the end, all this compute power being built under bitcoin uses the money of gullible people to finance data centers which can very easily abandon BitCoin once the boom is over.
Yes, if central banks and goverments start banning Bitcoin and they trace the transactions to their beneficial owners and starts prosecuting — if BitCoin is a honeypot -, then this will lead to people losing either access to their BitCoin, or the ability to exchange the token for accepted currency, or it will even bankrupt them on tax claims or they just go to jail. All this money will be lost for investments into the real economy and consumption and will be distributed from many to a few who then need to allocate this money or simply use it to deflate their debt burden — e.g. if they are governments.
Yes, if the stabilizing forces of BitCoin, all those heavy lifting investors and hoddlers that currently have an interest to stabilize the price by strategically adjusting the float and demand for BitCoin — sell when there is an upside push, buy when it is low, focus on controlling circulation —
Yes, if the service and value-added economy around BitCoin crashes, a lot of people are flooded into the unemployment pool.
Is the risk systemic? The official answer from central banks seems to be a clear no. There is no infection of the banking system. But is it systemic on economic justice and consumption power of all those that are connected to the ecosystem.
Is there a reason why BitCoin does not make any sense at the current level of interest it has? I believe yes, as I described in this piece: https://macrohedge.medium.com/why-bitcoin-will-not-be-a-global-reserve-currency-c305bdf0da3a
My personal view on BitCoin remains as it is. The drawbacks are far larger than the benefits. Simpler and fairer banking is the better option. Should BitCoin be banned? I very much believe so. Is it possibly killed? I doubt it. It is a technology that will never fade. But it might go back to a reasonable value by shrinking the mining ecosystem and dropping back to 1–100 Dollars per BitCoin. We will see.