Bitcoin Reality Check

For the most part all of us hold currency for day to day expenses. We hold stocks in retirement and investment funds, and knowingly or unknowingly we hold bonds in those same funds or money market accounts in preparation for investment. There are many who don't hold precious metal, and some of those same people are the ones who tell others that zero is the correct allocation to an asset that has held its value and protected its owners through harrowing economic crisis. I argued that without holding at least some of an asset, even a token amount, it is hard to pass judgment, particularly when you own the others. Without holding at least some of an asset there is a natural human reaction to want to see it fail for fear of that 'missing out' feeling if it does succeed.

I have been a strong bitcoin skeptic for several reasons, most notably its unknown origin coupled with past government research into crypto currency, and what I believe is questionable timing. These coupled together could make one think that bitcoin could be a beta test for a government sponsored crypto currency. With all that said I also have witnessed how bitcoin reacted to the Cyprus bail in, the Greek crisis round one, the Ruble Crisis, Greek Crisis round two, and most recently the Chinese capital controls. The upward reaction of bitcoin to these monetary hiccups can't be ignored if you believe major monetary turmoil is on the horizon as I do.

I made the decision to invest in the crypto currency at a very mild pace several months ago. This will have approximately 1% of my liquid assets invested in bitcoin in three years. As discussed above, this small investment did change my mindset, and I started to believe just a little more. This belief got even stronger in the recent run-up as often happens to investors as an asset goes up in value. The feelings of missing out and wishing I had bought more crept in. With some help from the program, and experience, I understood these feelings were natural and they didn't get me to do anything rash. It was almost enjoyable to experience this human reaction with an observers mindset. That was until Jamie Dimon snapped me back to reality.

Yes that arrogant loathsome creature and head of an immoral institution, Jamie Dimon. In the video below Dimon clearly makes the statement that bitcoin believers such as Andeus Anotopolis jokingly mock as flat out ignorant. Andeus and others understandably compare the future bitcoin takeover of finance to the Internets takeover of communication. After doing a moderate amount of research (dozens of hours compared to many who have spent thousands) on crypto currency, I feel that the technology of crypto currency has every ounce of potential that computers and the internet had. The question is, is it going to be able, or allowed, to realize that potential. The internet took on the telecommunication, and media industries, bitcoin is taking on banking, but more importantly the monetary industry.

If bitcoin were going head to head with just the banking cartel I would say Andeus would be right, but it is taking on the monetary industry, which is part banking, but also part government. Below Dimon, the ultimate insider, bluntly reminds us what is likely to happen.

I truly despise Dimon, but he is correct. If bitcoin truly threatens the governments cash cow and monopoly over money creation the game will be over. Consider if the punishments for owning or using bitcoin were similar to the punishments laid out in Executive Order 6102. Executive Order 6102 banned the private ownership of gold in 1933 and failure to comply carried a fine of up to $10,000 and ten years in prison. Now you may be thinking that ten grand doesn't sound like that much but that was also when gold was being exchanged for only $20.67 an ounce. At today's gold prices that would be well over a half MILLION dollars.

After watching a few get financially ruined or thrown in jail most people would comply. Considering bitcoin garners its value from its utility, if it can't be used it will likely lose its value. I work for a fortune 500 company and there is one thing I know…they do not F--- with government regulation. You will not be able to spend your bitcoin at Target, Amazon, Walmart or any other retailer, you will not be able to spend you Bitcoin on a new Tesla, or a pizza for that matter. Since bitcoin isn't truly anonymous even the black market will likely shift to another medium of exchange to limit another avenue of exposure to the government and law enforcement.

If you are banking on moving to another country, the "the US can't ban bitcoin world wide" meme, then you are assuming that other nations are going to be willing to give up control of their money supply. The EU? Not a chance, how will they fun their socialist governments? China? China will crack down harder than the US, only they will kill people. The Middle East? Africa? South America might have the best chance but they would face economic pressure from the rest of the world. How committed are you to keeping and using your bitcoin, would you start your life over half a world away, to a place that may ban bitcoin next year?

There is a flaw in the rational that because bitcoin is a superior monetary technology to our current debt based monetary system that it will take over the industry as past superior technology and that is in the foe that it faces. Not At&t, and MCI, but the combined might of all of the world governments, not to mention world banks. That is not to say the technology will die, only the perceived savior and equalizer.

Like with national defense and military weaponry, the government can effectively ban the use and ownership of a technology, but that doesn't prevent them from using the technology themselves.

I truly hope I am wrong, and bitcoin is wielding a invincible golden sword, but we must look at this rationally and not get swept up in the hype.

I have not changed my mind on holding a small allocation to bitcoin. Bitcoin has proven that it reacts well to monetary turmoil and there may be a wonderful trading opportunities in what I believe is going to be a very tumultuous decade to come. This opportunity may be fleeting, a time between when people rush to the crypto currency for safety while fiat currencies are faltering, but before it is outlawed.


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