5 Ways BitCoin and CryptoCurrencies Could Collapse

Monday, October 23, 2017
By Paul Martin

by James West
OCTOBER 22, 2017

Jamie Dimon called BitCoin a fraud last week, and he’s right. But only in the context that all fiat currencies are arguably fraudulent, and are only made viable by the collective faith and confidence of the society in which they transfer and hold value. The United States dollar is the most visible case in point. If the balance sheet of the United States was forced to comply with Generally Accepted Accounting Principles, (GAAP) or even the more lenient International Financial Reporting Standards (IFRS), it would have been sold off to creditors years ago for pennies on the dollar.

Fortunately for the United States though, having the biggest military pointed at the heads of the international lending community, and having them pregnant themselves with USD, it is easy to convince the rest of the world that this debt is sustainable.

But right now, the faith and confidence being diverted away from dollars and into cruyptocurrencies of every imaginable stripe (led by BitCoin) is rampant, and shows no signs of abating. (DISCLOSURE: Midas Letter Financial Group is actively financing Cryto Currency and BlockChain technologies). This suggests that the world is in fact clamouring for an alternative to the elite financial control of currencies, and is convinced that the solution lies in cryptocurrencies resident on blockchain technology due to its “decentralized” nature.

While this is foolish and myopic wishful thinking, that won’t stop crypto and blockchain from having an extended day in the sun, of which the dawn is only beginning. So, just as the tulip bubble that Dimon refers to made millions for early investors before collapsing, the same will likely unfold with BitCoin, Ethereum, BlockChain, and every other manner of coin, token and digitally distributed financial ledger.

So while we dutifully stampede after every and any deal with Bit or Block in the name somewhere like everybody else, we will not be left holding the proverbial bag of fragrant paper when the music eventually stops. And stop it most surely will.

Why? Well, here’s a few reasons:

1. HyperInflation: The beauty of BitCoin we are told, is that there will only ever be 21 million coins made, and so it is perfect for a global financial system. That’s arguably true, if we were all to agree that BitCoin was going to be the global currency we all used. However, that is not going to happen.

In fact, the rate at which new coins are being issued is enough to make your head spin. Here’s a hypothetical question: What’s to stop every tech weenie who can code from starting his or her own currency?

At what point will the entire financial community wake up and say, “Wait a sec!”. It happened with tulips, and it happened with the Dot Com bubble. It happened with real estate, and the next “black swan” furiously paddling into view is Crypto.

With no limit on the number of CryptoCurrencies being created, how soon will it be until the world realizes that this most simple of threats is also the most real.

2. Fraud: The BlockChain is immutable, we are told. It can’t be tinkered or toyed with without every single node “knowing” that such has occurred.

Oh yeah?

That’s interesting. So how did all this BitCoin go missing when Mount Gox collapsed? There are still over 650,000 BitCoins missing. A company called Chainalysis, who was retained by Mt. Gox bankruptcy trustees to find the coins, say they know exactly where they are, but have provided no proof. Why doesn’t every single node “know” where it is?

The Rest…HERE

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