Long-term I'm BEARISH on Bitcoin

In the short-term, I have no idea what Bitcoin will do.

In the medium-term, I’m bullish on Bitcoin.

Long-term I’m bearish on Bitcoin.


My approach to Bitcoin in the short-term is that Bitcoin is extremely volatile – the most volatile asset I have ever speculated on. What it will do from day to day – not to mention hour to hour – is beyond my ability as a trader to anticipate, let alone to predict. So, I don’t trade Bitcoin.

I buy and hold Bitcoin. I’m a “hodler”. If Bitcoin were a real asset, I would call myself an investor. But, I suspect that Bitcoin does not have real asset value. Therefore, I’m not an investor; I’m a long-term speculator.

As a buy-and-hold Bitcoin speculator, I’m well ahead of the game. And going forward into the medium term (which I will try to define), I think Bitcoin will continue to make money for me, and for other hodlers. I have never sold any of my Bitcoin, and I don’t expect to start selling for months, or maybe longer.

The medium term in Bitcoin’s remaining lifespan depends entirely on the US government’s creation and roll-out of their Central Bank Digital Currency (CBDC), typically referred to as “FedCoin”. The Federal Reserve System’s FedCoin (and the total-surveillance society that FedCoin will support) will not tolerate competition from Bitcoin (and the partial anonymity that Bitcoin supports). Consequently, the US government will destroy Bitcoin, while co-opting and utilizing the distributed-ledger technology underlying Bitcoin.

In my estimation, this destruction of Bitcoin will occur when the government is ready to launch FedCoin. And not long afterward, in the wake of that launch, every other cryptocurrency will be destroyed.

I’m guessing now – but I would say that Bitcoin is well past the halfway point in its lifespan. From its present level just shy of $60,000, it appears to be ready to surge ahead in another leg upward, possibly to the $80,000 level. I intend to hold my Bitcoin position and ride that leg higher. But, I will have one eye on the exit, going forward.

Regrettably, I no longer have confidence in my past prediction of $1-million-dollar Bitcoin. I don’t see that happening, ever.

Here in the US, the launch of FedCoin and the destruction of Bitcoin have not occurred already, because of powerful opposition from (1) the US banking industry, (2) the payments-processing industry, principally Visa and MasterCard, (3) cryptocurrency traders and hodlers, and the industry that supports their activities, and (4) libertarians who fear the dystopian world that FedCoin will usher in. These groups will fight tooth-and-nail to protect their various interests, and these fights will delay what the US government otherwise would have done by now.

In China, where opposition to the government is routinely stamped out, the ChiComs have moved ahead smoothly to impose their CBDC on the world’s largest national population. The same would have happened here already, were it not for the opposition of the groups mentioned above. But, all of that opposition will be overcome; and when that occurs, it will mark the end of the “medium term”, and the end of my bullishness on Bitcoin. By then, I hope to be completely out of cryptos, and 100% into hard assets.

After the US government outlaws Bitcoin for US citizens, or taxes it into oblivion here in the United States – if Bitcoin manages to survive as a trade-able asset anywhere in the world, it will be less valuable and less liquid than XRP is today. The era of Bitcoin will be a curiosity we look back upon, like the Tulip Mania in Holland in the 17th century.

In the post-Bitcoin era, those of us who played a dangerous game with a dangerous asset and managed to make a few bucks in the process, will grin and tell stories to our grandchildren. Those who stayed too long at the party and got crushed by the introduction of FedCoin, will suffer the consequences. In some cases, the suffering will be great.

Jim Rickards has written extensively on the negative aspects of Bitcoin. In the following piece from Addison Wiggin’s The Daily Reckoning, Jim summarizes the advantages and disadvantages of the coming FedCoin, and he connects the predicted demise of Bitcoin directly to the development of FedCoin.

After removing certain items of advertising, I have copied-and-pasted Jim’s comments, below.


Addison Wiggin banner

War on Cash: The Next Phase

  • Anyone who controls the money controls political power, the economy, and people’s lives”…
  • The bright side of central bank digital currencies…
  • The dark side of central bank digital currencies…

Portsmouth, New Hampshire
April 2, 2021

Dear Clint,

With so much news about an economic reopening, a border crisis, massive government spending and exploding deficits, it’s easy to overlook the ongoing war on cash.

That’s a mistake because it has serious implications not only for your money, but for your privacy and personal freedom, as you’ll see today.

Cash prevents central banks from imposing negative interest rates because if they did, people would withdraw their cash from the banking system.

If they stuff their cash in a mattress, they don’t earn anything on it; that’s true. But at least they’re not losing anything on it.

Once all money is digital, you won’t have the option of withdrawing your cash and avoiding negative rates. You will be trapped in a digital pen with no way out.

What about moving your money into cryptocurrencies like Bitcoin?

Governments Won’t Surrender Their Monopoly Over Money

Let’s first understand that governments enjoy a monopoly on money creation, and they’re not about to surrender that monopoly to digital currencies like Bitcoin.

Libertarian supporters of cryptos celebrate their decentralized nature and lack of government control. Yet, their belief in the sustainability of powerful systems outside government control is naïve.

Blockchain does not exist in the ether (despite the name of one cryptocurrency), and it does not reside on Mars.

Blockchain depends on critical infrastructure, including servers, telecommunications networks, the banking system, and the power grid, all of which are subject to government control.

But governments know they cannot stop the technology platforms on which cryptocurrencies are based. The technology has come too far to turn back now.

So central governments don’t want to kill the distributed ledger technology behind cryptos. They’ve been patiently watching the technology develop and grow — so they could ultimately control it.

Anyone who controls the money controls political power, the economy, and people’s lives.

Enter the central bank digital currency, known as CBDC…

Not Exactly Cryptos

CBDCs use the same underlying distributed ledger technology that cryptocurrencies use. But they’re different from cryptocurrencies like Bitcoin, although the differences are often overlooked by the crypto crowd.

Unlike cryptos, CBDCs aren’t new currencies. They’ll still be dollars, euros, yen or yuan, just as they are today. But these currencies will only be digital; there won’t be any paper money or cash allowed. Only the format and payment channels will change.

Balances can be held in digital wallets or digital vaults without the use of traditional banks. A blockchain is not needed; the CBDC ledger can be maintained in encrypted form by the central bank itself without the need for bank accounts or money market funds.

Their greatest appeal is their convenience and lack of credit card transaction fees. Payments can be done with an iPhone or other device with no need for credit cards or costly wire transfers.

Who needs bank accounts, checks, account statements, deposit slips and the other clunky features of a banking relationship when you can go completely digital with the Fed?

An individual Fed account on your mobile phone could also eliminate the 2.5% fees that merchant acquirers charge retailers to process credit card transactions. Payments, in general, would be faster, cheaper, easier and more secure than they are today.

The Federal Reserve has been working with scientists at the Massachusetts Institute of Technology to develop a dollar form of CBDC.

Big Banks Beware

The roll-out of this new digital dollar may still be a few years away, but the implications are enormous. There’s more at stake than just customer convenience.

Railroads were one of the largest sectors of the economy from 1870 to 1930 but were mostly bankrupt by the 1970s. General Motors has been rescued from bankruptcy more than once by the U.S. government.

General Electric was once an industrial giant and now is a shell of what it once was. Oil company stock prices have taken a beating from the threats of the Green New Deal. Things change.

Today banks and other financial institutions dominate stock market valuations alongside the tech sector. CBDCs may be coming for the banks.

A reaction to the proposed change has already begun. Major banks fear they will be completely cut out of the payments system. MasterCard and VISA are also concerned that their payment channels will be made redundant.

Trillions of dollars of wealth in the form of financial institutions’ stock prices for JPMorgan, Citi, MasterCard and VISA could be wiped out as the new digital payments technology takes hold.

Goodbye, Privacy

You might not have much sympathy for JPMorgan, Citi, MasterCard and VISA, but what do you think would happen to the stock market if they crash?

That’s not the only potential fallout from CBDCs. There’s a dark side. If there is no cash, there is no anonymity.

Governments will know your whereabouts and habits at all times simply by tracking your use of funds through the CBDC payment system.

This can already be done, to some extent, by tracking credit card transactions, but the CBDC system will make state surveillance more pervasive.

China is leading the way with CBDCs. And this kind of surveillance is the real driving force behind the Chinese CBDC.

China already uses facial recognition software, mobile phone GPS tracking and the purchase of plane or train tickets to track their citizens. This surveillance can be used to detect anti-state activities and to arrest dissidents or anyone who doesn’t strictly follow government orders.

Global Control

Now, China wants to take its CBDC rules and make them the global standard.

Even if the U.S. and Europe don’t agree, it’s likely that many Asian and African countries might agree in exchange for aid from China. That aid can take the form of access to scarce COVID vaccines, for example.

Once China’s totalitarian surveillance software is perfected, they can make it the standard for much of the world and facilitate intrusive 24/7 surveillance by every dictator and autocratic leader in the world.

No doubt China would arrange to have access to the same surveillance information it was providing to client states. The end game would closely resemble George Orwell’s dystopian novel, 1984.

If cash is gone, there is only one way to escape digital surveillance of wealth — physical gold.

Regards,

Jim Rickards
for The Daily Reckoning

P.S. Physical gold (and silver) that you directly control is key. I strongly recommend you have at least 10% of your portfolio in physical gold and silver as the war on cash enters another phase.

I’ve got my gold. Have you got yours?


Thank you for reading The Daily Reckoning! We greatly value your questions and comments.
Please send all feedback to feedback@dailyreckoning .com.

James G. Rickards is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street.
He is the author of The New York Times bestsellers Currency Wars and The Death of Money.

11 Likes

Excellent post, Clint! I’m very naive to cryto (and trading in general) but I found your thoughts and the article you quoted very interesting!

If the launch of the ‘Fedcoin’ were to happen, do you think Bitcoin and other cryptocurrencies may still have a space in Europe and other parts of the world, much like CFDs? I know it’s a bit like comparing ‘apples to oranges’ but if Bitcoin (and others) do manage to survive in other area’s of the world, then maybe it has a chance of holding some value and not being wiped out? Or even continue to grow in value (perhaps at a slower rate)?

Sorry if my questions seem silly, your post sparked my interest!

Best regards,
Phill

1 Like

Hello Phill,

If the US government decides to launch FedCoin, and then decides to eliminate all competition to their new digital dollar, they will certainly have the power to cripple Bitcoin. Bitcoin at, say, $100,000 (just to pick a figure) could be driven down to $50,000, then to $20,000, then to $1,000. Bitcoin would still exist, but as a speculative instrument it would be useless.

A couple of days ago, I read an interesting article on the mystery surrounding the identity of Satoshi Nakamoto. One paragraph in that article relates to our discussion in this thread –

Why Satoshi might want to remain anonymous

If the real Satoshi lives and breathes, there are some compelling reasons to stay hidden. The US government has a well-established track record of prosecuting individuals audacious enough to invent a competitor to the dollar. As The New Yorker reported, the FBI has declared it to be “a violation of federal law for individuals . . . to create private coin or currency systems to compete with the official coinage and currency of the United States.” In fact, federal prosecutors pursued a range of charges against the founders of a startup called e-Gold in 2007, claiming that their outfit didn’t explicitly prevent money laundering or other crimes.

The US government jealously guards their control over the only legal currency in this country. Their control extends to the power to corrupt, debase, inflate and counterfeit the US dollar at will.

The government says, in effect, ’This is the only currency you may use. However, we may drive its value to zero, as we see fit’.

Isn’t it ironic, then, that many businesses refuse to accept the currency that the US government asserts to be “legal tender for all debts, public and private”?

I’ll quit now, before this turns into a full-blown rant.


If you would like to read the Satoshi Nakamoto article I referred to above, here’s a LINK.

1 Like

Any thoughts on XRP?

Unlike Bitcoin, it supposedly has utility.

Admittingly the guy who told me was heavily invested (with obvious bias), but it definitely has piqued my interest in buying some.

Supposedly the whole financial system is going to using XRP for something (beyond my level of understanding).

Are all crypto doomed, or were you talking specifically Bitcoin?

1 Like

Hi Clint,
Before I understood Bitcoin, I followed the logic of Jim Rickards (and Mike Maloney’s silver rants) so we were well into gold and silver as insurance against the ultimate day of reckoning. Now in 2020 we just added Bitcoin (and XRP) as further insurance.

With the sort of seriousness that Elon Musk affords to Dogecoin, any of these following events predicted by modern Youtubers will have us retiring as multi-millionaires:

Silver to $5,000 an ounce.
XRP to $1,000
Bitcoin to $5M
Gold to $50,000 an ounce.

Meantime, in the real world, we just try to earn a living and maintain a hobby and interest in Forex. :smiley:

1 Like

So basically we’re fucked.

Attempting to read between the lines of your post, I gather that you were being facetious when you offered those numbers.

I’ve seen some large numbers bandied about, but not as large as yours —

  • Silver – 200X the current price.
  • XRP – 877X the current price.
  • Bitcoin – 83X the current price.
  • Gold – 25X the current price.

• Jim Rickards suggests $10,000 (maybe $15,000) gold, and whatever silver price a reasonable G/S ratio might suggest. Your $50,000 figure is really out there.

• Many of us, including John McAfee and myself, predicted $1 million Bitcoin. I’ve not heard of a
$5 million prediction. I have rescinded my million-dollar prediction, as mentioned in my post, above. (Meanwhile, John McAfee has reneged on his contract with the TV-viewing public.)

• As for XRP, I bought some at 22½¢ per coin in early January, and now the damn things are marooned on Coinbase. I can’t sell them back to Coinbase, and I can’t trade them on Coinbase for any other coin. All I can do is send them somewhere. Some time ago, I inquired on this forum where I might be able to park my XRP, with the ability to buy and sell normally. The answer I got was Kraken. Then Kraken (like Coinbase before them) shut the window on XRP. So, let me ask you: As a holder (and apparently an enthusiast) of XRP, how do you plan to dispose of your XRP, when the time comes?

• You should add Dutch tulip bulbs to your list. – I know, that was uncalled for. :grimacing:

Hi Clint,
My post was tongue in cheek, but factual (well, I saw it on Youtube videos). for silver, my number was $5,000 an ounce, not $50,000. XRP to $1,000 - seen on two Youtube videos (I watch far too many of them). Bitcoin to $5M - I may stand corrected but that was either Michael Saylor or Raoul Pal. Gold to $50,000 - can’t remember where I heard that one, but I thought it was a bit steep too.
XRP. Pure luck, I am sure, but the first exchange account I opened to buy crypto was Bittrex. I sold some XRP a few days ago and just placed a limit order to sell some more at $1.65 (triple cost). Still have 80% of original XRP tokens. At one stage they were 13% of portfolio, and after recent sell off and price change, they are now about 25% of portfolio. Still miffed about selling the BTT in December though :grimacing:

Hi,

I’m still curious to know where you sold your XRP.

As I mentioned, my XRP are stranded on Coinbase at present – which is fine, as long as the price keeps heading higher. But, looking to the future, I want to be able to cash-out quickly, if things appear to be heading south.

So, I’d like to park my XRP on an exchange that – unlike Coinbase – supports all aspects of XRP.

Any suggestions?

Sorry I did not say. I did XRP/USDT trade in our Bittrex account. Sold 4,800 XRP @ USDT equivalent of $1.06. Then bought ADA and BTC with the proceeds.

Thanks. I’ll check out Bittrex.