My Thoughts on Last Night’s BTC Crash and a Guest Post on “Why Bitcoin Will Succeed”

I haven’t seen action in Bitcoin like we saw last night since earlier this year in the spring when the price went from $10 in January to $260 in April, and then crashed down to $50 before stabilizing in the $80-$120 range for months before beginning the latest parabolic move. I was so taken by the action in BTC China last night that I wasn’t able to sleep until 5am Rocky Mountain time, trying to buy what I could at the best prices possible. I saw every single tick. It was a crazy evening.

Yesterday I posted that while I thought BTC was at the lower end of the range at $650, there was the potential for some near-term headline risk. I thought that it might come from the U.S. banking system, but instead it came from China when they banned new renminbi deposits into the leading global exchange BTC China. While I am not saying that the price will now quickly launch to new highs, there was complete and total panic in the air last night. No question about that. In addition I tweeted that:

Now I think we have a much more positive setup going forward, although a similar period of consolidation such as we saw earlier in this year is likely. The news out of China cannot get any worse, and BTC China as far as an exchange and price discovery mechanism is basically dead. The big risk now is that other nations take similar actions, but the sentiment is now sufficiently bad and people expect bad news. Last night represented the most BTC I have bought since the spring crash.

In light of all this, a reader of my blog going by the handle Anon Wibble posted an excellent comment and I have decided to republish it here. Would love to get reader feedback as well. Enjoy!

Bitcoin will prevail. This isn’t just another e-currency, this is an entire framework for communicating information and money unlike no other ever before. This is the biggest revolution since linux and the more you use bitcoin the better and more complex you realise it is.

Look at the following things:

1) bitcoin can do everything a bank can do

2) while it’s true that unlike credit cards, btc has no way to chargeback claims, also consider that in the past chargeback scams have defrauded business through payers likes paypal etc. Chargeback doesn’t prevent fraud at all, it moves the person being defrauded from one person to another. Also consider that escrow services do chargeback for far cheaper than credit cards do.

3) bitcoin isn’t just a currency it’s a protocol that can be used to exchange information, nowhere in the headlines is this even mentioned files and information can be exchanged through bitcoin nobody has even looked at this yet

4) JPMorgan wouldn’t have tried to patent their own version of bitcoin 170 times, if they didn’t think crypto currency wasn’t the future

5) Russians wouldn’t have coprighted the bitcoin logo if there wasn’t money in it

6) The government may well attempt to block bitcoin, and attack it by using rival crypto currencies to attempt to dilute the impact, however this will NOT work because bitcoin protocols can be upgraded.

7) The government may well try and block the bitcoin protocol using port block and active packet inspection systems like ingress and egress, however, again, this will NOT work because bitcoin can upgrade it’s protocol. In the worst possible scenerio some way to block it will be found within a country. When that happens you can use dark web like TOR and proxies to bypass this censorship.

8) Bitcoin IS backed by tangibles. You can buy things with bitcoin you can’t buy with ANY other currencies on the dark web. Despite what mainstream media says this will continue to provide bitcoin with liquidity. Just stop and think about this for a second, what is more valuable, something that can be exchanged for drugs or gold you have to take down to a pawnbroker ? Which is easier to exchange?

9) Bitcoin just needs to get to a critical mass where a few companies provide all items you need to purchase to survive, as soon as that happens, bitcoin will be self sufficient and these companies will be able to keep btc off balance sheet where they will not be obliged to pay taxes, this is as big of an incentive as any for a seller. When this happens, there will be an entire ecosystem of commerce which is not answerable to the government. Furthermore there is NOTHING the government can do about it. When this happens, the government will be cut off from their taxes and will no longer have the credit rating to finance institutions that censor free speech and there WILL be a revolution. Currently over 22,000 companies accept bitcoin, and that number is increasing every day!

10) Bitcoin can only fail for either of two reasons:
a) a rival crypto currency offers better features
b) all of the dark web is closed down which is the source of bitcoin’s liquidity / or the government somehow censors it

Addressing these points in order: a) will not occur because btc is an upgradable protocol and if such a thing occurs, or a flaw in btc is found, the protocol will upgrade overnight. b) Given that after 4-5 years the government is _still_ trying to shut down pirate bay in the lightweb – and they are still failing, likewise with wikileaks. In the dark web only one of 200+ dark websites they managed to close down was SR, and that was only because the feds got lucky, and busted some guy stupidly ordering fake passports over the net. NSA cannot crack RSA encryption, if they could, why would they be installing backdoors into everything they can? Think about this logically for a second. RSA / SSL is something that US intelligence use to secure their data, would they use it if it was compromised?

In summary, the best the government will be able to do is try and scare people off bitcoin using newspapers like someone trying to scare flies of a cowpat, and everytime the flies will return and there’s nothing they can do about this. When bitcoin comes of age, it will be the most amazing financial revolution the world has ever seen, which will be as significant and as influential as Unix was to computing.

In Liberty,
Mike

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19 Comments

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  1. One point not addressed here:

    A crucial assumption is that businesses will provide services for Bitcoin, which is completely reasonable and as we have seen is a growing trend. What if banks refuse services to those businesses that accept Bitcoin?

    And to be fair, this is not an “if” – it has already happened as Mike reported earlier with Chase.

    This is the weakness of the writer’s argument. If BTC is so revolutionary and such a threat to the status quo, SSI’s will shut it down amongst all businesses except those that transact exclusively in BTC.

    His counterargument would be that there will be enough businesses transacting only in BTC. I certainly find this improbable but that is just my opinion. Even if possible, it implies that there is a fully BTC market for first order goods, as well as second order. This does not currently exist, and until it does BTC is susceptible to .gov interference.

  2. I agree that Bitcoin is here to stay. And, even though I didn’t make any purchases during the highs of the past couple of months, I’d be lying if I said I wasn’t a little bummed today. I just have to remind myself that this is probably going to be a long hard slog to get BTC more ubiquitously used and recognized, plus the fact that central banks and TBTF banks are going to be at war with it every step of the way.

    As for me, I’m buy, hold, use and proselytize…

    Here is an example of someone (Andreas Antonopoulos) who has an immense grasp of what BTC is as well as its potential to be a huge player in world economics.

    It’s a bit long, but if you want to really up your “understanding” game of BTC, I suggest watching the whole thing. One of his most profound statements in the video is, “if you’re thinking that BTC is the money of the internet, you’re thinking too small. BTC is really the internet OF money.” I still can’t entirely wrap my brain around that statement, but as I expand my understanding of BTC as a protocol, means of money transfer, technology, etc., I’m thinking there’s probably a lot of truth in what he’s saying.

    Check it out here: http://www.principle7.com/2013/12/17/want-bitcoin-expert-watch-guy/

    Cheers,

    Brad

    • Brad, that is exactly how I look at it. I don’t have very many bitcoins, but the ones I have I got at a low enough price that I’m allowed some calmness in spite of recent events. I’d probably be a lot more worked up if I had bought in at $1100. My focus has shifted to SPENDING bitcoins and doing so regularly. My current strategy is to buy my groceries using the Gyft cards at Whole Foods market, which is our regular market anyway. It works just as easily as using that super popular Starbucks smartphone app. Once Coinbase or Blockchain.info makes a wallet with a ‘spend and repurchase’ in one step, we will be freed from even caring about the exchange rate at all. Until that happens, I rebuy any bitcoins spent at Gyft immediately so as to not deplete my holdings. It’s working really well for me.

      • So here is a perfect opportunity to encapsulate my argument from above into a tangible, real world example.

        If I’m understanding your process (correct me if not!) you are selling Gyft BTC in exchange for gift cards to Whole Foods (for ex). That’s great! Its very exciting that this is possible…for now.

        Now, what do you think Gyft does with your BTC after the transaction is complete? They convert it into $, and then deposit those $. The other possibility is that they hold the BTC. If you think any successful firm would be able to do this, you are deluded. Can they pay Whole Foods for the gift cards with BTC??

        If/when .gov becomes sufficiently threatened by BTC, it has the ability to refuse banking services to Gyft. Do you think Gyft will continue to accept BTC at that point?

        This is the point missed by the writer in Mike’s article, and by many of the commentators here.

        • I understand your concerns… as China has shown, it isn’t hard to find choke points to slow down or even mortally wound Bitcoin. Using Gyft is the best I can do for now. At least I’m making regular purchases on the exchange for reasons other than speculating and that extra bit of velocity might add up. I’ve asked a local food coop to consider accepting BTC and they are looking into it.

        • Gyft, by policy, will keep all profits from Bitcoin sales in Bitcoin at least until the end of 2014.

          • Well that’s even better! I’m having some trouble with their Android app, so I will confirm that as a part of our back & forth.

  3. I share view on the disruptive effect crypto currencies will have due to the usage value it brings – it’s a natural evolution of money when a potentially secure and mature Internet is rather adopted globally. The timing with the 80 year old ending world currency USD paradigm is striking.

    It’s all historically really beautiful and gives true enthusiasm and optimism to this bankster globe we currently live in.

    Question
    Who do you think is buying BTC in China now from all panicking sellers?

  4. Bitcoin—the internet of money.
    Love it.
    We’re into freedom.
    I’m no geek, but how much more appealing can money get?
    Time to admit the evil of bank & government behavior.
    They will do all they can to block it, but game over. “They” have no control now.
    Our path – employ bitcoin.

    • Whatever I can do to secure and grow the resources I’ve slaved to earn up to this point is what I’m going to do. And, I figure the more of us in this movement that share and encourage one another, the wider and faster the word spreads. Employ Bitcoin!

  5. If there is any question of Chinese not buying bitcoin currently, they can go to http://www.fiatleak.com and see in real time the Chinese are buying bitcoin again. For a couple of days they completely stopped buying after the government announcement, but the Chinese people always find a way!

    • I agree. Money fungible. Too many dollars sloshing around over there. They will find their way out of country into BTC. I half expect the old “Nigerian Prince” email to morph into the “Chinese Housewife” email, except the offer while less lucrative comes totally legit.

  6. Bitcoin has all the benefits of a regular currency like the US dollar and of a commodity like Gold.
    Like the US dollar, Bitcoin is much more liquid than Gold.
    Like Gold, Bitcoin has a larger intrinsic value than the US dollar.
    Gold fanatics like Peter Schiff need to invest more in an alternative to Gold & US dollar –> BITCOIN

    • Nothing has intrinsic value, nothing. All value is subjective.

      Ignoring this mistake in your argument, how do you figure that Bitcoin has a “larger value” than the US dollar? Tell me, which instrument do you purchase more goods/services with? Disregard the question if you don’t live in America because obviously that changes my counterargument..but if you do live in America, be honest – which is it? That answer the question of which has greater value.

      Of course, acknowledging again that all value is subjective, perhaps your answer is still BTC. But now, expand this out to the entire population of the US. Are you claiming that the entire population, on net, obtains more goods/services from Bitcoin (or even has the ability to) than it does from dollars?

      And BTC has few of the benefits of a “regular currency like the US dollar”. Unlike FRNs, they are not cash-anonymous. Unlike FRN’s, they are not accepted (currently) for nearly all available goods and services in the world.

      Don’t mistake this as an apology for FRNs. But there is a lot of poorly thought out comments here about BTC.

  7. If you’ve read all the articles at keiserreport and jsmineset.com about the coming bail-ins, then you know there will be a time in the not-too-distant future when large numbers of people will realize that it’s better to have your money in bitcoins bobbing violently up and down and giving you stomach aches than it is to…welll….just not have your money any more at any price.

    • Man, I know that’s right. Amen, to that. It’s easy to get distracted by the roller coaster ride, but in the end, what you’re saying about bail-ins is entirely true and baked into the cake. Just look at what happened to the interest in BTC back in April when Cyprus did their bail-in. It’s going to get ugly and I surely don’t want any of my “slaved for” fiat currency sitting in some bank that’s going to steal it and offer me utterly worthless “bank stock”.

      principle7.com

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