Thursday , 17 August 2017


Bitcoin vs. the U.S. Dollar – No Contest – Ever!

Ever since the Federal Reserve embarked on its easy money campaign, everyonebitcoin-435cs061112 and their mother has been on a crusade for an alternative reserve currency. [The euro and China’s yuan have been talked about – and dismissed – as realistic contenders and]…during the world’s desperate search, the Federal Reserve has just  continued printing more money. That has only intensified the desire for an  alternative. Enter Bitcoin. Ultimately, however, it is all about greed – not a genuine interest in a fundamentally stronger alternative to  the status quo – that’s driving Bitcoin prices so forget Bitcoin being a contender as an alternative currency. At best, it’s a speculative investment, and a very speculative one at that.

So writes Louis Basenese (www.wallstreetdaily.com) in edited excerpts from his original article* entitled Beware of This Insidious  New Currency Scam.

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Basenese goes on to say in further edited excerpts:

Bitcoin was envisioned in a 2008 paper by the pseudonymous developer, Satoshi Nakamoto,  and launched in 2010. It’s  essentially a peer-to-peer electronic cash system that can be transferred  through a computer or smartphone without an intermediate financial institution. That sounds incredibly interesting but…it is nothing beyond that of a curiosity. Any talk about Bitcoin being a potential alternative currency is a function of  desperation, not rational thinking – even  if it keeps garnering more and more notable support.

Last  week, BitPay – an Atlanta-based startup that processes payments merchants  receive in Bitcoins – secured $2 million from a venture capital firm backed by  PayPal’s founders and a  few weeks before that, Coinbase, an 11-month-old startup that also facilitates Bitcoin transactions, secured $5 million in capital from another Silicon Valley heavy-hitter, Union Square Ventures.

Despite  such strong votes of confidence, though, Bitcoin stands zero chance of being a legitimate, widely adopted currency. Here are three key reasons why:

~Bitcoin Pitfall #1: In  God Nobody We Trust

No  doubt, the atheists who cringe over the fact that U.S. paper money says “In God  We Trust” love the fact that Bitcoins pledge no such allegiance. In  fact, many supporters of the digital currency tout the lack of any centralization or regulation over Bitcoin as a key selling point. Combine that with a finite supply of Bitcoins (21  million), and it seems like no government can inflate the currency.

I’ll concede that a world without inflation would be wonderful and Bitcoin is set up to make that a possibility but, without regulation, and the guidelines and legal protections that come with it,  consumers have no reason to trust the currency – and  if we can’t put our trust in a currency, we won’t use it. Simple as that. Furthermore, if you think governments around the world are going to sit on the sidelines and allow an unregulated, digital currency to gain momentum, you’re crazy.

The  Department of Homeland Security has already dropped the hammer on Mt. Gox, the  world’s largest Bitcoin exchange, for operating a money-transmitting business without a license – and that’s only a preview of what’s to come so this whole notion of an unregulated currency is really just a pipe dream. While  citizens might want it, world governments won’t allow it. Whether  or not that’s fair doesn’t matter. It’s reality.

~Bitcoin Pitfall #2: No Guarantees

In  addition to lacking trust, we have no guarantee that Bitcoin won’t be replaced.  I mean, what’s going to stop a better Bitcoin from coming onto the scene? If the limited supply drives up prices to untenable levels, there’s nothing to stop  the creators from simply creating more Bitcoins. They say they won’t. But do you actually trust  them? Put another way, would you be willing to accept your next paycheck in Bitcoins? Yeah,  I didn’t think so.

~Bitcoin Pitfall #3: No  Inherent Value

Haters  continually deride the U.S. dollar because it’s not backed by anything of  value. What’s  the difference with Bitcoin? Just  like there’s no inherent value in paper, there’s no inherent value in a bunch  of ones and zeros in cyberspace. That  means there’s no way to figure out what a fair price is for a Bitcoin – and that’s ultimately the digital currency’s undoing. It’s nothing more than a  speculation – and a wild one, at that.

When  Bitcoin first hit the market, it had little to no value but the price of each  coin quickly soared above $25. Then it collapsed back to $5 again. After a slow and steady recovery, prices zoomed above $250 in the wake of the asset  seizure in Cyprus and, sure enough, they cratered back down to Earth again. Notice  a pattern? I’m  sorry, but people want a currency with a stable value, and that’s something  Bitcoin simply can’t offer.

Bottom  line:

The only reason people won’t stop talking about Bitcoin is because of the  chart above. Forget its “sound theoretical underpinnings,” as Henry Blodget of Business Insider notes. Greed is what’s  driving interest right now.

Investors  see an opportunity to make a quick buck on a far-fetched “asset,” just like they’ve  been doing for centuries. Tulip bulbs, anyone? The fringe set of retailers that accept Bitcoins are no different. They like  the currency because it allows them to avoid interchange fees and it also  immunizes them to the risk of chargebacks. (Like cash transactions, Bitcoin payments can’t be reversed.) In  other words, it lines retailers’ pockets with more money.

Ultimately,  it’s greed – not a genuine interest in a fundamentally stronger alternative to  the status quo – that’s driving Bitcoin prices so forget Bitcoin being a contender as an alternative currency. At best, it’s a speculative investment, and a very speculative one at that.

Ahead of the tape,

(Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.)

*http://www.wallstreetdaily.com/2013/05/20/investing-in-bitcoins/

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