Bitcoin and the Irony of “Real” Money (SLV)
One of the most fascinating aspects of the Bitcoin phenomenon is its ability to deflect investor attention from weightier matters and create such a frothy interest in something that, we feel, will ultimately lead to oblivion.
That’s a fully packed sentence, we know. So let’s offer a little exegesis.
First, why call Bitcoin a ‘phenomenon’? After all, its promoters and staunchest believers tell us it’s real money, not the phony fiat fraudulence we’ve grown accustomed to.
And because there’s a limit to how much of it can be made and the speed at which it can be produced, there are effective controls in place with cryptocurrencies that would never permit the kind of free-for-all money printing excesses of central banks that we’ve witnessed over the last two decades.
And we say, fine. On that count, hurray for Bitcoin.
But as we’ll explain in a moment, it’s not enough.
We also said ‘deflect attention’ and ‘create frothy interest’ – as if this were some kind of tulip craze. But from exactly what is it deflecting attention, and why can’t it last? The stuff is already being used, after all, to buy real things in real time.
And we answer, yes, Bitcoin is, indeed, used for many purchases of real things, though it’s not as widely accepted as many would believe. That said, it may come to be as current as dollars and cents in the near future. No problem there.
The issue is that in arguing Bitcoin as a genuine alternative to paper dollars or Euros or Pesos or whatever, its defenders are employing a straw man tactic that simply doesn’t pass muster.
For there is no argument that fiat currencies will eventually see their day – particularly in light of the egregious Q.E. programs undertaken by central banks the world over since roughly the year 2000. The amount of liquidity pumped into the system since that time has Weimar stamped all over it, and it’s only a matter of time before folks understand that their paper is … well, just paper. And at that point, paper money will be used for commode hygiene, and some other means of exchange will step in to take its place.
So, yes, you can beat the fiat currency concept with all the sticks at your disposal, but that doesn’t make Bitcoin the necessary, logical alternative.
Because Bitcoin is not portable.
And as we’ve stated here before, that one quality is a steadfast requirement of all money, a sine qua non, and that’s not going to change.
Consider – in order to make a purchase, Bitcoin requires 1) an electronic device that’s fully charged to be at one’s disposal, and 2) another electronic device, fully charged and available to the seller, in order to complete the sale. Under no other conditions will Bitcoin be employable as a means of exchange.
And with that, friends, we arrive at the crux of the matter: just how much faith do you place in the future of technology and science.
That is, do you believe that there always be a worldwide web? Will it always be in service and available to all those who require it? Will electricity, as we’ve become used to it, be available everywhere and always?
The thought that things will continue as they always have, and even improve and become more reliable, is a luxury that we in the West have afforded ourselves for too long. In fact, we at Normandy believe that such thinking is downright delusional, and that preparations for a calamitous outcome that removes us temporarily (a month? two months?… a year?) from our current mode of existence, are not only prudent but necessary.
Given the current world order and the speed and direction toward which the great powers of the world are driving, it’s simply laughable to think that a conflict of global proportions is avoidable in the decade ahead.
And that means Bitcoin will not be able to function as money.
For there will be no battlefield wars between the great powers in the coming conflict. No more Syrias. No Crimeas. There will be only all-encompassing, knock-the-enemy-flat apocalyptii that return life to a form and speed that existed roughly a century ago – if not more.
Not everyone will enjoy an electric light at night. Not everyone will wash with running water. And fewer still will travel on the durable chassis of a Ford F-150.
Sound the Biblical Alarum!
On that day, we will all return – for some time at least – to a barter driven economy in which the only widely accepted means of exchange will be precious metals – gold and silver.
Which brings us back to our opening statement regarding Bitcoin serving as a ‘distraction’.
For it’s precisely at this time, with gold and silver turning a corner and pressing higher after over six years in the grip of a relentless bear market, that Bitcoin is stealing otherwise staunch goldphiles from investing in the one true form of money!
And that’s ironic.
For regardless of their many flaws, there are likely no greater adherents to the basic values of savings and investment than the gold bugs. And here, it’s precisely this group that has been most captivated by the prospects of Bitcoin!
But that’s the way it goes, we suppose. Salvation only arrives at the last moment. And those who can’t wait, whose itchy fingers and wandering eyes ever entice them toward the latest idols and false gods, will eventually wake up disappointed – if not outright ruined.
Bitcoin will prove a disaster.
At some point.
In the meantime, its value is increasing wildly, while gold and silver are struggling to hold their own.
So we recommend that if you do decide to trade it, remember that it’s not eternal.
Our initiative for the week is, predictably, based on the precious metals, and it calls for action in the silver market.
Take a look now at both the daily and weekly charts of the iShares Silver Trust (NYSE:SLV) for the last two years –
The daily chart (upper) paints an intriguing picture of a stock that never managed to get its salient moving averages unfurled and trending higher after bottoming in December, 2015 (blue square, top).
Yet in the last two weeks, SLVs moving averages have, for the first time in 24 months once again unfurled LOWER, with price trending beneath them all (black square)!
This is bear market action, friends, and it’s supported by the weekly chart, whose moving averages are trending lower and appear just days away from being fully unfurled themselves (blue box)!
With strong overhead resistance at $16 and all the focus on the exciting, new world of crypto-money, silver appears today no more than a slab of dirty rock.
So…- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]
Wall Street Elite recommends you consider selling the SLV June 29th 16 CALL for $0.49 and buying three (3) June 29th 13 PUTs for $0.17 each. Total debit on the trade is $0.02.- Content protected for Normandy Executive Lounge, Wall Street Elite, Executive Lounge members only]
Because Bitcoin isn’t going away soon.
With kind regards,
Hugh L. O’Haynew