BTC - Debunking the FUD

Note- NOTHING in the piece is to be taken as financial advice.

Bitcoin’s a scam, ponzi scheme, volatile asset/investment blah blah blah WAKE UP THE U.S. DOLLAR IS THE BIGGEST SCAM OF ALL. Automobiles have held their value better since the pandemic.?

FUD stands for fear, uncertainty and doubt. It refers to negative sentiment and misleading information surrounding Bitcoin and the cryptocurrency market as a whole.

Negative sentiment around Bitcoin has become the sort of thing where if a talking point is repeated enough, regardless of substantiated evidence, it becomes true (even if it isn’t). So, in this piece my main goal is to debunk some of the main arguments that nay-sayers use to criticize Bitcoin.

This final piece in our Bitcoin series seeks to debunk so much of the FUD that has permeated our broadcasting and financial institutions.?

The FUD starts with bureaucrats and financial institution elites, like Warren Buffet. It then bleeds its way down to the mainstream media, whose purpose is to amplify and spread talking points of the aforementioned group.?

Yet, so many people still write off bitcoin as a scam because they heard Jim Cramer or some other finance influencer trashing it on CNBC.?

Bitcoin is a SCAM!

The most misleading talking point surrounding Bitcoin is that it’s a scam or ponzi scheme. Amongst the most notable proponents of this narrative are Berkshire Hathaway operators, Warren Buffett and Charlie Munger. They’ve called bitcoin ‘rat poison’, with the critique that Bitcoin has no unique value on its own. My question is - how does this differ at all from the U.S. dollar, which is backed by nothing except the world’s confidence in it?

Buffett has also stated that the only value in bitcoin is the hope that someone will be willing to pay you more for it in the future. This is tantamount to calling Bitcoin a Ponzi scheme. So, let’s review the fundamentals of exactly what that means.?

According to Oxford Languages, a ponzi scheme is “a form of fraud in which belief in the success of a nonexistent enterprise is fostered by the payment of quick returns to the first investors from money invested by later investors.”

Essentially, the operator of a ponzi scheme starts by bringing on investors. Early investors see great returns, often funded by the designer of the ponzi scheme or otherwise. As the scheme grows and new investors are brought in, early investors are paid by later investors from the sum of money that has been pooled together. No actual value is being created, money is simply being shuffled around from investor to investor. Eventually, it reaches a point where the ponzi scheme brings in new investors at a decreased rate, and the operator's ability to pay back older investors diminishes. This is when the ponzi scheme collapses.?

The key difference here is that there is no operator or orchestrator that controls Bitcoin. Bitcoin is completely decentralized and there is nobody at the top of the pyramid to pull the rug. Similar to any other asset like gold or stocks, the value of Bitcoin fluctuates with buying and selling action. Now, some may say that it is a scam because people are investing in digital code with no inherent value. However, the inherent value is exactly the same as the U.S. dollar - belief. People trade using the U.S. dollar because there is worldwide confidence that it is a stable mode of transaction. The same applies to Bitcoin; the price is further elevated by belief in the currency as a safe store of value and transaction.?

Crypto is for CRIMINALS!

Another misleading talking point, pushed primarily by bureaucrats, is that crypto is the currency of choice for criminals.?

On December 14th, 2022, amidst the FTX and Alameda Research scandal, Senator Elizabeth Warren (D - Massachusetts) and Seantor Roger Marshall (R - Kansas) introduced a bill called the “Digital Asset Anti-Money Laundering Act of 2022”. The bill required know-your-customer rules to digital wallets, crypto miners, and other players in the crypto space. Additionally, it empowered federal financial regulatory agencies to like the treasury and SEC to audit providers in this industry for compliance. Under the rule, all involved entities would have to identify customers and track their transactions.?

Said Warren of the bill, “Crypto has become the preferred tool for terrorists, for ransomware gangs, for drug dealers, or rogue states that want to launder money… There is no reason that cryptocurrencies should be held to a lower standard that creates loopholes for criminals to launder money and finance terrorism.”

Essentially, the purpose was to remove the anonymity aspect inherent to cryptocurrency.?

The irony here is that the #1 tool of money laundering is the U.S. dollar. Additionally, before the SBF-operated FTX and Alameda research groups were busted, they donated upwards of $70 million to political campaigns over the span of 18 months. In fact, Sam Bankman-Fried was the 2nd-largest donor to the Democrat party only behind George Soros.

This critique and the proposed bill is not to prevent money laundering or criminal activity. It just furthers the government’s never-ending mission to have their noses in every aspect of American citizens’ lives. It’s like a financial version of the Patriot Act, which has been used to invade the privacy of millions of Americans.

Volatility or Predictability?

To understand the chart below from Bitcoinmagazine.com, we first need to understand what a Bitcoin halving is. I’ve mentioned in previous articles that bitcoin is mined like digital gold by people using computers and servers. Well, every 4 years, the rate at which these miners are able to mine bitcoin is cut in half. This means that there is less supply of new bitcoin to go around following every halving, and historically this phenomena has had a direct relationship to Bitcoin’s price. See below:

There is a clear and consistent trend with Bitcoin’s pricing pattern. The year preceding a halving, the year of a halving, and the year following a halving all have positive (and very impressive) returns for Bitcoin. The ONLY years that have ended up with negative returns for Bitcoin come 2 years after the most recent halving, the most recent example being 2022. It’s happened every single time we’ve reached the second year after a halving.?

If history tells us anything, we will have to wait around a year to a year-and-a-half following bitcoins halving (expected April 18th, 2024) to reach the next peak. This puts us some time between May 1st, 2025 and November 1st, 2025 for the next Bitcoin peak.?

Furthermore, since the bitcoin halving takes place every 4 years, and it started during an election year, it conveniently coincides with every U.S. presidential election. Hopes of an economic turnaround that come with many elections may also potentiate the effects of each halving.?

Volatility shouldn’t be feared, in fact it should be embraced. Volatility is what pushes away institutional investors, like banks and other big players. However, as time has gone on and large investment firms with big pockets have seen the macro trend that Bitcoin has delivered, more and more hop on board with every Bitcoin bull run (which happens like clockwork every 4 years). Retail investors (people like you and me) prop up the price and give it a floor to stand on. As the price steadily builds following a halving, large players enter the market and boost the price. Being the smart investors they typically know when to get out and sell near the peak. They sell, the price drops, then retail investors who jumped in with the hype and sell as well. Then it all starts over again.?

When something is volatile yet semi-predictable, we leave the realm of gambling and enter the realm of informed decision making.

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