As we are seeing with bitcoin as its users struggle over who gets to write the algorithm for it going forward, it is the best of times and the worst of times when it comes to cryptocurrency, depending on who writes the blockchain code.
But do we care? Or will cryptocurrency just be a ponzi – a cryptobubble? When it comes to cryptocurrency, we could do worse than to ask Michael Terpin. He knows what he is talking about. The good news and the bad news is that he is very bullish. So it looks like cryptocurrency is here to stay, and whatever it could be doing for us, it will be doing for us. That may be good, and it may be bad; depending on who writes the code.
The following is from his prognosis for 2017 from January:
When David Johnston and I co-founded BitAngels more than three-and-a-half years ago, bitcoin was still very much a novelty … . Flash forward to December 2016, and … from my perspective, the ecosystem is much improved. The big trends of 2017 from my perspective in bitcoin will be the following:
1. The 1% will finally get in on the action …
2. The first mainstream bitcoin ETF will come to market …
3. The price will go higher in direct correlation to the war on cash …
4. Bitcoin will continue to climb …
(Blockchain Breakout? 2017 Will Keep Investors on the Brink, Jan 1, 2017, by Michael Terpin)
Things are panning out just as he said. I can only add that the first three points are the causes; and point four is the result.
As for points one and two: XBT Provider, a Swedish firm, has had a bitcoin ETN since 2015. There is a Bitcoin Investment Trust Fund (GBTC). The two cryptocurrency ETFs, COIN and XBTC (from SolidX) may or may not have been approved by SEC as I write this. SEC has declared that initial coin offerings (ICOs) are “securities offerings”. The industry is resisting this, and the upshot will likely be that some coins will be exempted. Overstock, Goldman Sachs, and others are preparing stock trading platforms using blockchain technology, and Delaware has signed laws establishing a regulatory framework for representing share ownership on a blockchain ledger. LedgerX has been approved by CFTC to provide trading in Bitcoin options.
We can see that blockchain-based products are slowly but surely becoming accepted by the financial industry and its regulators. That is all to the good if you are investing in the asset class, but unfortunately it has attracted the attention of another not so promising fun-seeker.
This brings us to point three: the war on cash.
Doug Casey says that the United States Treasury has decided that the dollar has become dangerously unstable. This is because for decades the US dollar has been foisted on the world as a reserve currency, but the United States has abused the position and the world is losing confidence in the dollar and wanting out. He says this:
When the confidence blows away, the first people to dump the dollar are going to be foreigners. All those dollars, the $10 trillion abroad, are going to come back into the United States in exchange for what? Share certificates, titles to real estate, to companies, to real goods, to Boeings, to IBM’s, and the dollars are going to come in. I mean, inflation could explode in this country. (Project FEDcoin)
He thinks that the U.S. has been working up a solution, and that the government,
might try to create an alternative (to the fiat dollar). And an alternative that’s more under their control than the dollar and actually out of the traditional banking system. What would happen if the Federal Reserve created a look-alike dollar? Let’s call it the Fedcoin … which will actually act as a parallel, alternative to the dollar. … Perhaps based on the same technology that Bitcoin is based on. This is the blockchain technology where every transaction can be tracked … . (Project FEDcoin)
He says that the U.S. Federal Reserve claims that a blockchain-based currency will lead to better monetary policy through better data. Casey says,
In the 2008 crisis, they like to blame a lot of the problems on a lack of transparency, but with blockchain and the Fedcoin technology, they can see everything, everywhere. (Project FEDcoin)
But this is Bitcoin’s evil twin, as Casey points out:
Without cash, you have no privacy. If you have to put everything through a bank account, the government (is) able to take what they want out of it including your entire account if you become politically undesirable (and) it will be impossible to escape the tax dragnet with no cash to trade. It will be barter or use Fedcoin. (Project FEDcoin)
He continues that it is not just the United States, but governments around the world are at war with cash as they on the one hand restrict the use of cash and remove larger denomination bills from circulation, and on the other hand initiate plans for government issue blockchain currencies.
In Canada, they have something called Project Jasper, which is their own version of this. The Chinese have announced that they’re planning on a blockchain type currency, the same thing… They have said that they wanna see this happen “as soon as possible.” The British have made the announcement along these lines. (Project FEDcoin)
They claim that this is largely because cash, being anonymous, is used for nefarious purposes. But it is also because they want sole claim to define what is nefarious. If they don’t want you buying twinkies because you are overweight, they want to be able to block your funds from that kind of transaction. If they don’t like your comments in the forum of public opinion, they want the power to block your account from, say, receiving ad or sales revenue related to your blog or published content. The blockchain facilitates these things by making all transactions transparent; and a blockchain can be written that includes these kinds of controls. It is not a happy thought, therefore, that government issued blockchain currency is being seen as a worldwide solution to the world’s fiat currency and social woes.
So, cryptocurrency has both is light and its dark side. But one thing seems certain; it is here to stay.
Also read Cryptocurrency Simplified!