Rafi Farber

Bitcoin: Speculation vs. the big picture

The cryptocurrency plunge since December 2017 has not been forgiving on the stomachs and wallets of digital currency speculators. Full disclosure just for the sake of piquing interest, I’m not one of those. I did have a very small amount of Bitcoin Cash (BCH) I happened to earn over the course of 2017 essentially by accident for simple lack of any other way to get paid for my services. I did absolutely nothing with it. It went up like crazy, and I sold it mid 2017 and bought a car, because why the hell not? I was up triple digits. I still have the car. I like to tell myself that had I held on to the Bitcoin and sold in December I would have been a millionaire, which would have been true, technically on paper, but would I have sold? I like to tell myself of course yes because I’m a genius, and imagine that all my worries would have been over. It makes a great story. But who am I kidding? I’d have probably cashed out after the crash in dejection and bought the same godforsaken car.

That story haunts me now and probably will for the rest of my life. I’m sure many reading this have similar stories. How many people actually sold at the top? Very, very few, all of whom I’m sure are convinced that they are absolute geniuses now, many of whom will lose it all on some other wild speculative venture drunk off the heady illusion that they are, in fact, speculative geniuses. Every so often though, I see the light, or at least I imagine that I do. The truth is, I’m just one person. There is so much more happening here than the personal fortune of any one specific human being, myself included.

Anyone the least bit invested in the cryptocurrency industry understands this is more than just a speculative game. Everyone from retail traders to institutional investors on both sides, both haters and enthusiasts who track the price of Bitcoin with an electron microscope and hope that their theories are confirmed by either its skyrocketing to infinity or plummeting as close to zero as possible, are missing the point. This is not, primarily at least, a game where those who can guess where the most volatile asset class in the history of the world is going, end up rich. That’s just an infinitesimal fraction of what’s going on here. Let’s just keep in mind that digital currencies have only existed for less than a decade. We’re still in the immature speculative baby phase here.

So what’s really going on in the bigger picture? Let me try to plot it for us all.

By far, the single absolute most important invention in the history of human economic activity has been the invention of money itself. An indirect method of exchange, no matter what it happens to be, is responsible for the entirety of economic advance since the era of the cavemen. This cannot be overstated. The fact that we can work together as a single species (sometimes) rather than as exclusively warring tribes of wild humans, means that we can trade with one another, exchanging good for good, instead of bad for bad, as in total war. We can actually work together, improving everyone’s standard of living on this planet. But in order for this to be possible, we need a measure of account. This is money, the basic unit of account we use in order to measure how much good X produces in exchange for how much good we get from Y. Money makes it all possible.

But money is becoming more and more poisoned as governments, now with nearly complete control of its supply, find more and more ways of skimming off the top of its value. If governments were in direct control of the supply of food, or shelter, or clothing, they would be overthrown. Control of the money supply is even more important than those three because it controls all three human basic needs, but since it is indirect, as money is indirect exchange, few realize how they are bent to poverty because of the absolute control over the supply of money. So central banks continue on their merry way.

The PhD academics who we are all supposed to consider geniuses, most of whom come from failed investment ventures rescued by government (read the personal history of former Fed Chair Alan Greenspan for example) or else have never even been part of the private economy at all, call this “monetary policy”. This is an Orwellian term from the centralized control of the quantity of money by vested interests we are required to consider “independent” and “benevolent”. Fah.

Now let’s get to the point. The point is, until the advent of Bitcoin, there has never been a way to verify monetary transactions without a Central Bank-controlled middleman, which are their lackey banker goons. Now there is a way. That doesn’t mean the medium won’t at first have some, or even a lot of, volatility. It simply means that there is a way now, in principle, to bypass the oligopoly. It exists. We can all cheer that.

When I say that word, “oligopoly”, I am aware that I sound like one of those Alex-Jones-type conspiracy theorists who mouth off sophisticated-sounding terms that make me look smart and conspiratorial, and you’re all supposed to be amazed. Instead of leaving it at that though, let me bring that term back down to Earth. An oligopoly happens when a specific group of power-privileged elite, the “oligarchs”, through political and personal connections, control an entire industry. There can be competition between these oligarchs, yes, which makes it slightly less disgusting, but all the rest of us without connections are left out and have to pay their price. As time goes on, the oligopoly becomes more and more concentrated. Let’s see that on a graph and lay it bare. Down below is the number of banks in the United States since 1971, when the US went off the gold standard and money supply came exclusively under the control of a connected group of bureaucrats and nobody else.

Bitcoin: Speculation vs. The Big Picture

Since 1971, the number of banks in the US has contracted from about 13,000 to below 6,000. This is the numerical meaning of oligopoly. More and more power in the hands of fewer and fewer people, over time. And as the number of banks goes down, so their fees go up. According to the World Bank, the global average for remittance fees is now 7.45%. Banks in particular are at a whopping 11.2%! Click on that link and you’ll see that the percentage has been going down since 2008, but that’s only because of decreasing interest rates, themselves manipulated by central banks. Compare that to a chart of Bitcoin BCH transactions fees, and the price differential is nothing short of insanity. The average Bitcoin BCH transaction fee is $0.017 for an average transaction of just under $17,100. That’s 8.19 X 10-7, or .000000819, or .0000819% compared to 11.2% for the average bank fee. Transferring money by bank is about 100,000x the cost of transferring money through Bitcoin. Let that soak in.

That’s how much we’re being robbed, just in commission.

Here’s another chart from Ron Paul showing real wages on the same timeframe.

Bitcoin: Speculation vs. The Big Picture

But there is an even bigger point than that absolutely crazy price differential for money transfers. Think government enforced capital controls, the starving masses in countries where monetary policy has gone completely off the rails. People are dying because of this, nothing less than that.

Governments enact capital controls when they don’t really feel like suffering the consequences of their reckless “monetary policy”. That means they printed too much money and now they have to pay for it through increased interest rates, negatively affecting their ability to borrow money ad infinitum with little to no immediate consequence. So they prevent people from moving money out of the country who fear that their capital is rapidly eroding. Which it is. So the people lose money and the government ends up relatively unscathed. That’s why governments lock down their national banking systems in times of crisis. It’s a moral outrage.

High bank fees are nothing compared to a government’s ability and willingness to enforce capital controls. Bitcoin and other cryptocurrencies destroy their control over the money supply, and render ineffective their ability to enforce capital controls, at least in principle. The unfettered movement of capital means that those governments that were reckless with their own money supplies can no longer pass on the consequences to their hapless citizens while they eat spiced venison in their palaces. Think Venezuela and Turkey, Zimbabwe and Argentina.

The bigger picture here is not the speculative price of Bitcoin whenever it finally settles, whenever and wherever that may be. That may be important for our personal fortunes, but it means nothing in the bigger human picture. The bigger picture is that we have a method of instant payment that is out of the hands of government. Wherever it stabilizes, and it will at some point, is where it can start serving as a method of stable capital transfer across borders. This will help enormously in dissolving artificial political boundaries that promote nothing but inane nationalism and senseless war. Just as money itself has done so long ago in enabling international trade in the first place, cryptocurrencies will eventually enable international trade independent of government control.

Allow me to come clean now. I am no Bitcoin enthusiast. I am simply a decentralization enthusiast. Personally, I am a gold bug because I fear government’s power to smash cryptocurrencies if they feel threatened enough to do so. But that doesn’t mean I’m not rooting for Bitcoin, too. I really hope it succeeds just so we can simply trade with one another without capital controls or monetary policy or any of the other tools that governments throw in our path in our simple efforts to improve our lot in life on Earth together.

So forget about your personal fortunes and how much money you’ll make in this speculative game, where the bottom may be or anything else other than the shared human effort to further trade, fairly and truly, which starts with fair and honest money, whether gold, Bitcoin or whatever the preferred medium may be. The human race is being robbed by banks, oligopolized by governments. The tool is here. When it settles, that’s when we can start living more independent of banks, and hopefully, eventually, trade without banks entirely, with no fractional reserve institutionalized cheating or anything else. Just honest money.

Rafi Farber writes for CoinGeek.com’s sister site CalvinAyre.com where he analyzes shares and investments in publicly held gaming companies. You can read his column every Tuesday.

Note: Tokens on the Bitcoin Core (SegWit) chain are referenced as SegWitCoin BTC coins; tokens on the Bitcoin Cash ABC chain are referenced as BCH, BCH-ABC or BAB coins. Altcoins, which value privacy, anonymity, and distance from government intervention, are referenced as dark coins.

Bitcoin Satoshi Vision (BSV) is today the only Bitcoin project that follows the original Satoshi Nakamoto whitepaper, and that follows the original Satoshi protocol and design. BSV is the only public blockchain that maintains the original vision for Bitcoin and will massively scale to become the world’s new money and enterprise blockchain.