The Beta Coin Bubble

Bitcoin! Freedom Baby, Yeah! It’s all very groovy.

I’m cheering for Bitcoin. I really am. But, the majority of present-day Bitcoinistas are likely to wind up impoverished, imprisoned or immolated at the stake in the public square.

Bitcoin is too much of a threat, to a global elite that relies on fiat currency for much of its power, for them to leave Bitcoin unmolested for much longer. The Progressive establishment has run the world for the better part of a century. They’re not about to let a bunch of pasty geeks eat their dinner without a fight.

How will the progressive establishment destroy Bitcoin? Let’s think like tyrants.

The US government could declare Bitcoin a national security threat and announce its intention to prosecute all Bitcoin users as money launderers. How sympathetic would the public be, if gangs of terrorists were discovered trading in Bitcoins? Or a child porn ring? Maybe they’re holding focus groups as I type, to pinpoint the most emotionally resonant cause, upon which they might lash the anti-Bitcoin initiative.

The Bitcoin Faithful have a tendency to view the conflict between Bitcoin and the US Dollar as a sporting match between technological standards. Mac Vs. PC! HD-DVD Vs. Blu-Ray! But the reality is that Bitcoin is a direct assault on one of the most important tools that our ruling oligarchy wields – the power to control currency. They’re not going to let it go without a fight, and they have guns. Also, robot wolf-bears:

But here’s the real reason why I am inherently (wolf-) bearish on the eventual fate of Bitcoin: It is a currency for Beta Males.

Consider the typical bitcoin user: White, male, tech-y, libertarian or neoreactionary conscience, reader of Hacker News, law-abiding citizen and productive member of society. In other words, he is a completely un-diverse, un-progressive, nice guy. He is the least cool, least hip, most privileged person in the world. In the end, Bitcoin ownership may actually serve the progressive elite well as a useful binary marker of who pack off to the Gulag.

gulag_map

Some say the US Dollar and The Cathedral it finances are dying. They are too optimistic. The Cathedral has no shortage of bright and tech-savvy allies willing to sell their souls for a slice of power. Google, Apple, Facebook, and many others will be lining up to kiss the ring. Neoreaction will be lucky if we can recruit Snapchat. The bad guys have hackers too.

And it’s not like the only players in the game are The US Dollar and Bitcoin.

I’m told there are a number of good old-fashioned corn-fed boys out in flyover ‘Murica. Their future looks bleak to me, but they do have a lot of guns, and they probably make up a majority of the US Armed Forces. Their preferred currency, if they’ve even considered the question, is physical gold and silver.

There are also the foreign candidates. China? Russia? La Raza? Will Canada finally cast off two centuries of politeness and assert her rightful claim over the entirety of British North America? Predictions are hard, especially about the future.

But I am fairly confident that whoever winds up in power, their first order of business will be to destroy Bitcoin. Doing anything else would be leaving money on the table.

You see, currency is a coordination game. If everyone is using silver, you want to use silver. If everyone is using bitcoins, you want to use bitcoins, etc.  In a theoretical world with many independent agents, choosing a currency to put your savings into requires predicting everyone else’s behaviour. But in the real world, sometimes one person has the power to enforce his will on everyone else.

For example, what would happen if Russia introduced the “RubleCoin”, a cryptocurrency controlled by the Russia government, and insisted its citizens conduct all saving and transaction in RubleCoins? What if China did the same? What if some enlightened US President (or coup leader) recognized the imminent failure of the global financial system, and acted to create the DollarCoin, a bitcoin clone issued by the USG?

The result would be a world with all the benefits of the Bitcoin, but without the massive one-time transfer of global wealth to a bunch of Hacker News and Dark Enlightenment dorks. Myself included.

As I said, I think Bitcoin is a great idea. I own Bitcoins. I’m cheering for Bitcoin. The intelligent, curious, tech-savvy, risk-taking people who currently own Bitcoins are a more worthy collection of Aristocrats than any competitor. But history will screw them, because they have chosen to put their faith in justice and a good idea. They think that because they are right, they will succeed. But the Bitcoin nerds would be wise to heed the words of Freda Utley:

“Do not to expect the material rewards of unrighteousness, while engaged in the pursuit of truth.”

Sell your Bitcoins today, if you own them for any reason other than that it’s the right thing to do. If you want a picture of the future, imagine a boot stamping on a beta’s face forever.

  • lel

    They cannot stop using bitcoins in the same way they cannot stop people downloading illegal stuff with bittorrent — in fact they are very similar in how they work. They can make bitcoin transactions illegal for businesses but people will still use it because they cannot monitor it. They can create new alt.coins which may gain some popularity but bitcoin will remain the number one cryptocurrency because it is and most likely will be the most used one, and the whole value and usefulness is based on how much people use it.

  • Jack

    I agree that you need to sell your bitcoins, but I disagree with the reason. Bitcoin is fundamentally flawed, it has nothing to do with the elite.

    The purpose of bitcoin is to be a currency, but in fact it’s a commodity. Nobody buys bitcoin to trade, but to to invest.

    To understand the structural problem of bitcoin, you need to understand one of the most fundamental laws of the economy; the law of supply and demand.
    This law explains the value of a resource. If the supply is high and the demand is low, the value of that resource is low. If the supply is low and the demand is high, the value of that resource is high; for example gold or oil.

    A good currency is characterized by an equilibrium of supply and demand. A commodity is characterized by a low supply and a high demand, in other words by scarcity.

    A good currency (supply) needs to be linked to the size of the economy (demand). If the size of the economy increases, the currency supply need to increase and vice versa.

    The problem with the US dollar is that the money supply increases much faster than the size of the economy, because of the incompetent government and their policy of printing money to solve all their problems.
    The problem with bitcoin is just the opposite. The size of the economy increases much faster than the finite bitcoin supply of 21 million.

    That’s also the reason why nobody buys bitcoins to trade, but to invest. They know that the supply is finite, but the demand isn’t. So, the value will increase and they hope to sell it to a bigger idiot than themself. That idiot has the same reasoning, to sell it to a bigger idiot. Although, there are a lot of idiots, there are certainly not enough idiots alive to keep this bubble alive.

    The fact is that you can’t create a good currency without using a good measure of the economy.

    Bitcoin is doomed to fail, that’s why the people in charge don’t care about it.

    • Maigo

      “The purpose of bitcoin is to be a currency, but in fact it’s a commodity. Nobody buys bitcoin to trade, but to to invest.”

      Sorry Jack but that’s nonsense. It’s estimated that Silk Road was doing $20-30 milllion a year and I’d guess that’s an understatement. All trade, no investments.

      • Jack

        $30 000 000 / $840 = 35 714

        So, there are around 36 000 bitcoins used for Silk Road.
        Not much, certainly if you know that there 12,322,125 bitcoins in existence.

      • Jeremy

        Silk Road was shut down when bitcoin was <$200 a coin, and there were fewer bitcoins in circulation, so multiply that X3 or more.

      • http://causalitysend.mee.nu/ Kristophr

        It may be popular, but it is still a commodity, and not a currency. And a virtual commodity at that. The last big virtual commodity was “property” in Second Life, and that market died when the goons at Somethingawful.com made it rain virtual penises at a big sales event.

        Fail bandwagon fallacy argument is still fail.

      • sdafasdf

        That’s why you have to simply invest all your Bitcoins to Betacoins. Because this new crypto won’t fall on the same problem as the old one.

      • Jeremy

        Maigo wasn’t making a popularity argument. Exchange of one thing for another is a barter system until one of the goods exchanged becomes infinitely fungible. When one of the things exchanged in such a transaction achieves infinite fungibility (a nebulous concept, but worth using in this case), then it is essentially a currency. Currently, I can turn bitcoins into any good on Overstock.com or tigerdirect.com, or any one item from many other merchants. Such ability to turn BTC into items makes it much much more fungible than anything you would call a commodity on any modern market.

        I cannot, for instance, trade gold coins for a computer on Tigerdirect.com.

    • GuestX

      You have probably listened to Peter Schiff, who was right, but well, A YEAR AGO.

      Beginning of 2014 has been entirely different to 2009-2013. Lots of new start-ups beginning all the time and different stores accepting bitcoin are increasing for dozens every day. People are using bitcoins and they also use it a lot for charity. One an idea like Bitcoin stars spreading, due to the networking effect the growth just keeps speeding and speeding up. 2014 will be the year when Bitcoin really started to go off.

      Overstock started accepting bitcoins only a bit over a week ago and is now first to process –$1 million– in Bitcoin payments. Tigerdirect is also one of the bigger retailers which accepts bitcoins and are doing great. In fact, Tigerdirect CEO just announced: ““there’s going to be a wide acceptance [of bitcoin] among major retailers”.

      One of the biggest names in Bitcoin, Andreas M. Antonopoulos was just in one of the world’s biggest podcasts Joe Rogan Experience and made an incredible case for Bitcoin.

    • Jeremy

      The purpose of bitcoin is to be a currency, but in fact it’s a commodity. Nobody buys bitcoin to trade, but to to invest.

      This is actually not true. on /r/bitcoin there was a post recently where someone looked through the blockchain to determine how recently each bitcoin changed hands. It turns out that fully 50% of all existing bitcoins changed hands in the last couple months. I doubt the US dollar could make such a claim. When you also consider that Overstock.com and tigerdirect.com just started accepting bitcoin, you’ve got a picture that says currency, not commodity.

      • http://twitter.com/ilovegrover Thane_Eichenauer

        Got a link?

    • LongLostFriend

      People do indeed buy bitcoins to trade. I am one of them. I spend bitcoins all the time on goods and services.

      And bitcoins are actually divisible to eight decimal places. There’s plenty of supply. You don’t have to buy or trade entire bitcoins any more than you have to buy gold or silver in 10 oz. bars.

  • Bob Wallace

    They’re challenging the power structure. That makes them Alpha. The accepted definition of Alpha are cowards who would never do such a thing. They’re all mouth and bluster, like the narcissists they are.

    • Telemachus_1

      What differentiates money from barter? read your freaking dollar. All debts public and private.

      Money is that which the government demands in taxes, and which enforces in civil court. Everything else is barter.

      this is a side show. Until judges and IRS agents are requesting asylum in Israel, there is no challenge to the existing power structure.

      Libertardians are always afraid of inflation, money losing value. Money ONLY loses value when the issuing sovereignty ceases to be sovereign either due to incompetence, natural disaster, or war. You know you have won when your enemy’s currency is worthless.

  • LaidNYC

    Yeah, I’m holding my bitcoin purely for the black swan possibility but I’m fully aware that going down with the ship is a likely scenario. Physical gold is probably the best hedge against a cathedral collapse scenario.

  • Jeremy

    For example, what would happen if Russia introduced the “RubleCoin”, a cryptocurrency controlled by the Russia government, and insisted its citizens conduct all saving and transaction in RubleCoins? What if China did the same? What if some enlightened US President (or coup leader) recognized the imminent failure of the global financial system, and acted to create the DollarCoin, a bitcoin clone issued by the USG?

    How would such countries ensure continued scarcity of their currency? Why would a bitcoin user trust a cryptocurrency issued by politicians when they could use one controlled by users? One of the primary benefits of cryptocurrency is you can’t simply start the printing presses every time you want to pay for some new war, or some new social program that no one wants to repeal. Since governments are the source of deficit spending via fiat-currency-printing-presses, why should anyone trust a cryptocurrency issued by someone who has demonstrated a willingness to devalue their currency?

    When you consider that cryptocurrency is also not a debt-based currency, but rather an instantaneous transfer of value, you begin to see that it’s a true digital barter system more than a currency. What I am willing to trade for bitcoins needs to match what I can barter for those bitcoins, or I have lost value. The advantage cryptocurrency is that transfer is instantaneous and completely avoids the financial system of regulations and fees. There is no counter to this for government-backed anything, because governments only seek to create and enforce regulation on everything they can. It’s an adapt-or-die situation for governments and financial services industries, long-term. It’s literally, as was stated in the MSM lately, Napster for finance.

    Short term is a much bigger guessing game. About all countries can do is outlaw the exchange of cryptocurrencies into fiat currency. However, at some point that will become a self-destructive option because when faced with the advantages of a world market and a (theoretically) more stable currency, citizens can simply trade only in the cryptocurrency. Where we pass that point is anyone’s guess. We are admittedly a long way away from that point.

    The good news for the very wealthy you are pointing to is that Fiat currencies will likely never go to zero, they will never completely devalue. Besides which, all those wealthy people you’re talking about are very very close to the money supply. They get the printing-press money first, so they’re income isn’t so devalued. Most of those very-wealthy people are not so liquid anyway that they need to worry about currency devaluation.

    I don’t recommend selling bitcoin. But neither do I recommend purchasing large batches of it. It’s still mostly a penny-stock, but a penny-stock that has nothing holding it back (at least in the U.S.). I would recommend not treating or thinking of bitcoin as a commodity, because is isn’t, it’s a digital barter system. The more you use it to spend on things, the better. The more mom-and-pop shops that start accepting bitcoin, the better. Don’t buy it, spend it. Save a fraction of it, but only a fraction, not 10’s of percents of your savings.

  • sdafasdf

    Just buy Betacoins which is not a Bubble! I have dumped all my BTCs for BETs

  • http://bakerjd99.wordpress.com/ bakerjd99

    Just the other day I was making the point that Bitcoin opponents would not go quietly into the good night but would work to suppress cyber-currencies so I agree with your cynical assessment, focus groups and all. Fortunately, due to the stunning ineptitude of the Obama and Bush administrations, faith in government is at an all-time low. If these clowns started peddling Bitcoin, the choice of terrorists everywhere, tales few would believe it and many would actively undermine whatever idiotic laws they impose: sort of like our moronic wars on drugs and poverty. While I doubt the transition to Bitcoin-like currencies of the future will be bloodless I am not as pessimistic as you. Sure governments currently hold the balance of terror but with every passing day the ability of small groups to cheaply produce government shaking weapons grows. What good are gated communities when the proles have drone based bioweapon guided missiles that are cheaper than iPhones?

  • LongLostFriend

    “What if some enlightened US President (or coup leader) recognized the imminent failure of the global financial system, and acted to create the DollarCoin, a bitcoin clone issued by the USG?”

    What would be the difference between this “DollarCoin” and the dollars they already print into existence?

    The success of Bitcoin is precisely due to its decentralized nature. There is a fixed upper limit, a gradual inflation of the BTC supply over the course of more than a century, extreme divisibility, a pseudonymous transaction system, and no individual or corporation or government that can pull the plug on it. You’d have to shut down the entire Internet to put a stop to Bitcoin at this point.

  • Phero

    Bitcoin will destroy itself. No need for conspiracy

  • http://badassu.net/ Mark Insight

    I agree with lel.

    As long as the internet is around, Bitcoin will be around.

    They will try to stop it just like they did e-gold.

    The US government CHANGED THE LAW just to criminally prosecute e-gold’s owners. There was illegal activity going on USING their service, but nothing illegal themselves. If you should be arrested for that, then the CEOs of Western Union and all the Banks should go to jail too.

    Yes the government will try to stop them to please the banks (they already arrested the CEO of BitInstant, a Bitcoin exchange). But they will fail to end it all. The technology is too strong.

  • http://badassu.net/ Mark Insight

    More great info about Bitcoin:

    • http://twitter.com/ilovegrover Thane_Eichenauer

      by Stefan Molyneux

  • Rob

    You were bullish on bitcoins about 6 weeks ago. Have you sold off or are you holding?

  • xPoisonPillx

    Just an aside, but why do you insist on calling gammas betas? Any beta is a potential alpha, and any alpha is a potential beta in the presence of a stronger alpha. Gammas are the waxy skinnyfat white knights.

  • Telemachus_1

    You are the first in this little world to really grasp the concept of money. Money is the projection of sovereign power. It is the ONLY universal manifestation of sovereign power. Bitcoin is not money. it is barter. as you point out, it can be eradicated on a whim. Eradicating the United States Dollar would be eradicating the United States – the most powerful military empire in history.

    Follow this road further. Read something like _Super Imperialism_ to understand how our foreign policy is oriented to compel the world to use US dollars. All the foreign aid, all the national debt, all of it is part of that system. Read about horizontal and vertical transactions. Completely purge your mind of money as a commodity. Understand that sovereigns don’t need to tax. Money was always created first, then taxed. Taxes are about making people submit to the sovereign will.

    The truth is the US is more powerful than ever before. They don’t need 90% of the population in this country.

    There is a reason the rich, wall street, and everyone at the top is doing fantastically well, better than ever. They essentially take a cut of global trade – 75% of all foreign exchanges transact in USD, and all must eventually go through a US bank.

    These are dark times, and the boring topic of monetary policy is the key to understanding how the system works. The pace of technological progress is such that we do not have much time to effectively mount any resistance. We need more people who can spread this message, and you’re way closer than most of the haters.

    • Lili

      I find your comments to be insightful. Thanks for the tip on Michael Hudson. Keep commenting!