Cryptocurrencies are a Ponzi scheme. Their birth and ascent to prominence has been made possible by the rapid ailing of most global currencies as their buying power decreases in the face of widespread counterfeiting by governments of which QE is perhaps the most obvious and extreme example.
The first cryptos such as Bitcoin have enjoyed an exponential and explosive growth in their prices, propelled higher and higher by the GFT, the Greater Fool Theory – buyers know that they are overvalued and that their prices bear no relation to any real underlying value, and buy them anyway on the assumption that even bigger idiots will roll up later and relieve them of their holdings at even greater prices. This works until it doesn’t, and then a major panic selloff ends the bubble.
Because there is no end to government counterfeiting of money in sight, one might suppose that the crypto fad will just keep going, at least until China backs the Yuan with gold, and that might be the case, were it not for proliferation. The problem with get rich quick, money for nothing Ponzi schemes like Bitcoin and the other cryptos is that they breed copycatting. After all if you can create a crypto and it quickly snowballs in value, as Bitcoin has, so can other people, lots and lots of other people, and that is what is happening, with the result that cryptos are proliferating like weeds in a jungle clearing. They are all intrinsically worthless, despite the lofty talk of being underpinned by a handful of gold coins etc, and being virtual their values can evaporate almost overnight, as in “poof”, gone. In short cryptos are just another Tulipomania that feeds off the seemingly endless supply of mugs and suckers out there. Even if they weren’t eventually doomed by the reappearance of real money, backed by gold, at some point, which is closer than many think, they will be killed off by overcompetition as the field becomes crowded with fresh faced sharp suited vendors vying for the cash of the gullible, who are actually finite in number despite initially seeming limitless.
The fact that cryptos’ days are numbered is good news for investors in the Precious Metals sector, because over the past couple of years cryptos have been siphoning off some of the funds that would otherwise have destined for the Precious Metals. This means that when this bubble bursts a good portion of the liberated funds (or what's left of them) will find their way into Precious Metals, acting as an additional driver. Because of the extreme proliferation of cryptos that we are currently witnessing, this time could be close at hand.
We therefore will have nothing to do with cryptos and will continue to focus our attention on the much more solid and substantial world of the Precious Metals, which we know is not going to suddenly vanish like a mirage.
Posted at 7.15 am EDT on 8th September 17.