EXPOSED: The Bitcoin Fraud

Built on Foundation of Sand Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] EXPOSED: The Bitcoin Fraud - Why Bitcoin could fall from $50,000 to $10,000 or lower… - The fraud behind the massive Bitcoin run-up… - Then Jim Rickards shows you why, when it comes to Bitcoin, “there’s no there there”… Recommended Link [We’ve scored 31 triple digit wins… here’s your invitation]( [Read more here...]( A few months back, Jim Rickards took a moment to share some of the proprietary research behind my Sigma System with readers like you. Right now, we’re up to 31 triple digit wins. 31 trades that would have doubled your money or better. And I want to share the full details about it with you at this link right here. There is no obligation. Discover exactly how I formulated the Sigma System. [Click Here To Learn More]( Portsmouth, New Hampshire March 1, 2021 [Jim Rickards] Dear Reader, Bitcoin crashed from $20,000 in 2017 all the way to $3,300 by December 2018 — an 83.5% collapse in one year and the greatest recorded asset price collapse in history. That crash marked the collapse of the greatest asset price bubble in history, larger even than the Tulipmania of 1637. Well, now Bitcoin is trading around $50,000 (the price currently is $48,595.50), 2.5 times its 2017 peak. It’s a safe bet that it’s going to crash again. Today I’ll show you the fraud behind Bitcoin's crazy run-up. You don’t need a Ph.D. in finance to see that Bitcoin is a bubble. Just take a look at any price chart. The time series of prices over the past six months has been hyperbolic and almost vertical. If you look at a chart of the Japanese Nikkei Index up to late 1989 or the NASDAQ Composite up until March 2000, you’ll see exactly the same pattern. The Nikkei crashed over 80% beginning in 1999, and now, 32 years later, it still has not recovered its old highs. The NASDAQ crashed over 75% and did not recover its old high until April 2015, a 15-year recovery. Bitcoin is positioned for the same kind of fall. Based on the Nikkei and NASDAQ crashes, Bitcoin could fall from $50,000 to $10,000 or lower before establishing a new base. Still, there is one important difference between the Nikkei and NASDAQ bubbles and the new Bitcoin bubble. The Nikkei and NASDAQ bubbles were based on a combination of investor mania, leverage and hyped-up earnings releases from companies in the index. But, there was relatively little outright fraud. In contrast, the Bitcoin bubble is based almost entirely on fraud. Therefore, when this bubble bursts, the damage may be even greater, and the value of Bitcoin may disappear entirely. Here’s an example of how the fraud works, as described in a legal notice from the New York State Attorney General... A company called Bitfinex sponsors a cryptocurrency called Tether. This crypto is a so-called “stablecoin.” This means that the value of one Tether is fixed at $1.00. When you buy a Tether for $1.00, the money is supposedly held in safe liquid assets. When you cash in your Tether, you should receive $1.00 in return (less small transaction costs). The problem is that no one has been able to locate the liquid assets that supposedly back Tether. There has been no full audit, and there is no transparency about the whereabouts or composition of the liquid assets backing the coin. Tether claims that its dollar reserves are held in a Bahamian bank named Deltec Bank & Trust. But independent research revealed that the assets claimed by Tether exceed the total U.S. dollar assets of the entire Bahamian banking system. Other research shows that those who buy Tether use them overwhelmingly to buy Bitcoin from unregulated crypto-exchanges based in Africa and Asia. These exchanges offer leverage and often award “free” Tether coins for those who bring in new customers. These Tethers have been used to bid up the price of Bitcoin and create the bubble. Meanwhile, the dollars supposedly backing Tether are unaccounted for. If this process were to go in reverse, which it inevitably will, the Bitcoin values would collapse quickly (because of leverage) and Tether would be unable to redeem retreating Bitcoin investors (because of the unaccounted-for liquid assets). The Tether crooks would walk away with dollars. The prices of Bitcoin and Tether would collapse catastrophically. And the Bitcoin “investors” would walk away empty-handed. This is not just a spectator sport for prudent investors. The types of losses arising from a Bitcoin collapse would easily spill over into the brokerages and banks handling the accounts of investors who would be eager to sell everything because they’d be desperate to raise cash and avoid further losses. Because the shady Bitcoin and Tether exchanges are unregulated, there is perhaps little that can be done to avoid this coming fiasco. I would advise you to stay far away from Bitcoin. Don’t get sucked in by the hype. Sadly, some people never learn. And many will probably get burned all over again. Investors should at least be alert to the potential collapse by increasing their cash allocations to help weather the storm. Below, I show you why, when it comes to Bitcoin, “there’s no there there.” Read on. Regards, Jim Rickards for The Daily Reckoning P.S. I need to have your attention. As you’ll see, this situation is so critical I recorded [this briefing to explain everything.]( I hope you don’t miss it. [Click here for more...]( After all, this is the culmination of my life’s work so it’s extremely important. And I don’t want you to miss out on the opportunity that comes from the event occurring right now. But the window won’t stay open for long. [Click here now to see what I mean.]( Recommended Link [Legend Who Bought Amazon In 1998 Says: Now Is The Time]( [Read more here...]( Wall street legend Chris Rowe says there’s a huge stock market event looming - and he’s revealing his #1 pick for free. [Click Here ASAP To See This]( The Daily Reckoning Presents: “With Bitcoin (to paraphrase Gertrude Stein) “there is no there, there”… ****************************** Bitcoin: “There’s No There There” By Jim Rickards [Jim Rickards]I’m not some technophobe who doesn’t understand cryptocurrencies. I know them very well. I’ve been studying cryptos since before many of their current owners even heard of Bitcoin. I actually worked with the intelligence community years ago to counter ISIS’s use of cryptocurrencies to bypass the international monetary system. I can tell you that as an asset, Bitcoin has very little to offer outside of speculation. It still has no practical use, except for gambling by speculators or the conduct of transactions by terrorists, tax evaders, scam artists and other denizens of the dark web. Bitcoin is also unsustainable due to extreme demands for electricity in the computer “mining” process. Bitcoin has no future as “money” because the supply of Bitcoin cannot grow beyond a preset amount, which makes Bitcoin inherently deflationary and unsuitable for credit creation, the real source of any system of money. Furthermore, Bitcoin has been subject to continual price manipulation by miners through wash sales, front-running, ramping and other tried-and-true techniques for price manipulation. The Bitcoin infrastructure has been plagued with hacking, fraud, bankruptcy and coin theft measured in the billions of dollars. What is Bitcoin's intrinsic worth? It actually serves no purpose to assess Bitcoin based on “intrinsic value.” Bitcoin has no intrinsic value, and neither does any other form of money, including dollars or gold. Intrinsic value is an obsolete economic theory that was abandoned by economists in 1871. The phrase “intrinsic value” is bandied about frequently, but it is of no use in valuing Bitcoin. Instead, economists use subjective value as a way to consider prices. The subjective value theory says that the price of something is what a willing buyer will pay a willing seller based on the utility of the goods and services to the buyer. A few years ago, JPMorgan Chase tried to break it down by examining Bitcoin as a commodity. To arrive at its worth, JPMorgan Chase estimated the cost of producing each individual Bitcoin by looking at factors such as electrical costs, computational power and energy efficiency. When they crunched the numbers, what number did they come up with? JPMorgan Chase estimated the value of Bitcoin at around $2,400. Let’s assume for now that is an accurate or reasonable approximation that still applies. Then what can you say about $50,000 Bitcoin? Has anything fundamental changed? Not really. Of course, Bitcoin cheerleaders cite this or that reasons why its meteoric run-up to current levels is justified. But there’s nothing to analyze Bitcoin except the price itself. When you look at analysis applied to stocks, bonds, commodities, foreign exchange or other tradable goods, there’s an underlying asset or story embedded in the price. Oil prices might move on geopolitical fears. Bond prices might move on inflation or disinflation fears. In both cases (and many others), the price reflects real-world factors. With Bitcoin (to paraphrase Gertrude Stein), “there is no there, there.” Bitcoin doesn’t reflect corporate assets, national economic strength, terms of trade, energy demand or any of the myriad factors by which other asset prices are judged. Normal analysis is meaningless when the price itself is meaningless in relation to any goods, services, assets or other claims. Recommended Link [Prepare for America’s Trojan Horse…]( [Read more here...]( The left’s plan to push America into a socialist nation is finally coming to fruition right before our eyes… But what could happen “next” will have a tremendous impact on your everlasting wealth. [Click Here To See Why]( I also reject the utility of technical analysis when applied to Bitcoin because it has low predictive value when applied to substantial assets and no predictive value at all when it comes to an asset like Bitcoin. If you follow technical analysis, you’ll see that every “incorrect” prediction is followed immediately by a new analysis in which a “double top” merely presages a “triple top” and so on. Technical analysis can help clarify where the price has been and help with relative value analysis, but its predictive analytic value is low (except to the extent the technical analysis itself produces self-fulfilling prophecies through herd behavior). Meanwhile, frauds and hacks continue to be revealed on a regular basis. It’s business as usual in the Bitcoin space. Mature cryptocurrencies such as Bitcoin have shown their inherent limitations and non-sustainability. These cryptocurrencies all have major flaws in terms of investor safety and ease of use. Another relevant fact is that the Bitcoin price has been the target of rampant manipulation by miners in recent years. Bitcoin miners have rising costs of production due to the increasing complexity of the math problems that must be solved to validate a new block on the blockchain. Miners have huge incentives to pump-up prices, both to cover costs of production and to create demand for undistributed coins. These price ramps are conducted through wash sales, “painting the tape,” joint action, low volume price pumps, and other classic manipulations. The evidence is strong that this kind of activity has taken place in the past and there is no reason to believe it is not taking place now. As mentioned above, JP Morgan & Chase have estimated Bitcoin's value at about $2,400. The last potential contributor to the Bitcoin price spike is simple speculation. Bitcoin buyers who missed their chance to reap fortunes when the price went to $20,000 have seen another chance to ride a wave of much higher prices. But nothing fundamental has really changed about Bitcoin. A use case for Bitcoin has yet to emerge (and probably never will). Bitcoin is still unsuitable as an investment. Count me out. When the next financial panic happens, probably soon, will the global demand for liquidity force holders to sell Bitcoin to meet their debts and margin calls? If so, will all of that forced selling and demand for liquidity cause the price of Bitcoin to collapse if it hasn’t already collapsed due to the normal bubble dynamics? My estimate is that Bitcoin will suffer in a liquidity crunch as investors sell all forms of assets, including Bitcoin, for more liquid forms of money that governments and creditors are prepared to accept. A 75% or greater collapse in the dollar price of Bitcoin, therefore, seems likely. But just because I don’t believe in Bitcoin doesn’t mean I reject cryptocurrencies or the blockchain technology behind them. A second wave or new generation of cryptocurrencies has emerged with better governance models, more security, and vastly improved ease of use. These newer coins represent the future of cryptocurrency technology. These cryptos have much greater potential to disrupt and disintermediate established payments systems, and financial intermediaries such as banks, brokers and exchanges. Second-generation cryptocurrencies have a much greater chance of competing successfully with existing payment channels such as Visa, MasterCard, PayPal and the traditional banking system. The potential value of these new wave cryptos can be measured by the current franchise value of the institutions that will be disrupted. If these cryptocurrencies can disintermediate centralized financial behemoths like Citibank and the New York Stock Exchange, their value can be measured in the trillions of dollars. The blockchain is growing up and new tokens and use cases are emerging all the time. Crypto has a bright future. But Bitcoin doesn’t. Regards, Jim Rickards for The Daily Reckoning P.S. I need to have your attention. As you’ll see, this situation is so critical I recorded [this briefing to explain everything.]( I hope you don’t miss it. [Click here for more...]( After all, this is the culmination of my life’s work so it’s extremely important. And I don’t want you to miss out on the opportunity that comes from the event occurring right now. But the window won’t stay open for long. [Click here now to see what I mean.]( --------------------------------------------------------------- Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [James Rickards][James G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is the author of The New York Times bestsellers Currency Wars and The Death of Money. Add feedback@dailyreckoning.com to your address book: [Whitelist us]( Additional Articles & Commentary: [Daily Reckoning Website]( Join the conversation! Follow us on social media: [Facebook]( [LinkedIn]( [Twitter]( [RSS Feed]( [YouTube]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press delivering daily email issues and advertisements. To end your Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [unsubscribe here.]( Please read our [Privacy Statement](. For any further comments or concerns please email us at [feedback@dailyreckoning.com](mailto:feedbackdailyproof@dailyreckoning.com). If you are having trouble receiving your Daily Reckoning subscription, you can ensure its arrival in your mailbox [by whitelisting The Daily Reckoning.]( [Paradigm Press]© 2021 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security they personally recommend to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Email Reference ID: 470DRED01