The Bitcoin Bust

Cryptocurrencies are in a tailspin, and the Bitcoin bears are out in force. Here's what investors need to know right now. [Liberty Through Wealth]( SPONSORED [Former Chicago Board Options Exchange Trader Predicts...]( [Click Play]( Stockflation is coming... Get ready now! [Here's how to protect your cash - click here.]( THE SHORTEST WAY TO A RICH LIFE The Bitcoin Bust Nicholas Vardy | Quantitative Strategist | The Oxford Club [Nicholas Vardy] Cryptocurrencies are in a tailspin. Bitcoin bears are out in force. Bitcoin pulled back more than 50% from last month's peak of close to $64,000 before rebounding over the past few days. Still, it has now fallen below its 200-day moving average for the third time in its history. [Bitcoin is now officially in a bear market.]( After the end of the other two such streaks, it tumbled an average of 50%. Observers are of two minds on the current pullback. For the bears, the recent drop confirms that Bitcoin is - as Charlie Munger eloquently put it - "rat poison." For the bulls, it's another opportunity to get a bite of the Bitcoin apple. The media is doing its part to keep the party going. It fetes cryptocurrency pioneers like Michael Novogratz as "visionaries." It indulges in schadenfreude over the fate of a California-based software developer, Stefan Thomas. He forgot the password to his Bitcoin account. He stands to lose 7,002 Bitcoin, worth more than $273 million. Then there is the Bitcoin developer Laszlo Hanyecz. In May 2010, he traded 10,000 Bitcoin for two pizzas. Today, those 10,000 Bitcoin are worth $390 million. The media's anointing of both heroes and zeroes reinforces my biblically inspired view that there is nothing new under the sun. I am convinced now more than ever that Bitcoin and its army of imitators will soon be added to the ash heap of financial history. The Outlook for Bitcoin Bitcoin offers many attractions for naïve investors. Bitcoin has the patina of a whizbang new technology called the blockchain. Bitcoin is more than a medium of exchange. As a Bitcoin investor, you are part of a revolution. Strip away the feel-good factor, however, and you are left with... well, not much. Bitcoin is a "currency" because its supporters say it is. Enthusiasts argue that Bitcoin's scarcity - and expensive mining costs - gives it its value. That argument never made sense to me. "Scarcity" doesn't make anything intrinsically valuable. You can't trade a four-leaf clover for a BMW. But you can trade a Bitcoin for a BMW for one reason: psychology. At the peak of Holland's tulip mania in 1637, a single tulip bulb - the Semper Augustus - was worth more than a house on the Amsterdam canal. (Today, that house is worth about $2.5 million.) Nor is Bitcoin's status as a "currency" unique. Remember the Japanese financial bubble in the late 1980s? Back then, Renoir paintings were routinely used as currency. Like Bitcoin, they offered the benefit of tax-free transactions. SPONSORED ["Get Unrestricted Access to All My Favorite Income Investments Today!" - Marc Lichtenfeld]( [Small Bag of Money]( If you want to discover... - My No. 1 strategy for building a constant extra income stream - Details on my 12 favorite dividend stocks that could help you earn an extra income check every month - for the rest of your life - How you can get unrestricted access to all of my top income research and investment recommendations NOW and in the future... [Click here now...]( Bitcoin as a "Store of Value" Let's stick with the analogy of Bitcoin as a piece of fine art. Like art, Bitcoin produces no cash flows, no dividend yields. It has no price-to-earnings ratio. Whether you see art as a "store of value" or a "pie-in-the-sky speculation" is a matter of taste. And tastes can change. As art critic Robert Hughes put it, "Art prices are determined by the meeting of real or induced scarcity with pure, irrational desire, and nothing is more manipulable than desire." The same applies to Bitcoin. Yes, art, like Bitcoin, can make you money. As Henry Clay Frick, the hard-nosed partner of Andrew Carnegie and an art collector, observed with wide-eyed wonder, "Even during possession, some paintings were seen to increase sometimes 100- or 1,000-fold more rapidly than the certificates of the best-managed joint-stock companies." But that does not make it an investment... any more than buying Beanie Babies was when they accounted for 10% of eBay's transactions. Or buying a lottery ticket that happens to hit. Arguing With "Success" Alexander Green's [recent (negative) column on Bitcoin]( drew the following comment: "How can you argue with an average annual return of 200% per year for the past 11 years?" The answer is simple. Just because the price goes up doesn't mean that it is worth anything (unlike, say, a share in Coca-Cola or Google). I can put a value on company shares. No one can do that for Bitcoin. Far more relevant to understanding Bitcoin are [investor psychology]( and [financial history](. Bitcoin started as a medium of exchange designed for a libertarian utopia, free of government control. A digital currency had been the dream of entrepreneurs since Peter Thiel founded PayPal in the late 1990s. The elephant in the room is this... Today's Bitcoin investors aren't revolutionaries engaged in a holy war against fiat currencies. If you bought Bitcoin, you bought it for a single reason: You expected it to go up. No Japanese businessperson cared about the impressionist art they were buying at the peak of the art mania in the 1980s. When asked why he had paid more than $300 million for late 19th-century French paintings, Yasumichi Morishita replied, "Impressionist paintings go better with modern decor." The real reason was far more straightforward. In the 15 years leading up to 1990, the price of French impressionist paintings rose more than twentyfold. Morishita was betting this trend would continue. The Ultimate Fate of Bitcoin [I've predicted the demise of Bitcoin before.]( That's because governments have the power to take the punch bowl away from the Bitcoin party any time they want to. China will be the first of many to do so. My advice? If you've made money in Bitcoin, pat yourself on the back. But remember, "Never confuse brains with a bull market." Get out of the cryptocurrency game of musical chairs before the music stops. And live to invest another day. Good investing, Nicholas P.S. During The Oxford Club's upcoming Wealth, Wine & Wander Retreat through Paris, Normandy and Amsterdam, I'm looking forward to paying a quick visit to the Tulip Museum. And I'll be discussing the Dutch tulip mania and how it resonates with today's disruptive technologies during one of the trip's in-depth financial seminars. I hope you'll consider joining us from August 28 to September 5 on this extraordinary adventure. But act quickly - space is extremely limited. [Click here to view the itinerary]( then contact Maggie Stephens at 800.638.7640, ext. 125, or [Maggie@aesu.com](mailto:Maggie@aesu.com?subject=Wealth,%20Wine%20%26%20Wander%20Retreat) to learn more and register. [Leave a Comment]( [Today's Trade Is]( [Click here]( to watch Nicholas' latest video update. For the latest news from Nicholas, connect on [Facebook]( and [Twitter](. JOIN THE CONVERSATION [Facebook]( [Facebook]( [Twitter]( [Twitter]( [Email Share](mailto:?subject=A%20great%20piece%20from%20Liberty%20Through%20Wealth...&body=From%20Liberty%20Through%20Wealth:%0D%0A%0D%0ACryptocurrencies%20are%20in%20a%20tailspin,%20and%20the%20Bitcoin%20bears%20are%20out%20in%20force.%20Here's%20what%20investors%20need%20to%20know%20right%20now.%0D%0A%0D [Email Share](mailto:?subject=A%20great%20piece%20from%20Liberty%20Through%20Wealth...&body=From%20Liberty%20Through%20Wealth:%0D%0A%0D%0ACryptocurrencies%20are%20in%20a%20tailspin,%20and%20the%20Bitcoin%20bears%20are%20out%20in%20force.%20Here's%20what%20investors%20need%20to%20know%20right%20now.%0D%0A%0D MORE FROM LIBERTY THROUGH WEALTH [A New Way to Play Gold]( [How to Profit From the Buyback Bonanza of 2021]( [Here's How Much Crypto You Should Have: Zero]( SPONSORED [5G Megastock Trades Under SECRET Name]( [Woman with Secret]( You won't find this 5G megastock on the NYSE, the AMEX or the Nasdaq. It's attracted more than $2 billion in investments from Wall Street... And it trades for only $3 a share. How will you discover the SECRET trade name? [Get the urgent details from market mastermind Alexander Green in his latest TEK Talk. Click here to see more.]( [The Oxford Club]( You are receiving this email because you subscribed to Liberty Through Wealth. Liberty Through Wealth is published by The Oxford Club. Questions? Check out our [FAQs](. Trying to reach us? [Contact us here.]( Please do not reply to this email as it goes to an unmonitored inbox. [Privacy Policy]( | [Whitelist Liberty Through Wealth]( | [Unsubscribe]( © 2021 The Oxford Club, LLC All Rights Reserved The Oxford Club | [105 West Monument Street](#) | [Baltimore, MD 21201](#) North America: [1.800.589.3430](#) | International: [+1.443.353.4334](#) | Fax: [1.410.329.1923](#) [Oxfordclub.com]( The Oxford Club is a financial publisher that does not offer any personal financial advice or advocate the purchase or sale of any security or investment for any specific individual. Members should be aware that although our track record is highly rated by an independent analysis and has been legally reviewed, investment markets have inherent risks and there can be no guarantee of future profits. The stated returns may also include option trades. We expressly forbid our writers from having a financial interest in their own securities recommendations to readers. All of our employees and agents must wait 24 hours after online publication or 72 hours after the mailing of printed-only publications prior to following an initial recommendation. Any investments recommended by The Oxford Club should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Protected by copyright laws of the United States and international treaties. The information found on this website may only be used pursuant to the membership or subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of The Oxford Club, 105 W. Monument Street, Baltimore MD 21201.