January 27, 2022 - 8:00am
The McDonald’s Bitcoin meme — where newly impoverished crypto investors depict themselves sporting the fast-food behemoth’s iconic logo — perfectly captured the sentiment of crypto enthusiasts this week. During what looks to be the latter part of the latest crypto crash, the McDonald’s logo manifested itself on Bitcoin’s long-term chart (above).
The recent rout — in which the Bitcoin price fell to as low as $34,000 — arrived two months after the cryptocurrency reached its highest level of adoption. Similar to investors of other dubious assets (like the now-disgraced fund manager Cathie Wood’s so-called Innovation ETF), new Bitcoin “HODLers” have lost almost 40% of their holdings in just a few months. As for altcoin investors, they have endured even greater losses.
Once again, we’re at that familiar moment where it looks like it’s all over for Bitcoin bulls, and then usually see prices not only bounce back but reach all-time highs. Will this time be different? Well, that depends on the regulators. If the damage to retail investors’ purses is too much for the authorities to ignore, Bitcoin and other cryptocurrencies might be in serious trouble. But this means that authorities face the ultimate regulatory dilemma: how do you take down a global market for privately-issued digital money, especially one that’s already installed its influence in high-up places?
The lust for massive financial gains via Bitcoin has created conflicts of interest between the crypto underworld and public figures. Former Interpol arrestee and Tether co-founder Brock Pierce mingles with high-profile characters like NYC Mayor Eric Adams (who regrettably announced he would convert his first pay cheque into Bitcoin right before the crash). Meanwhile, the CTO of Bitfinex and Tether, Paolo Ardoino, can nonchalantly hold a speech in public, go back to his home office, and print billions of dollars in fake currency. You’d think he’d be called into question for running a counterfeit operation that creators of digital cash pre-cryptocurrency are serving jail time for, but no.
It goes all the way up to the White House. The billionaire founder of the crypto exchange FTX, Sam Bankman-Fried, was one of Joe Biden’s top political donors. And politicians have up hundreds of thousands in cryptocurrency. Many members of congress openly hold the fluorescent orange coin, such as Cynthia Lummis and Pat Toomey, who tried to prevent an anti-crypto bill from passing through the Senate.
The resistance to regulation goes even wider. Even if public servants gave up their Bitcoin to protect the sanctity of the U.S. dollar (or to just follow standard counterfeiting laws) authorities would still have to bring down the major players (Tether, Bitfinex, and Blockstream). But since these are elusive global entities, the only way of thwarting them is to devise a globally coordinated crackdown through the Financial Action Task Force (FATF), the sole intergovernmental agency that tackles money laundering.
Of course, if you somehow manage to pull off a global anti-crypto cooperative, during a period of ever-increasing geopolitical tensions, it’s doubtful if this will still lead to a crypto prohibition. The likelihood at this point must be that regulation will not happen, and that Bitcoin will rise — and fall — again.
Join the discussion
Join like minded readers that support our journalism by becoming a paid subscriber
To join the discussion in the comments, become a paid subscriber.
Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.
SubscribeSo you are basically lamenting the fact that the world’s biggest Ponzi scheme is powerless to regulate the world’s fastest growing Ponzi scheme?
How is FATF a Ponzi scheme?
You cannot regulate a crypto currency but you can, and should, regulate its interface with fiat money if you want to enforce payment of taxation and curb illegal activities. You can, and should, attempt to regulate e-wallets by which investors allow third parties to hold their crypto currency – with all the risk of fraud that entails.
What is missing is education. It appears that very few people understand that all crypto currencies do is transfer fiat money from new investors to old investors, leaving the new investor to hope someone comes along to buy them out when they actually want to spend their “savings”. One day no one will want to and the supposed “wealth” will be seen for what it is, wishful thinking. Until education balances greed with fear you can expect continued transfer of wealth from those who are greedy to those who were early adopters. That it will end in tears is certain but when depends on education. The sooner that happens the fewer the tears.
Best descriptions I have ever read. Thank you
This man knows what he’s talking about.
Exact and the financial elites are happy to keep the discussion limited to the impossibility of regulating a blockchain because they don’t want to regulate the interface between the blockchain and fiat money.
I’m curious, how do you gain access to your own crypto wallet?
You can spend them, too. though, right? Loads of retailers accept crypto – Microsoft, Amazon. Not reallty sure why you’re referring to ‘investors’, but it’s not important, I guess.
It is not quite:
“few people understand that all crypto currencies do is transfer fiat money from new investors to old investors,”
It is much worse. What you describe is mere hustling the gullible. The Trillion of $ Bit coin is valued at never was $ put into the system. No investors took a $ Trillion and bought bit coin – rather the $ bit coin claims to be its value has been created out of air.
Back a decade+ ago bitcoin was worth, say, $1 – $10 a coin. Huge holders (called whales) actually bought it when it was $1 a coin! Anyway, the price rose as the Whales promoted it, and did as you say, ‘Holdeled’ it (sat on it, limiting the amount on the market – so the price for Bit coin rose due to hype and limited numbers hitting the market.) (A long term stratify of the ‘Pump and Dump’ which is still in the pump phase)
This caused price to explode – hype (see Michael Saylor) successfully done – Media colluding, VERY weird stuff done by Tether (a ‘Stable Coin’ ie, supposedly backed by the USA dollar one for one, and is how Bitcoin is bought and sold – by the medium of Tether as it is convertible, being supposedly dollar backed.) The thing of tether is it is how Bit Coin converts to Fiat – and is is likely VAST amounts of Tether are created out of air, used to buy Bitcoin – and none of it was real, but the artificial increasing of price for bitcoin.. Every scam know to history is in the large Bit coin game…
But here is the thing: THE $ Trillion has just been created out of air! It was just 10000X inflated value bidding the price up, not ever money. It produced nothing, it was not something produced, like goods and services – it is just monopoly money, which if it gets stable enough, will spend like real money.
But if the Whales sell it all will collapse as supply will exceed demand. And that is the HUGE volatility – the Whales letting some go to cash out, and then the price crashing….. It is all a very destructive game.
“It appears that very few people understand that all crypto currencies do is transfer fiat money from new investors to old investors,…”
Looks very much like you need more education yourself. You do not understand this subject.
Educate me – specifically to bitcoin if possible.
It would be like trying to ban porn on the internet, good luck with that.
It is easy to ban it.
1) Make it all capital gains. Make all to reveal their coin, charge capital gains on it based on the inflation of its value – it is not an equity, the same laws do not necessarily apply – the Gov could demand coin holders pay vast tax (or as a tax cheat, go to jail) This was mooted.
2) Outlaw buying, holding, and selling it. If you know of FATCA – all the world is required to report any USA citizens banking to the USA IRS – it is not safe to try to do anything globally under FATCA which is illegal – and the foreign Banks DO NOT want to cheat under FATCA rules.
USA outlawed owning Gold in 1932 during the depression – till Regan in 1980. The Feds said buying, owning, and selling gold, except as jewellery, was illegal. Virtually all surrendered it to the gov in exchange for USA$. You could not sell it – no one would buy it – it was no good, unless but for criminals, as they could stash it, or smuggle it out…
“All Americans were required to turn in their gold on or before May 1, 1933 to the Federal Reserve in return for $20.67 of paper money per troy ounce. Americans who did not turn in their gold were subject to arrest on criminal charges and faced up to 10 years in federal prison. An exception was made for dentists, who could own up to 100 ounces.”
Sure, stealing TVs and goods, and burning liquor stores is quasi legal in USA today – but the Federal and IRS Laws? No sane American with anything would wish to cross them.
Your comment could easily be- ‘it’s easy to make people have vaccines. Simply imprison people if they don’t comply.’ Funny how most ‘libertarians’ are all about freedom until something comes along they disagree with….or more likely, don’t understand and hence fear.
Appreciate your reply and have two counter-points
1) USA is 4.25% of the total world population.
2) Gold is Physical, Bitcoin is not.
perhaps to squeeze in a third – most illegal sites operate outside of jurisdiction…
Bitcoin is the Internet of Money in many minds – “you won’t take away our internet, you won’t take away our internet currency”.
Saw an interesting quote on Reddit recently – “Due to the market crash, my 5 ETH are now worth 5 ETH”…. That’s the mindset, moving from gold to government fiat and the vast printing of money is the ponzi scheme. Bitcoin is digital gold. Yes the price fluctuates and yes bitcoin has collapsed 9 times in is life but it continues because people want it to be their future currency.
Highly recommend watching this – https://www.youtube.com/watch?v=1ToffjIo6hk followed by this – https://www.youtube.com/watch?v=PQC_c5QXG-A.
Both presenters start these interviews by saying they do not understand bitcoins, if they had spent a day or two researching the mathematics they could have challenged the speakers. These interviews feed myths about what money is and its role in an economy. A bitcoin is an asset – a tedious to calculate number with a limited supply that has no intrinsic value. If everyone tries to “put” their savings into it its “value” can only respond by going up and if they all want to spend their savings the “value” goes down. The fixed supply ensures that. Money is a promise. The promise helps an economy expand by allowing a farmer to employ labour that is paid from the grain that is grown rather than limiting it to grain saved from last years crop. It is “created” whenever someone accepts the promise by a specific person/institution/government. It is deflationary when people accept a promise (deposit) rather than spend and inflationary when people make a promise (borrow) and spend. The total number of promises do not make it inflationary of deflationary – only the inclinations to spend of those accepting and making the promise. To have value money needs to be a promise by a creditworthy institution and linked to a fiat currency managed by a body that has some control on the promises made to keep its value stable. Bitcoins are tokens but they are not money. Their growth in value depends on pyramid selling, which sensible people understand and avoid. Four hundred years ago the same greed and limited supply led to tulip mania. People no longer put their savings in tulips.
Spot on and an excellent explanation of the distinction between what amount to intrinsically valueless beads and state backed, fiat currencies.
The “intrinsic value” argument is baseless: the state-backed currencies themselves used to be based upon the intrinsic value of the coins themselves, and then this was dropped centuries ago as States realised that the value of the coin was not in the physical medium itself but in its function.
Modern fiat currencies are not trusted to contain worth as a consequence of the nebulous notion that they are state-backed but because they are consensus-backed to perform their three stated functions: a unit of account, a medium of exchange and a store of value.
The last is the function to which you refer, and given that fiat currencies are actually more state-debauched than state-backed anyway, the other two functions of a currency can also lend credibility to blockchain-based alternatives to the official currency systems.
I agree that money is a store of value that can be used as a medium of exchange. Use as a unit of account can follow from that. The store of value can be the token itself, if it has an intrinsic value such as a gold coin or a sack of grain, or it can be a promise from a particular institution/person/government. A bitcoin is a token in limited supply but it neither has intrinsic value nor a promise of a value. A blockchain does not add anything other than a mechanism to authenticate the validity of a particular number as representing the right to a bitcoin. In light of your disagreement in an earlier comment what do you think happens to the fiat money used to buy a bitcoin and where does the fiat money come from when you sell a bitcoin?