Bitcoin resumes passage to zero

See the latest Australian dollar analysis here:

Macro Afternoon

It almost looked as if it would hodl out at $6k. But no, worthless is worthless:

The latest driver is the same driver we’ve noted since the beginning, regulatory risk, via Bloomie:

On Friday, the SEC announced its first civil penalties against two cryptocurrency companies that didn’t register their initial coin offerings as securities. Airfox and Paragon Coin Inc. will each have to pay $250,000 in penalties to compensate investors, and will also have to register their digital tokens as securities.

“The selloff is related to enforcement, which is almost certainly underway,” said Justin Litchfield, chief technology officer at ProChain Capital. “Projects are being made to return investor money, which, after having spent a ton of money marketing their $100 million ICO on a lavish party-filled road-show that was the norm for this vintage of ICOs, will be tough.”

If we see crypto as a simple expression of central bank liquidity then this recent implosion also stands as a warning that the Fed has already pushed into danger territory.

Houses and Holes


  1. The Fed pushed into dangerous territory once they went past 1.5%.
    As always, over the cliff we go.

    • Yup, just a matter of time. I suspect the stock bear market (the Big One) is already underway, but only history will confirm it.

  2. The sell off is being driven by activity taking place in another crypto market – the break away BCH coin.

    Craig Wright, part of the gestalt entity known as Satoshi, has declared he’s going to war to defend the Satoshi’s original white paper and is refusing to support the direction that Chinese bitcoin and mining chip billionaire Jian is wanting to take it.

    Effectively he has said he’s prepared to drive BTC down to $1,000 if necessary by selling BTC in order to fund the costs/losses needed to win the Hash war he and online gambling kingpin Calvin Ayres are engaged with against Jian and Roger Ver (who wants to open a BCH based exchange and consequently supports the Jian (BCHabc) changes.

    Regulatory change is also happening at the margins, but the trigger for this currently decline has been the computational hash war that is being fought for BTC soul (ie the Satoshi White paper represented in BCHsv).

    My money is on Wright winning and BTC possibly falling to $1,500 before Ver calls “Uncle” or Jian, who runs a public company (as opposed to Calvin and Wright’s private company) is forced to yield to the losses mining BCHabc or BCHsv are generating.

    • The problem with this narrative is that Craig Wright has been repeatedly exposed as a charlatan. He repeatedly fakes evidence he is Satoshi and therefore he does not have access to the Satoshi coins. It’s possible the BCH hash war triggered a selloff, but I buy into the MB thesis that it’s enforcement action related to ICOs that’s driving it. Note that Bitcoin is not an ICO and is not actually affected by these SEC rulings, but a lot of money in the cryptosphere is (particularly ETH).

      • Yup lots of people believe he is a fake – I’ve followed him for years and personally believe him to be arrogant, tactless and a massive troll. I still believe that he is part of the gestalt entity that was Satoshi along with his partner Dave Kleiman, who died. I think half the reason for the rage for “Fake Satoshi” is that Satoshi was such a hero to so many people and Wright is such a FW that people just can’t internally reconcile the two.

        I guess the ultimate proof will come if some of those long term whale accounts start liquidating and who will crack first – if Craig doesn’t have access to those BTC, then I guess this should be a very short hash war.

      • Stewie, that’s an old article. Look deeper, you’ll see that literally every piece of evidence regarding CSW is fake. There’s no evidence he had any involvement in BTC before 2013. Even I’ve been into BTC longer than CSW! 🙂 Craig and Dave mined Bitcoin in 13/14 and traded on MtGox. Craig can’t even code.

      • I’m aware of the tests he performed to ‘prove’ he was and the reasons why they weren’t considered adequate. Craig has never claimed to be much of a coder – cryptography is his specialty. I’ve been involved in BTC since late 2011 early 2012, but I wouldn’t claim the length of time it has held my interest as bestowing any additional validity to my opinion.

        I’m not here to persuade anyone one way or another re Craig Wright being Satoshi, I’ll leave that unwinnable and eternal argument for 4Chan and Reddit. What matters most to me is that Craig supports Satoshi’s original vision, and that is enough for me.

      • No no it’s a store of value! Not manipulated and devalued by central banks! Manipulated and devalued by some completely different people!

  3. If we zoom out and look at all these symptoms from afar is quickly realise we’ve got a global debt problem that has been steadily growing since the start of the 1980s. It’s no wonder CBs want to keep inflation down around 2% and rates must remain low; the debt mountain can’t handle it.

    If we have indeed financialised the global economy, causing a dislocation from gains via productivity, and we are not willing to inflate away the debt, then we will have to choke on it sooner or later, surely? Just lending for the sake of lending because we think money is real? Such a false economy isn’t in our best interest, is it?

    This graph just does my head in:

    • The very reason bitcoin was created was to act as an inflation-proof unit post GFC, when everyone expected all the new debt to create inflation. All this new debt was only given to those who could buy assets, not the poor. This together with China stopped inflation in 2009.

  4. It may be going to zero, but there will be plenty of (trading) opportunity to make (and lose) money before it gets there.

  5. The price might fluctuate wildly but crypto as a tech isn’t going anywhere and is still the biggest macro play around by a long way.

  6. Gundlach-equities follow Bitcoin. Is it a coincidence to have AAPL, bitcoin, oil, Syd property, China all crash at the same time as QT steps up and interest rates have risen the highest % amount ever?

  7. There are other factors involved, too. Bitcoin cash is forking again, while there’s a big move from Bitcoin to Ripple.

    Bitcoin might fall faster, soon, as once it becomes too expensive to mine, liquidity will dry up.

  8. It costs a bit over USD $3000 to mine a bitcoin in China, and a little more in some US states. Assuming bitcoin allowed to continue then you can probably derive a fair value at thereabouts.

    It has previously been discussed that bitcoin poses an existential threat to itself by attempting to undermine the monetary system. I would also point out that the price of electricity is heavily subsidised in many countries including China and US, and that bitcoin is therefore an efficient means of stealing money from government.

  9. As a programmer myself, going back to the 1980s, I immediately recognized the crypto craze as a fad and did not invest. I feel sorry for those without a technical background who were fooled by the hype.

    • I feel sorry for you for not realising the potential. Assuming you knew about bitcoin before September last year, you could still sell it all for a profit.

      • lol, start your own fiat.
        Even if you think it’s worthless it is clearly still able to be sold for higher than it cost at any time before late last year.
        Not going to be able to say that about the share market much longer.

  10. Lame shallow analysis yet again. Switzerland just approved ETFs and SEC is about to make a ruling on BTC ETFs by 19Q1 at latest. Prices will go down further, but they’ll recover again before long.

      • It has no monetary storage costs, but requires a level of knowledge to store securely. So to avoid learning, and for security from theft?

        Edit: Also possibly to avoid dealing with potentially dodgy and unregulated exchanges, assuming the ETF is regulated.

      • darklydrawlMEMBER

        I am mostly guessing, but it should allow your average person to ‘invest’ in a selected basket of cryptos using their fiat currency without needing to jump thru all the hoops required to trade crypto as an individual. Whilst these steps are not overly complex, for many people it is too much hassle / too complicated when compared to buying an ETF via their existing (and trusted) online broker. After all, with the broker you just choose the ETF code and press buy and you’re done.

    • Wow… this was meant to be an amusing little entente but I’ve watched Bitcoin drop a full % and over $25 over my lunch break and Dogecoin has stayed stable.

      Should have bought Dogecoin