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Are The Cryptos Going To $0?

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This morning there was an article suggesting that in July, the value of 99.9% of the cryptos will go to $0

Certainly there’s plenty of commentary on the internet suggesting a variety of opinions. Although given that this came from Casey Research, founded by Doug Casey who most certainly understands the flaws in paper currencies (and has been one of my greatest teachers in the past decade), it caught my attention.

In particular, the article mentioned that:

On July 21, 2018, they (Casey Research) believe Bitcoin and 99.9% of all crypto currencies will get banned.

They’ve received word of a private meeting that will take place on July 21st where the 20 most powerful countries on earth are joining together to discuss cryptos.

Given the reputation of Casey Research I’m confident that they aren’t just making this up based on nothing. And certainly there has been speculation that governments and central banks would attempt to ban cryptos. As the cryptos represent a direct threat to government’s hold on power, which exists largely through their control of the paper currencies.

So the idea that the government may be planning a meeting to attempt to shut down the cryptos is certainly plausible enough. Yet worth considering is that even if they attempted to do so, it’s far from a guarantee that they would ultimately be successful.

Primarily because there’s great risk to any country that attempts to ban the use of cryptocurrencies. Because given the technological innovation and possibilities that the cryptos offer, it would have the same effect as if a country tried to ban cars, electricity, or any other type of productive free market technology.

Any country that did ban cryptos would be putting itself at a significant competitive disadvantage to other nations. Which given other recent actions out of established governments certainly doesn’t discount the possibility of them trying. But again, it would represent a very desperate attempt by those who control the current system to maintain their hold on power. At the expense of the constituents the decision makers have publicly pledged to serve.

Also worth noting is that even if such an attempt were made, whether these governments would be able to successfully pull it off is another question.

Yes, the governments and banks have been able to successfully manipulate many of the markets for longer than most including myself have expected.

Yet while things like this can go on successfully in the short-term, the market has a way of addressing these issues from a longer-term perspective. Similar to how the banks have been able to suppress the prices of precious metals, yet the underlying fundamentals that suggest there are now as many as 500 paper claims to each physical once still dictate an eventual resolution with significantly higher prices.

If the potential crypto and blockchain technology does turn out to be as powerful as suggested, and government finances continue to deteriorate (which at this point it’s difficult to see a scenario in which that does not occur), such an action could conceivably hurt the crypto market in the short-term, yet not change the underlying demand that would continue to grow.

Those familiar with the free market Austrian School of Economics are aware of how there are usually unintended consequences of any government distortion in the market. Should the Casey Research report indeed be accurate, it’s likely that a ban would be met with similar results as those experienced during the prohibition era. And at least with the data and information currently available, as well as how shaky the government and political structure is at this point, I expect that at some point we would see a similar resolution.

It’s worth keeping an eye on, and I’ll be interested to see if such a scenario manifests in July. Again if it does, it would strike me as an extreme move of desperation, that would likely ultimately only have a short-term effect.

Keep in mind that such a move would also verify that governments realize just how powerful the technology actually is. Otherwise why bother to ban it? And if they do attempt such a move and are eventually overwhelmed by market forces, it’s fascinating to think about just how much upside potential in price there might actually be.

 

-Chris Marcus

May 29, 2018

 

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