I'm sorry gentlemen, but this shit seems like a disaster.
Bitcoin is a highly speculative asset. It has created a bubble inflated by fear, speculation and hopes of a viable hedge against inflation + or even the possible collapse of the US dollar.
Here are some scenarios which could lead to a drastic drop in the value of BTC:
- The European Central Bank's president, Christine Lagarde, has called for greater regulation of BTC. If the European governments decide to squeeze BTC, it can lead to it's downfall. Not to mention that once Biden comfortable in the White House, he will most likely start to do the same and demand more regulation towards BTC.
- On Thursday, January 12, 2021, Federal Reserve chairman Jerome Powell stressed the fact that the creation of central bank digital currencies (CBDCs) is a very high priority. In other words, the US Federal Reserve Bank is already working on this and this is essentially the epitaph on BitCoin's tombstone.
- Why is BTC seeking for crypto custody by large US financial institutions? Playing devil's advocate, let's consider an alternate scenario as to the reason "why" BTC is looking for assumption of crypto custody by large US financial institutions. I believe BTC’s recent search for crypto custody by large US financial institutions (like Goldman Sachs, JP Morgan & CitiBank) is likely a move out of sheer desperation by BTC due to fears of likely incoming government regulation and furthermore the creation of a Federal Reserve digital currency. Remember, the Federal Reserve (which is made up of the 12 distinct Federal Reserve banks in the USA) is not owned by the US government (even though the US government/President can nominate a chairman). There are old families, which control some of the largest financial institutions here in the USA, that are behind the FED in its totality. I think it is farfetched to assume that after they (the families) built up the USA's standing as the current world superpower with the world's reserve FIAT currency, that they will just bend over and allow for the rise of BTC as the alternative to the US Dollar. If the FED gets involved and pushes for a FED coin (As Jerome Powell just suggested), BTC will disappear or at the very least crawl back into the speculative cave from which it came from to die a painful death.
- If the USD index continues to rise as recently seen this past week, then BTC value will undoubtedly drop as there has always been an inverse correlation between the two.
- Increased US government regulation of cryptocurrencies. Remember, Joe Biden and his party want more government regulation & taxation. This is the Democratic party for fuck's sake and they're about wealth redistribution at the cost of the wealthy. For anyone to think that a hypothetical store of wealth like BitCoin (where many of the "young" rich are trying to hide their money) would be immune to high government regulation, that Biden and family look to bring, is downright naive. Also, with the European Central Bank calling for more regulation of BitCoin, how long before the US Federal Reserve bank does the same? If the Fed follows in similar path to the European Central Bank, you better bet the house on the fact that Biden and Democratically controlled Congress will do as the FED asks, because they (The FED) are literally the USA's piggy bank.
- If a better designed version of cryptocurrency is created, it can also make BTC go away (this was most recently voiced by UBS).
- History has shown us that right as stocks (of any kind) are overbought, this most often times than not leads to ultimate corrections in price. Right now, BTC is way overvalued & overbought, I think his most recent 28% drop in the price of BTC was just the beginning.
Here are some scenarios which could lead to a temporary rise (even if short-lived) in the value of BTC:
- Crypto custody assumed by large US financial institutions. This will create a false sense of security, as traders/investors in Wall Street will adopt the sentiment that these financial institutions are TOO BIG TO FAIL and that the fate of the US economy hangs in their balance, which would then lead these investors to blindly assume trust on crypto not collapsing. The average financial analyst will assume that these big institutions would never assume such risky positions unless they knew something that the common man doesn't. What people forget is that these large institutions care about their FEES above all else. Regardless of BTC rising or crashing, so as long as they can charge their customer fees and get money for subsidized gambling, they don't give a fuck about the fate of BTC or any other cryptocurrency.
- A move from a worldwide dependence on oil to more sustainable sources of energy (electric, solar, hydrogen, wind sources etc). Given that oil is priced in dollars, we've had a monopoly in the world markets, but if you take the value of oil away, it will hurt the US dollar index substantially and lends more value to BTC. With some states like California talking about removing all oil powered cars by 2030 (clean car mandate), this could slowly set a trend that could be followed by other states, which could be bad for big oil companies and of course the US dollar.
- Fear of the US dollar undergoing substantial inflation (due to US gov't counting on the FED to continuously keep monetizing the debt in order to keep funding additional relief packages, keep our economy on life support & to furthermore fund the green new deal that democrats will aim for under Biden). If the USD loses value, most people will look for alternatives hedges against inflation. While I believe in different assets (Real Estate etc), some will blindly place trust in digital FIAT currency.
Let me know what you guys think. As an accountant, easily over half of my clients have sizable positions in BitCoin and when now preparing their taxes for the 2020 year, I keep asking the same questions to them that I have posed to you all. Sadly, they are mostly driven by the fear of missing out on a possible great opportunity created by BTC to make money. They're not looking at the end game, but instead following the guidance of their financial advisors that are of course supplied by the big financial trading firms.
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