Tuesday, October 7, 2014

My Bitcoin Nightmare

The Central Banks of planet Earth can print as much fiat as they need.  They can hire people to hire people to hire people to... who will run trading bots against all the largest exchanges, to buy bitcoins incessantly, but slowly in order to stay just below the kind of volume that would be noticed by anyone.  In this way, a Central Bank of Planet Earth can slowly collect bitcoin without anyone taking notice.

Consider this:  If you pay enough attention to the market, there's a good chance you'll be able to identify points at which various opportunities arise, such as: when making a large trade will move the price a lot, when a movement in price will take a long time to be reversed, if it ever gets reversed, and when creating trading patterns can precipitate such opportunities.  Who has the money to do all that?  Why, Central Banks of Planet Earth of course!

Clearly then, it seems that if you have infinite financial resources (like Central Banks do), you can mess with the price of bitcoin.  I suppose that as a market matures, the frequency and size of these opportunities will decrease, though I suppose they never disappear entirely.

However, if you have a counterfeiting machine, which is the essential definition of a Central Bank of Planet Earth, then you don't care if you will lose money.  Instead, you care that some other currency is going to replace the fiat that you produce and then you won't be able to control the people in your country.  So you spend whatever you need to spend to make the value of that new threat fall.

Whenever they've accumulated enough to have a strong effect, they can dump their bitcoins, pushing the price into a nosedive.  I know of people who do this and they aren't Central Banks of Planet Earth or even hired by them under some kind of Black Ops meant to stave off the impending demise of the world's reserve currency.  They're just currency manipulators who will get mad at me if I publish their names.  I don't mind them because at least they are honest.

So regardless of who might be doing it, when does this strategy stop working?  Or do you think it can continue forever?  I don't think it can.  In the worst case scenario, my "Nightmare Scenario," the Central Banks of Planet Earth keep doing this until they and I are the only ones left who have any bitcoin.  No one else will want it, because it will be worthless.

They would hold all of the bitcoins except for the few (thousand?  million?) I still have because I like to keep my savings equally split between gold, silver, and bitcoin.  That leaves me as the only non-coercive being that has any bitcoin, and I don't think that would be such a nightmare after all.  It apparently worked out pretty well for the early miners of bitcoin, whoever they are, and I don't think I'd mind going through that.  Bitcoin would be my own personal pre-mined cryptocurrency.

Of course, any reader who catches my drift here would join me in the group of the only non-coercive people who hold bitcoin.  The combined bitcoin savings of all the people who hold bitcoin right now is worth just under 5 billion dollars (minus whatever coins have been lost).  That's a lot to split up between us and the CBEs, but it's less than 1% of the value of the centralized corporation called Apple.  That's something to chew on.

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