Best of the Week
Most Popular
1.UK House Prices BrExit Crash NOT Likely Despite London Property Market Weakness - Nadeem_Walayat
2.BrExit Morning - New Dawn for Britain, Independence Day! - Nadeem_Walayat
3.LEAVE Wins EU Referendum - Sterling and FTSE Hit Hard, Pollsters, Bookies and Markets All WRONG! - Nadeem_Walayat
4.BrExit Implications for UK Stock Market, Sterling GBP, House Prices and UK Politics... - Nadeem_Walayat
5.Trading BrExit - Stocks, Bonds, Sterling, Opinion Polls, Bookmaker Odds and My Forecast - Nadeem_Walayat
6.FTSE and Sterling Brexit Trading, Deconstruction of the EU Referendum Result - Nadeem_Walayat
7.UK Interest Rate Cut to 0.25% Imminent and More QE Money Printing - Nadeem_Walayat
8.Trading BrExit - British Pound Plunges, FTSE Stock Futures Slump on LEAVE Shock Referendum Win - Nadeem_Walayat
9.The Stock Market is Reading it Wrong! - Chris_Vermeulen
10.Breakouts Galore in Gold and Silver - Jordan_Roy_Byrne
Free Silver
Last 7 days
Silver Bull Faces Correction - 22nd July 16
The Serious Warning No One’s Talking About - 22nd July 16
Stock Market Insight from Greed, Volatility, and Put/Call Ratio - 22nd July 16
What Will Happen To the Stock Market When Interest Rates Rise? - 22nd July 16
How to Escape the World’s Biggest Ponzi Scheme - 22nd July 16
Addicted to Debt - We Can’t Borrow from the Future Anymore - 21st July 16
Not Everything Is Bullish for Gold - 21st July 16
Don’t Get Sucked Back Into the Stock Market - The Big Picture Hasn’t Changed - 21st July 16
Silver – Caught Inside - 21st July 16
Forex: "The Markets Are Getting Exciting!" - 20th July 16
China Economic Troubles - Is Kyle Bass Finally Getting His Revenge? - 20th July 16
Why Lithium Will See Another Price Spike This Fall - 20th July 16
The Peak Oil Paradox Revisited - 19th July 16
SPX Challenges the Upper Trendline - 19th July 16
Missing ’28 Pages’ of the 9/11 Report Released into Blitzkrieg of World Events - 19th July 16
Likelihood of Organized Disruption at GOP Convention - 19th July 16
More on the ‘Breadth Thrust’ and Stock Market Internals - 19th July 16
FX Traders: Get a Free Week of Forecasts (Details inside) - 19th July 16
Ups and Downs in Gold and Crude Oil Price - 19th July 16
Keep an Eye on ‘Bitcoin’ as the Next ‘Financial Crisis’ Starts! - 18th July 16
Erdogan Might Have Known about the Coup but Didn’t Prevent It on Purpose - 18th July 16
More Deflation Ahead: Silver, Gold And Their Mining Stocks A Must-Have - 18th July 16
Stock Market Minor Top? - 18th July 16
5 Best Gold and Silver Junior Mining Stocks in 2016 - 17th July 16
Gold And Silver – NWO-Created Tragedies Will Never End, Seek Truth - 16th July 16
How Long Can Buybacks Continue To Support A Market Which Is Standing On A Fundamentally Flawed Premise? - 16th July 16
Will They Come For Your IRA? - 15th July 16
Gold’s Record Selling Overhang - 15th July 16
Capitalism Has Entered a New Era—and Historic Stock Market Investing Returns Are Gone Forever - 15th July 16
Gold Price Could Hit $5,000 or Even $10,000 in a Few Years - 15th July 16
Junior Gold and Silver Mining Funds or Individual Gold and Silver Mining Stocks - 15th July 16
The Soaring Risk of Flying in Bernanke's Helicopter - 15th July 16
The Broad Stock Market, Helicopters and Gold - 15th July 16
The Curious Case of Vanishing Lady Liberty; Only Gold and Silver Remember Her - 15th July 16

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Forex Forecasts

Bitcoin - High Tech Fiat Alchemy

Currencies / Bitcoin Dec 20, 2013 - 12:07 PM GMT

By: Dr_Jeff_Lewis

Currencies

The curious case of Bitcoin and the associated rise of electronic currency has rekindled money and wealth discussions. It has also given rise to the re-birth to a libertarian cyberpunk ideology. In some ways, the response is a natural reflection of the devaluing of paper promises. In others ways, electronic cryto-currency is perfectly positioned to launch into physical metals. In fact, early correlation has been established, despite the overall tight control of the precious metals markets.


The most enthusiastic e-currency proponents have an insatiable appetite and need for understanding and defending their positions. What is fascinating is the much sought after anonymity and speed of movement. More difficult to establish is credible backing.

However, the intensity and enthusiastic defense are manna from heaven for the long-term physical precious metals investor. Such an investor is apathetic to the cause that any significant mass of the populace will gradually wake up to the ongoing (and historically unprecedented and ultimately hyperinflationary) monetary experiment being run today.

Bitcoin investors, outside of the pure speculator, are not necessarily buying from the safety or fear side of the trade. Obviously, the same could be said for the speculative side to precious metals paper trading, though at this point the betting is heavily to the short side of the boat.

The machine will start and feed on itself, becoming more and more fragile. And then velocity hits light speed. Collapse.

The New vs. The Strong

Electronic and currencies have a market backing. And while this may suffice in providing confidence, the speculative patterns that have developed along with the rise of derivatives in the crypto space threaten the worthiness of that market backing.

In much the same way, precious metals trading is dominated by manipulative paper trading wagging the physical dog. Electronic currencies could fall into the same pattern. It is worth noting that (without much of their own defense) the precious mining sector has been nearly destroyed by these illegal and unregulated price management practices.

JP Morgan’s recent patent application for its own digital currency might be construed as a warning sign rather than a vote of confidence. It is easier to imagine this move as stakeholder - just in case the U.S. Treasury’s enforcement arm doesn’t decide to come down on businesses that accept virtual currencies (which if course it already has).

A currency with a “market”, rather than commodity, backing is much more exposed to an array of external influences that are largely political in nature. This makes it much easier to manage perceptions, using a monetary propaganda put in place long ago to keep the oldest forms of money out of the system.

The Bitcoin movement is reminiscent of the tendency to limit our projection of new technologies. In his recent book, "Antifragile", author Nassim Taleb characterizes robustness of the inanimate objects. Taleb notes that if some thing or technology has already existed for a significant amount of time, the likelihood of its survival into the future rises considerably. 

Precious metals are obviously an old world technology that, despite machinations to the contrary, have continued to exist. They wield influence and are desired. The current period of overt price manipulation, horrible sentiment, propaganda and misinformation is spread by the priesthood of monetary policy. This pales in comparison to the demand for physical metal, which has never been stronger.

The Medium vs. The Storehouse

Money loves speed and momentum, and digital currencies offer this in a way that dovetails with the magic of user-friendly electronic devices designed for toddler interaction.

Speed and ease of use, however, is not necessarily conducive to a store of wealth, savings vehicle, or the formation of capital - essential ingredients for organic economic growth.

The use and widespread adoption of digital currencies would easily dovetail with an investment class still anchored by the desperate search for yield and the often fruitless endeavor to have money work for you.

Indeed, the digital currencies could be an essential mechanism for transferring or coaxing the trillions of dollars in retirement accounts and pensions soon to be looking for yield.

Much like a glass of water in the desert, fair value and civilized commerce ultimately revert to the natural predictability of commodity - not debt, military or market-backed mediums of exchange.

For more articles like this, and/or for a breath of fresh silver market reality amidst the stench of denial and technically meaningless short term price obsessed madness, check out http://www.silver-coin-investor.com

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2013 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife