Why You Should Believe in the Speculative Bubble

You’ve seen the headlines all year.

Bitcoin this, bitcoin that.

In the second half of the year, as the price of bitcoin rallied past US$7,000 (AU$9,173), bitcoin was everywhere.

News outlets reported that people were selling their gold to buy bitcoin. There were even stories about people taking out mortgages to buy bitcoin.

I wouldn’t read too much into these sorts of stories. While they may be true, they’re just hype. But they certainly get people to click through and scoff at the recklessness of some investors.

All these stories of people piling into bitcoin make it easier for those in powerful positions to ridicule it. Reserve Bank of Australia (RBA) governor Philip Lowe reminded us about this yesterday, suggesting that bitcoin is mostly for crooks:

When thought of purely as a payment instrument, it seems more likely to be attractive to those who want to make transactions in the black or illegal economy, rather than everyday transactions. So the currency fascination with these currencies feels more like a speculative mania than it has to do with their use as an efficient and convenient form of electronic payment.

So you’re a thug for wanting to use bitcoin to pay for goods, and just plain stupid for wanting to buy into the ‘speculative bubble’?

It’s a tired argument, isn’t it?

Behind all this is the subtle implication from central banks that there is no trusted third-party to bitcoin, which makes it trustless.

South Korean Prime Minister Lee Nak-yeon took a different approach. Viewing the youth of today as fragile, he said that there were concerns cryptocurrencies would ‘corrupt’ the nation’s youth.

What I can’t understand is why policymakers would give so much airtime to a so-called ‘speculative bubble’. Especially one as tiny as bitcoin and cryptocurrencies in general.

The crypto market

The bitcoin market itself is worth about US$300 billion (AU$393 billion). And the total cryptocurrency market currently tops out at US$400 billion (AU$524 billion).

To put this in perspective, the entire global gold market clocks in at around US$8.3 trillion (AU$10.8 trillion). To boot, the global value of all stock markets comes in at US$100 trillion (AU$131 trillion).

In spite of its miniscule size, central banks continue to point to a forming bubble in bitcoin. Yet they have no problems cheering for the ‘Everything Bubble’ — the bubble forming in US markets that encompasses several asset classes.

Locally, the RBA is happy to ‘acknowledge’ the presence of a highly indebted and vastly expensive housing sector. But when they discuss it, there’s no criticism of it. No analysis of how it got out of hand.

However, the greatest scam ever played on the public took place under the very system we are supposed to trust.

Take a look at this:

US Money Supply 14-12-17

Source: Trading Economics
[Click to enlarge]

That looks just like the rising price of bitcoin, doesn’t it? A bubble, even… Only, it isn’t a bubble.

Instead, that chart shows the amount of US dollars in circulation from 1959 to today.

It’s an incredible exponential growth in wealth. Or, as I like to call it, the greatest theft in history.

As central banks continue to push inflationary-driven agendas, they have significantly devalued what each US dollar is worth by printing money.

Fiat currencies have nothing backing them other than faith in governments.

In spite of that, they continue to pressure people to sit on the sidelines and cheer for them on their ‘no bitcoin’ stance.

Bitcoin is a defensive move

Yet bitcoin isn’t the devil they accuse it of being.

Bitcoin isn’t a blood sport for the violent; rather, it’s a defensive move to thwart perpetual financial repression. The 32,000 lines of code driving the cryptocurrency is a skilful attempt to challenge financial powers.

The ability to access bitcoin gives people the chance to dismiss a trusted system. We had trust in the system for over a century, and it robbed us of our ability to protect ourselves.

So, which side of history will you be on? The side that agrees with misleading policymakers who ridicule bitcoin? Or the side that’s buying bitcoin? If, as we hope, it’s the latter, go here to find out how you can become part of this revolution.

Kind regards,

Shae Russell,
Editor, Markets & Money

Shae Russell started out in financial markets more than a decade ago. Working with a derivative brokering firm, she helped clients understand derivative markets, as well as teaching them the basics of technical analysis. Since joining Port Phillip Publishing eight years ago, Shae has worked across a number of publications. She holds the record for the highest-returning stock recommendation, in which a microcap stock returned over 1,200% in six months. Ask her about it, and she won’t stop yapping on. For the past two years, Shae has worked alongside Jim Rickards as his Australian analyst, translating global macro trends for Aussie investors, and how they can take advantage of these trends. Drawing on her extensive experience, Shae is the lead editor of Markets & Money. Each day, Shae looks at broad macro trends developing around the world, combining them with her distaste for central banks and irrational love of all things bullion.

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