Very Bad Signs: Active bitcoin addresses drop 47% from their April 15 peak and MicroStrategy is BORROWING $400 million to buy more bitcoin – June 8, 2021,
Being that Bitcoin got the label digital gold and the hoarders of bitcoin often tried to claim that Bitcoin was superior to Gold, they, unfortunately, attracted the same sorts of speculators who speculate on Gold. The difference between Gold and Bitcoin is that Gold is physical and sells outside the digital arena.
So the actual market price of gold will depend on what’s it’s being purchased for. If it’s being purchased for consumption it might have a different price than a person purchasing it for storage, Bitcoin doesn’t behave like that, Bitcoin has one purpose and it’s to be a digital asset, that is expected to appreciate in fiat dollar terms.
I’ve often stated that I don’t know how a person values Bitcoin without fiat dollars because if the fiat dollar system crashes, people will inevitably barter and find value in things relative to their demand. Trade without the U.S dollar will for a time become distorted and because bitcoin is a derivative of technology that offers no pricing mechanism relative to the true cost of energy and its barter ability in the real world and also being that the amount of Bitcoin is fixed, without fiat money, Bitcoin is useless.
5 things that happened in crypto over the past week | cnbc.com | Software firm MicroStrategy announced on Monday that it plans to offer $400 million senior secured notes to raise funds to purchase more bitcoin
Now, with that stated, it doesn’t appear that our fiat monetary system is going anywhere anytime soon, but Bitcoin faces another problem and that problem is economic DEFLATION in fiat terms. What most people often don’t understand is that higher prices in fiat dollars is a deflationary mechanism and the way governments and central banks in the modern era combat deflation is by debasing the currency supply via borrowing while at the same time disincentivizing saving money by keeping interest rates low.
Near-zero interest rates and higher fiat denominated prices hurt people on FIXED incomes. Now, for myself and my investments, I include all people WHO DO NOT WORK and who are on fixed incomes as people on Government Welfare. If you consume more than you’re able to produce, you’re on Welfare, there’s no getting around it.
Currently, the Joe Biden administration is encouraging people to be on welfare, the aforementioned along with Joe Bidens determination to raise taxes and add more regulations to the U.S economy is deflationary and the only way for Joe Biden and company to hide deflation will be to BORROW more money.
When most people imagine printing more, they forget that things like Paycheck Protection Program loans are loans. All the checks Joe Biden is sending to Americans not to work are LOANS, they’re not free. Even in the event, there’s a UBI, it’s a loan, it’s not free and in order for anyone to get a UBI, productivity has to be at a level that allows the government to tax more than it sends out in UBI.
Now, this on the surface sounds like Inflation, but if it doesn’t work like it was planned to work, it’s actually deflation. Similar to rent controls, the government can’t control the purchase price. Even if let’s say Joe Biden enacts price controls, well the private sector may simply stop restocking shelves.
When the government enacts rent controls, landlords, typically stop making non-essential improvements to their property. There’s no benefit for them to fix any property if the government decides how much profit they’re allowed to make, this happens in any market, which is why the government should stay out of the markets.
But with that said, as is the case with many business ventures, so is the case with Bitcoin in that a lot of people BORROW money to purchase assets in hopes of asset inflation. As I’ve been reporting a lot of people are BORROWING money to buy Bitcoin and if the price of Bitcoin doesn’t go up, the people who are borrowing to buy bitcoin have to SERVICE their loans.
Unlike the Gold who can borrow and spend without penalty, Bitcoiners who borrow to spend comes with a lot of risks, which by the way is also deflationary if the price of bitcoin stops appreciating in value. Let’s say you borrow to buy Bitcoin today and the price of Bitcoin doesn’t go up, within 12 months? Well at Bitcoins’ current price of $34K, every month that passes you have to spend money to SERVICE that loan.
That price you’re paying to service that loan is taking away from your future profits. Which is the opposite of what most smart investors do. So for myself, I pay cheap dividend-paying stocks usually during a period of mass panic and I don’t borrow money to purchase these dividend-paying stocks, furthermore, I prefer buying twice the amount of shares I plan to own long term, because when I get my free stocks any dividend payments I receive going forward is gravy and even if I sell the stock at loss, the stock was basically free for me anyway.
What people like Michael Saylor do is they borrow to invest, so as the article I pointed to above stated Software firm MicroStrategy announced it planned to offer $400 million senior secured notes to raise funds to purchase more bitcoin? I personally would never do that, because even though I do transactions in fiat dollar, my behavior mirrors what it would be if I were doing trade in Gold.
If a venture can’t pay me a dividend, it’s not worth considering, because my time to sell could be during a deflationary cycle, and tying up all my money in a greedy entity that wants me to take all the risk to me is like buying furniture, that I hope will age well.
Anyway currently the active participants in Bitcoin are dropping like flies, primarily because most of the people in Bitcoin are SPECULATORS, and if let’s say they bought at $40-$60K and now Bitcoin is at $30K and they borrowed money to buy Bitcoin, the cost to service that loan is probably killing them financially.
Pouring salt on the wound are people like Michael Saylor who expected to be rewarded by using other people’s money to purchase something that if the price rising again will benefit fewer people, thereby defeating the purpose of Bitcoin to have mass adoption.
Interesting times ahead
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