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Critical Bitcoin Truths Rarely Discussed by BTC M(B)illionaires

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by skwealthacademy
Monday, May 17, 2021 - 6:00

This is Part Two, critical bitcoin truths never discussed by BTC millionaires, of a two part series about risks in the bitcoin markets. As you know, in Part One, which you may find here, I debunked all accusations that my analysis of risk in bitcoin markets is motivated by an anti-BTC, pro-precious metals bias, as I documented in Part One, numerous times when I issued acerbic commentary against gold and silver analysts that have issued the exact same type of sensational, irrational public declarations about future gold/silver prices to sell their books as bitcoin millionaires have done to sell their books.. In other words, the revelation that I have issued the exact same criticisms against false takes in the gold/silver industry for years should squash any unmerited accusations that any time I forward honest analysis of risks in the cryptocurrency markets, an anti-cryptocurrency bias is driving my analysis (Editor’s Note: Please note that we always post the most timely, comprehensive analysis on our patreon platform first, on our own news site second, and on all other forums a few days to a few weeks later).

Furthermore, the fact that Bitcoin millionaires and billionaires continue today to state that bitcoin is a much more sound form of money than gold and is not speculative only further exposes the delusions of people that worship at the bitcoin altar as much as it exposes the delusions of those that worship at the altar of gold. The greatest fanatical supporters of any asset often cannot separate delusion from reality because their delusions have merged with their reality (i.e. billionaire Saylor's reference to BTC as "immortal" as if the cryptocurrency is a god). Simply because an asset has offered opportunities for spectacular returns in highly condensed period of times does mean that it can’t be speculative in nature and that it is the lowest-risk, most fundamentally and technically sound asset ever. Such a stance is patently absurd.

And as it is a simple fact that traders have made the most extensive profits over the past decade in gold asset purchases, it is likewise a fact the bitcoin traders have far outperformed all BTC HODLers over the past decade as well, and likely at a multiple of how much gold traders have outperformed gold holders due to the much greater volatility and frequency of spectacular rises and falls in BTC price. By the way, the very fact that there are no forex collars or derivative contracts between the world’s major currencies and BTC identifies bitcoin as speculative and unsound money, though enormously profitable to the best traders. However, if it were indeed a better iteration of sound money than gold as falsely claimed by bitcoin billionaires that don't have a solid grasp of all the necessary pillars of sound money, then all banking institutions would currently offer forex collars in pairs between every major fiat currency and bitcoin.

For example, a corporate executive can easily purchase forex collars for USD: Euro, USD: Pound, Pound: Yen, Yen: USD pairs but not for one in any of these currencies with bitcoin. Since 1994, for 75 years, global banking institutions only gave full credit to US treasuries and the US dollar as a Tier 1 asset as collateral and even gold was categorized as a Tier 3 asset for which only 50% credit against its cumulative price would be granted. Though there had been discussion for a couple years now of the Bank for International Settlements (BIS) reclassifying gold as a Tier 1 asset, there has been no mention of this on the BIS website in their discussion of Basel 3 regulations. Essentially, bankers consider Tier 1 assets to be riskless. Do I believe gold, US Treasuries and the US dollar to be riskless assets? Absolutely not. But I believe gold to hold far less risk among these other two assets granted Tier 1 classification.  And has Bitcoin been given status as a Tier 1, 2 or 3 asset? It is nowhere to be found. But BTC millionaires love to quote Central Bankers that issue statements that support their arguments but completely ignore Central Banker actions that destroy their arguments – the very definition of someone blinded by massive confirmation bias. The massive problem today is that all of the gigantic social media platforms censor, shadowban or outright ban financial truth while raising up to the highest visibility, financial news shows full of journalists that really have very little idea of what they speak about.

For example, I recently saw a headline for a very popular YouTube financial show that said the narrative of high inflation was mere fearmongering and very overblown. Why would any journalist that understands anything about economics make such an uninformed claim? Well, because they do not understand anything about real economics. Their assessment that high inflation rates do not exist and are nothing to worry about are entirely based upon official US government statistics of an annualized rate of 4.2% and less than half that during Q1 2021. And they argue if you look at UK inflation rates, annualized UK inflation rates were still only 1% in March 2021 so obviously, they conclude, the most recent inflation data in the US is just a temporary anomaly and nothing of concern. Of course, since they don’t have the journalistic integrity to actually learn about the comical manner in which “official” inflation is calculated, they have no understanding that the data they reference in their conclusions is highly suspect and has been for decades.

But back to the topic at hand. The reason I’ve been posting a few videos about BTC lately to my channel even though I’m not a BTC owner is not to convince BTC holders that have made a killing just within the past four months to take some profits off the table at $58,000 per BTC (as of the May 2021 date I wrote this article) and buy some physical gold at its $1,775 an ounce price. I know that with the reverence held for the advice of BTC billioniares like Michael Saylor, who is still pushing a never sell, HODL BTC narrative, that the chances of this happening are slim to none with most BTC HODLers (though very realistic with BTC traders). However, I’m not here to convince anyone to do anything, so this point is moot. The point of writing this analysis of risk in the BTC market is merely to provide a factual refutation of some of the biggest myths being promoted by some of the biggest BTC whales at the current time in their efforts to continue to keep driving prices higher for very Machiavellian reasons. Thus, consider it to be an effort to merely educate (or perhaps influence BTC HODLers to unlearn the myths they’ve embraced and to relearn facts) anyone interested in being educated in the hopes that I can provide a much better understanding of the asset they currently hold.

For example, many BTC HODLers like Saylor almost always cherry pick the lowest BTC prices during recent price crashes and combine them with the highest prices of BTC during recent price peaks when praising BTC performance and then compare it to another asset’s price performance during that period that either was stagnant or poor, while ignoring other periods the alternative asset may have outperformed BTC to build his case for why everyone should dump all assets they own in favor of only holding BTC. In fact, believe it or not, Saylor increased his BTC price prediction to $5,000,000. It is really difficult for me to believe that every BTC HODLer that brags about their spectacular gains always correctly purchased BTC at the absolute lows of every massive dip in price for the last several years, which seems to be the claim issued by many BTC HODLer. In addition, I personally know someone that bought BTC at its near top in 2017 at $19,000 on the hype it was going to continue to more than double in price the following year, only to observe BTC prices get crushed by more than 75% the next year. And for all BTC owners that sold at massive losses in 2018, this event is conveniently completely ignored by people like Saylor.

Secondly, it is very difficult for me to believe that even billionaire holders of BTC believe all the nonsense they parade on financial shows that reach audiences of millions. I’ve been in the business long enough, including past experience in working in the Private Wealth Divisions of some of the biggest firms in the world to spot a snake oil salesmen when I see one. Most of the time, in my opinion, even cryptocurrency hundred millionaires and billionaires (meaning those that actually hold hundreds of millions to billions of dollars worth of cryptocurrencies personally or institutionally) fully understand the speculative nature of cryptocurrencies, but merely are eternally optimistic when publicly speaking of future BTC prices as a calculated Machiavellian tactic to sell their book. The type of duplicitous behavior in which self-serving behavior is repackaged as behavior that will “free humanity” has plenty of historical precedent in the world of finance.

Thirdly, Saylor perfectly elucidates the billionaire BTC mentality that tunnel visions one into cherry picking information that supports his arguments from a source he deems authoritative, while completely dismissing information delivered from the same source  when it rebuts his arguments. For example, Saylor has repeatedly argued that BTC is a far better store of value than gold, quoting US Central Bankers that have stated BTC is a digital asset and not a currency, thereby invalidating criticisms against BTCs volatile price declines of being priced at $60,000 one day and $50,000 just a couple of days later. Saylor argues that despite BTC’s extreme price volatility, since people choose to hold it as an investment and not as a currency with plans to actually spend it to purchase items, that the downward price smashes can be completely ignored when analyzing BTC’s role in being a store of value as the only concern is that the price continues to move higher on an infinite timeline into the future (the HODL narrative). Yet, in his appeal to Central Banker authority to make his appoint, he simultaneously complete dismisses a 2020 World Gold Council survey of Central Bankers conducted just last year in which Central Bankers named their top 5 reasons for holding gold reserves as the following: (1) its historical position (legacy holding), (2) its status as a long-term  store  of  value,  (3) its  performance  during  times  of  crisis,  (4) its  lack  of  default  risk  and  (5) its effectivity as a portolio diversifier. Thus, even though Central Bankers have publicly identified gold as a great store of value but have never acknowledge BTC as a store of value, somehow Saylor still manages to appeal to the authority of Central Bankers to explain why BTC is a better store of value than gold.

 

Emotional Detachment in Assessing Risk Leads to Greater Clarity in Price Predictions

I have always been honest in my assessment of risk and I believe that my complete emotional detachment from my risk assessments of various asset classes have been responsible for the success I’ve had in many of my calls in recent years (though of course, my assessments have not all been on point, as is the case with all analysts). With apologies to all those that have already read the below referenced articles, allow me to rehash some of these calls for the benefit of cryptocurrency HODLers that may still be seeking a better understanding of market risk, as often, the intersection in consumption of my cryptocurrency based articles and all other financial articles I publish is slim to none. For example, I’ve spoken about risk in terms of stocks very publicly on my news site and have been spot on as far as calling the tops of many stocks’ share prices in the last year. For example, on 5 February 2020, even before politicians enforced economic lockdowns around the world in response to coronavirus, from studying the opportunistic historical behavior of political leaders in response to a perceived crisis, I knew that such global lockdowns were imminent. Consequently, I predicted that fourteen stocks, some of them airline companies headquartered in Asia like ANA Holdings, Eva Air, Thai Airways, Singapore Airlines and Cathay Pacific, and Shangri-La Hotels, but also including non-tourism related companies like Starbucks, Tesla, Apple, Remy Cointreau, and would crash in share price. Finally, I predicted that Hyatt Hotels and Intercontinental Hotels, because of coming travel bans, would also suffer crashes in share price.

And indeed, just one month later, the stocks I named as ones that would crash in response to yet-to-be-declared economic lockdowns, crashed significantly by  17.8%, 10%, 20.6%, 19.4%, 23%, 29.5% and 36.8%. Of the fourteen stocks I predicted would suffer significant share price declines as a consequence of political responses to coronavirus, only one had a positive return one month later, with the other thirteen suffering quite significant and rapid losses. Furthermore, as you can observe from the analysis I provided last year in this article, I predicted that the massive sell off that happened in the Shanghai Stock Exchange last January would spread to yet unaffected other Asian markets and Western markets. If we travel even further back in time to the 2008 global financial crisis, I also issued a warning of an imminent US stock market crash on 23 April 2008, just 18 trading days before the crash that led to a 50% sell off of the S&P 500 index.

The only reason I bring up these past predictions of immense risk in markets is because I feel that almost everyone is ignoring my current predictions of enormous risk in BTC markets at this time (Editor's Note: Recall that all benefactor skwealthacademy patrons received warnings of this high BTC risk factors when BTC was still hovering around the $58,000 mark). Does my past track record mean that my sentiments about enormous risk in BTC markets will also continue to manifest? Because I do not consider myself to be an expert in cryptocurrencies by any means, but simultaneously believe my understanding of risk in cryptocurrency markets is quite solid, I want to stick to facts here meant to educate versus to speculate. If you’re interested in my speculations about time frames and other factors that I believe will trigger underlying risks in BTC markets to manifest, then you may do so by becoming a Benefactor level member of my patreon platform.  Consequently, even if BTC prices continue to rise from $60,000 to $100,000, an event that I’m not saying is impossible, the current risks I’ve identified in BTC markets will still exist at a $100,000 price as well. In the meantime, speculating about when, and at what BTC prices will reverse and then resume higher is merely a distraction from a more important discussion of risk.

 

What Prevents Humans From Assessing Market Risk in a Non-Delusional Manner?

We have seen complete dismissal of large risk in global financial markets happen time and time again, from paper millionaires making this mistake during the dot com market in early 2000 that refused to get out of the market and take massive profits off the table, to US stock market investors in April of 2008 that believed US stock markets still had considerable room to run significantly higher, to silver bugs in 2011 that were convinced silver’s achieved $50 per ounce price level in futures markets would launch silver prices into the triple digits, to bitcoin HODLers today that believe all predictions of $300,000 to $500,000 bitcoin prices within the next 7 to 24 months without any acknowledgement of real downside risk. Even the BTC HODLers that are rational enough to acknowledge immediate downside price risk at the current time are still predicting $300,000 prices by the end of this year.

Most recently, I wrote in an article published on my news site, published just a few weeks ago, of my belief of great risk in the share prices of four more stocks - Tesla, Boeing, Chipotle Mexican Grill and Deutsche Bank, whose shares prices at the time of publication were respectively $677, $252, $1,531 and $12.30 a share. In the weeks that followed Boeing and CMG have fallen considerably in shareprice to $229 and $1411 a share, but Tesla is barely down in share price from that time at $663 share and DB has actually risen in share price to $13.87. Does this mean that there is little risk in continuing to hold TSLA and DB for the long-term? Hardly. But this is the conclusion that will be drawn by many TSLA and DB shareholders. In fact, I’ve been warning people of potential asset price crashes on my news site for 16 years and for the most part, for 16 years, people have ignored my warnings, many of which have come true. (Update: TSLA has dropped to $589.74 as of 14 May 2021, but DB has soared even more to $14.40 a share, so my batting average on these three stocks was three out of four, or 75%). Why?

Upton Sinclair, a famous American muckraker, and author of the seminal book , The Jungle, about child labor exploitation in the meatpacking district of New York city in the early 1900s, once stated, in his essay, I, Candidate for Governor and How I Got Licked, “It is difficult to get a man to understand something, when his salary depends on his not understanding it.” I would apply Sinclair’s acerbic observation in the 1900s  and restructure his comment to apply to the modern day investor in the following manner: “It is difficult to get a man to understand risk, when all his hopes are pinned to rising prices of his investment.” And this is the phenomenon at play here.

When I ran a precious metals analysis and consulting firm more than a decade ago, I would encounter at times, multi-millionaires that had done the correct thing and bought millions of dollars’ worth of physical gold over time, making their first purchase as low as $700 an ounce. However, I was amazed to discover in conversing with some of them, their complete lack of understanding of the price mechanisms that controlled and dictated gold prices. A few understood the connection between futures markets and physical prices, but most believed fundamental supply and demand determinants of the underlying physical markets actually set prices and had no knowledge that prices were heavily manipulated and dominated by bullion bankers in the New York and London futures markets (though this facet of price mechanism setting may significantly shift in the near future). I was shocked because without an understanding of price mechanisms that most heavily influence prices, one cannot possibly have a rational understanding of the risk in holding such an asset.

Today, this same lack of understanding of risk in bitcoin markets among many BTC HODLers is just as astonishing. Again, as I’ve already stated, none of the savy BTC traders that have made, by far and away the largest profits in the BTC market are HODLers and they all have traded quite heavily due to their understanding of risk. However, the most delusional BTC HODLers share a delusion level on par with sports fanatics. What do I mean. If you desire to read some of the largest samples of the most illogical, delusion-based assessments of reality just visit any forum in which sports is the focus of discussion. You will always encounter loads of people that confidently state that “their team”, at the start of a season, whether that sports season is futbol (soccer), NFL, NBA, or baseball, is going to win the championship that year. In addition, every year, sports fans literally lose their homes by betting enormous sums of money during their playoffs on “their team” to win, even when the opposing team is favored by professional gambling sites as 2:1 favorites to win. In the past, I’ve observed this type of delusion among precious metal investors but I find this type of extreme delusion to be far more rampant among bitcoin HODLers.

The “nothing can go wrong mentality and everything can only go right” is extremely dangerous to everyone’s financial livelihood so let’s discuss some salient points of that has invaded this type of mentality in the cryptocurrency world. Michael Saylor is a billionaire that just recently purchased BTC and has already made billions in profits (at least paper profits) from it. Those that looked at his positions have stated that he purchased his BTC at about an average price of $23,000 per btc. Yet, if you just visit this video I posted last year and purchased at the price point I determined was the right time to purchase BTC, your purchase price would have been at a better price point than at the one Saylor purchased. So why are almost no BTC HODLers listening to my warnings today and nearly everyone adopting Saylor’s mantras if my analysis of BTC prices were more on point than even his last year? Could it be the fact that he unrealistically always promotes massive BTC prices while I issue warnings to temper all optimism about mid six-figure and seven-figure price expectations with a healthy dose of realistic caution derived from a realistic understanding of risk?

 

Two Irrational Views of BTC (That Become Apparenty Only When Risk is Factored into the Equation

So, let’s take a closer look at two eternally optimistic views spread by BTC millionairs such as Saylor and the Winklevoss twins that simply are completely ignoring any realistic risk assessment, and that I find to be intellectually dishonest.

  1. Why would anyone ever want to buy gold because if you observe the price returns of gold over the same period as bitcoin, bitcoin always wins.

Let’s deconstruct this lie. We all know how intellectually dishonest it is to cherry pick time frames to sell a point of contention. This is one of the biggest scams used in the investment industry by dishonest people to scam others. For example, in the precious metals industry, I used to see newsletter writers advertise all the time their junior mining picks that soared by 5,350%, 1,640%, 8,325% and 2,430%, all in one year. I was curious for two reasons. Having analyzed many junior mining stocks myself, these yields seemed sketchy to me, even among junior explorers. Two, I wondered how someone could pick so many huge winners among tiny exploration mining stocks in a single year, because typically the winning percentage is extremely low when investing in high-risk exploration mining stocks. The general rule of thumb is invest a tiny portion of your portfolio in exploration stocks, nothing beyond what you can afford to lose, and if you get one or two massive winners among them, the profits from these few massive winners will cancel out the losses from all the others and still leave you with significant profits.

When I looked further into this person’s claims, I discovered that (a) he only advertised his winners and ignored the losers; (b) he ran a trading service that often advised buys and sells of small junior mining explorers with investment time frames as short as a few hours to a single day; and (c) dishonestly annualized all his returns for his winners. Therefore, if a junior mining stock he advised buying and selling rose 23.5% in one day, he would multiply this yield by 365 days (even though there are far less than 365 trading days a year) and advertised annualized gains for this stock at 365 x 23.5%, or 8,577%! That is about as dishonest a tactic as possible, because the real gain from that stock would never be 8,577% but yet his advertising campaign made it seem that if you invested just $3000 in that stock, that one’s profit would have been more than $257,000 when it was only $705.

I have found the cherry picking of BTC price gains of BTC millionaires that ignore all the massively volatile downward price movements to be just as disingenuous as the above example. If I wanted to argue that the US S&P 500 was going to continue to soar from its current level of 4200 to 12,000, I could make a deceptively strong argument by arguing that I purchased the index in 2009 at 917, and with a return of 328% over that time frame, another 300% rise moving forward is nearly guaranteed. And to the novice investor that understands little about the US stock market, this may seem like a very convincing argument. However, if we widened our perspective and discussed the much more modest gain in the S&P 500 of only 80.5% over a much longer period of 20 ½ years from August of 2000, then  a prediction of S&P 500 reaching 12,000 moving forward seems insane. Do gold and silver asset holders make the same disingenuous claims as well? Absolutely, as I provided an example above.

  1. Saylor attacks gold as a poor asset to hold v bitcoin because he states that everyone knows gold prices are heavily manipulated in the futures markets and claims that bitcoin prices are immune from manipulation, with BTC prices set by the people and free markets. Consequently, why would you want to be subject to downward price manipulation of gold prices from bankers that has limited gold’s price rise when you can hold an asset like bitcoin with no limits to upward price appreciation?

To begin, not everyone knows that gold prices are heavily manipulated, though Saylor’s assertion of downward gold price suppression/manipulation are true. When I first started publicly making claims of gold price suppression in 2006, I was widely mocked for making these claims. So unless you were studying price manipulation at a time and making such claims when 1% of the population believed you instead of 99%, then your authority in speaking about such matters is questionable as an argument for not holding such an asset (simply because there has been ongoing erosion in the power of bullion bankers to manipulate gold prices since 2008 that needs strong consideration in the btc v. gold debate). Consequently, I strongly believe that Saylor really doesn’t believe his above assertions and that he only makes them in attempts to drive prices of BTC higher. I will push back on his assertion that BTCs price is never manipulated in just a moment; however, let me begin with this point first.

A claim that gold is a terrible asset to own because its price is constantly fighting an uphill battle against bankers is completely colored by one’s personal biases. Given that gold’s price was $250 an ounce when it began its journey to a price of more than $1800 today, a 7.2Xs multiple, one could interpret this tremendous rise in the face of constant price suppression to be a supremely positive development that forecasts the end of bankers’ efficacy in suppressing gold prices in the future, or as a harbinger that bankers may be getting ready to flip sides and to serve to manipulate gold prices forever higher in coming years (again, I’ve provided more detailed analysis of this topic to my benefactor and higher level skwealthacademy patrons on the patreon platform, if interested).

Secondly, Saylor conflates value with price. The value of gold can never be destroyed by bankers because its true value is immutable and is its weight. Bankers have conflated value and price in our minds by assigning fiat currency prices to gold’s units of weight, thereby tricking us into believing its price is its value, when these are two entirely separate and very different concepts. But this is an argument for a different article, so I will not be sidetracked here and I will return to my manipulation v. non-manipulation narrative.

Thirdly, If Saylor actually believes bitcoin prices are invulnerable to price manipulation with a $5B alleged position in btc as of May 2021, that is truly scary as he will expose himself to massive losses in the future. This is why I truly do not believe that Saylor actually believes the words coming out of his own mouth. There are multiple reasons that have revealed BTC’s vulnerability to extreme price manipulation, including many I’ve discussed already (with skwealthacademy patrons), including obvious price manipulation that led to the 2018 crash from a $20,000 price to a $3,000 price. But even outside of this, just research how the BTC trader nicknamed “Spoofy” was moving BTC price up and down by massive price amounts in 2017. And of course, we have the most recent example of a single tweet by Elon Musk that caused a significant BTC price dump. I just don’t see how any person of any intellect could conclude that BTC prices are immune to price manipulation, and that is why I think Saylor’s comments are geared toward selling his book rather than reflective of his true beliefs.

Though I speak of a few other points of contention that I consider to be BTC myths propagated by large BTC investors that deceive other much smaller and naïve BTC owners that you can listen to here, the above points cover some of the more significant points of contention I have with the claims of BTC millionaires.

Other recent skwealthacademy published content:

A More Detailed Discussion of Critical Bitcoin Truths Ignored by BTC Millionaires

A Candid Discussion About the True Risk of Cryptocurrencies

Preview, M for Mindfulness

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