Should you really trust your money with these currencies?
It is estimated that $400 billion, yes billion, has been wiped off the value of major cryptocurrencies since January 2018. Today, the word billion is tossed around by businesses, banks, and governments as the word million was 50 years ago. So let’s look at the number of zeroes involved in 400 billion. There are eleven, as in $400,000,000,000. Not a small sum of money by anyone’s standard. Almost, but not quite; half a trillion dollars. As of this date, November 2019, that loss worked out to an average of $18 billion a month.
Who is behind this loss, who benefited and who carried out the manipulations?
Equally important; who are all the people who lost this enormous amount of money? Why aren’t they front and center with pitchforks and flaming torches?
Quoting from Wikipedia: Bitcoin was invented in 2008 by an unknown person or group of people using the name Satoshi Nakamoto and started in 2009 when its source code was released as open-source software. Bitcoins are created as a reward for a process known as mining. They can be exchanged for other currencies, products, and services.
I think the words UNKNOWN PERSON in the previous quote speak volumes. The history of cryptocurrency has a long and checkered and shadowy past. The central idea behind crypto was to remove the middleman from person to person and business to business transactions. In doing so, it maintains a structure that permits strangers to conduct business without government control or an intermediary such as a bank, credit union or some other financial institution charging user fees. It also removes any centralized institution from the passing of currency from one person to another or one business to another in the business arrangement and leaving it reliant on a network of independent computers. This creates a system that is not centralized and operates outside the control of the government.
Operating a buying selling system or trading system without an intermediary is not a new concept. In ancient days it was called bartering. It still exists today. A chicken farmer swapping a dozen eggs with an orchardist for a dozen or so apples is a very simple example. No intermediary; no fees; no taxes.
At the core of the cryptocurrency business is the notion or principle it is purported to be fully public and monitored for safety by the computers acting independently of each other. The network behind the crypto is a system called blockchain that works behind the scene as the intermediary. Blockchain is the underlying technology monitoring transactions to ensure they are accurate, transparent and unchanging so there is always the fundamental presence of consistency and preventing human error. Blockchain is, in fact, the go-between and ensures both parties are monetarily sound for the transaction to be consummated.
By removing government and financial institutions from the equation and eliminating fees and service charges, it is supposed to reduce the cost of doing business and to eliminate corruption. At its center is the promise to remove and take control and information away from the elites and put control in the hands of the cryptocurrency users.
My question is: Who controls the computers?
AND, the big question is: who are the movers and shakers in the background? And, do they really care about the democratization of currency and the common people.
Or, do they care only about making huge profits and little else?
I wrote in a previous post dated 22nd of October, 2019: Public suspicion of crypto remains high as the bounce rate wildly continues. Bitcoin has gone from a high of USD$19,783 in December 2017 to a low of USD$6,200 by October 2018. As of today’s date, Bitcoin is trading at USD$8,100, great if you bought in October 2018, not so good if you bought in December 2017.
In whose pockets or pocket did the $13,583 loss per Bitcoin go? Did anyone take responsibility? For a currency that is presented and promoted as being transparent and above board, there appears to be a great deal of market manipulation taking place. I know, if I had bought into Bitcoin for $19,583 dollars in December 2017 to find my investment only worth $6,200 ten months later I would have been very upset and would like to know why and how it happened. And, who was responsible.
So for the mysterious creators of crypto to claim their currency is free and clear of corruption is not quite truthful. Someone is making a great of money from the trading of crypto and it is not the average man or woman in the street.
I understand the principle behind crypto. I also understand how the current payment system works with hard costs included in the retail price of a product or service to ensure the system works with credit and debit cards.
As an example, I buy a coffee and a muffin for $10.00. My card is processed by an intermediary, a company such as Moneris contracted by the retailer. Moneris charges the retailer a percentage of up to 2.9% of the retail price (dependent upon the type of the credit card used) plus a transaction fee per sale of anywhere from ten cents to thirty cents. Therefore, the retailer has to charge the customer this cost plus a markup. The retailer also rents or buys the credit/debit card processor and again, this cost is passed along to the customer plus another markup. All this information is readily available on the internet; clear and transparent to anyone who cares to dig down.
If we break down the retailer numbers, it would look something like this.
The currency being used for payment in the above example is guaranteed by the government and while inflation occurs over the long term, the currency is stable and the retailer has cost certainty.
None of the above costs are incurred if the sale is carried out in crypto.
The big unspoken issue here is the cost or value of crypto. If the retailer was accepting Bitcoin for the transaction and the day after the transaction, a cryptocurrency trader dumped millions of dollars of Bitcoin onto the market, where does that leave the retailer’s profit? He/she still has to pay rent, buy supplies, pay staff, pay taxes and a myriad of other costs in the currency of the country.
It seems to me, a layman, not a CA or a trader or a financial expert, there are many questions relating to the crypto market that is yet to be answered. Perhaps they never will be and crypto will fade away to be replaced by some other highly manipulative system.
The news the Chinese government is investing heavily in crypto should be of great concern to the average person in the street.