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Messages - ArnoldW2

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ilconsiglliere wrote:
I wonder is what is driving the meltdown. Is it the Feds, Wall Street or something else?

I'm not really sure.
Wall Street is a possibility, especially in view of their new crypto-currency futures.
The previous three price crashes of BitCoin were driven by owners selling out.  Wall Street wasn't involved then.

My best guess is that Wall Street and people selling are both driving the current crash.

I'm sure that the Federal Reserve currently views crypto-currencies as not big enough to worry about — yet.
They've taken no action — yet.

Discussions - Public / I just ran across more crypto-currency articles
« on: January 16, 2018, 07:30:25 PM »

CRYPTO INSIDER: Everything is getting smoked

Litecoin has lost half its value since the creator sold all of his stake

The cryptocurrency, created by former Coinbase engineer Charlie Lee in 2011 as a quicker alternative to the flagship bitcoin, was worth an all-time high of $365 as recently as December, according to Markets Insider data.

That price plunged by more than half to $178.

Ripple’s XRP has lost 60% of its value in less than 2 weeks

The token hit an all-time high of $3.31 on January 4, according to Markets Insider data, before sliding 62% over the next 10 days to land at just $1.23 Tuesday afternoon.

Ethereum drops below $1,000 amid crypto bloodbath

The coin is down nearly 30% to $918.24.

I think it's just the warm-up, for the reasons I wrote about in an earlier message thread:

Before I posted this message, I checked the price charts at three different web sites.  I was really surprised at how different they are.  Here are the specifics:

Chart URL
    Dec 2017 High    Jan 16 2018 Price    Percent Decline

More evidence that the crypto-currency business doesn't yet have its act together.

Unix wrote:
At least Federal Reserve Notes were created using some valuable natural resources, like trees and cotton and ink.

The overwhelming majority of dollars are numbers in computers, not pieces of paper.  Worse yet, governments around the world are in the process of ending all paper money, thereby forcing all people to keep all their money in big corporation computers that governments, campaign contributing cronies and hackers can all plunder at will.

Denmark is already in the process of doing away with all their paper money, and many Danish banks no longer accept paper cash.  There, the buying and selling of anything requires a bank debit card or credit card.  Here are some links to articles on the coming abolition of paper money.

Time running out for billions of old Swedish kronor (excerpts below)
Eleven billion kronor of old Swedish coins and banknotes are still in circulation despite the Riksbank central bank's warning that they need to be handed in by the end of June.
Sweden's major money changeover, which began in 2015 and has grabbed headlines around the world, has entered its final phase, meaning that old 1-, 2- and 5-kronor coins, as well as 100-kronor and 500-kronor bank notes, will become invalid after June 30th.

But according to the Riksbank's latest estimate, 9.2 billion kronor's worth of old notes and 1.9 billion kronor coins are still hiding in Swedes' wallets, piggy banks and mattresses.

Should the U.S. move to a cashless society?

A very interesting debate.

Ken Rogoff says YES.

James J. McAndrews says NO.

In China, cash is all but dead thanks to more convenient options.

Michael Pento - Crazy Stock Market Will Crash

He actually talks at great length about the inevitable default on government bonds — maybe explicit default, maybe implicit (inflation), especially as interest rates begin to rise.

Pento says that paper cash must be eliminated to make sure that negative interest rates will work.

The War On Cash (excerpts below)
Nations around the world are taking large denomination bills out of circulation.
The European Central Bank announced in May of last year that its 500-euro note would be gone by the end of 2018.
Now, there’s talk about doing away with $100 bills.

India’s Prime Minister Narendra Modi did away with 1000-rupee banknotes (worth about $15.32) and 500-rupee notes (worth $7.66), although he set redemption deadlines to give people time to deposit them in banks.

The problem with cash is it’s not traceable.

The real reason for the war on cash is taxation. But governments don’t admit that. They use other excuses like national security, that free-flowing cash is feeding terrorist groups, financing the drug trade, that all kinds of illegal activities are cash-driven, and that cash can be counterfeited.

One reason Prime Minister Modi killed the 1000-rupee and 500-rupee notes is tax evasion. Those notes, together, account for 86.4% of the value of all rupee bills in circulation. By forcing the population to exchange expiring notes for new notes, authorities can ask where the money came from, if a tax has been paid on it, and if depositors can prove it. If they can’t, the tax will be taken from it, and a fine totaling as much as 200% of the tax owed will be levied and taken.

Breaking the back of corruption where bribes are paid in cash, and being able to collect income and transaction taxes could only be accomplished by attacking the old cash economy.

The war on cash across Europe is heating up even faster than in the U.S.

Sooner rather than later, we will all need to deposit our cash somewhere or buy hard assets, because one day your cash won’t be nothin’ but trash.

How "Fedcoin" Will Spearhead the War on Cash (excerpts  below)
While hypothetical for now, there's good reason to believe the Federal Reserve is seriously considering the creation of a Fedcoin.

Jim Cunha said:
"Right now, I can tell you categorically, there is no plan to issue a Fedcoin at any specific date or time”.

Cunha's denial is extraordinarily narrow. Just because no Fedcoin launch date is set doesn't mean the Fed isn't working on the project behind closed doors.

A lot of technical issues will need to be resolved to make fiat cryptocurrencies work. For example, many cryptocurrencies, like Bitcoin, are decentralized. A Fedcoin would be totally controlled by the Federal Reserve (and, by extension, the U.S. banking system).

If Fedcoin is introduced and all the dollars have been exchanged for Fedcoin, Americans will get a rude shock.

A cashless society would cripple, if not destroy outright, the underground economy. And the government would rake in billions of additional tax revenue with the bonus of making a lot of common crimes much more difficult.

Fedcoin would become a tool for imposing negative interest rates. You'd have to pay the government interest on your money — unless you spend it all fast.
If everyone spent all their Fedcoin, the resulting stimulus to the U.S. economy would dwarf everything the Fed tried in the years following the 2008 financial crisis.

Unix wrote:
... I need assurance that [BitCoin] won't suddenly crash to zero.

The inventor of BitCoin made sure that there are only 21 million Bitcoins available to be mined.  There will be no more Bitcoins after they've all been mined.  This makes the chance of BitCoin falling to a price of zero much less likely, but it COULD still happen.  If it does, I think it will be because other crypto-currencies displaced it.

I hasten to point out that there is no guarantee that the dollar or the Euro or any other government fiat currency won't crash to zero either.

Unix wrote:
What is the point of "mining"?  Why is that necessary, I don't get it?

I had to read Satoshi Nakamoto's original paper to find out the answer.
His mining process prevents counterfeiting of BitCoins.
No matter how many computers participate, that process is the source of all BitCoins.
Verifying that each BitCoin came from that process is the first step in its blockchain.

Read sections 6 and 12 of Nakamoto's paper for more details.  Here's a link to the pdf:

Discussions - Public / The truth about BitCoin and the world economy
« on: January 09, 2018, 10:48:43 PM »
Bitcoin Isn’t the Bubble — The Global Financial System Is
I agree with most of what the author of this article wrote.  Here are some key excerpts:
For one thing, bubbles don’t do what bitcoin has done since its inception in 2009…They don’t come right back a couple of years later and soar again to a new price 10 times greater than the previous bubble’s high, which is what bitcoin has done after each one of its three or four previous “bubbles” burst.

When a real bonafide bubble bursts. It stays below the prior high for decade at least, sometimes forever.

While we’re on the topic of bubbles, it seems the truly gigantic bubble in the world isn’t bitcoin, but rather the global debt market. This leviathan now stands at around $233 trillion, or 318 percent of global GDP. Even more troubling, an estimated $11 trillion of government debt now trades at negative yields. This means whoever is buying this paper is doing so despite the fact they are guaranteed to lose money on the “investment.” Much of this buying has been propelled by central banks which can print their own currency and buy debt indiscriminately. This is not characteristic of a healthy financial system (particularly so many years into a global recovery), but rather a zombie one that’s been artificially propped up since the financial crisis.

The rise of bitcoin foreshadows the emergence of something potent and new in the realm of money and finance, which also happens to be something the world desperately needs.

Understanding the NonCOINformist
This is another very worthwhile read.  Some key excerpts are:
The argument most used against Crypto-assets is that it is a bubble like the Tulip bubble 500 years ago. I would venture to guess that 90% (99.9%?) of the people making this argument know nothing about the tulip bubble other than they read somebody else’s post that Bitcoin = Tulip bubble and it fits with their negative narrative against Crypto-assets.

The other argument that I hear less now but by those with the least amount of research is that Crypto-assets will fail because ultimately its only purpose is nefarious and clandestine and that eventually all governments will outlaw it.

These people fail to realize/admit almost all crime is greased by cash, either US dollars or the other fiats, and nobody has thought to outlaw USD.

cash has no intrinsic value and in fact, most of our US dollars are entirely in digital form. When its said the government is printing money they are just changing some numbers in the ledger. Its the monetary equivalent of all music going from vinyl to iTunes.

But what intrinsic value does gold really have? Its a rock that people say has value.

Once you get a certain mass to own Bitcoin, I truly believe it has a NETWORK EFFECT that is more powerful than corporate economics.

ilconsiglliere posted this link:

I agree with the author of that article, except for this:
The thing that makes crypto-currencies such a speculative craze right now, their stratospheric increases in value, is also the reason the current crop will likely fail in their intended use as currencies.

The real problem is that there are not enough people using BitCoin -- yet.

As I write this post, the "market cap" of BitCoin is roughly $250 Billion.

According to the Federal Reserve, in November 2017, the M1 money supply was $3.6 Trillion and M2 money supply was $13.8 Trillion.  Here's the link if you're interested.

If (yes, I know this is a big if) enough people start using BitCoin to drive its "market cap" to $2.5 Trillion (a 10 X increase), the price volatility will settle down because it will take vastly more dollars to drive its price up and down, and that would make BitCoin usable as money.  There will still be speculation, but it will be similar to speculating in other fiat currencies.  The conversion rates between dollars and other currencies (the Euro, the British Pound, etc.) do fluctuate, but usually much more slowly than the crazy ups and downs that you see with BitCoin.  If a fiat currency changes value suddenly, its prices crashes downward and never recovers, because the root cause was a government printing too much of it.  And smart currency traders can usually see such crashes coming.

Also, I noticed that the author missed the obstacle of governments refusing to adopt BitCoin, or even opposing it.

Now that we've got some numbers, let's do a little math.

The total number of BitCoins is 21 Million (although not all of them have been "mined" yet).

   Divide assumed future market cap of $2,500,000,000,000  by 21,000,000 BitCoins yields $119,047.62 per BitCoin.

   John McAfee thinks that BitCoin could go to $1,000,000 each.  That would result in a BitCoin "market cap" of $21 Trillion,
   which would surpass the Federal Reserve's M2 of 13.8 Trillion.  That seems debatable to me, at best.

Discussions - Public / More Articles on the Latest Microprocessor Flaws
« on: January 05, 2018, 04:17:00 PM »

How a researcher hacked his own computer and found 'worst' chip flaw

This article is not nearly technical enough to explain “how”.  But it’s still some interesting history.

The author of this article admits his understanding is over-simplified, but it's still interesting.

The details in this article get pretty technical.

Intel speaks out on fixes for ‘Meltdown’ and ‘Spectre’ CPU exploits, their impact

Intel now says it has a fix for the Spectre bug that Google found to be unfixable

The US Government brutally laid out the magnitude of the Intel processor vulnerabilities that affect almost everyone

"The underlying vulnerability is primarily caused by CPU implementation optimization choices. Fully removing the vulnerability requires replacing vulnerable CPU hardware," says the bulletin.

Apple is updating its software to combat chip security holes

Apple says the patches will have "no measurable effect" on performance.

Spectre affects more chips, including the Arm processors used in iPhones and iPads.

Apple confirms all Mac and iOS devices are affected by Meltdown and Spectre bugs

“All Mac systems and iOS devices are affected, but there are no known exploits impacting customers at this time,” the company writes in a blog post. “Since exploiting many of these issues requires a malicious app to be loaded on your Mac or iOS device, we recommend downloading software only from trusted sources such as the App Store.”

Apple Watch devices are not affected by Meltdown in any way, Apple said.

Blockchain Gorn wrote:
Will it be possible for low end cell phone/mobile users with no tech skills or understanding of the tech to buy, sell and use bitcoin?

It would take a lot of work to put something like that on a low end cell phone, of course.  But given enough venture capital, I suppose it could be done.

I think Apple Pay will give you some idea of what that would look like.

Have a look at this video:

Of course, Apple Pay doesn't support BitCoin yet, so you'll have to imagine what it will look like when Apple gets around to that.  Unfortunately, Apple is NOT in any hurry to support crypto-currencies.


Crypto wrote:
The second link is not even about Bitcoin

I included that link because the bubble is not limited to BitCoin.  LiteCoin is also participating.  So is Etherium.  All the crypto-currencies will go down during the crash.  I believe Charlie Lee knows this and that he sold all his LiteCoin for that reason.  BitCoin is the most important crypto-currency right now, but that doesn't make the others unimportant.

Crypto noticed that the articles I linked to had different opinions on BitCoin's post-crash future.  The main point I was making is that BitCoin (and other crypto-currencies) are beginning to crash.  I chose articles to link to based on that and not on their post-crash predictions, because  I am not certain what the post-crash future of BitCoin will be.

Note:  My opinion on the future is that more BitCoin boom and bust cycles are possible, but not certain.

One more thing:  The new Bitcoin futures will unleash hedge funds, short sellers, and other assorted bad actors on the Bitcoin market, enabling them to manipulate the price of BitCoin - down at first and back up later.

Based on his response to my third link, and the article he linked to, Crypto must believe that world wide adoption of BitCoin as money is inevitable.  People may adopt it as money, but governments won't - at least not until the government fiat money system collapses.  Governments want the power to print money at will - which is impossible with BitCoin.  That makes BitCoin totally unacceptable to almost all governments.  Almost all my uncertainty about the future of crypto-currencies comes from the uncertainty of government action.

However, I will give Crypto credit for pointing out one thing:  If attempts to get the world to adopt BitCoin as money fail, it won't be because people are using it mainly for speculation right now.

Crypto responded to the fifth and sixth links - stories about some people's irrational buying behavior - saying:
There is no mention of why this means that Bitcoin will keep going down.

I included links to those stories because irrational buying is a classic symptom of a bubble that is historically correlated with bubbles popping.  Irrational behavior does NOT guarantee that the popping of a bubble is close, but it usually happens that way.  The smart money is usually selling around the time that the most irrational people are buying.

Discussions - Public / Re: The First Digital Country
« on: December 31, 2017, 09:14:11 PM »
Unix wrote:
Can the supply of a cryptocurrency be inflated at will to the point where your account can turn to 0.000 of whatever currency it's designated in?
Who controls this inflation, if any?

Let's begin with a very basic equation from economics:

Price level = (Money quantity X Money velocity) / (Supply of all real values)

The way to prevent the value of a currency from falling to zero is to have a hard limit on the Money Quantity.
BitCoin has a hard limit.  Government fiat currencies don't, which guarantees that they will all - eventually - fall to zero.  Eventually could be centuries away.

But BitCoin is not the only crypto-currency in use.  All the crypto-currencies that become widely used (as money - not for speculation) are part of the Money Quantity.

In theory, there is no limit to how many crypto-currencies can be created.  In practice, there must be a limit to how many can be used by people.  Assuming that the number of government fiat currencies (not much over 100) is roughly how many crypto-currencies the world can actually use, the overwhelming majority of crypto-currencies will be virtually unused.  Of those that become widely used, I expect that some will fall to zero, but most will just fluctuate.

Based on two assumptions:
    1.  The number of crypto-currencies in-use is limited.
    2.  Every crypto-currency has a hard limit on you many units can be created.
the values of crypto-currencies won't go to zero, but some might fall to something not much above zero.

A world of competing crypto-currencies will have problems, just as the world of competing fiat currencies has problems today.  I expect the problems of crypto-currencies (assuming they escape government control) to be less bad.

Discussions - Public / Re: BitCoin’s fourth big crash is now in progress
« on: December 31, 2017, 05:11:48 PM »
Crypto wrote:

They don't understand the internet and the new world of iot where every device is a router. How do you block that? Saying the Government will make blockchain illegal as if they just have to pass a law and it is done. So how is the government going to stop me from transferring digital cash from my digital wallet to your digital wallet whenever I want.

Government Bitcoin will be a joke. the might be able to force the people who work for them and contractors to use that. But the whole point of it's invention was decentralization and going back to centralization defeats the whole point and then they will have the ability to monitor all your spending and even stop transactions. "we stopped you from buying that ice cream because we think it will be unhealthy for you."  The wider population will never go along for that.

Twenty years ago, lots of people were writing that the internet would be a tool of freedom forever and that it would make all censorship impossible forever.  Today, China's internet censorship mostly works, and China has already turned the internet into a 1984 style surveillance system.  And almost all the other governments in the world (including the U.S. government) are working to do the same.

I'm sure that governments and central banks are already trying to figure out ways to use blockchain tech to track 100% of all financial transactions:  All food purchases, clothing purchases, medical care purchases, etc.  Every crypto-dollar will have a blockchain with a complete history of every person who ever owned it and for how long, easily accessed by "authorized" people.  All under the excuse of tracking "illicit" transactions, of course.  It will be a level of surveillance beyond anything George Orwell imagined.

To claim that government crypto-currencies will be a joke is like claiming government censorship and surveillance of the internet are jokes.  Yes, hackers have proven that it's possible to overcome these things, but most people don't have the computer skills to do that, and they never will.  That's why, eventually, we will live in a world where only hackers can spend money as they please and all other people will have to settle for government approved purchases.

The U.S. government is slowly killing the freedom of the people to spend their money as they please.  It's a death by thousands of tiny cuts over decades of time.  If the government tried to kill freedom too quickly, the people would object.  But there's always an excuse to kill a tiny bit of freedom, especially under the pretense of "protecting" the people.  If governments have the necessary combination of patience and persistence, the people will allow freedom to slowly die.  History proves that again and again.

Discussions - Public / Re: BitCoin’s fourth big crash is now in progress
« on: December 30, 2017, 07:13:50 PM »
Crypto wrote:

That's not a crash It's a fluctuation.
Crash implies something that comes back down to earth and never rises again.

True for an airplane.

But any large and sudden drop in the stock market (or other investment) has been called a "crash" for a very long time.

The stock market did eventually recover from the disaster of 1929, so I suppose it seems like only a fluctuation to you.  But it sure seemed like a "crash" to the people who lived through it.  There were people who committed suicide after their losses impoverished them.

Back in 2010, I knew a guy who was underwater on FOUR mortgages.  I wonder what he would say if you told him his situation was only a "fluctuation".

There's a fairly good chance that BitCoin's boom and bust cycle will continue two or three more cycles, but that is far from certain.

Crypto wrote:
A currency that has a fixed amount like Bitcoin will actually then be more stable than currency like Federal Reserve Notes.

This will be a big problem for Fiat currency producers like the Private Federal Reserve Bank because over the years people will begin to understand that inflation is not prices going up but actually Federal Reserve Note Dollars losing value because more of them are being created.

For now, crypto-currencies are, from the point of view of government central banks, a sideshow.  Once crypto-currencies become threatening, governments and central banks will react.  Possible reactions include:
1.  Outlaw BitCoin and other open source currencies
2.  Create their own crypto-currencies

Here are links to some articles about that.

I doubt that crypto-currency prices will stabilize anytime soon, if ever.  The new crypto-currency futures pretty much guarantee instability for the foreseeable future.  Here are some articles about that.

Most people have no idea how inflation really works.  They don't know enough math to understand.  Even if BitCoin prices stabilize (a big IF), it will be a long time before people begin to notice BitCoin holding its value better that government fiat currencies, and they won't understand why.

Karl Denninger, on his web site, wrote:
America is, for the most part, an innumerate nation.  If the people were not innumerate there would have been an utterly vicious reaction by now and not one single politician -- or Federal Reserve president -- would still be in office.

Discussions - Public / BitCoin’s fourth big crash is now in progress
« on: December 29, 2017, 07:52:53 PM »
I was looking at some graphs of Bitcoin, and I noticed that the price of Bitcoin has crashed three times -- in a big way.

I believe that BitCoin’s fourth big crash is now in progress.  Now is absolutely NOT the time to buy BitCoin.

Here is a summary of the crash history, based on a graph at

                  Crash History of BitCoin
Price ($)
    Crash 1 - Bottom
    Crash 2 - Bottom
    Crash 2 - Bottom Again
    Crash 3 - Bottom

As I write this, the price of BitCoin is down roughly 25% from the latest top.

Similar, but not identical numbers can be derived from the graphs at two other web sites:

I don’t know why the three graphs are different (if only a little).  My best guess is that three different organizations did their own price measurements in different ways.

Note 1:
Between the peaks of 2013-04-09 and 2013-11-29, the graphs showed something that stock market analysts call a “double bottom”.  After the first bottom on 2013-04-16, the price of BitCoin looked like it was recovering nicely, but it later fell back to the bottom again, which is why the phrase “Bottom Again” occurs in the Comment column.

Note 2:
The three web sites mentioned above allow you to adjust the graph so you can zoom in on time intervals of less than a month.  Without that zoom capability, there would be no way to extract the data in the table above.

Note 3:
The chart is a bit flaky.  Every time I zoomed in our out, the numbers from the graph changed, if only a little.  I conclude that the math skills of the web site writers are not quite what they should be.  The numbers from the other two sites didn’t change.

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