The Bitcoin Breakout & Last Limiting Factor.

there is now a case being made for

Banning Bitcoin while at the same time

you actually have Bitcoin hitting new

record highs let's talk about that first

because we have not seen

over thirty thousand dollars per Bitcoin

for over a year and we sat at the 28-2

level for a solid three weeks which was

actually pretty impressive because it

felt like during the banking crisis the

safe haven was Bitcoin which is pretty

remarkable because as the banking crisis

really took hold we actually went from a

low of about 20 000 when the banking

crisis started to about that 28 200

level where we sat between about March

17th and about April 9th it's pretty

damn impressive for Bitcoin now on one

hand there's an argument made that a lot

of this is driven by and after all we

know statistically that over 80 percent

of trading volumes for Bitcoin are on

binance but some folks are making the

argument from that binance is

potentially manipulating the Bitcoin

Market conveniently as the occurrences

like this happen in the market now out

what could potentially have been the

Catalyst over the last few days well

some people suggest the oil and the

dedolarization movements so in other

words you have one argument that says

look Bitcoin is rallying because

obviously you want to escape the dollar

you want to escape the Federal Reserve

you want to escape the cbdcs and you

want to escape sort of government

control and oversight and you want that

freedom that's the one argument right

that essentially while we have a banking

crisis and the fringes of the banking

sector collapse which fringes this a

pretty generous word to use given that

Credit Suisse was a pretty massive bank

and pretty integral to uh the Swiss

banking system uh but then you you have

these fears that okay well well if OPEC

is still controlling oil and uh by

having a a production kind of of a

million barrels a day they can affect

the price of oil so substantially and

clearly the reserve currency of the

dollar is at risk when that same

organization and individual member

countries of that organization start

considering using or even start are

using other countries currencies like

the Chinese Yuan or and minby to start

transacting in oil that's creating this

sort of dual pressure potentially for

Bitcoin so you really have three things

going for Bitcoin in the banking crisis

you have the D dollarization thanks to

walking away from the Petro dollar but

then you also have this third argument

that look maybe we're looking past the

recession maybe Bitcoin is the tool that

says the recession if it comes it's not

going to be that bad the biggest culprit

here is inflation and we're going to go

back to money printing once inflation is

gone and we'll go right back to below

one percent interest rates which is

pretty much what the IMF said today we

will be going back to one percent

interest rates believe them or not

whatever uh and uh potentially Bitcoin

is just trying to pre-price in what is

to come in the future which makes sense

because to some extent markets that

trade freely like to pre-price in what

could occurred so that way you're not

last to the party so to speak and that's

why potentially for those three reasons

Bitcoin could be moving up breaking now

that 28 to 2 previously resistance level

and pretty strong support levels been

bobbing around above and beyond that

level uh and now we're above 30 000

which potentially sets us up on a course

to head back to the next Fibonacci

retracement level which would be 35 900

but at the same time as this is all uh

coming to a head now there's talk about

potentially Banning BTC now or just by

any crypto entirely now I generally

don't love talking about this because

people usually get mad at me when when

we talk about this but I'd like to see

what the argument is that people are

making for for Banning uh BTC and this

is a foreign affairs piece which I

generally uh I generally respect Foreign

Affairs but let's let's see what

argument they make here uh it's also

worth noting that

some folks on these sort of anti-crypto

side do make the argument that hey if

binance controls 80 of a market flows

because of people using binance uh is

that necessarily a bad thing it just

means they had commission free trading

for Bitcoin maybe that's why they have

80 of the flows because they were smart

well according to analysis by Morgan

Stanley which a lot of folks in the

crypto Community don't believe as far as

they can throw them anyway but Morgan

Stanley believes that the biggest

Traders during the banking crisis were

actually

whales that is likely brokerage accounts

not individual retail Traders so if it

was whales driving

crypto pricing or Bitcoin pricing then

perhaps there is some convenient

manipulation happening especially since

binance did liquidate usdc reserves they

had in favor of buying Bitcoin now that

ends up looking like a really good

decision because they got a great deal

right and the value of that BTC has gone

up which is fantastic but it does make

you scratch your head on how much risk

is this company taking and that is

something that people are very fearful

of right now in markets because well

ultimately the more risk and exchange

takes the more of this chance you have

of creating potentially another FTX

which nobody wants to hear about for

example FTX made headlines yesterday for

their nonsensical arguments that they

basically would they had such loose

accounting practices that they would

sometimes just happen to accidentally

just find 50 billion dollars you're

sorry 50 million dollars sitting around

in an account somewhere and have

absolutely no idea what that 50 million

dollars was for that was an example of

binance for or FTX for you now hopefully

binance as is substantially different uh

from FTX but we don't know because we

don't have uh audits we don't have proof

of reserves our audits anymore those

have been canned and we do not have uh

any kind of audits that give us insight

into how much debt this company actually

has those are both very important so

what is the potential argument that

Foreign Affairs is making and what is

the case for Banning as they say

crypto well let's jump into exactly that

piece uh I do think I want to be very

clear okay I want to disclaim this away

that even though we're going to look at

this piece it's okay if you like Bitcoin

it's okay to look at what another

argument is and they do actually make

some interesting arguments uh that uh

that again with the true or not uh or

valid or not or worth considering so

let's take a look at this here is uh the

piece and we're going to go through this

together I am going to throw up the

banner for the coupon codes uh because

that coupon code does expire tomorrow

for the programs on building your wealth

linked down below so what could the case

for Banning crypto actually be well

let's find out so they start their

article by talking about FTX which isn't

that entertaining oh come on there we go

they start their article by talking

about FTX but take a look at this but

FTX is unraveling was not an isolated

incidence the incident they say rather

it revealed a fundamental flaw in

cryptocurrency my goodness what what is

going on with this computer today there

we go it revealed a fundamental flaw in

cryptocurrency in the cryptocurrency

industry the root of the problem is that

cryptocurrency assets can be created at

no cost and without limit and an

unlimited supply of assets makes the

system more vulnerable to booms and

busts now I thought that was a really

interesting argument because I'm

thinking about it I think what they're

saying and this was sort of my initial

thought when I was hearing this is I

think what they're saying is if you have

crypto institutions like let's say a

binance that says hey look we will lend

against whatever crypto collateral you

have then you essentially create a

fractional Reserve banking system much

like the traditional banking system

right the difference though is rather

than a country being able to create a

currency

anybody in their mom can create their

own currency which if it has some deemed

market value which could be based on a

very thin order book and with very

horrible fundamentals if a company

starts lending against that whether it's

in the defy space or or the more

centralized space like a finance well

then you essentially can create this

flywheel of infinite money and this is

how you can actually prop up the boom

and bus Cycles substantially more

when assets have nothing behind them and

no reliable Financial Accounting

practices or valuation techniques

because you can't value them based on

income you can't you can value them

based on use right and that's generally

what people do with Bitcoin or ethereum

is we look at what's what's the value of

of the use the utility and what's the

value of uh of of uh demand compared to

supply which is difficult to measure

because sure that takes you right back

to well how much is a Bitcoin being used

for transactions but generally you're

not using Bitcoin terribly much for

transactions I venture to say that most

people are using it for a store of

wealth unless of course you're sending

money uh overseas and then in which case

you're probably using stable coins

anyway so but this is very interesting

the root of the problem is that

cryptocurrency assets can be created at

no cost without limit when assets have

nothing behind them and no reliable

Financial Accounting practices or

valuation techniques exist to expose

fraudulent manipulation of assets the

results is where the result is

fraudsters have rushed into

cryptocurrency exploiting the complexity

and hype as a way to dupe basically the

normies to dupe the people who are

completely clueless about how a

cryptocurrency can actually be

manipulated and this this is frequently

seen uh obviously in the historical

artifacts of what happened with FTX but

also uh when we look at

hey where why are we no longer even

doing proof of reserves Mr binance uh Mr

CeCe oh not doing proof of reserves

anymore because you don't want to okay

got it and uh you got dumped by the

auditing firm because they think the

reports aren't being trusted by people

anymore as they really shouldn't and

then when CZ provides uh uh proof of of

uh backing uh we tend to get very

overlapping wallets which does on one

hand make people who are super pro

buying and super pro CZ say oh my gosh

he's a God he posts all his transparency

but when you actually go but when you

actually go to the transparency these

wallet chains are like wait a minute

we're double counting some money and we

can't follow through with all of the

transactions that are actually occurring

because there are things purposely left

out and there's so many wallets that

these exchanges have the as transparent

as crypto is and as simple as it is to

make the argument that old crypto is

transparency or is transparent it's

actually extremely difficult to follow

along with most crypto transactions

unless you have a complete map of every

single wallet uh that an entity has and

it's very difficult this is why they're

actually analytic firms uh designed to

try to stitch this all together because

it is so complicated it's not it's

almost not meant to be understood by a

normal person it's pretty wild but

anyway cryptocurrency concerns

cryptocurrency already facilitates many

different kinds of harm and this is a

pretty like Janet Yellen style argument

right here Iran and North Korea use

cryptocurrency uh and the inanimous

to evade sanctions and launder money see

this gives you sort of the other example

it's like hey it's so transparent that

criminal entities or estate sponsors of

terrorism can use them to basically

skirt sanctions hey we need to go buy

stuff from Turkey because we can't buy

it from Russia anymore here's crypto

payment go turn it into you know a

stable coin or whatever afterwards if

you want which they do in 2022 for

example

reported reportedly stole 1.7 billion

dollars in cryptocurrency which it it

which it is believed to be using to fund

ballistic missiles and nuclear weapon

development so look at that here's

here's an example a report by Foreign

Affairs suggesting that North Korea sold

1.7 billion dollars in crypto and now

they're using it to develop their

nuclear weapons program it's intense

that's a pretty big allegation Bitcoin

has become the most common form of

payment for ransomware attacks

increasingly targeting businesses and

public services because it allows the

nefarious actors Behind these attacks to

receive large amounts of money quickly

and anonymously cryptocurrencies are

also increasingly being used to

facilitate drug and human traff

trafficking

and basically without knowing who's

using these wallets uh the crypto chains

are relatively Anonymous if allowed to

proceed unchecked the unrestricted

growth of the cryptocurrency industry

and its future integration with the

traditional Financial system could

produce a major crisis blockchain-based

Finance is complex automated and highly

interconnected it offers vast

opportunities for creating leverage

because there's virtually Unlimited

Supply of assets to borrow against this

is what I talked about earlier with if

you if anybody in their mom can create a

currency and an institution will lend

against it you do create essentially

infinite money

these are kind of the kind of

fragilities that led to the last

financial crisis in 2008 this damaged

trust in the traditional Financial

system uh and the cryptocurrency

industry wandered into the wreckage

promoting itself as a reliable

alternative to bank so basically in 2008

when we had infinite money in the

traditional system people stopped

trusting the traditional Financial

system so much that it essentially

created crypto and now crypto is

potentially following in the same

footsteps

there's the danger that members of the

cryptocurrency communities embittered by

their losses may also be funneled into

extreme online communities I think this

is a little bit more of an extreme

example here basically people are gonna

turn into a loose canon Maniacs because

they lost money in crypto industry

leaders and lobbyists tend to argue that

the primary benefit of crypto is

decentralization unfortunately that is

unrealistic the economic incentives of

crypto have led to extremely

concentrated pools of transaction

validators leaving users develop uh

dependent on those small groups of

people I mean that's true when you look

at the controls for example of uh

ethereum you're looking at Lido being a

massive player uh in the space and now

with ethereum 2.0 uh we the idea is we

have more centralization but still

staking pools what they really do is

centralize control into into a fewer

groups now many argue well that's not

necessarily a bad thing because people

are going to the most reliable

validators the ones who have the lowest

incentive to actually do something wrong

long were nefarious because then they

would lose all of the incentives and

payments that that pool would otherwise

be able to generate and they'd

essentially be shooting themselves in

the foot so there's some counter

arguments to this I think really the

best argument they make is this infinite

money argument I think that's great

otherwise so far the arguments here are

some of the pretty traditional

anti-crypto arguments uh misleading

rhetoric about crypto's decentralization

is being used to persuade Regulators

that software is calling the shots

applying their no business entities or

humans to regulate but the reality is

that regulation can be applied to many

different intermediaries they're

basically now they're talking directly

to Congress saying look you know

companies like binance are going to tell

you it's all robots and algorithms that

are controlling this but the reality is

there are plenty of people behind the

curtain uh that uh that that make

movement decisions CZ is a perfect

example and who knows they could end up

being the the and maybe they will be the

Survivor in the cycle uh you know I I

hope they survive because if they don't

survive it's just going to hurt more of

the financial ecosystem I personally am

just a big fan of not your keys now out

your crypto and I think it it makes all

of this a lot simpler get your money off

exchange right but if policy makers are

reluctant to adopt an outright ban then

the second best alternative is to

stringently enforce regulations that are

already in place banking Regulators

should use existing Prudential rules to

keep Banks from being exposed to the

risks of crypto now I don't think

anybody argues that some regulation

would be nice and crypto I mean when you

look at coinbase they're basically

begging for regulation they're basically

saying hey please give us regulation

tell us what the rules are so we can

play by them as opposed to the game we

have today which is we're going to try

to do our best and then we're just going

to keep getting sued by the SEC and

commodities future trading Commission

because nobody's actually telling us

what the rules are and now you're trying

to litigate your way to actual Authority

which is the inappropriate way to do it

Congress should actually bestow upon you

rules to enforce which then you are

dutied or basically uh uh you know

designated to enforce and then those

rules could actually be followed or not

followed and then duked out in court

rather than oh we don't have any laws

let's turn let's deputize the SEC and

the Commodities future trading

commission and turn them into cops where

they make their own rules and then they

find out if those rules are accurate or

not in court like it's it's super

backwards right now how crypto is being

regulated super super backwards uh and

that's a big problem and it's not to say

there's not also a big problem with

potentially some of what's going on at

binance potentially and potentially this

infinite money glitch that you could

have with crypto uh I think those are

realistic problems but I do think

regulation can help especially with that

infinite money glitch and then that's

exactly why companies like coinbase vet

their coins before they allow them on

platform to lend against anyway uh now

to what extent that vetting is nobody

really knows because again no regulation

greater concern is the development of an

offshore currency industry see this is

the other issue is is when you don't

regulate properly here what you're

basically just doing is you're pushing

people more out of the United States and

so foreign affairs makes a very good

argument here at the end they said the

United States should continue to take

part in the efforts to limit uh crypto

at a global level level by actually

regulating right and so maybe maybe

it's not so bad if we can actually get

some good regulation in that would

prevent some of the problems with it big

fan of that so I'm not a big fan of

banning crypto but I'm a big fan of

actually getting to the point where we

have some regulation I think that would

be fantastic I also think through a

Bitcoin often is is a good leading

indicator of potentially what's to come

in the stock market which in the short

term I think is actually fantastic that

we've just broken

through that 28.2 level and I think

we're on that path to 35.9 uh you know

am I am I knocking on the door of

looking at a million dollars for BTC in

the future who knows I mean if BTC runs

to 100 150k over the next one to two

years that could be enough of of sort of

starting the flywheel to get people

going oh my gosh this is the greatest

thing ever uh now will that potentially

lead to a 2008 like Foreign Affairs

projects uh could end up happening

who knows maybe maybe it won't be this

cycle that we get crypto regulation

maybe maybe it'll be the next boom cycle

and then the bus cycle that actually

leads to appropriate crypto regulation

who knows but we'll see uh so that gives

us a little bit of insight into what's

going on with BTC make sure to check out

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