CRYPTO WORLD BANKS . . .Why They Are The Weak Link of Bitcoin
In this quiet market the prime moving factor remains what I term THE EXTHIT (pronounced with a lisp and a weak wrist).
THE EXTHIT is the fundamental notion that the next defining bitcoin bull market will occur concurrent with or following the demise of The Crypto World and emergence of The Hayek Standard. Or put another way . . . the next bitcoin bull market will occur concurrent with or in the aftermath of market recognition that The Bitcoin Standard and the The Hayek Standard are one and the same.
The Hayek Standard is The Bitcoin Standard because the underlying asset, bitcoin, is the longest chain with a fixed supply on proof of work.
This is not to say a replacement may not come along. . . . it may . . . but there are no shortcuts . . . there is no need to promote it or advertise it. . .there is no need to launch another fraudulent ICO with teaser “better than bitcoin” . . . just show us by becoming the longest chain with a fixed supply and proof of work! It’s that simple.
Yet because it is so simple, but so difficult . . . Bitcoin is THE STANDARD!
The Crypto World is defined as all other standards competing with F.A. Hayek’s emerging STANDARD. Hayek recognized that competition in currencies will occur within an emerging STANDARD and has nothing to do with the The Crypto World canard that free market money emerges with competing standards.
Hayek recognized “the possibility of multiplicity of similar currencies” in his second edition of The Denationalization of Money but this did not extend to a multiplicity of standards. “In other words competition might lead to the extensive use of the same commodity base by a large number of issue banks that would still compete for the favour of the public through the constancy of the value of their issues and other services they offer.” (Good Money, Part II page 224.)
At the current stage of the free money movement there are few banks based exclusively on The Bitcoin Standard. 95% are Crypto World Banks based on a plethora of standards.
Who and what are Crypto World Banks? For the most part they are the exchanges.
I have previously warned about Exchange risk. This warning is based on the central nature of the exchanges. But I was remiss in this explanation.
The risk is not so much that they are centralized, but that they are centralized apart from The Hayek Standard.
With the emergence of The Bitcoin Standard there will be an increase in centralization but with increasing competition the centralization risk is diminished as one can readily flee from one banknote issuer to another or flee to the underlying asset, bitcoin. In other words, competing banks on the same standard keeps banking honest.
“As a result, even the complete collapse of one currency would not have the disastrous far-reaching consequences which a similar event has today . . . The whole structure of long term contracts would remain unaffected, and people would preserve their investments in bonds, mortgages, and similar forms of claims, even though they might lose all their cash if they were unfortunate to use the currency of a bank that failed.” (Id. 225)
At the current stage of the free money movement there are few exchanges based on The Bitcoin Standard. Most operate on the phony Crypto World Standard.
Now there are a few exceptions. And the first one that comes to my mind is Bitmex as this is a derivative exchange based solely on the Bitcoin Standard.
And while there remains a risk of centralization, this is a minor risk compared to major exchanges like Coinbase, Bitfinex, Bifinance and the vast majority exchanges which are banks using multiple standards.
And herein, lies the danger. Crypto World Banks are not based on sound money. We have no idea of the holdings of these various banks. Its like they are turn of the Century banks on The Gold Standard financing and promoting trade in buggy whips. But while buggy whips experienced diminishing use they still had use, and still have limited use today!
The risk is the exchanges are centralized on a phony Crypto World Standard while parading around as if this is competition in currency. The Crypto World is either trying to replace the standard or selling their crypto to purchase the standard. And rather than compete on the level playing field of The Hayek Standard, the Crypto World belittles Bitcoin Standard Bearers for calling them out.
What has this to do with trading Bitcoin? Well, it means Bitmex provides a relative safe platform to hedge your Bitcoin hodle as well as providing a relative safe platform to short Ethereum, BCash, Eos, Tron, Cardano, Lightcoin, and Ripple.
Hope this helps.
UOG
PS: I remain long bitcoin and have lightly sold Ethereum and BCash against my long position. Eth has worked, small loss in the BCash. The Virgin Trade should have worked regardless of what side you took. The spike in BCash is likely very temporary. . . for the novice just stay lightly long BTC with risk below two week low. . . dollar cost average, dollar cost average, dollar cost average!
