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On the Brink of the ''Bitcoin ETF'' Explosion

Introduction

Looking at the current mass hysteria, the laugh-fest with Bitcoin and its ETF application as the whipping boy of the mainstream media and wall-street alike, reminds me of the early 1990's and the near exact widespread mockery the first Internet Companies funds were getting from the same mainstream media to every expert and pro on wall-street.1)

Sometimes I think all of their Ivy League education actually serves to blind them instead of helping them as they seem to lack insight, vision and imagination.

What happened in the early 90's with the world's first internet funds or basket of stocks is the same exact same think happening now with this Bitcoin ETF application which 99% of the experts at large are certain the US government will NOT give Bitcoin and the Winklevoss brothers the License they're requesting.

Well, I've seen this movie before and I know how it ends. There are way too many synergies with digital money for the government, banks or multinationals to simply turn their collective backs on it at a time when it's growing by leaps and bounds. The US government couldn't have planned a more powerful, pervasive and popular digital currency even if they had tried and had put massive resources behind it. And perhaps this is the reason for a free market - there's no faster or more efficient way to launch a new technology and have it succeed in the most productive and efficient way possible in a matter of a few years.

That said, I'm really shocked that so many people with MBA's and PhD's and with massive real world and wall-street experience cannot see the big picture is which has little to do with investing in an ETF and much more to do with gaining control over the cash in our societies by having people first fall in love with digital money and then swap out their real hard cash for virtual money and if the digital cash frenzy gets crazy enough that will not be a problem. People gave away all their gold in exchange for paper money back in the 30's without putting up a fight, exchanging a dying dollar for a successful virtual coin should be a cakewalk by comparison.

The Winklevoss brothers have applied for an ETF license, employing the same firm which launched the very first ETF, so their odds are as good as they can be with this firm, although if you look at the popular opinion amongst the pros out there their odds are next to zero because the government and wall-street perceive bitcoin as a gangster coin used mainly to buy and sell drugs, prostitution and money laundering on the dark and mysterious underground playground called the Silk Road.

The arguments of these pros are solid and based on reasonable and rational thinking and textbook rules and regulations. They basically state that it would be at best irresponsible for the US government to issue a license for a virtual, play pretend currency to trade on the highest pinnacle of institutional success, wall-street, given this currency has already been proved to launder over $6 Billion through just one exchange, Liberty Reserves, whose CEO was recently indicted and the exchange shut down. And then there's the Fed crackdown on Mt. Gox, the biggest Bitcoin trading exchange, located in Japan - and one begins to quickly see why the pros think it is an absolute impossibility why the state would ever license Bitcoin.

But even so, I remain convinced that Bitcoin will get its ETF license and it will get it with no issues or reservations. The reason is that the government ( ours, the US as well as numerous foreign governments would love nothing more than a digital currency) and given most of the major currencies out there are in serious trouble this entire digital currency crazy sure is one huge coincidence - I mean, what a lucky break for the US government, the European Union, Japan, China, etc. Japan's currency is doing well, but they have been on record and quite vocal that they have wanted and pushed for a one world currency since the 70s so now here is their chance at a real viable digital cash.

Then it is no wonder the Chinese government, a few months back, ran a half hour special on their closed CCTV program basically pumping Bitcoin and encouraging their 1.6 Billion citizens to mine, buy and hoard bitcoins. I find that very interesting given China is a communist country and the last thing they want is another foreign, US digital currency undermining their own state issues fiat money. They did, after-all, killed a similar bitcoin cash which was getting extremely popular in the China back in 2006, by the name of QQcoin due to the fact it was leaking into mainstream where people were starting to use it for actual real money purchases.

Why did China kill it's own version of Bitcoin some 7 years ago while now embracing a foreign, American digital currency? This is a major red flag to me and it says that China is in on whatever is going on or they are at least suspicious of what the real intent is behind the ever so secretive Bitcoin digital currency. There's an old saying on wall-street: Follow the smart money, and let me tell you, China is definitely up there in the world of smart money.

Bitcoin ETF

I only found out about crypto-coins, also known as alternative currencies, roughly 3 months ago and I was instantly blown away by numerous factors and what I believed then, and now, to be the most unique and explosive - once in a lifetime investment opportunity I have ever seen.

First of all, I am an economist by Education and so my mind is trained to look for trends, preferably trends which result in unique money making opportunities. Add to this the fact that I have been very active in the stock market for over 20 years now and one would expect to, even by accident, notice and pick up on clues and trends which many individuals, trained to do other things, may potentially completely miss.

The biggest factor which has caused me to notice what I believe is the biggest thing since the internet industry and the dot com boom is the stark similarities between what was happening in the early stages of the internet era and what is happening now with these new crypto-coins, and in the very short term, the Bitcoin.

First let me quickly mention for those who know nothing about Bitcoin or digital money, that Bitcoin was founded/invented by an anonymous person by the supposed name of Satoshi Nakamoto. Bitcoin was launched in 2009 and the first reported purchase was not long after that, reportedly for a pizza for the price of 10,000 Bitcoins. 10,000 Bitcoins today equal nearly $1,000,000. That's a greater increase in value than the greatest more profitable stock during the entire tech and internet dot com boom - DELL, which increased in value by 54,000%, from 1991 to 2000. And Bitcoin beat this remarkable feat in much less time so naturally, any investor or economist would immediately do some research into anything with this kind of explosive potential.

Here's another bold and most likely unpopular prediction, prophecy or whatever you want to call it. Give it maybe 2 years at most and this type of Robin Hood coin would be looked up to by everyone in the alt community since it helped change the lives of so many people where the traditional alt coins simply maintained the status quo which is nice if you're well off cause that means you're about to get richer and since getting wealthier has to come from somebody that somebody will be the millions of market participants who don't yet know how to make everything inclusive - just no haters, spammers or the jealous type who can't stand the thought someone else is better off then them. The reason for this creeping in my mind is the fact of waking up and taking the kids on some educational tour.

I don't want to go into the full history of Bitcoin in this article for obvious reasons but it's important to mention that many people, including professional journalists from the likes of the New Yorker, have tried to track down and talk with the inventor of Bitcoin and no matter how hard anybody looks the man is simply nowhere to be found. He doesn't even respond to emails or return calls. Mr. Nakamoto has simply vanished off the face of the earth.

Very odd for someone who is seen as a genius and is now a very rich and famous individual. It would be like Steve Jobs walking away, with no sign of life, from Apple just as Apple started to become famous. Impossible! At no point in history could I find any human being walking away from fame, money and honor so quickly and without any sign, warning or apparent reason. This too must mean something yet nobody concluding anything about Bitcoin seems to give this enormous fact even a single thought.

Regardless, Bitcoin was born in 2009 and it is now part of history and I believed, the moment I researched Bitcoin, and all of its offspring cousins that I was looking at a totally new industry. While most mainstream media, investors, analysts and economists see Bitcoin and all alt-coins, as a fad, a gimmick, a Ponzi Scheme and nothing more than something used for illegal underground activities, such as money laundering or the goods and services one can purchase from the most infamous underground entity, the Silk Road, I see Bitcoin as the mother which birthed an entire new industry, an industry which will give birth to more supernova, explosive and incredibly profitable Bitcoins 2.0, 3.0, etc.

There are a number of reasons I concluded these things. First of all, there is no technical or fundamental reasoning or rationale to explain why a video game, play-pretend, virtual currency like Bitcoin, can spike in value to $266, which is exactly what happened this past April. Flukes in the stock market are pretty common and I've seen many penny stocks spike to ridiculous levels but this Bitcoin phenomenon was very different. First of all, there was no obvious spark or driver to create the mania. With penny stocks there's always some key event or rumor which initiates a massive rally followed by a confirmation of the rumor or facts showing the rumor was untrue, but in either case this rally is started by something or someone and within days the fair value for that stock is reached.

Well, with Bitcoin, there was nothing in particular, other than vague guesses, that anyone can point to which caused this huge rally to transform a worthless asset with ZERO intrinsic value into an ultra-valuable, $266 coin. But that's not what peaked my interest. What shocked me the most was that this worthless coin being hyped to unbelievable levels and making many millionaires nearly overnight became surprisingly stable after just a brief selloff which temporarily took the coin down to roughly $60 followed by a quick rebound where it found a very solid equilibrium between $100 and $120 per Bitcoin. Only until the last 2 weeks has the price breached $100 and is now below $80 but that is still a very high price for any asset with ZERO future cash-flows. There isn't even a plan for Bitcoin to ever start a business, yet it is being priced as if it was already a successful business.

This trumps and out-values any hype internet or tech stock from the internet era. At least with those cash bleeding startups there was some type of real assets (i.e. buildings, land, patents, etc.) which they held and they all had some sort of CEO behind the scenes you could actually talk to and some sort of business plan they were trying to execute on. Bitcoin should have never, in this world of physical matter, laws and rules, been valued at anything more than a few pennies, and perhaps if some huge virtual game hype ensued, the most it should have been ever valued at was a couple bucks. But here we are, trading at much higher levels than a solid silver coin, and trading as if it belongs there. This is something that is just not possible in the world of investing - it is unprecedented.

Naturally, an enormous question immediately popped in my mind: “Who is propping this up - who is stabilizing Bitcoin?” Well, that question cannot be answered with any certainty by anyone - and in any void of legitimate answers rumors tend to fly wild. Some think it's the mafia and the billions of dollars they launder but that can't be true because they would sell Bitcoins just as fast as they bought them and when someone is selling billions in a very limited supply Bitcoin then the price should implode and looking back at the last few months, Bitcoin has been trading as if it actually had a real exchange to be traded on and real market makers providing liquidity, and of course, none of these things are possible as they simply do not exists in this early stage of this new industry.

There are a few decent exchanges for Bitcoin and other crypto-coins, such as Mt. Gox and Vircurex, but these exchanges are very archaic, suffering from constant hacker attacks and massive theft from their client's accounts. And forget about Market Making, the liquidity for these crypto coins, and even Bitcoins, are absolutely terrible but one would have no idea by looking at the price of Bitcoin.

Another common theory is that the “state” created Bitcoin in an attempt to get the masses to embrace digital money due to the fact that the dollar, the euro, the yen, etc., are seeing their last days and if you need a new currency for more than half the planet then why not create one global currency and given the infrastructure for digital transactions is now in place (due to the wide rollout of NFC over the past few years) then why not make this currency a digital one, which would optimize the benefits and consolidate the power for any government which employs such currency - unfortunately at a massive loss to the privacy of the population at large.

With the advent of the internet, cellphones, Skype, IM, etc., we the people have been slowly been willingly forfeited more and more of our privacy and personal freedoms and this loss will probably culminate in the largest single handed loss in personal freedom since the dawn of civilization - the mass forced adoption of 100% pure digital money and the complete ban of real assets such as gold bullion, silver, silver dollars, paper money, etc. Because when you give any government total control over what you spend then you will be taxed on even the $5 you give your kid to mow your lawn. And this is why the government has the most to win -they would know where everyone is, where their money is, no more private bank accounts, no more Swiss accounts and no more tax evasion.

I'm all for making everyone pay their fair share of taxes but the thought that I can't give my wife or kids $20 without the local police, my bank and/or the Feds knowing about it is downright scary. Alas, this is progress and it is obvious to me that the time has come and nobody, no force on earth can stop this freight-train which I expect will move faster and with more explosive price valuations, riches and rewards for those who have the vision to get in early, than even the last and enormous tech and internet boom of the mid to late 1990's.

But who in their right mind would trade their real paper dollars for imaginary video game money? But what if there were a global craze for such currencies, and in the process many people made a lot of money, then that would be a different story and it would be much easier to get billions of people to willingly and happily trade their dollars for Bitcoins or Devcoins than to try and do it by force. I mention Devcoins as I think they will be Bitcoin 2.0 due to the fact they're the only alternative currency making a run for an actual business plan and the fact they're the only alternative currency actually out there trying to help developers and all people alike by actually providing jobs for individuals - a perfect coin for any politician or investor trying to sell the concept of digital money.

It is therefore plainly clear to me that not all is what it seems with Bitcoin and by extension, the same for all the other alternative coins. And as a result I have been saying, since the beginning, that not only will Bitcoin not crash and burn, but it will actually go main-stream and it will become a widely accepted and traded investment instrument. Three months ago and even now, this idea is absolutely ludicrous and the main reason is that educated investors are only thinking with their books and not with their imagination. With Bitcoin, and the entire industry they've created, one needs to really try and imagine what's happening behind the scenes because there is obviously much more than meets the eye.

Clearly, this new Crypto-Coin industry, if one can even call it that, is similar in numerous ways to the internet industry. In the early 90's, wall-street and main-street were all mocking and laughing at these new startups calling them fads and saying that they would never make any profits because who would trust and buy their things over the internet when people needed to see what they were buying and people in general were not computer savvy. I remember during the 90's, and especially later on after 2000, when Amazon (AMZN) crashed down to roughly $7, the only major analyst to see the potential and buy up massive amounts of Amazon shares was an analyst from Legg Mason. The way most back then thought internet companies couldn't survive because they didn't fit their old way of thinking - is the same way today with how analysts are laughing at Bitcoin saying it will never be an investment.

But I finally have some proof of my theory that not only will Bitcoin go to wall-street but it will soon (12-24 months) be on main-street and the mainstream media will go from mocking it to pumping it and that's when the masses will really go for Bitcoin and all their spinoff coins which should create massive riches for those who get in early enough and eventually, like all new hyped industries, a massive bubble will emerge and the faster something inflates the bigger the bubble will be and given Crypto-coins have limited supplies with mass appeal and there's only a handful of Crypto-Coins to choose from, and they have nothing inhibiting growth since there's nothing to them besides an idea, a concept - these are essentially pure electrons and so they can be pumped into a massive bubble faster and harder than anything the world has ever seen.

The proof I'm talking about is the ETF application from a few days ago by the Winklevoss brothers. Already there's nothing but doubt, mockery and laughter by everyone in the media and on wall-street. Absolutely nobody believes the US government will give approval to Bitcoin to join wall-street and trade next to ETF which are derivatives based off real things such as gold, silver and other real assets such as stocks. And who can blame them, my education says it's not possible and it would actually be irresponsible and risky for the US government to give the green-light to Bitcoin as it would open the door for other illegal or imaginary things people want to start an ETF for. But once again, I'm not looking at this through my college textbooks because there is so much more to this than anyone can see or understand.

To those who think Bitcoin is still a joke and I'm out of my mind I have only this to say: “What will you say when the US government sanctions and gives its blessings to this imaginary coin and it starts trading on Wallstreet and not only that, but it will quickly become incredibly popular and it will make millionaires of many individuals who have the vision and the guts to have gotten in early enough?”

Forces Affecting the Bitcoin ETF

Will you doubters who can't stop thinking through the academic filtered, school-books for but a moment and instead start thinking about the big picture which is that there is a much bigger plan at work here and until this whole thing unfolds nobody really knows what the end goal is - one can only speculate. It is very clear to me, from a Macro Economic view, that many western countries and Japan are in serious financial trouble and their currencies have very big issues which may not be able to be resolved.

In fact, I recently heard a speech by Martin Armstrong where he stated that in doing research going all the way back to 6,000 BC, no country has ever repaid its debt in full with the exception of one country: [Communist] Romania (while part of the Eastern Bloc) and this was way back around 1980, under the leadership of the hardline communist Dictator, Nicolae Ceausescu.

I was living in Romania at the time, as a small child, and I remember the way the dictator at the time, Nicolae Ceausescu, pretty much nearly starved an entire nation, 20 million Romanians, as he shipped out - exported to Russia and other neighboring countries everything from Chickens to Pork and textiles, gold and oil. I vividly remember when my grandparents would slaughter the traditional lamb at Easter, a government agent would show up at the gate, as if they had informants on every corner (and I'm sure they did) and you had no choice but to literally forfeit half of that lamb which was then shipped overseas in order to payoff the national debt.

As a peasant farmer you painstakingly worked hard to raise these farm animals and when you cut as much as a chicken for dinner you were forced, by law, to forfeit half of that chicken to the state and if you failed to do so it was an actual crime, a crime against the people which usually carried the harshest punishments. This is the real danger which 90% of Americans have never experiment and don't realize how close we are to such massive and painful austerity programs unless they figure out a plan B and I firmly belive this plan B is to switch to a virtual currency with most than half the planet, or they can convince Iran and Russia, the entire planet will finally be on their long-time desire for a one global currency, a digital currency.

This is extreme and forced austerity and it worked in that the debt was paid off but in the process it was a major precursor to what would later be a country-wide revolution where the dictator, his wife and one of his sons were all assassinated. Moral of the story here is that the only way any country deeply in debt like the US, Japan and the EU are have no choice but to think of a plan B because raising taxes and doing a massive austerity program would simply lead to civil unrest and probably even a revolution.

Bitcoin vs. Stocks Comparison: Then and Now!

Because I'm willing to bet anything and I am absolutely 100% certain that Bitcoin will get its approval to trade on wallstreet as an ETF and I am taking the risk now by going on record making what is now seen as an absurd and impossible prediction. My stance is that of the minority and the popular and educated version of the truth is that Bitcoin will not only never get its own ETF but it will also self-destruct under natural free market conditions. To those people I have to respond: “Where have all those natural market forces been all of this time and why have they allowed a truly worthless video game currency to stabilize at a much higher value than a real and rare commodity such as silver?”

Over the last 20 years I have had the opportunity to see many stocks skyrocket for whatever reason. I remember Siri Satellite Radio (SIRI) go from just 5 cents to $.50 in a matter of a couple of months and it now sits at roughly $3. I just saw Tesla (TSLA) make a dramatic short squeeze fueled run from around $30 to over $100 and not long before that I watched Netflix (NFLX) surge from $60 to $220 also in a very short time. All of these are amazing runs and there have been greater ones by the likes of DELL, Amazon , Intel (INTC), Microsoft (MSFT), Priceline (PCLN) and of course the mighty Apple (APPL) but none of these have matched the % based return created Bitcoin from the value of one pizza to a million dollars in less than 4 years.

There has never been a greater and then stable return on investment in the history of mankind. Perhaps the tulip bubble may be a contender in this race but then again, if Bitcoin gets its own ETF then there's much more room for it to run so this already incredible increase in wealth may be just the tip of the iceberg.

Conclusion

And if I am right then of course one has to realize investors will search for the next Bitcoin - Bitcoin 2.0 -and there are only a handful of these coins out there. I have already researched these and although there's a new coin popping up every couple weeks or so and I'm sure that rate will greatly increase if Bitcoin shoots to over $1,000 the way I believe it will, then it would be a good idea, as investors, to try and find these speculative investments now. For the mere fact that it is trying to develop an actual business plan and it is trying to help developers at large, Devcoin has got to be my favorite crypto-coin out of the whole bunch and the price of this coin is incredibly low as it is a more dilutive coin when compared to the other coins out there.

There are other popular coins with a good reputation given the sketchy nature of this nascent industry, coins such as: ixCoin, Feathercoin, Litecoin, PPcoin, DigitalCoin and you're not going to believe this but there is actually also a BBQcoin. I am seriously wondering where the real names are on this profit train, big sports names or I can really see a religious coin such as CatholicCoin or MormonCoin which can do a lot of good in the world while at the same time turn a tidy, biblical profit.

There are a good dozen coins which can be seen and priced at Vircurex.com and with a little bit of research any speculative investor can quickly pick out a few coins to invest in, in the event I am right and this crypto-currency industry, expected by the mainstream to quickly die off, instead really takes off and soon turns into a crypto-mania fueled by speculation and the desire to make a million bucks faster than anyone in history. The time has come for any investors out there to take notice and make your own informed decision because Bitcoin will once again prove the laws of the universe and that of finance do not apply to it.

Good luck to everyone and hopefully these merge-mined coins can give you a real edge to piggyback on the US warships.

- Maximilian Wilhelm

Citations


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