Armstrong Economics Blog/Cryptocurrency
Re-Posted Sep 4, 2018 by Martin Armstrong
There are way too many cryptocurrencies out there and even if we accept the theory that ONE will survive and become mainstream, what happens to the rest? This is the great unanswered question. You certainly cannot replace the dollar and central banks with thousands of currencies. We tried that once when Andrew Jackson revoked the Bank of the United States charter. We ended up with EVERY bank issuing their own paper money and we ended up creating the Great Depression of the 1840s that led to violence in the streets, defaults of State debts who tried to bail out failed banks, and eventually, a civil war that was not entirely over slavery. (You can buy catalogs of Broken Bank Notes that are published per state because there are way too many to be just one book).
There certainly is no possible viable economic system where there are thousands of cryptocurrencies. For the theory to even be viable aside from technology and every person being able to use computers or smartphones, In other words, the mere existence of a product does not necessarily mean that the product is working. After all, is a there has to be just one at least per nation. A single currency for the entire world will never work because not everyone has a current account and trade surplus. Someone must have a deficit. A single currency would result in exaggerated inflation and deflation globally in different regions. This is the problem with the dollar. If the Fed raises interest rates, it impacts the world because other nations are issuing debt in dollars. This is what results in losing DOMESTIC policy objective to INTERNATIONAL policy realities.
A recent study found that only 36 out of the top 100 cryptocurrencies has any working product. Most are just promises. Some people have gotten so caught up in this whole mess that they have lost a fortune. One borrowed $127,000 to invest in cryptocurrencies and lost 85%. Understanding that cryptocurrencies are no different from anything else. They are trading vehicles when you at least stick to the majors. Socrates picked the high in Bitcoin perfectly. How? Why? Very simple in fact. No matter what instrument you look at, the chart is not actually that instrument. It is a chart of HUMAN emotion relating TO THAT instrument. The chart of silver from 1980 is similar to that of BitCoin. Back then, they were touting silver would go to $100. They swore it would do that any day for the next 19 years. We have people in Bitcoin swearing it is going to $100,000. That is such a joke for any currency to be worth that much would guarantee it cannot be used in commerce since most transactions are small.
No matter what bull market we look at, we find the same patterns. People get all emotional and rush in and buy the highs. The curious element is that they continue to believe the decline is only temporary. This seems to be standard human bias when people get caught up in the fever and lose all sight of history or reality.
This is why PROFESSIONAL traders have one PRIMARY RULE! ———– Never marry the trade!