The digital grifter

Daily this blog is deluged with bot comments promoting crypto. Lately they’ve been supplemented with the fanatical enthusiasm of Bitcoin fans calling people like me dinos and dinks.

They all get deleted.

BTC has hit new all-time highs now that Trump is ascending to the Oval Office. Given the strength in the US$ and the relative slippage of the loonie, the price surge has been even more dramatic in Canadian dollarettes. We’re seeing $127,000 a coin these days.

So, do the clients working with me and my snappy portfolio manager buds own crypto?

No. The reasons in a moment.

First, let’s ask what Trump has to do with digital currencies. Why are Bitcoin cowboys so hopped up on MAGA?

Simple. Look at his ongoing attempts to (a) stick a finger in the eye of convention and of the securities regulator, and (b) his own self-interest.

• He pledged to make America ‘the crypto capital of the planet’
• Trump says he will create a ‘strategic reserve’ of Bitcoin, similar to the US strategic oil reserves – creating a huge potential demand
• His campaign freely accepted donations in crypto
• He has promised to loosen regulations surrounding digital currencies (which are backed by no assets and supported by no central banks or national tax system)
• He said, once elected, he’d fire the head of the Securities and Exchange Commission, Gary Gensler, “who has been leading the U.S. government’s crackdown on the crypto industry and repeatedly called for more oversight.”
• And then, above all, there is this…

The Trump family has launched World Liberty Financial, a decentralized finance (DeFi) platform for borrowing, lending and investing in cryptocurrencies. In addition to being “a tool for financial independence outside the banking system,” the Trumps are featuring their own token – WLFI – which the family is calling “the future of crypto.”

Here is how Trump and his kids will directly profit from his crypto-friendly actions as US president:

The equity structure of the project includes 20% of the tokens allocated to the founding team, including Donald Trump, Eric Trump, Donald Jr., and Barron Trump. 17% is designated for user rewards, while the remaining 63% will be available for public purchase.

World Liberty Financial says, “Donald Trump Jr. and Eric Trump are leading the effort, and Barron Trump, 18 and a freshman at NYU, is notably involved as the “Chief DeFi Visionary,” signalling a desire to bring a fresh perspective to the project.”

Seriously. He’s eighteen. Chief Visionary. And the platform aims to raise money using a securities registration which does not provide transparency or investor protection, as equity issuers require. A prime source of investors, and capital, are new crypto users, the company says – ‘younger demographics, eager to explore crypto.’

The naïve, in other words. Inexperienced. Immersed in social media pitches. Excited by the idea of making money without actually doing anything, but with zero experience dealing with losses. And here’s the avowed goal of Trump’s new venture: “dismantling the stranglehold of traditional financial institutions.” Yup the banks that finance the American economy. Is his what a president should do?

If you think this administration is going to be a success, you have not been paying attention. It isn’t about America, freedom or conservative values. It’s about family. The Trump family.

Why would you not want to jump on the bandwagon?

First, this shot of adrenalin into the world of crypto will probably end up exacerbating the extreme volatility of this asset class. Bitcoin has routinely gained and shed more value in a weekend than the S&P 500 does in two years. For people who want capital values protected or at least invested in stuff that pays dividends and will be there next Thursday, this is toxic.

Second, investors should never mistake crypto for money. Its not. Never will be. Too much extreme fluctuation in value to ever qualify as a trusted medium of exchange.

Third, it’s backed by nothing. Unlike money, whose value is supported by government monetary policy and the power of a nation to tax. Central banks, like the Fed, constantly monitor the worth of issued currency and have many levers at their disposal to even out volatility and fluctuations in market liquidity. Bitcoin is monitored by nobody. New coins are furiously mined in vast private computer farms. They are traded, stored and sometimes ghosted on platforms which can self-destruct. Ever heard of Sam Bankman-Fried?

Lastly, crypto is the love asset of a demographic most concerned about climate change, but which is having a massive environmental impact. The energy required to make digital tokens is mind-blowing. The UN estimates the mining of Bitcoin has a carbon footprint equivalent to the emissions from burning 84 billion pounds of coal or running 190 gas-fired power plants.

Thus, we do not invest. Neither should you.

About the picture: “Buenas dias Garth,” writes Craig. “I am sending you a dog picture from San Jose Del Pacifico in Oaxaca State, Mexico, where I am escaping from cold wet stormy B.C. for a few weeks. So many dogs here in Mexico and many are in rough shape being abandoned to survive on the streets. Luna is living the good life though, at a casa in this small tourist town high in the mountains.  Thanks for your blog and the helpful information.”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/11/12/the-digital-grifter/