The Bitcoin bloodbath has only just begun

A currency that plunges (or rises) 25 per cent in a single day is neither a viable store of value nor a medium of exchange.

The Bitcoin mania, the biggest speculative bubble in the history of global finance, bigger than Dutch tulips, Nikkei Dow warrants or Silicon Valley dot-coms, has just begun to unravel. I was certain the plunge in the cryptocurrency complex would be as swift as it would traumatic. Jim Morrison (People are Strange) said it best in his autobiography: nobody gets out of here alive.
This is no ordinary fall in the price of Bitcoin. Note that the Bitcoin Investment Trust fell more than 20 per cent on Friday and now trades at a discount to net asset value, not a good omen for the cryptocurrency bulls. A friend who is both a CFA and a successful portfolio manager told me he expected to make 100 times his investment in Bitcoin at $3,000. My friend is as close to "smart money" as is possible to be in the Gulf - but if even he embraced the speculative megalomania of the Bitcoin bulls, it meant only one thing to me. This time the wolf was really here.
This is now an ideal time to short Bitcoin or cryptocurrency proxies in the stock market, such as the absurdly renamed Long Blockchain (formerly known as Long Island Iced Tea) or Longfin, Riot Block Chain or even Nvidia. Given the stratospheric implied volatility of Bitcoin, even a 50 per cent fall from current levels will not surprise me. My advice for the bloodied bulls? Those who live by the sword also tend to die by the sword. Yet 50 million people worldwide now own Bitcoin, including blood relatives and friends of mine in the UAE, London, Pakistan, Canada and the US. The financial devastation of cryptocurrencies could well mean a "negative wealth effect" in some of the world's money capitals. It is now evident that central banks have launched a coordinated campaign to talk down, if not destroy, Bitcoin. The moment the Federal Reserve launches its own-cryptocurrency backed by the US dollar and the SEC bans initial coin offerings, Bitcoin and all its crypto-currency digital extrata (extratum?) will plunge to zero.
True, the US dollar (like all paper currencies) is a monetary Ponzi scheme, at least it is the legal tender of the world's preeminent military and economic superpower. Uncle Sam dominates the world economy. Who backs crypto? Terrorists, money launderers, speculative maniacs and tax dodgers. It would not surprise me if crypto-currencies lose 95-100 per cent of their value as "exchanges" collapse, ETFs go bankrupt, the SEC launches insider trading cases and criminal crackdowns are made.
As I had gently reminded my readers, a currency that plunges (or rises) 25 per cent in a single day is neither a viable store of value nor a medium of exchange, the traditional role of money. However, Morons R Us seemed to be the cerebral tagline of the Bitcoin bulls I know (one with more than $10 million exposure), not any real nuanced knowledge of monetary policy, one of the great intellectual loves of my life.
I just witnessed a 32 per cent peak to trough move in Bitcoin as I write but will resist the temptation to buy at $1,800 a coin (or at any price). After all, we were at $19,666 (that devil number again!) on December 17 and $1,000 just after last New Year. I have no paradigm to value Bitcoin. It could trade at $20,000 again or it could fall to $100 a coin. Easy come, easy go.
Human psychology tells me the failure of the Coinbase exchange to execute trades during Black Friday will (should) trigger a global scramble to withdraw funds from crypto-currencies and their proxies. If the world's largest Bitcoin exchanges collapse in unison, all bets are off. Regulation, governments, banks and intelligence agencies have their own geopolitical reasons to vanquish the Bitcoin bulls. Bottom fishing? Not now. Not ever. I am certain - I repeat - certain that Bitcoin will fall below $2,000 a coin sometime in the next six months. Etherium is another toxic fake asset class investors should avoid like the plague. Risk is a four-letter word. So is ruin.
Wall Street and global media outlets should be ashamed of giving the cryptocurrency con men a global stage. The Chicago futures and options exchanges launched Bitcoin products just to earn quick, fat commissions. Scam companies launched initial coin offerings to fool gullible investors. The Stock exchanges listed Bitcoin index funds to earn seven to 10 per cent commissions. Shame. Shame. Puppy shame! Hedge funds praised Bitcoin in public while shorting futures in Chicago. After all, 65 per cent open interest in Chicago MERC contract is short! This is not investing. It is fleecing leveraged lambs to their slaughter. Shame, shame, puppy shame.