June 16, 2021
Cryptos continue to dominate the news…
Thousands recently flocked to Miami for the world’s largest bitcoin conference. Reports are that the conference swag included neon fanny packs, festival bracelets, and a Lamborghini giveaway, and attendees dressed in everything from business casual to concert attire… Just the latest hint that the “crazy” world of cryptocurrencies is becoming more and more mainstream.
Today, we’ve got our resident crypto expert Eric Wade with the latest on what’s happening in the sector…
The Current Crypto ‘Wild West’ Era
It’s like the Wild West of the modern era…
That’s the sentiment shared by Senator Elizabeth Warren, as well as a large portion of crypto enthusiasts… And they aren’t wrong. Since their beginning, the main purpose of cryptocurrencies – and the blockchain technology they’re built on – has been to take aim at traditional finance, with centralized banking right at the forefront of the attack.
But just because it’s wild doesn’t mean it’s bad… The Internet was pretty wild when it was first taking off, and most would agree that it has done a lot of good for humanity. Just like how a muscle needs to tear to rebuild itself bigger, the centralized financial world needs to struggle so we can build something even greater. That’s decentralized finance (DeFi). That’s crypto.
However, an outside perspective shows a different story. Public figures, like Warren and Tesla (TSLA) CEO Elon Musk, have recently raised concerns over the energy consumption of bitcoin and other cryptocurrencies. Warren states that bitcoin’s blockchain technology takes as much energy to maintain as entire countries, which may be true… But she goes on to call it an “environmental disaster,” which does not speak to the whole truth.
A Global Cryptoasset Benchmarking Study performed by the University of Cambridge found that 76% of cryptocurrency miners worldwide use renewable power sources because they are cleaner, cheaper, and more efficient than most environmentally damaging energy sources. And the majority of blockchains are moving toward a Proof-of-Stake (PoS) model that consumes far less energy than the current Proof-of-Work (PoW) model that bitcoin is built on. Nevertheless, Senator Warren has remained passionate in her opposition of cryptocurrencies during discussions with other U.S. lawmakers.
And Warren isn’t the only U.S. senator attacking cryptocurrencies. Two weekends ago, U.S. Senator Roy Blunt blamed crypto as the currency of choice in two major U.S. cyberattacks – on the U.S. Colonial Pipeline system and meatpacker service JBS. Both attacks focused on compromising passwords, with hackers demanding bitcoin in exchange for permitting access back into the companies’ systems.
Senator Mark Warner also recently stated that we are beginning to see crypto’s “dark underbelly.”
Meanwhile, the Biden administration is working with international organizations on tracing methods for cryptocurrency transactions related to ransomware and cyberattacks. U.S. law enforcement officials have already recovered around $2.3 million of bitcoin paid to the hackers after the FBI was able to access one of the private keys that led to a wallet involved in the Colonial Pipeline attack.
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The Wild West Was an Expansionary Time
But it’s not all bad news…
At the Miami Bitcoin Conference two weeks ago, Senator Cynthia Lummis showed her support for cryptocurrencies by saying “there’s so much more fraud in regular fiat currency than there is in cryptocurrency.” She went on to insist that cryptocurrencies are a step in the right direction for the U.S.
In the same panel, U.S. Representative Warren Davidson compared the Federal Reserve’s recent money-printing habits with the popular meme-based crypto DOGE, which has an unlimited supply and continues to mint new coins daily.
Lummis said bitcoin stands a chance of becoming the national standard if we continue down this path. However, she sees a future where bitcoin – as the “most important commodity in the country” – helps cement the dollar as the world’s reserve currency of choice.
It reminded me that the Wild West became America’s frontier and home to countless natural resources. Transport, communications, and even banking flourished thanks to the wealth the Wild West offered, much like cryptocurrencies have blossomed into trillions of dollars of value.
The discussions on crypto regulation aren’t localized to the U.S., though. China’s Ministry of Industry and Information Technology (“MIIT”) recently released its agenda to promote the integration of blockchain technology in China.
The agenda covers four different application areas for blockchain adoption – the economy, finance, industrialization, and public services. MIIT compared the potential of blockchain’s traceability, data sharing, and supply-chain management with Big Data and artificial intelligence.
MIIT also believes the blockchain is perfect for smart cities and novel government services. Judicial endeavors, civil registries, and administrative law enforcement activities all stand to benefit from blockchain technology.
However, while China is embracing blockchain technology, it recently banned the use of cryptos and bitcoin mining.
Weibo, one of China’s leading social media platforms, also recently had several of its high-profile crypto influencers banned. Weibo users who visited a banned profile were met with a message that the banned account violated “relevant laws and regulations.” The ban has been called “judgment day.”
You see, while China continues to build out its blockchain road map for the future, it’s becoming clearer that cryptocurrencies like bitcoin will not be a part of the vision. Instead, China is working on its own central bank digital currency (“CBDC”), which it calls eCNY.
The Swiss National Bank and Bank of France have also begun testing their own cross-border CBDC, which they have named “Project Jura.” And South Korea’s central bank is currently seeking a supplier for its own pilot CBDC platform.
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The Frontier Just Moved to Latin America
Meanwhile, El Salvador has made history as the first country to declare bitcoin as legal tender. This move has seen tremendous support from various crypto communities, while critics claim it runs the risk of putting El Salvador’s economy at the whims of bitcoin’s volatile nature.
We believe bitcoin’s sovereign-less technology may ultimately help El Salvador reclaim some of its sovereignty which it gave up decades ago when it began using the U.S. dollar as its national currency. Leading the world in this regard is a controversial but exciting prospect for Salvadorans, especially considering the recent news of bitcoin miners seeking to use El Salvador’s volcanoes’ geothermal electric generators as a 100% renewable and clean energy source.
Officials from multiple countries including Mexico, Paraguay, Brazil, and Panama have recently shown their interest in attempting a similar push to adopt bitcoin as legal tender for their citizens.
India’s lawmakers are also looking into the classification of bitcoin as an “asset,” which is a big shift from their previous ban on cryptocurrencies. This decision has the potential to bring real-world crypto payments into the day-to-day lives of Indian citizens.
With the news of China banning all crypto payments and bitcoin mining rigs, El Salvador adopting bitcoin as legal tender, and countries worldwide weighing in on their stances concerning cryptocurrencies, it’s no surprise U.S. Senator Warren has described crypto as the Wild West.
But just as the Wild West grew wealth for miners in the form of gold, cryptocurrencies are growing wealth for individuals who believe in the technology and a vision of decentralizing the future… While that may threaten central banks and governments, it’s putting power and wealth into the hands of the communities and countries that believe in it. And that’s a movement worthy of respect.
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Publisher, American Consequences
With Editorial Staff
June 16, 2021