Bitcoin, Chinese Conquest and the Financial Houdini.

Bitcoin is annoying.

Yes! annoying to people like JP Morgan’s CEO Jamie Dimon and a lot of acquaintances of mine who keep praying that my being bullish about Bitcoin will blow up in my face some unfortunate day. But I doubt if they will ever get to see that day if the blockchain technology remains as it currently is or gets better.

About two months ago when Bitcoin fell from a high of about $4,300 to $2,600 a lot of sneering and sniggering erupted behind my back. Total Market Capitalization of the Crypto Currency Market plummeted from a high of $180,000,000,000 to about $126,000,000,000. In Nigeria the price of Naira to Dollar Bitcoin crashed from N380 to about N360. Many “I told yous”  and “this is the end” messages were flying around my cyber space. Some were even happy to place a call to tell me the end had come.

That period I sacarstically made a statement on my facebook page thus: “Do not buy Bitcoin in 2017……so that Bitcoin can buy you in 2027” as is usual with the human mind, the first part of the sentence caught on with most people and it was all over amongst Cryptocurrency watchers in yola that Julius said we should not but Bitcoin again….I laugh! I am actually still saying: Please do not buy Bitcoin so that the price will remain low until my believing friends have acquired to their belly’s full.

That is by the way anyways. Now back to our story.

They were oblivious of the three major factors that forced the price down as a lot of holders decided to sell off some of their holdings and adopted a wait and see attitude.

The three factors responsible for the drop in price were only visible to those who had taken time to understand the dynamics of the Crypto Currency landscape, certain aspects of religious myths in Asia, the fear of the Chinese (and other political sovereigns) and the power of satellite television (CNBC to be precise)

When Ghosts dictate the pace of Investments

The period of the recent albeit short term decline in bitcoin price  started with what a large proportion of Asians (predominantly the Chinese) call The Ghost Month which starts from August 22 and ends on September 9^th

According to Chinese folklore, ghosts have an entire month each year to visit the living and roam the world. That’s when the unhappy and troublesome spirits get the chance to cause misfortune to us. It is a period where one is believed to be prone to attacks and bad luck.

Superstition has it that everyone should focus on honoring the visiting spirits throughout the Ghost Month. On the 15th day of the said month (September 5  for this year), some people observe the Hungry Ghost Festival and sponsor feasts to please and pacify the ghosts, especially the restless ones.

Those who believe in the occasion’s significance avoid making big decisions or engaging in activities that open them up to risk. Here are some of the things they veer away from. 

• Taking long trips
• Making big purchases (eg. buying a house or a car)
• Building and renovating houses
• Starting a new business and signing a business deal
• Transferring offices
• Making new Investments

Past Events and Observance e.g. in the Phillipines
A lot of local mishaps took place during the Ghost Month. Among them are: the assassination of former Senator Benigno Aquino, Jr. (1983), the Manila bus hostage crisis (2010), the onslaught of Typhoon Habagat (2013), and the sinking of MV St. Thomas Aquinas (2013).
On the international level, there’s the 9/11 terrorist attack (2001).
Last year, market investments hit a three-month low in August. The Central Bank of the Philippines said that some investors might have deliberately downplayed their investments because of the Ghost Month

The shedding off of holdings in securities (Crypto Currency inclusive) was inevitable. This factor led to the first major drop in the price of most Crypto Currencies. The fact that the Asian Market vis; Japan, China and South Korea hosts the top 5 Crypto Currency markets of the world ensured that a drop in individual prices and Market Capitalization was inevitable.

Enter Ghengis Khan’s Descendants

At about that period also, the Chinese Government (which had previously made policy statements that caused a drastic drop in the price of Bitcoin and other Crypto Currencies in January 2017) issued another policy statement banning ICOs and the sales of Crypto Currencies by exchanges operating in mainland China. This caused a short term panic amongst Chinese holders of the Currencies prompting a large sell off. However, this situation was eventually circumvented by the Chinese enthusiast of the currency as they resorted to peer to peer sales and purchase of the currency and also buying through friends and relatives resident in Hong Kong, Singapore and other locations around the world. Evidence that the ban by China had only a short term effect on activities in the Crypto Currency space is glaring with the rebound of prices and Bitcoin price reaching an all time high of $5,000 (more on this later). The Chinese Government’s fear of the growing acceptance of Bitcoin and other Crypto Currencies is characteristic of most sovereigns where the control and issuance of Money is an untouchable preserve of Government. 

The peer to peer nature of Bitcoin, its issuance mechanism and its operational structure will ultimately strip Central Banks of key traditional functions but most importantly the income they make from siegnoriage (the printing of Money). 

 A point to note here is that the Chinese Government has not found it necessary to ban Bitcoin mining where over 48% percent of the Bitcoin Hash Power is concentrated. Why? Perhaps because the economic benefit that comes from it cannot be waived away with a mere policy statement. I have always maintained the view that if the Chinese Government is truly desirous of fighting or stopping Crypto Currencies they should ban it totally. The irony here is that despite the ban, most Chinese leaning exchanges like Yobit, Huobi, HitBtc, Binance are all actively trading. It seems like China holds Bitcoins mumu button!

JP Morgan’s Houdini

When magicians are your advisers, you know your life is running on a mirage.

Deadline, September 12, 2017 the platform? CNBC! Jamie Dimon the CEO of one of the World’s Global Banks which received bailout funds to the tune of $12,000,000,000 from the US Fed as a result of monies lost gambling on risk credit derivatives  that brought the Global Economy to its knees in 2008  (in addition to the activities of other like banks) turned adviser to many using CNBC as his stage. By the time he had finished his sleigh of hand analysis of Bitcoin where he declared he had no confidence in Bitcoin and that it was a fraud, even threatening to sack any of his employees found trading in Bitcoin, his shot had reverberated round the globe thousands of Kilometers across millions of homes.

Naysayers said aha! If this guy who knows everything that is there to know about money says what he is saying he cannot be wrong. As at that time, we had begun exiting the Asian Ghost month and prices had started rebounding.

What they failed to note was that he said HIS DAUGHTER HOLDS BITCOINS (and he was threatening to sack any of his staff who is caught trading in Bitcoins?) who funded her purchase of Bitcoins? If Jamie Dimon is really serious and convincing about the fact that Bitcoin is a fraud wouldn’t the best person to take his advice be his own offspring? Charity they say begins where? If you said CNBC…then your guess is better than mine.

What they (Naysayers) did not or do not know is that there is this news all over Cryptosphere that immediately after Bitcoin prices dropped to about $4,103.26 following his diatribe against Bitcoin on CNBC, Jamie Dimon is rumored to have bought over 12,000 Bitcoins.

What they failed to realize is that Jamie Dimon’s JP Morgan is a prominent member of the Ethereum Alliance (a group of Global Corporates promoting the use of a rival crypto currency to Bitcoin known as Ethereum)

I wonder who will have the last laugh, Jamie Dimon, the Chinese, National Governments and Naysayers on one hand or Bitcoin and us on the other hand?   

I had a bit of a big laugh this morning at about 9:00 am this morning when a discussion on bloomberg featuring John Moulton of Better Capital and Paul Quinsee Global Head of Equities at JP Morgan Asset Management was interrupted with a breaking news that Bitcoin Price has hit $5,000. He (Paul Quinsee) literally had nothing to say while John Moulton said he had investments in Bitcoin but that he was not sure it would survive the next 10 years with its current structure of manufacture.

Ironically the article below from CNBC sums up Jamie Dimon’s position and shows clearly the reason for his diatribe. Fear of falling revenue and loss of a high perch up the value chain for a Giant who “moves” $6 Trillion daily.

“Even Dimon’s own Bank, JPMorgan, has reportedly begun a trial project using blockchain as it tries to cut trading costs. Blockchain is the technology behind bitcoin. Earlier on Tuesday, Dimon warned about further declines in trading revenue for the banking giant. Dimon said third quarter trading revenue will drop about 20 percent on a year-over year basis.”  culled

Financial intermediation vs disintermediation..... who wins?

The journey has just begun!

Before signing off let us do a little math based on price since at the onset of the Asian Ghost Months early August.

At the beginning of the Asian Ghost month, one Bitcoin was trading at slightly above $2,600 and an investment of N10,000,000 would have fetched the expected returns below.

N10,000,000/360 = $27,777

No of Bitcoins in $27,777 = 27,777/2,600 = 10.68 Bitcoins

Current value of 10.68 bitcoins = 10.68*5,220 = $55,749

Value of $53,400 @ Bitcoin Naira sales price is N340 (it is normally sold at a spread of N20)

=55,749*340 = N18,954,660

Profit if you decide to sell off N18,954,660 – N10,000,000 = N8,954,660

% returns = 89.54% over a 40 day period thereabouts.

Note: This does not always happen, there are times when prices stay flat for extended periods.

Past performance may is not indicative of future results

But the trend has been upward since 2009.

Don’t buy Bitcoin in 2017 so that Bitcoin can buy you in 2027.