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Bitcoin’s Inconvenient Truths: The Silence Is Deafening - Dave Kranzler (29/11/2017)

Bitcoin’s Inconvenient Truths: The Silence Is Deafening - Dave Kranzler (29/11/2017)
By Dave Kranzler 11 months ago 7023 Views 2 comments

November 29, 2017

Gold is instantly and optically recognizable as money. You don’t have to explain it. Bitcoin and Special Drawing Rights (SDR), like a bad joke, have to be explained. Many “cryptologists” from the start gave up trying to explain Bitcoin and just sell it as virtual gold, which is de facto fake gold. – Dan Popescu, investment consultant

Numerous inconvenient truths are conveniently ignored by Bitcoin/cryptocurrency promoters. Not the least of which is that the fact that the original concept for cryptographic currency was envisioned by the NSA. I guess it’s convenient to assume the NSA developed this concept and then put it out there for the private sector to develop. Sure, that makes sense.

A rapid rise in price does not validate an investment concept. Dozens of dot.com stocks went from simple websites to multi-billion dollar market caps and back to zero in the late 1990’s. Until proven otherwise by the long test of time, Bitcoin could be another product of a fiat money printing bubble that is 100x the size of the money bubble that fueled the dot.com bubble. Gold and silver have withstood the test of 5,000 years. Bitcoin has less than 3,000 days of time-testing.

Be leery of the serial promoters who have dropped their previous advocacy of gold and silver like a hot potato to become religiously zealous salesmen of Bitcoin. These were often among the most raucously vocal in their protest of the use of Comex gold and silver futures to manipulate the market price. Yet, their silence on the introduction of Bitcoin futures hurts my ears.

The bulwark promotion of Bitcoin is that it is a de-centralized form of money that exists outside of Government control. But is it really? I dare say the roll-out of CME Bitcoin futures, as “regulated” by the CFTC, certainly smells like the implementation of official intervention. Those who previously protested gold/silver futures must not deny this fact. Perhaps more troublesome is the embedded forms of counter-party risk endemic to the system which creates Bitcoin.

Anything that exists in cyberspace is vulnerable to hacking. This is a fact that has yet to be invalidated. Circling back to the NSA white paper referenced above, can anyone out there truly claim the expertise required to deny that the NSA, or any other major sovereign intelligence agency, does not have the ability to corrupt the block-chain? To be sure, cryptocurrencies are subject to network or infrastructure risk during a crisis. Unequivocally, crypos are subject to government regulation.

Speaking of which, if I were a Bitcoin advocate, it would bother me that western governments go out of their way to hide their interest in gold as a monetary asset, yet they openly embrace cryptocurrencies. Perhaps when the BIS declares Bitcoin or Ethereum to be a Basel 3 Tier 1 Central Bank asset like gold, I’ll have a change of heart.

The price of Bitcoin has experienced a remarkable run in price this year. Of course, the same could have been said for Dutch tulip bulbs from late 1636 to late 1637. Most of the traders are chasing the price higher, with little to no understanding of the object they are chasing with their money, in hopes that someone at a later point in time will come along and pay a higher price to them. Even worse, these price-chasers have placed undying faith in the analysis of Bitcoin coming from the same con artists with whom they placed religious faith in the analysis of precious metals.

Also, up to this point there’s been an absence of two-way price discovery for Bitcoin. Once the CME futures are rolled out, it will introduce – albeit in an unwelcome format – a provocative method to sell Bitcoin on margin. The use of margin is the hallmark of a fiat currency-based fractional banking system – the very nature of which Bitcoin supposedly repudiates. The Bitcoin longs will face the same unlimited supply potential of paper Bitcoin that precious metals investors have endured for decades.

Make no mistake, I’m not trying to derail anyone’s interest in Bitcoin or cryptocurrencies. And I’ll be the first to admit that it’s likely the price will go a lot higher from here. But if the issues I raise here are indeed legitimate, how do you know when it will be the right time to sell? That is to say, while the parabolic rise in Bitcoin has been largely continuous, any number of events could occur that would force the price re-discovery to be a step-function. It’s all wine and roses on the way up, but at what price will there be a bid for you relieve yourself of your position?

Dave Kranzler

Dave Kranzler spent many years working in various Wall Street jobs. After business school, he traded junk bonds for a large bank. He has an MBA from the University of Chicago, with a concentration in accounting and finance, and graduated Oberlin College with majors in Economics and English. Dave has nearly thirty years of experience in studying, researching, analyzing and investing in the financial markets. Currently he co-manages a precious metals and mining stock investment fund in Denver and publishes the Mining Stock and Short Seller Journals. Contact Dave at dkranzler62@gmail.com.

The author is not affiliated with, endorsed or sponsored by Sprott Money Ltd. The views and opinions expressed in this material are those of the author or guest speaker, are subject to change and may not necessarily reflect the opinions of Sprott Money Ltd. Sprott Money does not guarantee the accuracy, completeness, timeliness and reliability of the information or any results from its use.

Dennis 11 months ago at 12:12 PM
It's important that the average person has some skepticism of a cryptocurrency that was envisioned by the NSA and is promoted by corporations and companies that will obviously only benefit from the expansion of Bitcoin. We haven't heard nearly enough skeptics explore the reality of Bitcoin. You've mentioned a great point. Why doesn't the government care nearly enough about the Bitcoin monetary value but clearly go out of their way for gold bullion. I am also curious as to when the constant rise of Bitcoin will eventually plateau.
Spiritual Jackass 11 months ago at 12:53 PM
Bitcoin is not going away. It may be replaced like NEO or Ethereum or another High Quality programming. Do you think the internet is going away? Do you think that your smartphone and computers are going away? How about Electricity? I would say Hip Hip hooray for Cryptocurrencies! That way the programming will keep this website up and running, or how about this...How about Gold and Silver being "bootstrapped" to cryptos so they don't ever get manipulated to hell like they have been for the last 40 years? I get it if you don't understand the programming behind it...Not many do. However, if you can't build a computer from scratch or understand how it works, or even really explain how a computer works, does that mean it's not a valid tool or even exist or fake?
Do you really think that the internet is a fad and all these computers (especially the one in your pocket) is all going to go away? Do you like NSA recording all of your information? How about we use cryptos to keep our stuff private and safe. Cryptocurrencies are in there infantile stage...kinda like buying yahoo at .21 (back in the 1900"s)
Bitcoin was just the first, and was always known that it was just the example of what could be possible. Maybe Bitcoin will go to zero, I can tell you with full certainty, that NEO or ETH will be at 20k if it does.
or...if all cryptos go away, that means so do computers and electricity...and in that case forget metals too...knives, bows, arrows, fire, seeds, water, etc will be the currency.
Wake up, we are evolving, Bitcoin was made as the "check mate" to the Bankers in 2008 (read the white paper). Cryptos hold the possibility of our greatness. We are moving from cart and buggy to horseless carriage. 10 years ago was a flip phone, now we have a full on computer, phone, video camera, still camera, heart monitor, gps navigation system and so much more in our pockets...and we talk into it instead of typing...the crypto community wants the same as the metal community...I know this because I bout 4k ounces of silver in '08 and 135 BTC in '13...All I do is read and watch..read the 'white paper", BTC was built on the business of gold. Gold mining and selling and buying. We are heading into a new world. Do you hate how Metals are manipulated? How about stocks? Privacy? Pray for all those that are programming the next generation of integrity and honesty. At least now the playing field is level.

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