We live in a world where the yield-starved and tech-savvy conspire in the
basement of the underground and unaccounted. While the rise of Bitcoin and
the explosion of alternative currencies may become the new scapegoat of
behavioral finance, there is nothing quite like the reality of trickle down
finance gone wrong.
Recently, EU officials called for putting safeguards on Internet currency.
The European Banking Authority called on the EU to develop safeguards for
trading platforms. They were also called to start groups to oversee each
Internet currency to ensure that no individual can manipulate the integrity
of a particular virtual currency scheme and its key components. In the
meantime, banks shouldn’t buy, hold or sell virtual currencies.
They stated:
“European Union banks should shun virtual currencies such as Bitcoin until
rules to prevent abuses are put in place, according to the Bloc.”
This would be sad if it wasn’t so ironic.
It is also ironic that one of the other excuses for regulation is that
electronic currencies make it harder for regulators to “manage monetary
policy”, which is one of the reasons for using alt currencies to begin with
to avoid the unintended consequences of intervention.
The key point is that media and the financial elite see the central banks
as regulators and policy makers.
The 100 year old central banking meme is still very much alive and well.
On the surface, Bitcoin represents many things. To the precious metals
inclined, it is often framed as an alternative or substitute.
But it is better to view the phenomenon and an anonymous currency with
market backing.
The Bitcoin trading is well advanced. Not only do dozens of exchanges
exist, but they are also functioning like their mainstream financial
counterparts.
Yes, similar equities and other paper trading vehicles borrowing Bitcoins
is a robust and well entrenched phenomenon. Margin swaps run in excess of $25
million on a daily basis.
Spin-off currencies are an even more dramatic spectacle. Well in excess of
200 individual currencies, these “software code-backed” instruments are born
on an almost weekly basis. Coders, the exchanges, and a handful of insiders
collude on the rise and inevitable fall of these new alternative currencies.
New crypto currency launches come equipped with the most advanced automated
social media marketing tactics.
The tactics used to launch a new currency are an extension of those
pioneered by the penny stock ‘pump and dump’ phenomenon. At least the penny
stocks have some form of backing — and not just code.
Regulation of these markets is a show.
First of all, regulators do not understand alt currencies anymore than
they understand high frequency trading or algorithm. And secondly, while
there is certainly a taboo associated with this, there really isn’t much
money to go after.
In addition, the rate in which these new currencies crash and burn (and
the relatively small size of the pool) results in an odd form of self or
market regulation. Alternative currencies beckon for their own form of
backing.
But speaking of justice and regulation…
Isn’t it ironic that any fuss should be made over these small markets,
when a journey up the chain of modern finance reveals the same corruption and
collusion – only worse?
When you consider that mainstream financial regulators are always one step
from rotating into the banks they are charged with regulating, it becomes
much easier to fathom the astounding degree of corruption.
And there are the precious metals markets.
Regulators, exchanges, and a small handful of advantaged and well
positioned players have access to the greatest ongoing pump and dump scheme
imaginable.
It makes what happens in the alt currencies seem like child’s play – which
is some ways it is when you consider the average age of the typical coder
copying and pasting the next program into the next new currency.
The great irony will not be lost on precious metals investors. As the alt
currency markets burn themselves out one by one before regulators have a
chance to get close, the fuse has been lit on another (largely) limitless
electronic experiment gone wrong. As the gold and silver pump and dump
becomes recognized for the scam that it is, the desperate search for wealth
will become apparent and too late for most.
http://www.silver-coin-investor.com/
