Raoul Pal, one of the most effective critics of
mainstream economics, is cashing in his Bitcoins. Gold is a better wealth
preservation tool, says Real Vision Television’s co-founder.
Yesterday Pal, who once thought that Bitcoins could
eventually be worth as much as $1 million each, informed Real Vision
Publications subscribers that he was selling the digital currency.
“Bitcoin not a store of value people thought it was,” he
told Sprott Money News, in a telephone interview this morning from his Cayman
Islands home. “If core developers are talking about changing the Bitcoin code
or how it works, what happens if – at some future point – they decide to
allow the number of coins to expand?”
Pal also cited lack of a Bitcoin “killer app,” and the
commoditization of blockchain technology – as new players chip away at the
market – as motivating his thinking.
Those who have been following Pal’s advice regarding
Bitcoin, which he has been pushing hard on Real Vision TV – through the
prominence that he has given sector advocates, such as Trace Mayer – haven’t
done that badly.
The digital currency is up more than tenfold in the last
two years.
Mainstream economics “does not work in the real world”
However, Pal’s dimming view of Bitcoin is particularly
important to gold investors, because he and partner Grant Williams, in their
legacy platforms and the recently-launched Adventures in Finance podcast
series, have been among the global financial system’s most astute critics.
Pal is particularly vociferous about the opaque
econometric models pushed by mainstream academics and central bankers, who
don’t sufficiently warn the public of the dangers involved.
He cites economists’ use of the qualification “ceteris
paribus” (which means “all other things being equal”, but which, Pal jokes,
really means “it does not work in the real world”).
This, despite the fact that while insiders understand the
jargon, profession politicians and the public are left insufficiently
informed by economists about the risks of policies such as rising debts and
quantitative easing.
Bitcoin: like gold, except . . .
Pal’s call is also important for another reason: if
Bitcoin’s allure as a store of value and a hedge against systemic collapse is
dimmed, this would increase the relative value of other solutions.
That includes gold, for which Pal’s partner Grant
Williams has been a particularly strong backer.
Pal’s fascination with Bitcoin echoes that of many
alternative investors, who seek a hedge from what some suspect is a “Krugman
Con” - sustained long-term increasing government spending, borrowing and
money printing at a pace that exceeds economic growth.
Bitcoin met many of those hedging characteristics.
Despite its wild fluctuations, the digital currency provided a partial store
of value outside the banking system and its encryption technology reportedly
kept away prying eyes.
Bitcoins fraught with increasing risks
However Pal’s concerns with the digital currency barely
scratch the surface of the increasing risks that Bitcoin investors face –
particularly at a time when its hockey stick chart pattern practically
screams “bubble.”
(According to chart compiled
by Coinmarketcap.com, the market capitalization of the top ten
cryptocurrencies as of June 2, 2017 exceeded $75 billion).
For one, an astonishing number of investors – including
this writer – have a hard time getting their minds around key Bitcoin concepts.
These range from how data mining (the process through
which Bitcoins are created) is done, to who is behind the various Bitcoin
exchanges (this writer could not find a single Canadian operator to speak on
record for a recent article), and how good the platform’s encryption is.
(Note: America’s National Security Agency, which few
journalists fully understand, is almost certainly making hacking digital
currencies its number one priority. In fact, (in this writer’s opinion) it
has likely already succeeded).
Despite Pal’s pessimism about Bitcoin’s future, the
alternative investment guru admits that the digital currency “may go up in
price, maybe a lot more,” before its ultimate future is decided.
But Pal won’t be going along for that last leg.
|
Peter Diekmeyer is a business writer/editor with Sprott Money News, the
National Post and Canadian Defence Review. He has studied in MBA, CA and
Law programs and filed reports from more than two dozen countries.
|
The views and opinions expressed in this material are those of the author
as of the publication date, 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.