The Rise of Cryptocurrency
As cryptocurrency sours to new heights, so does the regulations and restrictions that have begun to arise. When looking back over the past 3 years a lot has happened in the world of cryptocurrency, some good and some bad. There have been many new players entering into the market including huge investment firms, large corporations, and people like you and me.
Even Hollyweird and the uber rich have decided that if it is good enough for Mark Zuckerberg and Elon Musk, then it must be good enough for them, too. In many cases, those making the biggest investments into cryptocurrency are also the ones that are doing their best to manipulate the price, sometimes creating volatility in the market. When we introduced the idea of Bitcoin to our readers in 2018, the total investment into cryptocurrency was at $9 Billion US dollars, according to CoinMarketCap.com.¹
Now we are well above that at a whopping $1.9 Trillion. Where did that money come from? It came from people all around the world trying to get in on the Bitcoin Buzz and make some good money in the process. Companies like Facebook and Tesla are some of the juggernauts that tried to cash in on the ‘Bitcoin Bubble’. In both examples the owners of the companies, Mark Zuckerberg and Elon Musk, told very different stories about their involvement into cryptocurrency, but the end result was the same.
In the case of Facebook, they created their own form of digital currency known as ‘Libra’. We should be surprised based on the public stance that Facebook/Zuckerberg took at the beginning of their journey into cryptocurrency. In their case, it was the development of a digital asset for their social platform, or a native currency. Zuckerberg did everything he could to publicly criticize Bitcoin and cryptocurrencies, in general. While behind the scenes, he was buying large amounts of Bitcoin. You ask yourself, why would a billionaire tell me that Bitcoins are no good, and then buy them in secret? The natural answer is – greed. By creating a negative impression of a digital asset owned by the people, he could drive the price down, and then scoop them up when others were selling because of fear, uncertainty, and doubt – FUD.²
Possessing large amounts of this asset, allows Facebook to manipulate and steer investing in their own native currency, while also controlling prices of their biggest competition – Bitcoin. Bitcoin is not owned by a corporation; it is owned by the people who purchase Bitcoin.
There is independent governance by individuals and the environment that it creates. In Facebooks’ case, they want to own the asset, control the price, and bad mouth their competition – which is you and me. This should not be surprising, since Facebook obviously needs more control of our society - what we say, do, or think.
On the other hand, Elon Musk, went about his manipulation of the crypto markets in a very different way. You will remember back to February of this year, Elon Musk made a big deal about the cryptocurrency – DOGE coin after he bought a massive amount of DOGE coin earlier that year. DOGE coin was originally created as a form of mockery. It was an attempt to show that you could make a coin with no real purpose, or utility. It was considered a ‘SHIT’ coin, affectionately used in the crypto sphere to denote a product of no true intrinsic value. Since Elon Musk is a person of significance, people took notice.
People began to buy massive amounts of the coin, to avoid the fear of missing out – FOMO. When the price shot up, it would be no surprise to learn that Elon Musk dumped all those coins at a significant profit – never to be mentioned again. This is a classic pump and dump and has become all too common in the crypto sphere.
Well, it appears that Elon learned a valuable lesson from the DOGE situation and took it to a whole other level when he announced that Tesla Motors would invest $1.5 Billion into Bitcoin, according to articles written in Bloomberg, this past summer.³ This preceded favorable comments by Elon Musk about the use of Bitcoin as a payment option for these premium automobiles.
The price of Tesla stock shot through the roof, and the price of Bitcoin skyrocketed as well, from his positive words about both. According to articles in Bloomberg, Tesla motors was one of few large corporations that made this bold move and expected that other companies would follow suite. Tesla has since sold a large portion of their Bitcoin – at all-time highs between $49,000 – $65,000. After dumping his Bitcoin, Musk emerged as a critic of Bitcoin and cites his reasons, including the energy consumption related to mining Bitcoin and the energy needed to buy, sell, and trade this new digital asset.
Not surprisingly, during late summer he completely retracted this notion of absurd energy usage, and that Tesla Motors would again accept Bitcoin as a payment option. It’s impossible to believe that Musk did not understand what the technology surrounding Blockchain, and cryptocurrencies entailed. To Musk’s credit, he has been a big proponent of allowing crypto to ‘fly’ and often criticizes government overreach.
Currently, there are many instances of government overreach in the cryptocurrency world. When we last reported, Ripple Labs – XRP was climbing the ladder of gaining massive acceptance by banks and lending institutions, when the SEC (Securities and Exchange Commission) swooped in with a lawsuit against the company. Brad Garlinghouse and attorneys for the company assert that they followed all the rules and properly categorized this investment. SEC has been a thorn in the side of every large cryptocurrency project and the situation is growing in complexity.
Although Ripple XRP is still under investigation by the SEC, the price has been very positive and the government’s attempt to steer people away, has had the opposite effect. Ripple has been above the $1.00 mark ever since. Ripple has buried the SEC in paperwork, according to sources at ‘FinanceFeeds.com’.⁴ Requests by defendants have buried the SEC in massive paperwork, and the SEC is complaining that it would take them over a year to address those requests. In addition, the SEC has been caught in an apparent lie, according to another FinanceFeeds article. ⁵
According to the article, “While the SEC awaits a ruling on this matter, the plaintiff (SEC) must be struggling with the most recent attack from Ripple’s counsel days after discovering a document that may prove that the SEC provided guidance based on Hinman’s 2018 speech – which could reveal the SEC lied when stating the speech was only a personal opinion, not policy.” ⁶
So apparently the SEC is hiding the fact that they are taking a stance against Ripple – XRP, and it’s not merely the opinion of William H. Hinman, the Director of the Division of Corporation Finance – SEC. When any cryptocurrency project comes into the view of the SEC, it usually ends in litigation. The SEC has now set their sights on Coinbase, the largest US based cryptocurrency exchange.
According to articles recently published in Forbes magazine, the lack of clarity falls directly on the SEC in many instances.⁷ The crypto sphere could not be any clearer. The US government seems to be the ones that lack clarity in every instance. The article also explains that the CEO of Coinbase approached the SEC in order to get guidance on moving forward with a new lending product that many other companies in the sphere are offering. In a recent tweet by Brian Armstrong of Coinbase, he explains, that when he approached the SEC for guidance, they returned with subpoenas for records and depositions. They demanded their client list for all Coinbase users and they issued Coinbase a ‘Wells Notice’, which is a warning of impending enforcement. Not the welcome that Coinbase was expecting.
Increasingly, the US government, the SEC, and the IRS are taking tough stances against cryptocurrency. President Biden has promised to increase IRS scrutiny and to crack down on cryptocurrency. This raises the question, why they would be so hard on US citizens who are making their own decisions about what they want to invest in these days? Maybe it has something to do with world governments wanting to create their own digital assets and replace the ones that are owned by the people with one’s that are owned by the them? According to other sources at Coindesk, the Central Bank of China is cracking down on crypto and cryptocurrency mining operations in China.⁸ They have run the largest cryptocurrency exchange out of the country – Huobi. They recently relocated to crypto-friendly Singapore, instead.
Much of the administration at Huobi are Chinese citizens. The government of China has outlawed the buying and selling of crypto by Chinese citizens, yet some of the biggest government run Bitcoin mining operations are based in China. Again, why would the government want to restrict access to such a desirable investment for their citizens? Most likely greed. Chinese citizens find ways around these restrictions by using VPN’s and other computer masking technology. It is also not surprising that China plans to produce their own digital coin, issued and controlled by the same people who are trying to take away the options available on the free markets of the world.
There are a lot of things going on in the investment world that are difficult to understand. One thing is clear, the governments of the world want to control our access to the many cryptocurrency investments that should/could be available to us. Large corporations in the United States are using pump and dumps to get better prices on assets, while shattering some people’s confidence in good projects. The United States government is trying to litigate what they do not understand, to give us their ‘better’ option, instead of what the free markets provide us.
My ultimate take-away from this situation is this - if the federal government is trying to take something away, hide it, lie about the quality or reliability of something, then you can bet that I want double of my share. Every time the SEC files a motion to upset the balance of natural market fluctuations, then you know they are scared of losing that control. Ripple – XRP is still not currently available for buying or selling in the US. Get you a VPN, register on exchanges outside the United States, and buy those very things they are trying to keep away from us. Get you a digital wallet to store those coins in because you can bet that more control is coming. I want as much cryptocurrency that I can afford, because the returns are real. Popular exchanges available to United States citizens are Kraken, BinanceUS, KuCoin, Coinbase.
1 Coin Market CP. (2021, September). www.coinmarketcap.com
2 FUD is an acronym used in the trading world to denote spreading Fear, Uncertainty, and Doubt
3 Ossinger, J. (2021, July). Tesla Correlation to Big Tech Breaks Down. Blame Bitcoin. Bloomberg. www.bloomberg.com
4 Steves, R. (2021, September). XRP LAWSUIT: RIPPLE COULD PROVE SEC LIED ABOUT HINMAN’S ‘PERSONAL OPINIONS. www.financefeeds.com
5 Steves, R. (2021, October). RIPPLE BURIES SEC IN PAPERWORK IN XRP LAWSUIT: NEARLY 30,000 REQUESTS. www.fanancefeeds.com
6 Steves, R. (2021, October). RIPPLE BURIES SEC IN PAPERWORK IN XRP LAWSUIT: NEARLY 30,000 REQUESTS. www.fanancefeeds.com
7 Layton, R. (2021, September). It’s Time to End the SEC’s ‘Clarity’ Charade on Crypto. www.forbes.com
8 Gkritsi, E. (2021, September). China Tightens Crypto Mining Crackdown, Bans Trading. www.coindesk.com