Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Bitcoin Is Free From Counterparty Risk? Not So Much…

Published 11/25/2020, 12:35 AM
Updated 07/09/2023, 06:31 AM

Hugo Salinas Price is one of the most successful businessmen in Mexico. He also happens to be a brilliant monetary system analyst. In his latest essay, he explains why Governments and Central Banks largely ignore Bitcoin and cryptocurrencies, choosing instead to focus their efforts on containing the price escalation of gold and silver.

Note: The latest price attack on gold and silver is largely a paper gold/silver market operation. Outside of the massive quantities of gold being imported by India every day right now, very little physical gold is changing hands. Yesterday I saw commentary accompanied by a chart that showed “a record outflow of cash from the largest gold fund.”

Again, the withdrawal of cash from GLD does not at all trigger physical gold selling. Most of the cash that piled into GLD over the last 6 months has been leased from the Bank of England or ECB or counterparty to the massive quantities of BIS gold swaps since July. When enough cash leaves GLD, the gold lease expires or the BIS swap unwinds—not one ounce of gold is moved from the vauts]

Contrary to the promoters of Bitcoin, and to the myth to which the believers in Bitcoin ascribe, Bitcoin has significant counterparty risk. As Mr. Price asserts:

Bitcoin relies on the continued existence of a worldwide electronic Internet. In the event of WAR, the Internet will go down instantly. Goodbye, Bitcoins!

Furthermore, as Price explains, Bitcoin is imaginary money and nothing more:

Bitcoin has a monetary value, only because the – unknown – founder said that it had monetary value, and a few simple souls accepted that statement. Once a few repeated the mantra “Bitcoin is money”, its “monetary value” began to rise. Fundamentally, Bitcoin is nothing more than a satisfying game to play.

Note, I do not have any problem whatsoever with treating Bitcoin like any other speculative trading vehicle that relies on the greater fool theory for the buyer of Bitcoin to make money. But please do not buy and hold Bitcoin thinking that it is a monetary and wealth preservation asset similar to gold.

Latest comments

great article.  bitcoin will be the top performing asset class in 8 of the last 10 years  (!!!!)
Amen! Refreshing to hear vs. “Bitcoin to $100,000!”
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.