Bitcoin: It’s a Cult and has zero utility, but it’s likely to rally nevertheless – Why?

Blain’s Morning Porridge, Jan 10-12th 2024 – Bitcoin: It’s a Cult and has zero utility, but it’s likely to rally nevertheless – Why?

“Every time we tell a bitcoin truth, a crypto fairy dies in screaming agony.”

Bitcoin has zero fundamental utility. It is cult that was designed and loaded to make its’ “high priests” rich. To understand how it will trade, forget common sense – focus on what it is, who the players are and what is likely to motivate and influence the price. On that basis Buttcon may be a cynical buy – but be prepared to exit early.

Bitcoin

Oh… How hard must the Trickster Gods of Finance be laughing at the absurdities of cryptocurrency. Aint it funny that Bitcoin, the great disruptor of regulated finance, is now claiming a mantle of regulatory respectability from the SEC approving spot ETFs?

Last Tuesday afternoon an SEC Twitter/X account was hacked and a tweet saying the US securities regulator had finally approved the first Bitcoin ETFs caused an immediate 1.5% rally in the price of the cryptocurrency. The SEC waded in, denied the news and Bitcon crashed down 3.4%. On Thursday the SEC made the announcement – Buttcon ETFs are approved, and the not-real-money dumped a further 1.5%. Buy the rumour, sell the fact.

Any regular reader of the Morning Porridge will know I consider Bitcoin complete froth and nonsense. All this malarky about a limited number of coins (21 million) and making them progressively more difficult to mine (via halvings) get the believers terribly excited. Yet, these mechanisms were deliberately designed to keep pushing up the price – as long as the ‘forces’ behind Bitcoin can keep convincing the marks (ie any gormless crypto buyer) that it has real value, longevity and utility.

There is no investment case for Buttcon – except the hope it will keep going higher. Hope is not a valid investment strategy. The only thing that matters for Crypto shysters is ADOPTION – that was the plan from the start. That’s the simple bet any investor has to make: will Bitcoin achieve and sustain mass-adoption?

I pray not. The implications would be horrendous. Not least that it would create inequality and a concentration of wealth on an unsurpassed scale.

Boil it down and everything the crypto shills push is about persuading us to adopt it. The more people who are suckered into buying it, then the structure of Bitcoin means of course it will go up. It was designed deliberately that way.  The issues to consider are simple – not the very clever tech (which has much validity) – but is crypto, and Bitcoin in particular, really going to garner mass adoption and be widely used as a global currency, means of exchange and store of value?

When Bitcoin launched in January 2009, the world was a very damaged place. Speculation fuelled by ultra-low interest rates was coming to fore, driven by a hope/belief new technologies could rescue the battered post-Lehman GFC global economy via anything tech and digital – the internet-of-things (remember that) – and disruptive concepts like fin-tech and electric cars.

Someone had that judder moment insight: why not equally disruptive digital money?

Bitcoin inventor Satoshi Nakamoto (who is likely a collective of clever proto-fin-tech nerds) spotted the opportunity to play the Zeitgeist of the time, spice it with some libertarian rote about freeing money from government control, and create the ultimate get-rich-quick scheme.

If crypto overcomes the suspicion and is widely adopted, then these crypto-whales, the high priests who designed and have refined the Crypto-Cult are going to become phenomenally rich. No one owns the Bitcoin project, but it’s reckoned the Satoshi Nakamoto collective is the biggest owner. Nakamoto Inc mined the first 22,000 blocks (each of 50 bitcoins) for pennies –  worth more than $49.5 bln at today’s price. These bitcoin are held in thousands of different addresses – but very few of them have ever traded except to test and hype the product.

Behind Nakamoto there are 6 other big anonymous holders of anything between 100-50k bitcoins. The biggest known holders are the charming (barf) Winklevoss twins of Facebook fame who have 70,000 coins.

Crypto promoting “fund” Greyscale owns over 650,000 bitcoin – you can see why it is so anxious to lay off the risk by selling them as ETFs to retail investors. The Block 1 and Microstrategy funds own around 150,000 each. (The US government through various confiscations, and proving just how insecure Bitcon keys really are, has amassed over 170,000 buttcon!)

The key issue is: the largest 97 holders of Bitcoin hold nearly 3 million Bitcoin – 14.7% of the total that can ever be issued. Go figure.

Crypto shills argue Bitcoin is now a currency. It is not. The value of a currency is a factor of confidence in that currency which includes the underlying political competency of the nation with sovereignty over the currency, and its ability to keep the currency strong and stable via the economic success of the nation. What underlies the value of Buttcon? Nothing more than the expectation a greater fool will pay more for it.

Over the last 10-years no one has persuaded me Crypto has any real utility. Its only tangibility is what that next greater fool will pay for it. There is absolutely nothing legal Bitcoin can do, or provide, that isn’t already performed perfectly well by other mechanisms or assets. My offer of £100 to anyone that can propose a genuine unique, useful and legal thing Bitcoin makes better still stands.

(Don’t waste my time trying to persuade me crypto’s anonymity makes its special – it makes it a useful money laundering tool. Don’t tell me it’s easy to trade cross-border – Revolut is simpler. If it’s so much better than the Greenback, why are buttcons priced in dollars? How is digital gold worth more than real, tangible, beautiful, heavy, lustrous, strokable, wearable gold? Let’s not even discuss the vulnerabilities of Bitcon wallets, or its well-dodgy backstory.)

In reality, Bitcoin has zero utility as a store of value (too volatile and other assets work better), is not a means of exchange, and it’s based on already obsolete 2000’s tech. (Gold, in contrast, is based on supernova that exploded billions of years ago!) Do you really trust BC as a long-term store of value? It has no unique use case or valid arguments to support its adoption, is vulnerable to ongoing technological changes (like quantum computing uncovering new ways of breaking into wallets), and it will continue to consume insane amounts to power to “mine” artificially scare coins.

Think about it one moment. Except for buying arms and drugs on the dark-web, does Buttcon allow you to do anything you could not already do? It is utterly pointless – again; its only upside is what the next greater fool is prepared to pay – and that is not about carefully considered risk/return decision, but hype.

The current rise in Bitcoin is yet another wave based on the myth it is being widely adopted and has nothing but scarcity driven upside ahead. Even I can’t resist having a pop at it. (I am trading it because even though I think it’s a fake asset, the market will buy the hype and push it higher…. Before the inevitable dump.)

It’s not what I think that matters. It’s what the participants in buttcon markets are prepared to believe that counts – they set the price. Never make the mistake of thinking you can out-think a market – markets are not intelligent and don’t think. They are just voting machines.

The Crypto shills are pushing the SEC approval of ETFs as giving Buttcon the veneer and glister of regulatory approval. They are screaming this is the guinea-stamp of respectability, a naked call to draw in new investors, thus pushing prices higher. That will be reinforced by the imminent halving of Bitcoin (I’ll explain below), which will boost the scarcity illusion at a time of increased crypto demand – thus boom time is right around the corner!

I find myself standing in shocked bemusement at the absurdity of it all – but it might happen.

There will be a reckoning.

One thing the world has in plentiful supply is fools. A tulip was once worth more that the whole of Holland. A Saudi Prince paid half-a-billion for a picture that might or might not have been by Da Vinci. Someone will pay millions for a 1936 penny. Convince a peasant that your old phone contains bytes worth billions, and you are prepared to exchange for that fine cow…. You get the drift…

To understand the market in Bitcoin forget all the mumbo-jumbo technobabble bovine-excreta that accompanies what passes for crypto-commentary. Instead, regard Crypto as a cult – it’s just another form of Ponzi where the top players are enabled to pray on the most recent entrants at the foot of the ladder. Ponzi’s succeed because they convince their marks about the story, the myth, the lie. This one is about: “everyone else is doing it.” It is designed to breed FOMO (Fear of Missing Out – the strongest force in finance.) Focus on who the players are.

I perceive four layers of crypto participants;

the High Priests – Nakamoto and the other anonymous names,
the Accolytes, the funds and tub-thumpers like ARK
the Believers, who really should know better, and
the Cultists – the retail who are sucked in

We know Nakamoto and other crypto whales are out there, sitting on digital mounds of the stuff, waiting to rule the world or cash out at the highest levels by manipulating sentiment, hopes and expectations. With the exception of the Winklevosses, these High Priests are smart enough to say nothing and quietly work in the shadows to reap returns by predating and farming the lower rungs of the crypto food-chain. They know to fully cash out their founder positions at market highs could kill the market (and lose the ultimate reward), so they play the wave-game – fattening up the marks for slaughter. That means generating volatility based on the inherent miasma of myths that surround crypto, like halvings and the finite number of Bitcoins.

I suspect it’s these high priests/whales who stepped in and started buying at the buttcon market lows of $3000 in 2019, at $25,000 in June/July 2021 and again at $14,000 in Dec 22. Each wave is free money for them.  Each of these lows followed the mass market retail “cultist” driving market momentum and prices to highs which predictably crashed because the Whales had stopped buying. The Whales wait for the tumble and start buying at a suitable low, pushing the prices up as waves of claptrap like new proofs of concept, new investors, rising institutional interest, recognition and regulation, and bizarrities like halvings and the imminent approval of ETFs spark new interest.

The high priests leave it to the Acolytes to preach and shill the message of imminent higher value – folk like Greyscale, Microstrategy and Cathie Wood confidently predicting a $1mm target by each and every month end. Learned, complex articles about adoption by major hedge funds fill the pages of the Crypto-media – eventually picked up by the mainstream. It fuels FOMO.

All the crypto-guff is eagerly devoured by the Believers who seek to back up their hunch there might be value in Buttcon, but are blinded by the quasi-science, quack-maths and fiscal mummery that postures as crypto-market analysis.

It’s funny how it’s always the same value myths the Acolytes promote to drive up Bitcoin.

That large institutional investors have become major adopters of bitconn.
Anyone who claims it’s a Ponzi or Shell company is a fool, a know-nothing not clever enough to understand it – much like the silly folk who can’t see the emperor’s marvellous invisible suit in the fairy-tale.
Regulators are set to approve the market and have given their blessing.
That holding bitcoin is simple and safe – usually right before yet another exchange collapses on illegality.
Some tech event (like a branch or halving) is about to create massive bitcoin upside.
Stories of overnight and immediate riches, and how Celebrities are giving their support, fuel FOMO.

Every boom in Bitcoin happens the same way:

The High Priests hold and buy at the bottom.

The Acolytes preach the myths.

The believers nod their acceptance and join the rally.

The Cultists, the want-to-get-rich-quick meme-stock trading retail who read in the National Enquirer they will make $300k a week buying it, are persuaded the market can only keep going higher. The Cultists don’t need to see anything more than headlines that Buttcon is Digital Gold, and the price is rising, and they pile in willy-nilly. As they buy and the market ratchets higher, the smart high-priest holders are the ones selling, while the Acolytes fan it higher.

By the time the Cultists are driving crypto-prices, common sense is out the window. Greed and FOMO drive prices higher. Because the market participants voting on the price of Bitcoin are desperate to get rich, easily led, and willing to believe in fairy farts, then it’s likely the next few months will see Buttcon upside.

The timing today is serendipitous – following the SEC’s reluctant ETF approval, we have a Bitcon halving – meaning the number of new coins that can be mined will half. A bitcoin halving occurs every 210,000 blocks (I could explain what that means… but, yawn…) right up till we reach the finite number of 21 million buttcons – which is expected to occur round about 2140…

The next halving is expected in April ’24. Previous halvings have seen significant gains in the subsequent months, but major collapses in price within a year or so – exactly as my cult model predicts. The High Priest Whales will use SEC ETF approval and the halving, plus the noise generated by Acolytes and Believers to ramp the market and boost the adoption myth. They will exit into euphoric markets as the Cultists join the get-rich-quick free-for-all.

So…. Despite thinking Buttcon is absolute tosh – which it is – there is probably trading upside off the gullibility of the market. It will collapse. The trick will be knowing when to take profits.

As a final thought, let me ask you if you would ever use your Bitcoin to buy anything? If you believe in it, the answer is clearly no. You would hold your Buttcon in the sure and certain knowledge there can be no more than 21 million and more and more people want to use it. Ask why. Then ask… what use is it? It’s apparently valuable but I can’t possibly sell it?

Walk away now.. while you still can. There is a little child in the audience about to ask very loudly: “Why is the emperor stark naked?”

Bill Blain

Market Strategist – Author of the Morning Porridge