RIP Bitcoin

Dearly beloved…

We are gathered here today to mourn the passing of our cherished friend, Bitcoin.  A friend who came to this world full of promise and hope, seeking to protect us from inflation, fraud, and worthless printing press money.

Alas, Bitcoin is dead.

Bitcoin came into our world as a precocious but brilliant child, brightened our lives for a moment, and tragically left us too soon.  Now it’s time to put a wreath on the coffin and move on with our lives.

Not because cryptocurrency wasn’t a brilliant idea.  It was and still is… 

Not because cryptocurrency couldn’t have succeeded. It should have... 

No, it’s time to move on because crypto will miss its Overton window – its moment of opportunity when it could have broken through the forces of inertia, navigated through the hellscape of government regulation, and overcome sabotage from the legacy money system – to become the worldwide electronic cash that Satoshi Nakamoto envisioned – and we all desperately hoped it could become.

Now that we have the breathless clickbait lede out of the way, allow me to get serious and explain my hypothesis...  

I don’t believe Bitcoin is actually dead, but I believe it and other cryptocurrencies are facing a fate far worse than death: irrelevance.  Before sharing my reasoning for making this (what many will label as insane) prognostication – please note these three disclaimers:

• I am NOT an investment advisor, securities broker, or financial planner. I was expelled from high school and hold no college degrees.

On the other hand, I have earned more money in my life than 99 percent of the people on this planet.  Everything I share is my self-taught, real-world experience on the principles of prosperity and how you apply them in your day-to-day life.  As part of that work, I sometimes evaluate things like cryptocurrencies, NFTs, and the blockchain, in terms of how they operate from a prosperity standpoint.  This essay is presented under that premise, and that premise only.

• I have never been an anti-crypto evangelist.

Before you write off everything I say, you should know that I wasn’t one of the cynics who dismissed cryptocurrencies as an impossible to achieve pipe dream, or an unscrupulous sketchy scam. Quite the opposite.  I’ve been touting and investing in crypto since my Risky Is the New Safe book in 2012.

• In the sake of full transparency, you should also know that on November 19, 2022, I sold all remaining cryptocurrencies in my portfolio.

At that time, I was no longer confident cryptocurrencies would be viable in the foreseeable future and for the sake of transparency, announced that and promised to create a longer post explaining the rationale behind my decision.  This is that post.

So why have I jettisoned all my crypto investments? 

(Yes, if you’re wondering, this applies to all cryptocurrencies, including Bitcoin, which I consider to be the gold standard of cryptos.)

You should know, my reasoning is not the conventional anti-crypto arguments: Bitcoin or other cryptocurrencies haven’t achieved status as a hedge against inflation, aren’t being used as actual currencies, not become a true store of value, etc.  Even though those potential benefits haven’t transpired yet, they didn’t factor in my decision-making process.  You should never judge a new development by how janky, inconvenient, or bulky it is in version one.  Remember that lovely Motorola DynaTac 8000X mobile phone that Gordon Gekko carried around in Wall Street?  Compare that brick (which cost $3,995) to the elegant supercomputer you’re probably reading this post on right now.  Compare that authentic calling from inside a garbage can sound of the early Skype calls to the brilliantly functional Zoom rooms you host today.  With developing technologies, you have to project out how they will work at scale when the bugs are ironed out. Like most early crypto investors, I was willing to bet that those issues could be overcome.

Let’s go back to Satoshi’s actual vision for Bitcoin:

• A pure peer-to-peer version of electronic cash that would allow payments to be sent without involving a financial institution, reducing the risk for fraud.
• The ability to conduct decentralized transactions without government spying, taxation, and seizures.
• A system for non-reversable electronic transactions that doesn’t rely on trust.

But is that really how most people view and interact with Bitcoin?  Obviously not, or we would never have gotten all these other pseudo cryptocurrencies, pump & dump schemes, and bored apes.  If we were actually developing Bitcoin as envisioned, Dogecoin, Three Arrows Capital, Alameda, FTX, and Sam Bankman-Fried would have never existed.  (Okay SBF would have existed, but you would have never heard of him.)

We got seduced by the dark side of the Force…

Cryptocurrencies have reproduced like rabbits, offering dozens of coins and tokens claiming to be currencies.  Exactly zero of them have become accepted currencies.  Real people are not using them to buy real things.  (Note: Horny Crypto Bro drunks paying 100k with Bitcoin for bottle service at Club E11EVEN in Miami does not meet this criterion.)  For all practical purposes, we’ve just opened a new marketplace bazaar for gambling and trading.  But instead of offering Persian rugs, these markets buy, sell, and trade digital currencies.  If you don’t like the bazaar analogy, think of the current crypto space as a currency-only version of the stock market, or even Las Vegas casinos.

There’s lots of speculation going on, fortunes are being made, and fortunes are being lost.  But no one is actually using cryptocurrencies as, you know, cryptocurrencies.  Furthermore, most bazaars, stock markets, and casinos have some degree of oversight, regulation, and a way to adjudicate disputes.  The crypto space has none of that. 

If your concept of crypto is like the above, seeing it not as a cryptocurrency but an instrument you can be a ninja day trader with, riding the cycles, looking for new levels to buy low, sell high – stop reading here.  You’ve found your adrenaline rush and far be it from me to tell you how to have fun. Mazel tov, plunge your lungs out.

 The two principal reasons I’ve bailed on crypto are because I believe:

• The crypto infrastructure and eco-system are irredeemably corrupt.
• We won’t reach the Overton window of acceptance for cryptocurrencies because of the buzzkill of widespread fraud, losses, and negative publicity.

The last few months are exposing how systemically corrupted the entire crypto support structure really is.  There are security holes in the system that you could sail an aircraft carrier through.  Cryptos have eliminated the conventional financial institutions that Satoshi spoke about, but for the most part they’ve been replaced with options that are far worse: exchanges, farming, and storage operations.  (This is akin to firing Bill Cosby as your babysitter but replacing him with Jeffrey Dahmer.)

Many of these operations are run by well-meaning but incompetent people, and others are controlled by outright criminals.  The amount of fraud taking place is astounding.  Yes, you can keep your crypto in cold storage, and hopefully you do.  But even if blockchains were 100 percent secure (which they’re not), in order for cryptocurrency to be viable on a mass market scale, you need a safe marketplace.  This means platforms where it can be bought, traded, sold, and accrue interest.  For now, that means these sketchy operations.

And right now, those entities represent a cesspool of bad actors and fraud, devoid of any regulation, and without any effective means to redress wrongdoing.  The recent developments taking place at Three Arrows Capital, Alameda, FTX, Voyager, Celsius, BlockFi, and Gemini have demonstrated undeniably that crypto trading is still in the wild, wild, west stage of development.  (Before the days even of town marshals.) In reality, even exchanges thought to be reputable by the smartest names in the space have wretched cybersecurity and no credible oversight.  They’re often funded with worthless shit coins based on fantasy blockchains, have dangerous levels of illiquidity, are frequently insolvent, and use client’s assets to borrow against or even outright steal them.  Of the ones left standing, the largest, most credible one is Binance, a decentralized company with no actual headquarters.  All cryptocurrencies are still embryonic enough to be vulnerable to pump and dump price manipulation from insider whales or even sketchy social media influencers.  Ex: FEG, Dogecoin, Luna and literally hundreds of others.

Of course, you can still transfer crypto direct to someone in a one-on-one exchange. This works for bartering between evangelical Bitcoin maximalists, but it’s not enough traction to create credible mass adoption.  Every time you see someone breathlessly tweeting their excitement for discovering a dog groomer who accepts Bitcoin, it shows how insignificant the adoption rate really is.

Even the legitimate cryptos like Bitcoin or ETH have to navigate through the existing network of sleaze, grift, and criminality.  It’s like owning a Lamborghini, but the only route from home to work and back every day is through a crime-ridden neighborhood controlled by narco-traffickers.  At some point, you ditch the Lambo and buy a Toyota.   Toss in the blatantly corrupt MLM crypto scams like OneCoin, OmegaPro, Xifra/Decentra, and Evorich – and you have millions more gullible people victimized.

This entire ecosystem is fraudulent AF and I believe it is likely to collapse at any moment, in a domino progression of bankruptcies, hacks, and criminality.

But this isn’t the biggest challenge.  It’s timing…

To understand this issue, we must begin with the question of why is it better to be a pirate than join the Navy?  In the case of new breakthrough developments in technology, the Navy represents the existing incumbents in the space.  They’re very rich, very powerful, and will do anything and everything they can to kill off any innovation that can threaten their monopolistic marketplaces.  The dream of every start up is to begin as the swashbuckling pirate, defeat the imperial power, and then become the new Navy.  In business school they call this disruption.

To create a successful disruption in a space, it comes down to two factors:

• Achieving broad spread adoption by the masses.
• Getting to that adoption before the government and establishment incumbents can kill you.

You have to start under the radar and capitalize on the laziness, inertia, and cockiness of the incumbents.  The way Uber did this to the taxi industry, Airbnb did to hotels, and Amazon did to bookstores (and now essentially retailers).  I would argue that there is no disruption challenge more David vs Goliath than the one cryptocurrency is attempting now.  The crypto “industry” is attempting an end run around the entire worldwide financial system.  And because that financial system controls virtually all governments, crypto has to take on those governments as well.

This takes us back to the Overton window…

When Travis and his band of pirates started Uber, they were virtually illegal in every market they launched.  But they moved fast building their customer base, hooking them on the drug of a car service that was monumentally better than the shady taxi monopolies. Municipalities such as San Francisco would then send in inspectors, impound cars, and even arrest drivers.  Uber would respond by sending alerts to all their delighted customers beseeching them to contact their mayor and city council demanding that Uber be left alone.  They had enough critical mass of evangelical thrilled customers to overpower the Navy.  Now in many places, Uber is the Navy, taxies are an afterthought, and disruption is complete. It was a similar scenario with Airbnb.  Most localities tried to regulate them as hotels requiring licensing, inspection, and other government protection or shakedowns, depending on your perspective.  The Rebel Alliance of zealous, enchanted customers fought hard to get the company legitimatized.

This is exactly the game plan that needs to happen for crypto to make the jump from pirate to Navy.  Until recently, the crypto community was working quietly behind the scenes, trying to work with lawmakers to enact a minimal amount of legislation to prevent wholesale fraud, but not enough to be so onerous to negate the benefits of being outside the traditional finance system.

But Sam Bankman-Fried and pirates like him got too greedy, too fast... 

(Editor note: Bankman-Fried was arrested just before this post went live.)  Now the entire crypto eco-system is in meltdown mode, creating two problems. The first is that millions of people have been scammed and more are becoming victimized daily, causing the shellshocked masses to flee the space.  Wavering trust turned to skepticism, and now that skepticism has transformed into cynicism.  We’re not quite at the cynical bottom yet, but I believe we will be soon. Very soon. The investors left are walking on eggshells, waiting for the next rug-pull, bankruptcy, fake ICO, pump and dump, or MLM crypto.  Most people with a room temperature IQ or higher are coming to the conclusion the crypto ecosystem is a dumpster fire of exploding supernova proportions.

The reason that timing and public perception are so important here is because all forms of money, physical or digital, are simply memes (mind viruses). 

We like to believe that we are protected with safeguards in place to protect our financial system.  But the whole banking and finance system is simply performance art of kabuki theater based upon herd thinking trust.  (Can we stop all the bullshit and just admit that no one is a bigger Ponzi scheme than supposedly democratic governments?) We all mutually agree on the concept of currencies because it’s a lot more convenient than trading oranges for massages, fish for computer repair, or radishes for the new Beyonce album. But there is no intrinsic value in any currency, whether it’s doubloons, wampum, US dollar, or crypto.

Currencies hold their value only when there is broad-based public acceptance – a shared hypnosis that all willingly agree to. 

The bolivar from Venezuela was perceived as valuable until it wasn’t.  Everyone in that country knows the government will devalue it day after day, so no one believes in it as a viable currency any longer.  This process has been happening for all currencies since the very first one. Most fiat currencies have no competition which provides forced acceptance.  The new cryptocurrencies don’t enjoy this monopoly, so they have a much higher bar to reach mass adoption.  And what has happened in the space until now hasn’t helped the situation…

The Mt. Gox hack in 2014 stole seven percent of all outstanding Bitcoin at the time.  The UST/Luna debacle evaporated about $40 billion more. Toss in another $40 billion gone with FTX and Alameda, $18 billion from the Three Arrows Capital meltdown, $5 billion Genesis bankruptcy, four and a half billion each from the Celcius and BlockFi blowups, $3 billion plus from Voyager, and the Ronin, Wormhole, Nomad, Beanstalk and Wintermute hacks come in at over a billion dollars more.  Think of all these (and plenty more) in terms of crypto’s total market cap. Has there ever been a theft or similar fiat currency fraud that has consequences even remotely as severe?

I’m positing that we missed the timing window on crypto because the meltdowns are becoming too public and too frequent before the masses got hooked on the future ultimate benefits that could be realized.

The second problem is that this crypto ecosystem meltdown has provided the legacy banking system with the perfect opportunity to swoop in and use the most powerful weapon in their arsenal to destroy it: their puppet politicians and governments. Not to mention, cryptocurrencies threaten a lot more entrenched entities than the banking system and governments. It’s a direct competitor to precious metals, crowdfunding, wire transfers, and all the payment apps.  This means crypto is going to have to face the Navy, Air Force, Army, Space Force and Marines.  (And as Balaji Srinivasan points out, the blockchains that drive crypto could be viewed as competition against the cloud, search engines, operating systems, or even social media.  So then crypto wouldn’t just be fighting the Navy, Air Force, Army, Space Force and Marines, but also Emperor Palpatine and the Galactic Republic.)

There’s been much made about the large political donations made by FTX and its executives. This is pretty much the standard game plan of every pirate that wants to become the Navy. They give money to any politician in any party who could help them kill off any upstart that threatens their honey pot.  Where crypto went off the track here is the political bribes were paid, but FTX and some of these other Ponzi schemes collapsed before they had time to build a moat around the company with regulatory protection against the next round of pirates coming up through the ranks. Cryptocurrencies needed to achieve a large degree of mass adoption before politicians could figure out how they could co-opt it. Here in the U.S., Senator Elizabeth Warren’s office released a statement saying, “As Senator Warren has already said publicly, she’s working on crypto legislation and believes that financial regulators, including the SEC, have broad existing authority to crack down on crypto fraud and illegal money laundering.”  On November 6, the EU announced that crypto transactions of more than 1k euros will be “under surveillance.”  This is why we can’t have nice things. Do I really need to tell you where this goes next???

“How do we know that these crypto transactions aren’t being used for child pornography, sex trafficking, and drug dealer money laundering?  Why do you need privacy if you have nothing to hide?  Isn’t this just a scheme for the rich to avoid taxes?”

And all the other usual tropes the government uses when they want to spy on you and reach into your bank account.

Crypto is an entirely different dynamic than taxis, hotels, and bookstores.  Taxis, hotels, and bookstores don’t create money to replace governments fiat currencies.  Cryptos do.  What the Bitcoin maximalists view as progress (pandering words from a few central bankers, governments developing crypto regulations, El Salvador accepting BTC as official currency, etc.) are actually the opposite of what needed to take place for Bitcoin to become viable.

Cryptos seeking validation from governments is like a bunch of mice working together to build their own cat.

The only reason governments show any pretense of supporting or accepting cryptocurrencies is so they can manipulate, control, and tax them.  Or learn enough about how they work so they can create their own versions to usurp them.  If we ever are able to reach a state where a cryptocurrency gains worldwide acceptance, I believe it will be outside the reach of government, independent of all fiat currencies. In 2018 I predicted that if one cryptocurrency emerged to become THE global accepted currency, it would need to be a rogue currency – outside the constraints of any government.  Nothing since then has changed my view, in fact, it has only gotten stronger.

If governments have any participation in a cryptocurrency, they will eventually resort to manipulation, devaluation, monitoring your purchases, taxing your transactions, and seizing your assets.  That’s just what governments do. Governments can never create prosperity.  At best they can facilitate it.  Usually, they destroy it.

And that, boys and girls and non-binaries…is why I’m out of crypto.  Thanks for attending my TED talk. 

I’m proud to have earned a reputation as a thought leader, not a thought repeater.  To develop that kind of status requires having the balls to take risks, make predictions, and be willing to be proven wrong in public.  No one calls everything right. If they do, they’re just regurgitating the conventional beliefs of herd thinking.  You can expect this essay to be resoundingly criticized, trolled, and ridiculed.  (You may want to bookmark this page, so you can come back to post how much money you earned and troll me every time the price of your favorite crypto jumps.)  But my overall body of work over a few decades has shown a remarkable degree of prescience. Because of the current bloodbath taking place in crypto (which I predicted in June 2021 btw) – and the likelihood the bloodbath has only just begun – I’m putting these thoughts in the public square for discussion.

Here are a few important, final clarifications…

I’m not telling you not to invest in crypto or to sell any crypto assets you have. Like I told you, I don’t do investment advice, this essay is simply explaining the reasoning for my personal decision.  I’m not a typical investor.  If you’re looking to make the most profit from everything you invest in, I’m a terrible role model to follow. I’m at a place in my life where I want my investments to be congruent with the principles that are important to me. Those principles include investing in companies where the executive team has integrity, character, and talent – and they have a mission that involves solving problems and adding value.  Right now, cryptocurrencies are creating problems and decreasing value to society.

I’m not suggesting cryptocurrencies are actually going to literally die.  They won’t. They’ll still be around and the people with laser eyes in their avatars will still tout them, attend conventions around them, and promote them with breathless sensationalism.  (When I announced that I was getting out of crypto, someone in the comments wrote that crypto will be around long after I’m gone. As I pointed out to him, I’m very old, so this is a pretty low bar to reach.  It’s also true that Ponzi schemes, cockroaches, and Hot Tub Time Machine will also survive me.  That doesn’t mean they’re good.)

I’m not saying traders won’t continue to make money on cryptos.  They will.  You can be sure every time someone’s shit coin hits a new high-water mark, they’ll be back here to crow in the comments about it.  People will also continue to make large amounts of money robbing banks, participating in human trafficking, and becoming narco-traffickers.  That doesn’t mean you should do those things.

What I am saying is that I don’t believe Bitcoin or any other current cryptocurrency will reach the status of THE global currency that Satoshi envisioned.  They won’t offer freedom from government regulation, taxation, and manipulation we were hoping for.  And they won’t offer the security and privacy we were hoping for either.  They’ll be co-opted and corrupted by governments and the legacy banking system.

Right now, buying cryptos is like playing poker in a game with hustlers.  If you understand the game, are fairly cognizant of math, and you know the best ways to spot cheaters, you have a better than average chance to make some dosh.  But ultimately, each potential cryptocurrency will navigate to one of three potential paths:

1. It becomes worthless.
2. It pivots to another use.
3. It becomes accepted and used as an actual currency.

If option three occurs (Ex: when all the bitcoins are mined) and people begin using it as a currency, it will become simply another medium for exchange, a commodity serving the same function as the dollar, euro, or yen.  The value can’t go up forever.  Too many people in the crypto cults can’t seem to grasp this reality.

Cryptos may have missed their window and never prosper, or they may simply need a 10- or 15-year “timeout” to rise again with a new generation under different perceptions.  Or more likely another flavor: a black-market version with better safeguards and infrastructure against potential theft and insolvency.  Because Bitcoin or even cryptocurrency in general aren’t the real draw here.  The sexiest part of the whole scenario is the blockchain concept. (Personally, I’m much more excited about the future of smart contract programs run on the Ethereum blockchain. Unfortunately, the potential of these is being drowned out right now by all the people and companies whoring out their names by issuing worthless NFTs.)  There will be a plethora of ways blockchains can be used without all the luggage it currently has with crypto.

If and when a crypto begins working as a viable digital currency, I’ll jump at the opportunity to use it.  And I may come back into the game as an investor at some point. (If so, I’ll be the first to tell you.) But right now, the entire space feels too skeezy and is not the kind of game I want to play.  When I’m dead and gone, hopefully my tombstone will read:

Here Lies the Body of Randy Gage

He never sold anyone a shit coin or sketchy NFT

It’s easier to give birth than resurrect the dead.  Instead of trying to revive a concept that’s been poisoned in the minds of millions, I’d rather back something fresh, innovative, and pristine.  It’s much more rewarding to invest in people: Founders who have a dream, are willing to work their face off building that dream, and they’ve got a concept that truly solves a problem, adds value, or envisions a superior possibility.  If that’s you, holler!

Peace,

- RG

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