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Understanding the Cryptocurrency Boom: A Ground-Level Assessment

June 30, 2017
Charles Hugh Smith

Peak Prosperity

I recently came across a December 1996 San Jose Mercury News article on tech pioneers' attempts to carry the pre-browser Internet's bulletin board community vibe over to the new-fangled World Wide Web.

In effect, the article is talking about social media a decade before MySpace and Facebook and 15 years before the maturation of social media.

(Apple was $25 per share in December 1996. Adjusted for splits, that's about the cost of a cup of coffee.)

So what's the point of digging up this ancient tech history?

  1. Technology changes in ways that are difficult to predict, even to visionaries who understand present-day technologies.
  2. The sources of great future fortunes are only visible in a rearview mirror.

Many of the tech and biotech companies listed in the financial pages of December 1996 no longer exist. Their industries changed, and they vanished or were bought up, often for pennies on the dollar of their heyday valuations.

Which brings us to cryptocurrencies, which entered the world with bitcoin in early 2009.

Now there are hundreds of cryptocurrencies, and a speculative boom has pushed bitcoin from around $600 a year ago to $2600 and Ethereum, another leading cryptocurrency, from around $10 last year to $370.

Where are cryptocurrencies in the evolution from new technology to speculative boom to maturation? Judging by valuation leaps from $10 to $370, the technology is clearly in the speculative boom phase.

If recent tech history is any guide, speculative boom phases are often poor guides to future valuations and the maturation trajectory of a new sector.

Anyone remember “push" technologies circa 1997? This was the hottest thing going, and valuations of early companies went ballistic. Then the fad passed and some new innovation became The Next Big Thing.

All of which is to say: nobody can predict the future course of cryptocurrencies, other than to say that speculative booms eventually end and technologies mature into forms that solve real business problems in uniquely cheap and robust ways no other technology can match.

So while we can't predict the future forms of cryptocurrencies that will dominate the mature marketplace, we can predict that markets will sort the wheat from the chaff by a winnowing the entries down to those that solve real business problems (i.e. address scarcities) in ways that are cheap and robust and that cannot be solved by other technologies.

The 'Anything Goes' Speculative Boom

Technologies with potentially mass applications often spark speculative booms. The advent of radio generated a speculative boom just as heady as any recent tech frenzy.

Many people decry the current speculative frenzy in cryptocurrencies, and others warn the whole thing is a Ponzi scheme, a fad, and a bubble in which the gullible sheep are being led to slaughter.

Meanwhile, tribalism is running hot in the cryptocurrencies space, with promoters and detractors of the various cryptocurrencies doing battle in online forums: bitcoin is doomed by FUD (fear, uncertainty and doubt) about its warring camps, or it's the gold standard; Ethereum is either fundamentally flawed or the platform destined to dominate, and so on.

The technological issues are thorny and obtuse to non-programmers, and the eventual utility of the many cryptocurrencies is still an open question/in development.

It's difficult for non-experts to sort out all these claims. What's steak and what's sizzle? We can't be sure a new entrant is actually a blockchain or if its promoters are using blockchain as the selling buzzword.

Even more confusing are the debates over decentralization. One of the key advances of the bitcoin blockchain technology is its decentralized mode of operation: the blockchain is distributed on servers all over the planet, and those paying for the electricity to run those servers are paid for this service with bitcoin that is “mined" by the process of maintaining the blockchain. No central committee organizes this process.

Critics have noted that the mining of bitcoin is now dominated by large companies in China, who act as an informal “central committee" in that they can block any changes to the protocols governing the blockchain.

Others claim that competing cryptocurrencies such as Ethereum are centrally managed, despite defenders' claims to the contrary.

Meanwhile, fortunes are being made as speculators jump from one cryptocurrency to the next as ICOs (initial coin offerings) proliferate. Since the new coins must typically be purchased with existing cryptocurrencies, this demand has been one driver of soaring prices for Ethereum.

As if all this wasn't confusing enough, the many differences between various cryptocurrencies are difficult to understand and assess.

While bitcoin was designed to be a currency, and nothing but a currency, other cryptocurrencies such as Ethereum are not just currencies, they are platforms for other uses of blockchain technologies, for example, the much-touted smart contracts. This potential for applications beyond currencies is the reason why the big corporations have formed the Enterprise Ethereum Alliance (https://entethalliance.org/).

Despite the impressive credentials of the Alliance, real-world applications that are available to ordinary consumers and small enterprises using these blockchain technologies are still in development: there's lots of sizzle but no steak yet.

Who Will The Winner(s) Be?

How can non-experts sort out what sizzle will fizzle and what sizzle will become dominant? The short answer is: we can't. An experienced programmer who has actually worked on the bitcoin blockchain, Ethereum and Dash (to name three leading cryptocurrencies) would be well-placed to explain the trade-offs in each (and yes, there are always trade-offs), but precious few such qualified folks are available for unbiased commentary as tribalism has snared many developers into biases that are not always advertised upfront.

So what's a non-expert to make of this swirl of speculation, skepticism, tribalism, confusing technological claims and counterclaims and the unavoidable uncertainties of the exhilarating but dangerously speculative boom phase?

There is no way to predict the course of specific cryptocurrencies, or the potential emergence of a new cryptocurrency that leaves all the existing versions in the dust, or governments' future actions to endorse or criminalize cryptocurrencies. But what we can do -- now, in the present -- is analyze present-day cryptocurrencies through the filters of scarcity and utility.

In Part 2: The Value Drivers Of Cryptocurrency, we analyze the necessary success requirements a cryptocurrency will need to excel on in order to become adopted at a mass, mainstream level. Once this happens (which increasingly looks like a matter of "when" not "if"), the resultant price increase of the winning coin(s) will highly likely be geometric and meteoric.

Sadly, the most probable catalyst for this will be a collapse of the current global fiat currency regime -- something that increasingly looks more and more inevitable. This will destroy a staggering amount of the (paper) wealth currently held by today's households. Which makes developing a fully-informed understanding of the cryptocurrency landscape now -- today -- an extremely important requirement for any prudent investor.

Click here to read the report(free executive summary, enrollment required for full access)

Editor's Note: The above is a guest post by Charles Hugh Smith with PeakProsperity.com.

The Deep State's NEW plan to backstab Trump

Brandon Bell / Staff | Getty Images

We cannot make the same mistake we made in 2016 — celebrating victory while the deep state plots its next move.

In 2016, Donald Trump shocked the world by defeating Hillary Clinton. Conservatives cheered, believing we’d taken back the reins of our country. But we missed the bigger battle. We failed to recognize the extent of the damage caused by eight years of Barack Obama and decades of progressive entrenchment. The real war isn’t won at the ballot box. It’s being waged against an insidious force embedded deep within our institutions: the administrative state, or the “deep state.”

This isn’t a new problem. America’s founders foresaw it, though they didn’t have a term for “deep state” back in the 1700s. James Madison, in Federalist 48, warned us that combining legislative, executive, and judicial powers in the same hands is “the very definition of tyranny.” Yet today, that’s exactly where we stand. Unelected bureaucrats in agencies like the Environmental Protection Agency, the Department of Energy, and the Department of Justice hold more power than the officials we vote for. They control the levers of government with impunity, dictating policies and stifling change.

This is the fight for the soul of our nation. The founders’ vision of a constitutional republic is under siege.

We’ve felt the consequences of this growing tyranny firsthand. During COVID-19, so-called experts ran our lives, crushing civil liberties under the guise of public safety. Our intelligence agencies and justice system turned into weapons of political warfare, targeting a sitting president and his supporters. Meanwhile, actual criminals were given a pass, turning American cities into lawless war zones.

Thomas Jefferson wrote in 1816 that “the functionaries of every government have propensities to command at will the liberty and property of their constituents.” Today, we see Jefferson’s prophecy fulfilled. The deep state exercises unchecked power over our freedoms, and information itself is controlled by the fourth branch of government: the legacy media.

Even when we win elections, the deep state doesn’t concede defeat. It switches to survival mode. Trump’s first term proved this. Despite a historic mandate to dismantle the bureaucracy, the deep state fought back with everything it had: leaks, investigations, court rulings, and obstruction at every turn. And now, with the possibility of Trump returning to office, the deep state is preparing to do it again.

Progressives are laying out their attack plan — and they’re not even hiding it.

U.S. Rep. Wiley Nickel (D-N.C.) recently boasted about forming a “shadow cabinet” to govern alongside the deep state, regardless of who’s in the White House. Nickel called it “democracy’s insurance policy.” Let’s be clear: This isn’t insurance. It’s sabotage.

They’ll employ a “top down, bottom up, inside out” strategy to overwhelm and collapse any effort to reform the system. From the top, federal judges and shadow officials will block Trump’s every move. Governors in blue states like California and New York are gearing up to resist federal authority. During Trump’s first term, California filed over 100 lawsuits against his administration. Expect more of the same starting January 20.

From the bottom, progressive groups like the American Civil Liberties Union will flood the streets with protesters, much as they did to oppose Trump’s first-term immigration reforms. They’ve refined their tactics since 2016 and are prepared to unleash a wave of civil unrest. These aren’t spontaneous movements; they’re coordinated assaults designed to destabilize the administration.

Finally, from the inside, the deep state will continue its mission of self-preservation. Agencies will drag their feet, leak sensitive information, and undermine policies from within. Their goal is to make everything a chaotic mess, so the heart of their power — the bureaucratic core — remains untouched and grows stronger.

We cannot make the same mistake we made in 2016 — celebrating victory while the deep state plots its next move. Progressives never see themselves as losing. When they’re out of power, they simply shift tactics, pumping more blood into their bureaucratic heart. We may win elections, but the war against the deep state will only intensify. As George Washington warned in his Farewell Address, “Government is not reason, it is not eloquence — it is force; and force, like fire, is a dangerous servant and a fearful master.”

This is the fight for the soul of our nation. The founders’ vision of a constitutional republic is under siege. The deep state has shown us its plan: to govern from the shadows, circumventing the will of the people. But now that the shadows have been exposed, we have a choice. Will we accept this silent tyranny, or will we demand accountability and reclaim our nation’s heart?

The battle is just beginning. We can’t afford to lose.

Editor's Note: This article was originally published on TheBlaze.com.

Drone mystery exposes GLARING government incompetence

Gary Hershorn / Contributor | Getty Images

The drone issue is getting way out of hand.

Earlier this month, Glenn first reported on the mysterious drones stalking the night sky over New Jersey, but the situation is increasingly concerning as the sightings have escalated. Not only have drones been seen across the Northeast Coast, including over New York City, Maryland, and Pennsylvania, but recently, they have been spotted over the night skies of San Diego and other parts of Southern California.

It doesn't take an expert to identify the potential dangers and risks that dozens of undetectable, unidentified six-foot or larger drones pose to national security. Yet, our government's response has been one of unimaginable incompetence, leaving us to speculate on the origin and intention of these drones and wonder in astonishment at the government's ineptitude. Here are three examples of the government's lackluster response to the mystery drones:

Iranian Mothership and Missing Nuclear Warheads

- / Stringer | Getty Images

After several weeks of hubbub, New Jersey Representative, Jeff Van Drew gave an interview on Fox News where he claimed that the drones originated from an Iranian "mothership" off the East Coast of the United States. This theory has since been disproven by satellite images, which show that all Iranian drone carriers are far from U.S. shores. Another theory suggests that drones may be equipped with sensors capable of detecting nuclear material and that they are looking for a nuclear warhead that recently went missing! With these apocalyptic theories gaining traction in the absence of any real answer from our government, one can't help but question the motive behind the silence.

Pentagon's Limp Wristed Response

Alex Wong / Staff | Getty Images

In a recent press conference, national security spokesman John Kirby responded to reporters demanding answers about the government's lack of transparency, which has caused increasing public anxiety. He insisted that the drones did not pose a threat and were not assets of a foreign power, such as from Iran or China--even though he is still uncertain about their identity and origin. He also claimed that many of the sightings were simply misidentifications of normal aircraft.

This lackluster answer has only further inflamed national anxieties and raised even more questions. If the government is unsure of the identity of the drones, how do they know if they are a threat or if they aren't foreign assets? If they aren't foreign, does that mean they are U.S. assets? If so, why not just say so?

The Pentagon has also stated that they are leaving it up to local law enforcement to spearhead the investigation after concluding that these drones pose no threat to any military installation. This has left many feeling like the federal government has turned a blind eye to a serious issue that many Americans are very concerned about.

Where's Pete Buttigieg?

Chip Somodevilla / Staff | Getty Images

We are in the closing weeks of the Biden administration, and with the finish line in sight, Secretary of Transportation Pete Buttigieg probably figured nothing else could go wrong on his watch—but boy was he wrong. As Secretary of Transportation, Buttigieg is in charge of the FAA, the agency responsible for managing all air traffic across the nation. One would think that mysterious, 6-foot-long, seemingly intractable drones are invisible on radar and flying above major cities would pose a serious threat to the myriad of legal aircraft that traverse our skies. Yet, Buttigieg has been silent on the issue, adding another failure to his resume which includes: malfunctioning airplanes, the train derailment in Ohio, and the Baltimore Key Bridge collapse, just to name a few.

Glenn: How Alvin Bragg turned hero Daniel Penny into a villain

Michael M. Santiago / Staff | Getty Images

We cannot allow corrupt institutions to punish those who act to protect life and liberty.

America no longer has a single, shared understanding of justice. Two Americas now exist, each applying justice differently depending on who you are and where you live. One America, ruled by common sense and individual courage, praises heroes who stand up to protect others. The other, driven by political agendas and corrupted institutions, punishes those same heroes for daring to act.

This stark division couldn’t be clearer than in the case of Daniel Penny, the Marine whose trial in New York City this week drew strong reactions from both sides across the divided line of justice.

If we let this slide, we accept a world in which heroes are treated as criminals and the law is a weapon for ideological warfare.

Penny was on a subway train last year when Jordan Neely — a man suffering from severe mental illness and reportedly high on drugs — began threatening passengers, saying, “I’m going to kill you all.” The fear on that subway car was palpable, but nobody moved. Nobody, that is, until Penny did what needed to be done. He took action to protect innocent lives.

In the America many of us used to believe in, Penny’s response would be heralded as heroic. His actions mirrored the courage of Todd Beamer on Flight 93, who, on September 11, 2001, rallied others with the words, “Let’s roll,” to prevent further tragedy. But in New York, courage doesn’t seem to count anymore. There, the system turns heroes into villains.

Penny subdued Neely using a chokehold, intending only to restrain him, not kill him. Tragically, Neely died. Penny, filled with remorse, told the police he never meant to hurt anyone. Yet, instead of being recognized for protecting others from a clear and present threat, Penny stood trial for criminally negligent homicide.

In Alvin Bragg’s New York, justice bends to ideology. The Manhattan district attorney has made a career of weaponizing the law, selectively prosecuting those who don’t fit his narrative. He’s the same prosecutor who twisted legal precedent to go after Donald Trump on business charges no one had ever faced before. Then, he turned his sights on Daniel Penny.

A jury may have acquitted Penny, but what happened in New York City this week isn’t justice. When the rule of law changes depending on the defendant’s identity or the prosecutor's political motives, we’re no longer living in a free country. We’re living in a state where justice is a game, and ordinary Americans are the pawns.

The system failed Jordan Neely

It’s worth asking: Where were activists like Alvin Bragg when Neely was suffering on the streets? Jordan Neely was a tragic figure — a man with a long history of mental illness and over 40 arrests, including violent assaults. The system failed him long before he stepped onto that subway train. Yet rather than confront that uncomfortable truth, Bragg’s office decided to target the man who stepped in to prevent a tragedy.

This isn’t about justice. It’s about power. It’s about advancing a narrative where race and identity matter more than truth and common sense.

It’s time to demand change

The Daniel Penny case — and others like it — is a wake-up call. We cannot allow corrupt institutions to punish those who act to protect life and liberty. Americans must demand an end to politically driven prosecutions, hold DAs like Alvin Bragg accountable, and stand up for the principle that true justice is blind, consistent, and fair.

If we let this slide, we accept a world in which heroes are treated as criminals and the law is a weapon for ideological warfare. It’s time to choose which America we want to live in.

Editor's Note: This article was originally published on TheBlaze.com.

CEO Brian Thompson's killer reveals COWARDICE of the far-left death cult

Jeff Swensen / Stringer | Getty Images

Early on the chilly morning of Wednesday, December 4th, Brian Thompson, CEO of health insurance giant, UnitedHealthcare, was walking through Midtown Manhattan on his way to a company conference. Suddenly, a masked and hooded figure silently allegedly stepped onto the sidewalk behind Thompson, drew a 3-D printed, silenced pistol, and without warning fired multiple shots into Thompson's back before fleeing the scene on an electric bicycle. After a multiple-day manhunt, a 26-year-old lead suspect was arrested at a McDonald's in Altoona, Pennsylvania after being recognized by an employee.

This was not "vigilante justice." This was cold-blooded murder.

As horrific as the murder of a husband and father in broad daylight in the center of New York City is, the story only gets worse. Even before the murder suspect was arrested, left-wing extremists were already taking to X to call him a "hero" and a "vigilante" who "took matters into his own hands." Even the mainstream media joined in on the glorification, as Glenn pointed out on air recently, going out of the way to show how physically attractive the murder suspect was. This wave of revolting and nihilistic fanfare came in response to the findings of online investigators who surmised the murder suspect's motives to retaliate against healthcare companies for corruption and denied coverage. The murder suspect supposedly underwent a major back surgery that left him with back pain, and some of his internet fans apparently viewed his murder of Thompson as retribution for the mistreatment that he and many other Americans have suffered from healthcare companies.

The murder suspect and his lackeys don't seem to understand that, other than depriving two children of their father right before Christmas, he accomplished nothing.

The murder suspect failed to achieve his goal because he was too cowardly to try.

If the murder suspect's goals were truly to "right the wrongs" of the U.S. healthcare system, he had every tool available to him to do so in a constructive and meaningful manner. He came from a wealthy and prominent family in the Baltimore area, became the valedictorian at a prestigious all-boys prep school, and graduated from the University of Pennsylvania with a master's in engineering. Clearly, the murder suspect was intelligent and capable, and if he had put his talent into creating solutions for the healthcare industry, who knows what he could have accomplished?

This is the kind of behavior the far-left idolizes, like communists on college campuses who wear shirts that celebrate the brutal Cuban warlord, Che Guevara. Merchandise celebrating the UnitedHealthcare CEO murder suspect is already available, including shirts, hoodies, mugs, and even Christmas ornaments. Will they be sporting his face on their T-shirts too?

This macabre behavior does not breed creation, achievement, success, or life. It only brings death and risks more Americans falling into this dangerous paradigm. But we still have a chance to choose life. We just have to wake up and take it.