Elon Musk, founder and CEO of SpaceX, product architect of Tesla, and father of the child X Æ A-Xii, likes to joke on Twitter, where he has more than 46 million followers. He has just sent the cryptocurrency Twitterverse nuts by appearing to cast doubts on Bitcoin, the leading cryptocurrency. Bitcoin lost 24% of its value after Musk’s view became public. It has since then lost even more following a statement from China’s central bank.
The People’s Bank of China has just issued a stern warning to the country’s financial institutions against dealing in cryptocurrencies. All of them immediately collapsed in value.
Some people are very angry at Elon – and one swiftly created a very rude new cryptocurrency in defiance of Musk. This new obscenely-named cryptocurrency joined the almost 10,000 other cryptocurrencies in existence – and that’s just the ones that CoinMarket Cap lists as ‘Actual Serious Established Crypto Coins’.
For a supposed decentralised digital currency Bitcoin is empirically demonstrating some strong centralised characteristics. As a few words from Jerome Powell, the US Federal Reserve chairman, or Janet Yellen, the US Treasury Secretary, can shift the US dollar’s value, so too it seems can a brief statement from Elon Musk have a disproportionate impact on Bitcoin’s value.
This is not how cryptocurrencies are meant to operate. Cryptocurrencies are intended to be anonymous, beyond the reach of governments and/or other would-be manipulators; they are meant to facilitate confidence in transactions, thanks to their decentralised nature. Yet despite being based on supposedly hack-proof computer coding, the financial world is littered with cryptocurrency scams, scandals and cautionary tales – and I am not even talking about the love that fraudsters and crooks have for them.
In February this year the New York District Attorney suspended Tether (originally known as Realcoin) and its sister crypto exchange Bitfinex and fined them $18.5 million on the basis that they deceived clients and the market by over-stating their reserves and hiding about $850 million in losses. This clearly hasn’t much damaged Tether – which supposedly is a ‘stablecoin’, i.e. it claimed that its digital tokens were backed one-to-one by US dollars held in cash reserves. When it was fined in February Tether was worth $35 billion (£24.82 billion) but today it is worth around £58 billion (£41.15 billion). It’s a very odd world where a company fined for fraud not only stays in business but does even better.
I’ve said it before but it’s worth repeating. I ‘get’ why cryptocurrencies exist and people are flocking to them – it’s because people have lost/are losing faith in the fiat currencies issued by their governments. But the risks of being manipulated by external loud voices are just as great with cryptocurrencies as they are with dollars, pounds, or euros. Gold is not risk-free; the gold price can and does go up and down, although with rather less velocity than Bitcoin.
But if you want an alternative currency that can be spent readily and which has no Mars’ mission devotee influencing the price from the side-lines, then gold with Glint gives you that.
Have a great week,
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