Re-evaluating Bitcoin
Just How Risky is it?
“For the love of money is a root of all sorts of evil, and some by longing for it have wandered away from the faith and pierced themselves with many griefs.”1 Timothy 6:10
word of caution on BTC
I just read “Easy Money” by Ben McKenzie and Jacob Silverman.
I must admit that despite his lack of credentials (compared to the ‘experts’) and limited experience in the world of finance, the points he makes against crypto are hard to refute.
I’ve put some money into crypto currencies, mainly Bitcoin and Ethereum, the top two, and mildly recommended them as worth looking into, because they may become real winners. On the other hand, they are high risk, and I’ve always said not to invest more than you’re willing to lose.
before getting into the risks of crypto, some info in our weekly science section about how a certain area in Oregon may develop a solution for the global supply shortage of lithium, and a lesser known but very important need for natural gas - production of fertilizer…
Note: if you’re new to substack, when you see a word underlined, you can access a source link by clicking on it. This is so much better than the old method of footnotes for sources.
SCIENCE
lithium for batteries
A couple years ago, on a road/camping/hiking trip through southern Oregon, Nevada, Utah, and Idaho, little did I realize that I was driving right by what may turn out to be the largest source of lithium in the world…
“from “Energy Newsbeat” “A deposit of lithium recently discovered along the Nevada-Oregon border may be among the world’s largest, having potentially huge implications for the transition to electric vehicles.
Volcanologists and geologists from Lithium Americas Corporation, GNS Science, and Oregon State University reported their findings in a paper for Science Advances, published August 31.
The deposit exists in the McDermitt Caldera, a caldera approximately 28 miles long and 22 miles wide. It is believed that the caldera contains around 20 to 40 million metric tons of lithium – a figure that would dwarf deposits in Chile and Australia.”
fertilizer
from environMENTAL, Sept.9
“Fritz Haber and Carl Bosch won Nobel Prizes in 1918 and 1931 respectively for what is known today as the Haber-Bosch process, a large scale means of efficiently fixing atmospheric nitrogen by reaction with hydrogen from natural gas to create ammonia. Ammonia is a key ingredient in nitrogen-based agricultural fertilizers.
…There are about 500 Haber-Bosch plants operating around the world today in over 60 countries, supplying the world with ~185 million metric tons of ammonia annually. About 70% of that ammonia is used to make agricultural fertilizers.
…without the fertilizer enabled by these plants, it is difficult if not impossible to conceive of world food production supporting even half the planet’s current population.
…That reality alone should temper the enthusiasm with which Western “environmentalists” pursue their war on all fossil fuels and all CO2 emissions at all costs.”
FINANCE
reducing exposure to risk in cryptocurrencies
After reading “Easy Money”, I’ve decided to reduce my crypto holdings from 5% of my investments to less than 2%; in other words, to sell a little more than half. This is what I usually do when not sure which way to go – I’m thinking crypto could collapse, but I could be wrong, so I’m not selling all of it, at least not until I see more market data one way or the other. I now realize that by having more than 2% in a high risk investment, I was violating my own rule to limit risky investments and not to risk more than I’m willing to lose. I fooled myself, thinking I was being very conservative since I had secured my crypto in a ‘hardware’ wallet (aka ‘cold wallet’) which can’t be hacked or subject to fraud like on an exchange. Just this morning I read about another crypto exchange getting hacked - “Crypto exchange CoinEx's hot wallets were reportedly drained of at least $30 million in cryptocurrency”. CoinEx says they’ll reimburse their customers, but we’ll see… But even an offline cold wallet can’t protect against a collapse of the price of Bitcoin and all the other digital coins.
difficulty of cashing out
With stocks, I can sell online in seconds, commission free. But not so with crypto. The process is slow, clunky, and expensive. First, I have to send my crypto from my hardware wallet to Coinbase, the only exchange I trust anymore, because it’s in the US and seems to comply with our regulations.
The process of sending crypto from my wallet is tricky and takes several minutes. Then, I have to sell the crypto and pay very high fees. Then, I have to withdraw the cash to my home bank, which takes several days. The real problem would be if someone tried to do all that in the middle of a price crash panic. You just might not be able to get out in time. Plus, the transaction fees increase when volume is high.
El Salvadore
The situation in El Salvadore is one of the reasons I’m less optimistic. Until reading up on it last week, I wasn’t aware that El Salvadore’s experiment with making Bitcoin a legal national currency was looking like a failure.
Apparently, very few citizens of that country have been using Bitcoin. The promise of helping the poor, the homeless, and the ‘unbanked’ hasn’t been realized to any significant extent. Some folks can’t get a bank account, so I was hoping that Bitcoin would be an answer for them, since anyone can use Bitcoin even if they have no credit and no checking account. Everyone has a cell phone, which is all that’s needed. But setting up a Bitcoin account is a little complicated, and setting up a secure, hardware ‘wallet’ that can’t be hacked is even more complicated, plus a hardware wallet is not free. (My Trezor wallet cost about $60 as I remember.) Part of the problem in El Salvadore may be that the government’s roll out of Bitcoin was done very poorly, but nevertheless, to date, Bitcoin is not working too well for buying and selling, which is what a currency is supposed to do.
person to person crypto transactions still aren’t practical
Another reason I’m getting hesitant about Bitcoin is the question of how it could ever work as a currency on a large scale. As Ben McKenzie wrote in “Easy Money”, p.95, commenting on an interview he had with Sam Bankman-Freid, “if you have a billion people (using Bitcoin) you’re probably going to have at least about 100,000 transactions every second”, but the Bitcoin blockchain can only handle about 5-7 transactions a second.
My previous thinking on this was that Ethereum provides a platform for a 2nd tier of blockchain innovations that can process crypto transactions and record them on the blockchain much faster.
For example, according to Michael Byrne at fool.com, written in Dec.2021:
· “The Solana network processes a remarkable 50,000 to 65,000 transactions per second, compared to just 15 to 30 transactions per second for Ethereum (CRYPTO: ETH) or 250 for Cardano. This throughput also compares favorably to traditional financial networks like Visa (NYSE: V), which processes about 24,000 transactions per second.”
However, Solana peaked at $243 in November 2021 and as of Sept.1 2023, was down to $19.50. Anyway, the transaction speed for crypto currency secured by the blockchain is still a long way from being useful on a large scale, especially a global scale.
digital gold?
The other attraction of Bitcoin is as a global ‘safe haven’ against a failure of any national currency, like the US dollar. So it’s been called “digital gold”. It also has the advantage of crossing borders effortlessly, unlike physical gold. It has other similarities and advantages. It can’t be counterfeited. It can’t be stolen, at least not while it’s in your hardware wallet and your digital private key is kept secret.
The problem is that gold has use as an excellent electrical conductor and as jewelry, but if Bitcoin isn’t practical enough to become a widely used currency, then it may end up having practically no use at all.
smart contracts
See Pros and cons, including examples of smart contracts. I thought blockchain technology made records and transactions in smart contracts completely secure, but that’s not true. There are still risks of hacking, identity theft and fraud. For example, suppose someone in the company that’s writing and maintaining the software for the smart contract is a bad apple. As an insider, they could secretly code a back door into the software so they could hack into it later.
still have questions about mining
It's been a few years now since I first stuck my toe into Bitcoin, and it’s time to re-evaluate. The potential is still there, but I'm also seeing more risks as I learn more. I thought I understood how BTC is mined; now I'm not so sure; still studying it. I'm wondering how, as the blockchain ledger of every single bitcoin transaction gets bigger and bigger, and the miners need bigger and bigger computers and use more and more electrical power to find new 64 digit characters for each transaction, if a limit of capability or feasibility will be reached.
…and about the people in charge
Also, I'm concerned about the historical track record of some of the CEOs of some of the crypto enterprises. We all know about the FTX bankruptcy and Sam Bankman-Fried and his flaky methods. Somewhat surprisingly, Bitcoin has survived his downfall. But "Easy Money" uncovered some other flaky characters that are still at it. One is the CEO of Tether, the supposed most popular 'stablecoin'. Tether still hasn’t been officially audited. We only have the organization’s word that Tether is 100% backed with US dollars.
Block’s newsletter reports “Former Celsius CEO Alex Mashinsky's assets and Texas home have been frozen, according to an unsealed court order.
Judge Jed Rakoff for the U.S. District Court for the Southern District of New York ordered the restraint of “property and other interests,” including funds at Goldman Sachs, Merrill Lynch and SoFi Bank, and a home in Austin, Texas that's shared with his wife.
Mashinsky was arrested in July, accused of defrauding customers and misrepresenting Celsius' profitability.
The now-bankrupt crypto lender owes billions to investors and has faced scrutiny from multiple regulators, including the Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Trade Commission.
The SEC sued Celsius and Mashinsky in July for allegedly fraudulent activities, unregistered sales of "crypto asset securities" and price manipulation of its native CEL token.”
Another thought - the seeming endorsement of crypto by J.P.Morgan, Blackstone, Elon Musk, Michael Saylor (owner of Microstrategy Inc), and many others, doesn't really prove Bitcoin is a safe investment. Kevin O'Leary of Shark Tank admits he lost millions when FTX went bankrupt. If Kevin O'Leary can be fooled, who do I think I am?
If Blackstone successfully launches a Bitcoin ETF, that doesn’t necessarily mean Blackstone would be directly risking their own money in crypto. All it means is that they would be happy to provide a trading platform for you and I to risk our money.
So I still have one toe in the game, (or should I say ‘fingers in the pie’?) but I'm cutting back to a level of risk where it won't bother me if Bitcoin goes to zero.
Since I had recommended everyone should have a little Bitcoin in case it actually does turn out to be a winner, I now feel a responsibility to let everyone know that I'm having some second thoughts about the level of risk.
FAITH
persecution of Christians in Nigeria
From the Spectator Aug.19, by Aubrey Gulick - terrible persecution of Christians in Nigeria…
Jordi C/Shutterstock
“Last month, a reported 37 Nigerian Christians went to their eternal reward at the hands of Muslim jihadists in Nigeria. The rest of the world ignored them, just as they ignored the more than 1,000 Christians who were killed in the first 100 days of 2023 and the 5,068 killed in 2022.
“In 2022, Nigeria accounted for 89 percent of martyred Christians worldwide. Some might call that a “persecution” or even a “genocide” — the U.S. government refers to it as “banditry and other criminality,” blaming “climate change” for the violence.” What? How? read on…
“Persecution of Christians is nothing new in Nigeria — they have always been an ill-favored minority — however, the problem has intensified over the last few years. “We’ve seen increasing episodes [of persecution] in the last 10 years specifically,” Greg Kelley, CEO of World Mission, said. “But it’s been this way for generations, to be honest with you. It just happens to be accelerating over the last 10 to 12 years.”
“The violence tends to be aimed at Christian farmers in the northern region of the country. “Fulani cattle herders travel all over the country and terrorize the people. They heard their animals to people’s farms and eat up all their crops… There is nothing the owners can do. If they chase them away, be rest assured that your village will be attacked at night,” Chukwuemeka Offor, a Nigerian writer, said in the Albuquerque Journal, commenting that the fear of “extremist violence” is palpable.
“In addition to Fulani killings, the Muslim terrorist group Boko Haram — which made international headlines when it kidnapped 276 students from a girls’ school in Chibok in 2014 — and the Islamic State West Africa Province (ISWAP) “want to eliminate the presence of Christianity in Nigeria,” according to the U.K. watchdog Open Doors.
“fact, Nigeria, which is Africa’s most populous nation, “is the most dangerous place in the world to be a Christian, even though Christians make up nearly half of Nigeria’s population of 200 million.” During a senate hearing in February, Rabbi Abraham Cooper told Congress that Nigeria’s situation amounts to “slow-motion genocide.”
“… the World Economic Forum …is claiming that “climate change is partly to blame” for the increase of violence across the West African Sahel.
“… The climate change narrative allows Western governments to absolve the Nigerian government — which is supposed to be a democracy — of any fault. When President Bola Ahmed Tinubu came to power in May, the Biden White House sent the new administration “warm wishes.” If Tinubu is supposed to solve the problem of violence in Nigeria, he seems like the wrong man for the job. Prior to his election in February, he was fully endorsed by the leaders of the Fulani communities — the same communities executing Christians.
“Instead of receiving the attention and support they need from an administration committed to “human rights,” Nigerian Christians are left to mourn their thousands of dead and attempt to survive a slow-motion genocide. Tertullian once said in the midst of another persecution that the blood of martyrs is the seed of the Church — Nigeria seems like fertile ground.”
pray for David Daleiden
Please support and pray for David Daleiden. After years of persecution for exposing Planned Parenthood’s illegal and despicable sale of baby parts to OHSU and others, the 3 lawsuits against him are coming to a head this year. His defense is costing millions. You can donate through the Thomas More Society here
Thanks for the update.. I'm trying to learn about Bitcoin
Al