Crypto Value

Some would say yes, absolutely. Others, though, might be rethinking previous expectations for cryptocurrencies. We give the nod to the former - with some strong caveats.

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The value of cryptocurrencies has to do with the transaction process. Bitcoin and other cryptocurrencies have value because they provide a process for the private transfer of money.

Beyond that, expectations for their common use as an alternative to the U.S. dollar and other fiat currencies make little sense. Moreover, cryptocurrencies are certainly not a realistic alternative for gold. (see Is Bitcoin Money; Does It Have Value? and Comparing Bitcoin To Gold)

Bitcoin is a digital creation which has no value in and of itself. As such, it can never be used as a measure of value for anything else. Think of it this way: How many Bitcoins is your house worth? How many Bitcoins will your next car cost? If you can answer those questions without any calculations, you will know that Bitcoin has become a generally accepted form of money.

Far-Reaching Arm Of Government

In a previous article I said:

"It is naive and short-sighted to think that those who claim to have regulatory authority would sit idly by without making a concerted attempt to intervene in areas where activity is perceived as a threat to their own (the regulators) interests." 

Has anything happened (or not) which makes the control threat to cryptocurrencies any less likely or problematic?

The heart of the problem is the decentralized tracking system used by by cryptocurrencies. Transactions using cryptocurrencies avoid the scrutiny of regulators.

The central clearing system used in the banking system puts government and the Fed firmly in control. Look for an expansion of this control over money and banking to include cryptocurrencies. CBDCs (central bank digital currencies) are official confirmation of this ongoing effort. 

Crypto Fraud And Deceit

To whatever extent the ongoing legal issues involving individuals, companies, and exchanges from the crytpto world have any merit (or even if they don't), you can be sure that the feds  (U.S. Treasury, SEC, Federal Reserve, IRS, etc.) will find a way to use them to support their calls for more "oversight".

The warnings have been there all along. Some investors didn't listen. Janet Yellen verbalized the intentions of those who assume it is their responsibility to regulate cryptocurrencies more than two years ago.

Here are the statements she made in response to a question from Sen. Maggie Hassan, who asked Yellen during her confirmation hearing as U.S. Treasury Secretary:

"...we need to make sure that our methods for dealing with these matters, with terrorist financing, change along with changing technology," Yellen said.

"Cryptocurrencies are a particular concern. I think many are used - at least in a transaction sense - mainly for illicit financing.

"And I think we really need to examine ways in which we can curtail their use and make sure that money laundering doesn't occur through those channels."  

Secretary Yellen's comments set the stage for acceleration of the efforts to "curtail their use". (see Janet Yellen Re: Cryptocurrencies And Terrorists)

Price vs Value For Cryptocurrencies

Higher price is not necessarily an indication of higher value. This is especially true for Bitcoin and other cryptocurrencies.

The only unique fundamental value for cryptocurrencies is the privacy aspect of money-based transactions. Without the privacy (decentralized control) there is nothing special about cryptocurrencies.

As the effort to regulate and control cryptocurrencies continues, the prices of Bitcoin and other cryptocurrencies will reflect the loss of fundamental value which is correlated to the loss of privacy/decentralized tracking. No privacy. No value. (also see Will Cryptocurrencies Become Fiat Currencies?)

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