Janet Yellen is at it again…
In an interview with the New York Times last week, the Treasury secretary doubled down on her stance against bitcoin.
Repeating claims she made in January, Yellen said she feared bitcoin is used more for “illicit finance” than legitimate transactions… is an “inefficient” way of doing business… and that she’s worried about “the potential losses investors could suffer.”
And just a few days ago, SEC-chair nominee Gary Gensler made similar comments when he said certain crypto markets were “really rife with fraud and scams.”
It’s too soon to tell if Gensler’s words will carry enough weight to affect bitcoin’s price, but we are still feeling some of the damage done by Yellen… Bitcoin fell as much as 18% in the days after her remarks and now hovers around 10% lower than before Yellen spoke.
Now, I’ve been warning you that we’d likely see a temporary pullback in bitcoin for a number of reasons. And Yellen’s criticism is just one of them.
But many readers are concerned. They think Yellen’s recent words are a sign the U.S. government may take a more aggressive stance against bitcoin.
Today, I’ll show you why Yellen’s wrong on all three counts… And why you should ignore the noise.
More importantly, I’ll show you how Yellen may have tipped her hand when she spoke positively about a different digital currency…
Bitcoin Is Used for “Illicit Finance”
This first claim from Yellen shows a stunning lack of understanding of cryptos…
Using bitcoin to commit crimes is just about the dumbest thing a criminal could do.
That’s because the transparency of bitcoin’s public blockchain means the whole world can see how you spend and move your money.
Every transaction can be traced from one crypto wallet to another… So if law enforcement ties a single criminal to even one bitcoin transaction, they can unravel the entire criminal network’s finances.
That’s why cash is the preferred tool for criminals and terrorists. About $3.5 billion per year is funneled into terrorist organizations. Do you really think some terrorist in a cave is going to accept bitcoin over good old-fashioned American greenbacks?
Try buying an AK-47 in Afghanistan with bitcoin. Good luck with that.
And if you look at all the numbers, a recent report from Chainalysis – a blockchain analytics firm – estimates less than 1% of bitcoin transactions are used for illicit purposes. That amounts to about $10 billion. Sounds like a lot, right?
Well, according to a report from Deloitte, as much as 5% of all cash transactions involve money laundering. That’s as much as $2 trillion per year.
So less than $10 billion of illicit bitcoin transactions versus as much as $2 trillion of illegal cash transactions… and Yellen is more worried about bitcoin? That doesn’t make much sense.
Bitcoin Is “Inefficient”
Yellen’s second claim is something I hear a lot… And it often comes from banks and brokers who say, “bitcoin’s inefficient,” because they have a vested interest in keeping their clients reliant on their services.
Now to be clear, bitcoin does have some uses that are more efficient than others. So think of the bitcoin “inefficiency” argument like this…
Imagine a 30,000-pound Mack Anthem truck hauling a two-pound Barbie dollhouse down the street. Yes, you could do it… But it’d be a really inefficient use of transportation and fuel.
But if you need to haul 30,000 pounds of concrete and steel across the country to build a house… all of a sudden, that Mack truck becomes a very efficient option.
The bitcoin network is similar…
If you’re trying to move $200 on the bitcoin network, it can cost about $20 in transaction fees. That’s incredibly inefficient.
But if you’re trying to move thousands of dollars or more in value nearly instantaneously… that $20 transaction fee is a total no-brainer.
So be wary of the “inefficiency” narratives these entrenched players try to push on us… Because remember, bitcoin completely upends their power structure.
Bitcoin “Investors Could Suffer”
Yellen’s third concern regarding bitcoin is that investors might lose their shirts on huge losses…
That’s not entirely unreasonable… but all investments carry the risk of significant losses.
Investors lost nearly $132 billion in the 1980s Savings & Loan scandal. Millions more lost their shirts during the dot-com bubble crash of the late 1990s.
And hundreds of thousands of Americans who took out risky mortgages in the 2000s lost their homes during the 2008 housing crisis.
So the risk of losing money on an investment is nothing new.
That’s why I recommend you use small, uniform position sizes when investing in crypto – no more than $200–400 per position for smaller investors and $500–1,000 for larger investors.
That’s the power of “positive asymmetric” investments like cryptos… You only risk a tiny grubstake for a chance at 3x, 5x, or even 10x returns.
For instance, if you bought bitcoin when I first recommended it in 2016 at around $400… you’d be up 13,339%. That’s enough to turn $1,000 into $134,390.
Does that look like “suffering” to you?
And it’s not just bitcoin…
Last month, subscribers to my flagship crypto service had the opportunity to book massive gains of up to 38,055% on several of my altcoin recommendations.
Many of these subscribers tell me they’re going on vacations… paying off mortgages… or retiring early.
I’ll ask you again: Does that look like “suffering” to you?
So while Yellen is warning about the “dangers” of bitcoin… my subscribers are seeing life-changing gains on as little as a few hundred dollars.
What Yellen Really Wants
Now, I’m not a mind-reader. But here’s what I believe is really behind Yellen’s opposition to bitcoin…
Further into her interview, she was asked about the prospects of a so-called digital dollar. It’s a cryptocurrency developed and managed by central banks like the Federal Reserve. Here’s what she said:
It makes sense for central banks to be looking at it… Too many Americans really don’t have access to easy payment systems and to banking accounts, and I think this is something that a digital dollar – a central bank digital currency – could help with. I think it could result in faster, safer and cheaper payments.
All of those features Yellen mentions – accessibility and faster, more secure payments – are features already found in bitcoin. The difference is control…
So it sounds like Yellen is OK with digital currencies, but only if they’re centralized and controlled by the Federal Reserve. And as we’ve seen with quantitative easing and runaway money-printing, central bank control of currency tends to hurt our wallets more than it helps.
A Fed “coin” also defeats the entire purpose of bitcoin, which is decentralization… Or removing the middleman from most transactions.
So again, be wary of the negative narratives these entrenched players like Janet Yellen are peddling.
It’s in their best interest to keep you in assets they can manage and control. The more investors who move from traditional finance to crypto… the louder and more extreme their narratives will get.
So if you see bitcoin sell off below $40,000 on these negative headlines… buy it. Because it’s down for all the wrong reasons.
Let the Game Come to You!
Editor, Palm Beach Daily
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