Thursday, November 28, 2013

BitCasino: Canary In the Coal Mine for DowCasino

Both pure fabrications of a Central Bank-sponsored sugar high in social mood...

BitCasino w/DowCasino in the Background
Depending upon which denominator you use $0 or 5 cents i.e. where BitCoin started trading, it's either up ~2.4 million percent since inception, or infinity. 

The Ultimate Ponzi Scheme
Bitcoin of course is the ultimate ponzi scheme. Because without a steady stream of new fools with money to throw at this thing, it will crash for the third time i.e. similar to the Dow, which is now being artificially levitated for the third time. 

When the new Euro currency was created in 1999, all those who held other European currencies were converted at the exact same time. Those who held Deutsche Marks converted at the same time as those who held French Francs. There was no intertemporal advantage.

One Trillion Dollars !
Bitcoin however is trading under the premise that one by one we will all forfeit dollars and convert to Bitcoins. Therefore given the very small total potential float of Bitcoins at 21 million, the eventual value is inconceivably hyperbolic. Here, it's pegged at ~$1 million dollars per Bitcoin. 

Those who bought $100 worth of Bitcoins at inception, already have $2.2 million dollars. 

However, eventually the number of people willing to pay ever increasing amounts of money for Bitcoins will slow, then stall. Even if you look above at the lower pane of that chart. The horizontal line represents two standard deviations above the 20 DMA. As we see, the second derivative rate of change is decelerating as it did in the past prior to the last two 80-90 percent crashes. 

And unfortunately, BitCasino is not stable at higher elevations
Why not? Well, ultimately without greater fools to convert, BitCoins will have to trade at their intrinsic value which will be denominated in terms of what they can buy. Vendors who accept Bitcoin however, have to constantly lower their Bitcoin prices to be competitive with dollars. If not, that would set up an arbitrage by which it would be cheaper to sell Bitcoins, buy dollars and complete the purchase with dollars. Therefore, vendors would have to reprice their offerings daily, often by 10-20%. Over the course of the last month, Bitcoin-denominated prices have dropped by 80% (i.e. Bitcoin has gone up 5x). That means something that cost 5 Bitcoins a month ago, now costs one Bitcoin. 

Unfortunately, most vendor liabilities aka. accounts payable are still in dollars, because most other suppliers don't accept Bitcoin. So imagine having all assets in Bitcoins and most liabilities in dollars. It's economic suicide. One crash and you are out of business. And those who think that the local Mom and Pop store are going to start hedging their currency risk are drinking the fucking Kool-Aid.

"BitCoin" Searches on Google Trends
The tallest spike of course is occurring right now. The last two spikes in searches for the term "Bitcoin" directly preceded a 90% crash and 80% crash respectively.

DowCasino: False Idol to the Idiocracy
Recently, the following "log periodic bubble" chart has been making the rounds, which fits perfectly with the attenuation/heart attack meme:
"A log periodic pattern is essentially one where troughs occur at increasingly frequent and increasingly shallow intervals."
"The hallmark of the equation is the fast accelerating price of the asset or index, and when t approaches tc the oscillations occurs more frequently with a decreasing amplitude."

Partying Like It's 1999
“Man, it feels more and more like 1999 every day,” tweeted Bill Gurley, one of the valley’s leading venture capitalists. “Risk is being discounted tremendously.”

The New Subprime
"In May, Moody’s wrote that signs of a “covenant bubble” were emerging"
“Prudent lending practices have deteriorated” 
"More than half of all leveraged loans issued this year have been the so-called cov-lite types, double the level seen in 2007 on the eve of the credit crash."

Bubble in the Riskiest Credit Exceeds 2008 Peak

Fool Me Three Times, Shame on Me
This will be a lesson the Idiocracy never forgets. Suffice to say, shopping sprees on Thanksgiving will be an artifact of a doomed age, buried under a mile of economic rubble. The Lost Boys are long overdue to shut the fuck up. The untold numbers of fake bullshit artists spawned during this plasticized era, will be finally silenced once and for all; monkey hammered into oblivion by their own willful delusion. The moment of silence before the sobbing and wailing begins, will be golden...

The Almighty DowCasino: