How Hackers Bled 118 Bitcoins Out of Covid Researchers in U.S.

Transcripts reveal University of California at San Francisco’s weeklong negotiation to free its ransomware-locked servers. The haggling worked, sort of.  Bloomberg 2-28-21

Ms. Yellen doubled down on a “buyer, beware” message to investors in Bitcoin. “I don’t think that Bitcoin — I’ve said this before — is widely used as a transaction mechanism. To the extent it’s used, I fear it’s often for illicit finance,” she said. “It’s an extremely inefficient way of conducting transactions. And the amount of energy that’s consumed in processing those transactions is staggering. But it is a highly speculative asset, and I think people should beware. It can be extremely volatile, and I do worry about potential losses that investors in it could suffer.”  NY Times 2-23-21

For Bill Gates, it’s not something Main Street should buy into — plus it’s bad for the environment as mining the coins requires a lot of energy.

“Elon has tons of money and he’s very sophisticated, so I don’t worry that his Bitcoin will sort of randomly go up or down,” Gates said in an interview with Bloomberg Television’s Emily Chang. “I do think people get bought into these manias who may not have as much money to spare. My general thought would be that if you have less money than Elon, you should probably watch out.”

Also read: A Brief History of Elon Musk’s Devotion to the Crypto Cause

Musk, who’s worth $189.6 billion as per the Bloomberg Billionaires Index, has been an avid supporter of Bitcoin — so much so that he’s influenced the token’s price. It surged as much as 76% this month following Tesla’s investment, before tumbling 13% after he tweeted the prices of cryptocurrencies “do seem high.”

Bitcoin was trading around $51,400 at 8:30 a.m. in New York on Thursday.

The debate over Bitcoin isn’t new. Billionaire Warren Buffett deems cryptocurrencies have no value and don’t produce anything. Treasury Secretary Janet Yellen, another long-time skeptic, said at a New York Times conference earlier this week that Bitcoin is an “extremely inefficient way of conducting transactions.”

Also read: The Bitcoin Comeback – Is Crypto Finally Going Mainstream?

But with more and more companies starting to accept Bitcoin — as PayPal Holdings Inc., Visa Inc. and MasterCard Inc. recently have — the token has gained wider acceptance. As central banks including the Federal Reserve and European Central Bank are studying how to digitalize their own sovereign currencies, and firms such as Fidelity Investments Inc. launch funds letting investors add cryptocurrencies to their portfolios, the debate is here to stay.

Speaking on the social audio app Clubhouse, Musk declares he’s a Bitcoin supporter. “Bitcoin is a good thing,” he said, adding that he was “late to the party” and should have bought the cryptocurrency eight years ago. Feb 1

I don’t profess to know when the gig is up for bitcoin but I’m willing to bet it’s sooner than later.  It seems like it provides no real productive value other than to criminals trying to extort cybercrime, money launderers, or tax evaders.  I can’t imagine any government allowing large volumes of transactions to go hidden from their taxing and regulatory regimes.  I think the U.S. government’s attitude was let’s not squash the experiment and see where technology goes.  I think we know where it goes now and it’s far from a benevolent or productive thing.

I can’t say it better than Charlie Munger at the recent Daily Journal Shareholder meeting. In case you don’t know who Charlie Munger, he is the 97-year-old vice chairman of Berkshire Hathaway dismissed bitcoin during a Q&A session Wednesday, calling it “too volatile” to be considered a global medium of exchange.

“I do think that a properly run bank is a great contributor to civilization and that the central banks of the world like controlling their own banking system and their own money supplies,” he said.

Munger then went on to paraphrase an Oscar Wilde quote on fox hunting, saying bitcoin reminded him of those who buy the nascent asset class as “the pursuit of the uneatable by the unspeakable.”

I think it’s time to bet against Bitcoin. I don’t profess to know when the gig is up for Bitcoin but I’m willing to bet it’s sooner than later.  It seems like it provides no real productive value other than to criminals trying to extort cybercrime, money launderers, or tax evaders.  I can’t imagine any government allowing large volumes of transactions to go hidden from their taxing and regulatory regimes.  I think the U.S. government’s attitude was let’s not squash the experiment and see where technology goes.  I think we know where it goes now and it’s far from a benevolent or productive thing.

One thing I’ve learned in these years about betting that a bubble will burst is that the market can be irrational far longer than you can be solvent.  The best way to bet against bubbles is to know your maximum loss and stick to that. In this case, it eliminates shorting bitcoin (yes can do that, there are bitcoin futures). I would buy long-dated bitcoin options- if there is such a thing. Another way to do this might be to buy put options in the companies stocks that have profited handsomely from the mania.  Stocks like Riot BlockChain RIOT or  Marathon Patent Group MARA.   They would definitely collapse if by chance the U.S Government put their foot on bitcoin’s throat.  Most bitcoin is mined in China but even if the Chinese government outlawed it, I can’t say that would make the price go down. It could do just the opposite.

Several other stocks have run up in part due to bitcoin’s astronomical rise, for example, PayPal, Square, Tesla but bitcoin has been a very small part of their story. I wouldn’t think the collapse of Bitcoin would bring any of these companies to their knees but it could wipe out MicroStrategy MSTR altogether.

Michael Saylor, the chief executive of the business intelligence software firm MicroStrategy, believes deeply in Bitcoin and has urged other companies to shift their corporate cash into the cryptocurrency. That’s what MicroStrategy has been doing, in a bigger way than the others that have put Bitcoin on their balance sheets, the DealBook newsletter reports.

On Wednesday, MicroStrategy announced a $1 billion Bitcoin purchase, bringing its total spending on the cryptocurrency to more than $2 billion since the summer.  According to the New York Times, Bitcoin’s price is currently double the average cost that MicroStrategy paid for them, implying a gain of nearly $2.5 billion. Before it started buying Bitcoin in August, MicroStrategy’s market capitalization was just over $1 billion. It is now nearly $8 billion, with its Bitcoin holdings overshadowing its software business.

Microstrategy was a rather lackluster software company with no real revenue growth for the last five years until the Bitcoin buying binge.

Buying puts on Microstrategy is the play.  Go out as far as the market will allow it and buy deep out of the money puts. Hold your nose- it’s all or nothing here.  You’ll likely hit the ball out of the park or lose all of your investment. One or the other but at least you’ll know how much you can lose.

Other than that I’d buy puts on Bitcoin itself. Bitcoin [BTC] options are currently traded on CME, Deribit, LedgerX, IQ Option, Quedex, Bakkt and, Okex. Among these, CME, Bakkt, and others are regulated platforms in the US, with the CME group being the largest futures exchange in the world.  The challenge, though, is you can’t go very far out and I have no confidence about the timing of when this experiment in digital currencies will crash and burn.

Another way to place this with less risk to buy gold.  The GLD ETF has been steadily losing gold buyers to crypto.  If Bitcoin does crash and burn, Gold is likely to spike higher.  You can buy the miners ETF GDX or go buy GLD.