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Real Reason For Cash Ban And Why It Will Only Boost Bitcoin

Governments and Central Banks really picked up the pace in the war on cash in the last couple of years.  Various former Central Bank and government officials openly declared the need to ban cash to stop “criminals” and “terrorists”.  The ECB (European Central Bank) earlier in 2016 formerly declared that it is literally starting to banish larger denomination bank notes.  All of these actions will only help raise more awareness and acceptance of Bitcoin and cryptocurrency.  While attempts to ban cash can only help Bitcoin adoption and awareness, a look at the real reason for the push to ban cash uncovers some alarming truths about the existing financial system.

Central Banks are in full blown panic mode.  The real reason why they are trying to ban cash is because there hardly is any non-counterfeit physical cash in existence.  This is true when we look at actual currency in circulation (bank notes and coins) relative to aggregate measures of digits in accounts such as money market funds, equities, and bonds.  Analyzing this data also magnifies how transparent Bitcoin is versus the fractional reserve and excessively levered current monetary system.

The Board of Governors of the Federal Reserve System reports on its own website that as of June 1, 2016 there is $1.46 Trillion of currency in circulation (  The Fed also states that of this $1.46 Trillion, $1.4 Trillion is denominated in Federal Reserve notes (FRN).  A Federal Reserve statistical release published on June 9, 2016 states that as of the end of April of 2016 seasonally adjusted M2 equaled $12.56 Trillion.

M2 is equivalent to M1 plus savings deposits, money market deposits, a portion of small denomination time deposits, and a portion of retail money market mutual fund balances.  M2 is clearly in part an assessment of what any rational participant would consider extremely liquid funds that one in theory could immediately convert to physical cash.  Physical currency only covers less than 12% of what the Fed purports to be the most liquid assets in the current financial system. 

The size of the equity market in the United States is roughly $20 Trillion and the bond market (corporate, municipal, state, and federal bonds) is pushing $40 Trillion.  M2 plus equities and bonds amounts to almost $75 Trillion, all considered very liquid assets.  Converting them to physical cash is another issue though, and this analysis is still ignoring outstanding derivatives, real estate, precious metals, and many other financial instruments and products.  Unlike when a Bitcoin user opts to send Bitcoin from a wallet to another address, it is entirely possible customers with FRN could face resistance when trying to liquidate accounts particularly when higher quantities are involved.  This is even more critical for the Fed if customers liquidate and demand physical cash.

If participants in increasing numbers started to demand liquidation of various types of accounts along with the possession of physical cash, the Federal Reserve would have an extremely serious problem.  The Federal Reserve would face a nightmare scenario where the general population started to question why they are being restricted from withdrawing bank notes from their own bank accounts.  It is almost as if an attempt to ban cash is a not so subtle nudge to at least explore the option of exchanging some fiat for Bitcoin.

Hence, the Federal Reserve needs to try and ban cash so nobody has the ability to demand it.  If all accounts denominated in FRN existed only digitally then a run on the system at least would not involve the demand for physical currency.  We have already seen restrictions on the size of ATM withdrawals and other withdrawal requests both across Europe and in the United States along with public trial balloons floated about an outright ban of cash.  The prospect of a very real and literal bank run in Italy surged to the forefront in late June and early July of 2016.  The existence of physical cash and coins is a very real threat to the existence of the Federal Reserve System.

This is all very bullish news for Bitcoin of course.  Bitcoin is a way to exit the Federal Reserve System which governs essentially all retail banks in operation in the United States.  Also of note is that given the sustained trade imbalances of the United States and reserve currency status of USD, plenty of this physical currency is located outside the United States.  This makes the potential challenge in demanding physical FRN even more severe in America while also spreading the risk into other nations.

The Federal Reserve is very aware of Bitcoin and even shifting its stance towards it over the last year, but there is no evading the fact that currency in circulation is merely a tiny fraction of all assets denominated in FRN.  Bitcoin allows owners to have complete control over their own money.  Perhaps none of us know for sure if governments will ultimately succeed in banning cash, but there is no doubt that it is under serious consideration.  The fact that the Federal Reserve needs to even consider this option tells us quite a bit about the health and viability of the existing financial system and the potential of Bitcoin to completely disrupt it.  So little physical cash exists the Central Banks have no option but to banish it and blame it on “terrorists” and “criminals”.

David Young

Bitcoin as a Store of Value – Where 1% Really Adds Up

Amidst the constant search for the “killer app” and efforts by some to focus on blockchain, Bitcoin continues to perform exceptionally well as a Store of Value.  The proliferation of the ecosystem and emergence of new use cases will certainly impact adoption and market value, but perhaps being overlooked is how much massive opportunity still exists for Bitcoin’s role as a Store of Value.  Looking at two opportunities within the existing financial markets shows how even reaching merely 1% market penetration can place very significant upward pressure on the market value of BTC.

The global FX market trades about $5 Trillion per day.  Daily trading volume in USD for BTCUSD is a moving target given the price volatility and the questions about data reported by Okcoin and Huobi. Using data from for the last six months shows that aside from the two exchanges mentioned above the average daily trading volume from all other exchanges is about 168,000 BTC per day.  The price moved between $350 to around $780 during the time period and $565 is the midpoint.  At $565/BTC this yields daily trading volume of $94.9 Million.   Just 1% of the daily FX trading volume globally is $50 Billion (1% of $5T).

For BTCUSD trading volume to reach only 1% of the global FX market, total volume would need to increase by a factor of 526x.  Certainly that could happen in such a manner that the impact on the market price is minimal if the buying and selling balanced out in such a way, but with the supply creation mechanism of Bitcoin’s core existence, this is unlikely.  Given the momentum of cryptocurrencies and major issues facing fiat it is entirely possible that BTCUSD daily trading volume eventually reaches 1% or more of the global FX market.

We are already seeing meaningful spikes in daily trading volume when the price action accelerates and grabs the attention of more people.  Institutions are already looking into gaining more exposure to BTC and in fact can be forced into exposing a certain percentage of investment assets to any asset class that gains in stature and relevance regardless of the personal opinions of management.  The potential result is a massive pool of funds trying to jam itself into what is currently just a $10 Billion market cap.

Institutions and individuals seeking a currency hedge or more risk exposure in their FX portfolio will look to Bitcoin.  Unlike fiat currencies Bitcoin has an established track record as a Store of Value and mathematically enforced scarcity not subject to the opinions and decisions of a centralized group of humans such as a Central Bank.

This is attractive for investors not only due to Bitcoin’s supply dynamics.  Bitcoin not only doesn’t hang on every word from a Central Banker it also acts as a hedge against most if not all of what they are executing as policy.  As funds naturally spill over from the existing FX markets the limited supply of Bitcoins become even more scarce and valuable.  The looming Brexit scenario and inevitable avalanche of other nations looking to leave the EU only reinforces the likelihood that BTCUSD trading volume surges higher.  Keep in mind that the biggest trades in the BTC market take place OTC because the current exchange volume simply can’t absorb large seven, eight, and nine figure or larger USD trades without dramatically altering the price and causing slippage.  It’s likely the amount of coins available for sale is even lower than what is generally reported.

Chinese Demand and Yuan Devaluation

Bank deposits in China amount to roughly $22 Trillion.  Since the middle of 2015 the PBOC (People’s Bank of China) has been trying to simultaneously devalue the Yuan against a basket of currencies representing key trading partners and scare away speculators betting on such a strategic devaluation.  This is just one country among many countries facing challenges related to state-sponsored fiat.  The Chinese as a whole are no strangers to Bitcoin given the large presence of miners in China and China’s experience with Bitcoin in the 2012-2013 huge bull market.

If merely 1% of these funds sitting in bank deposits fled to Bitcoin even if only as speculation or a place to store value that is $220 Billion in funds versus the current market cap of about $10 Billion for BTC.  China is only one nation, granted a very large one, in a world where nations such as Japan and others are starting to see Bitcoin trading volume pick up speed.  Capital flight to evade devaluations and currency controls has the potential to make an enormous impact on BTC as a Store of Value.

More and more citizens in China, and any other nation, will see that governments have a horrendous track record of protecting the Store of Value component of state-sponsored currencies.  Inevitably more people will understand that the core tenets of Bitcoin enforce scarcity and that it is an excellent asset that can be saved, retrieved, exchanged, and predictably useful at a later time.  This will lead more people to ask why they are leaving fiat stored in traditional checking and savings accounts.  Just shifting 1% of the funds residing in such accounts in only China could vault Bitcoin’s market value, and performance as a Store of Value, higher by a factor of more than 20x.

The intent of this analysis is not to proclaim that instantaneously trillions and trillions of dollars will all try to flood into Bitcoin at the same time starting right now.  Rather, part of the intent is to revisit how very basic mathematics and very conservative assumptions can create scenarios where mathematically there is immense upward pressure on the market cap of Bitcoin.

Historically people used currency, precious metals such as gold and silver, physical assets, and securities like bonds or equities as a Store of Value.  The world has never seen another option whose scarcity is guaranteed by mathematics and not manipulated by a small, select group of humans.  Just very small adjustments made by more people and institutions over time will mathematically create demand for Bitcoin that overwhelms the supply of Bitcoin available at the current price.  The result will be a further resumption of the upward trend in Bitcoin’s market value thus reinforcing an increasing appreciation for and use of Bitcoin as a Store of Value.

David Young


Bitcoin Security – Multi Signature Wallets part 2

Part 2,  Spend from Multisig Wallets – Generate Bitcoin payment

This is part two of our series on multi signature addresses and wallets. This is important technology for massively improving bitcoin security. In part one we generated a multisig address / wallet. In this part, we’ll walk you through all the steps necessary to spend the funds.

Courtesy World Bitcoin Network

In many ways, multisig addresses are the answer to most of bitcoin’s concerns and fears of theft. And now its time to scale up massive implementation for them. Originally introduced into the bitcoin client a few years ago, multi signature addresses are massively more secure than regular ones. Their adoption by all wallet manufacturers are in progress.

Geir Solem
Cryptor Trust Inc.

Bitcoin Security – Multi Signature Wallets

Part 1, Generating a Multisig Address – What are Multisig Wallets

Bitcoin is now in that ‘second phase’ where security is becoming very important. Originally introduced into the bitcoin client a few years ago, multisignature addresses are massively more secure than regular ones.

Courtesy World Bitcoin Network

Their adoption by all wallet manufacturers is coming.

In many ways, multisig addresses are the answer to most of bitcoin’s concerns and fears of theft. And now its time to implement them.

Nest part 2, Spend from Multisig Wallets

Geir Solem
Cryptor Trust Inc.

The Bitcoin Miners – Bankers of the Bitcoin System

Miners are the Bankers of Bitcoin and make the system work. However, unlike Federal Reserve which is a centralized system, the mining system of Bitcoin is a decentrelized system.

Source World Bitcoin Network

The job of the miners are to create new bitcoins which are rewarded to them when they maintain the Bitcoin Blockchain by adding transactions. But for now, every day that goes by it becomes harder to solve the equation, so you need more and more computing power!

The Bitcoin Network system might be the worlds largest computer network systems.

Understanding why Satoshi needed mining is fundamental to understanding decentralization and bitcoin. The mining of Bitcoin’s is limited to 21 million Bitcoins as scarcity is key with any Monetary system.

Geir Solem
Cryptor Trust Inc.

3 Elements that influence Bitcoin Value

Where does bitcoin value come from? Lets take a look at 3 elements that are intrinsic to bitcoin’s nature.

Image Source –

Bitcoin as a New Disruptive Technology – VALUE ELEMENT #1

Bitcoin as a currency, as a payment system and as a stock cannot be separated from its nature as a new revolutionary technology.

Leaving technical concepts apart, the bitcoin system provides the base for:

– Transferring money with low or none cost to any place in the world. Global acceptance and distribution!

– Empower people to become their own bank, removing the dependance on financial institutions. Freedom!

– Empower people currently out of the banking system. Democratic!

– Avoid the deflationary effects of traditional currency. Buying power!

– Pay for goods and services while protecting your personal data. Security!

Continue reading 3 Elements that influence Bitcoin Value