The Ultimate Bitcoin Crash Nightmare
The experts in Bitcoinland have been proclaiming how great this cryptocurrency is and shall be into the future. The "experts" also claimed that it was healthy for the cryptocurrencies that the Securities and Exchange Commission required ICO's (Initial Coin Offerings) within the United States to be treated somewhat like IPO's (more at this link). However, and as usual with new technologies (a la Portfolio Insurance, Derivatives, etc.) the SEC is already 4 years behind a burgeoning multi-billion dollar industry as most nation's regulators are prone to be.
This brings us to a theoretical, yet realistic situation where those those individuals who put their faith into currencies based on bytes versus real world hard currency one can possess, will find out rapidly during an economic crash similar to 2008 just how vulnerable they are.
The following is a fictional situation to illustrate my point; the characters and dialogue are fiction and not meant to imply nor impugn any behavior by parties mentioned:
Robert woke up at 5:30 a.m. in the morning at his fashionable north side Chicago apartment preparing for another day of somewhat recently had been mundane currency futures trading. When he had last checked the markets during his 3 a.m. Eastern Time traditional "safety check," it was another slow day with very little action this Tuesday morning in October until he turned his television and computer on.
The headlines put Robert into an almost immediate case of shock:
North Korea Fires Nuclear Pre-Emptive Strike Against U.S. Forces in Guam and Okinawa
Other North Korean Missiles Intercepted Over Alaska and Japan
European Markets Closed by the ECB After 10% Drop in First 5 minutes of Trading
US Dollar Crashes to 82 on DXY Before Trading Halt
Gold Trading Suspended after $300 Gain in 5 Minutes of London Trading
President Trump to Address the Nation at 8 a.m. Eastern Time on Korean War
Rob slumped in his chair. He had prepared for the wildcard by buying gold futures, but without any way to trade the paper market, he could not cash in on his vast gains. Desperate to raise cash he signed in immediately to his Bitcoin account, looking to transfer those gains by selling most of his holdings and depositing the profits into his bank account as war appeared to have started in the last three hours and for some reason his iPhone failed to wake up his hungover self and make him aware of it.
The computer seemed to take forever to boot up but before grabbing his cell phone to trade, the log in worked and he was in his Bitcoin account and went pale:
$BTC (Bitcoin) as quoted on his system indicated a 50% drop on massive volume.
The largest traders in the world in China apparently had started selling within hours before the premeditated strike on the U.S. military and driven the price through the floor. His holdings were now down to only $120,000 or so in U.S. dollars and his ability to sell and transfer the funds to his bank were in question. Robert began to get dressed because he knew the systems at his trading office were exponentially faster than his own laptop thus he needed the speed not only to save his personal investments in Bitcoin, but possibly even his stock portfolio which now looked to be in dire straits with all indices indicated to open limit down.
After speeding through town to get to his office, Robert blew through security and parked at his desk as other traders were hurriedly arriving and booting up their terminals to find out what was happening and how the markets were reacting to the news. The television monitors inside the trading room were all tuned to Fox Business, CNBC, Bloomberg, and the other news channels when suddenly at 6:45 a.m., the Emergency Alert System notification appeared on all the screens. The volume was down but the shock and silence in the room was stunning:
"…all U.S. Military Personnel are hereby ordered to report to their bases of operation immediately. All U.S. military reservists are hereby ordered to report to their assigned military reporting base immediately…"
Before Robert could absorb the gravity of the ongoing announcements, several of his co-workers looked down at their cell phones and walked out of the room. They were the reservists, on call 24/7 should such a national emergency occur.
The immediate reaction was not that of someone who gave a crap about his clients, but for self-preservation. Robert logged into his Bitcoin account and immediately attempted to transfer the remaining balance to his bank account only to be greeted by this message:
DUE TO EXTRAORDINARY MARKET CONDITIONS ALL TRADING AND WITHDRAWALS IN BITCOIN HAVE BEEN SUSPENDED UNTIL FURTHER NOTICE
"What the hell," he screamed at his screen. As the panic of losing almost a quarter of a million dollars set in, he took a deep breath and tried to log in and sell his holdings in the futures markets only to see the following message:
FORCE MAJEURE DECLARED IN ALL FUTURES AND OPTIONS MARKETS…TRADING SUSPENDED PENDING PRESIDENT TRUMP'S ANNOUNCEMENT AT 08:00 A.M. ET….TRADING IS HALTED IN ALL MARKETS UNTIL FURTHER NOTICE
"Oh my God, what do I do." he yelled out. Robert ran to his boss and said, "I have to go downstairs to the ATM, I'll be back in 5," and before his boss could reply, Robert was running to an elevator with other employees trying to get downstairs before him. As the elevator hit the lobby level, he burst through the crowd running towards the two ATM machines in the lobby only to see two orderly lines of over what looked like seventy plus people. He knew that there would be no cash left by the 30th person, so he ran out into the street and down the block to the Chase bank around the corner.
There was no line at the ATM and he figured that nobody had realized what has happened just yet. He fumbled for his card and ran towards the terminal when he saw the display:
It was at that sinking moment that Robert realized that all of those insane claims made by the "survivalist" guy in the mail room were not that crazy:
If you don't hold it, you don't own it. Without cash, gold, or silver on hand you are literally broke and at the mercy of the government.
That is how the real world happens yet nobody wants to admit it because that would destroy their own personal version of internet reality.
Welcome to Realville Robert.
Welcome to Realville, crypto-geeks.
4 Comments on "The Ultimate Bitcoin Crash Nightmare"
Dave6034 | 01/08/2017 at 00:12 |
July to November 1914 was the only time US stock markets closed for more than a few days. Brokers set up shop on the streets outside to match up buyers and sellers. This only prevented the government from selling bonds (because people's savings were frozen in stocks), so the government relented and let the markets re-open. Lesson learned, markets stayed open for the entire duration of second World War.
If all Internet connections between the USA and China were severed, Bitcoin would fork, but as soon as someone rigged up a secret connection via a neutral third country, the shorter blockchain would be quickly discarded in favor of the longer one. People who didn't try to transfer Bitcoin during the disruption wouldn't even notice.
Even cash is useless in an emergency if there's nothing to buy. Always have a few days worth of food and water on hand just in case.
concerndcitizen | 14/08/2017 at 10:58 |
The same thing would likely happen to this person's bank account. Cash would be useless. Best to let the gold and btc sit around for when you'll really need them. The point about the internet being disrupted is a fair one, however, the Chinese would be buying MORE btc to get their money OUT of China, more likely than not.
aqrobles | 26/08/2017 at 19:51 |
I agree – the Chinese would buy more. They are hostage to our dollars and dollar denominated debt because they are trying to keep our dollar stronger in relation to the yuan. Normally to exchange yuan for dollars, you sell dollars (bidding down its value) and you buy yuan (bidding up its value). I say normally because this sort of thing gets reconciled by SWIFT. The Chinese solution is to hold on to those dollars and make internal loans against them in yuan. But what if? If the Chinese sell their dollars to buy a non-sovereign, crypto currency like XRP (which is a crypto currency designed to circumvent SWIFT), the value of the yuan vis-a-vis the dollar doesn't change. They get out of dollars and the rest of the world supports the crypto currencies as the dollar and other major currencies crash.
johngaltfla.com | 03/09/2017 at 08:16 |
No doubt about it. And with global governments beginning to crack down on the cryptos, they might well be the agents which pop it. Time will tell, but make money while you can and don't be the last one trying to squeeze another nickel out of it. BTC dropped $500 yesterday in thin trading so with what happened overnight, I expect volatility in ALL markets for the next week.