Crypto Showdown: Bitcoin vs. U.S. Government
Bitcoin is hyperbolic again.
The premier cryptocurrency just cracked the $6,000 price level.
As I shared yesterday, we shouldn’t expect it to stop anytime soon, either.
I’m projecting that $6,000 is nothing more than a speed bump on the way to $10,000.
I hope by now you realize that we’re witnessing the biggest financial storyline of our lifetime.
The explosion of cryptocurrencies — led by Bitcoin — will be studied by scholars, economists, entrepreneurs and technologists for the next several hundred years. I know this, of course, because we still talk about Tulip Mania nearly 400 years later.
The latest Bitcoin news helps to crystallize its charm…
WikiLeaks founder Julian Assange is purported to have made upward of 50,000% on Bitcoin.
That is, because the United States siphoned off Assange’s access to all traditional money channels. So Bitcoin was his only hope of staying solvent.
“In a tweet over the weekend, Assange posted a screenshot of Bitcoin prices on July 18, 2010, and Oct. 14, 2017, on industry website CoinDesk. In this period, the price of Bitcoin went from 6 cents to around $5,814. This represents a 9,689,900% increase.”
Assange’s case, if true, proves that Bitcoin lies beyond the reach of policymakers.
Still, I’m hearing chatter that U.S. regulators are ready to begin meddling with Bitcoin anyway.
But what exactly can the feds do?
Here’s what you need to know now…
Assessing the Threat Level
The threat posed to global governments by cryptocurrencies is clear…
They allow people to store assets and undertake transactions entirely anonymously, without governments being able to trace them.
This is also the principal advantage of cash and Swiss bank accounts.
And the world’s central banks are strongly tempted to abolish the former, while the latter were effectively made illegal by the 2010 FATCA legislation.
So it’s very likely that the U.S. authorities will (at some stage) attempt to take on Bitcoin.
Russia and China have already attempted to restrict cryptocurrencies. No doubt the U.S. will follow suit.
But what can the government do?
It certainly can’t shut cryptos down. At least not without inflicting huge economic and political damage.
Cryptocurrencies are too big of a market already. And they’ve become too useful to the emerging 21st-century economy to be abolished entirely.
With that said, however, nothing is 100% beyond the U.S. government’s control.
In this regard, Bitcoin is the most susceptible to interference. That is because Bitcoin is not perfectly anonymous. Its blockchain suffers from flaws, so its transactions can be traced.
Other cryptocurrencies have developed advanced technologies that solve this problem. That makes them less vulnerable to government action. (Go here to see the best Bitcoin alternatives in the market today.)
Testing Cryptos’ Resilience
Cryptos are a free-market proponent’s best friend… and a government’s worst enemy.
As an American, the government can legally seize all of your fiat money if you are deemed a criminal.
We’re talking about physical cash or electronic holdings such as savings held in a bank or brokerage account.
But in the eyes of the federal government — particularly the IRS — cryptos aren’t considered “currency.”
They are technically viewed as property.
That makes cryptos subject to ordinary capital gains tax treatment, as well as regulations on seizure
But if your holdings aren’t “stored” in the States, the feds can’t steal them.
Of course, that doesn’t mean they won’t try…
Former president Barack Obama signed an executive order in 2015 that gave authorities the ability to confiscate crypto holdings of anyone they suspected of criminal activity.
The order was vague but carried enough weight to get the government in the crypto-seizure game.
Now it’s Congress’ turn…
Senators introduced a whopper of a bill last month titled the Combating Money Laundering, Terrorist Financing and Counterfeiting Act of 2017.
The legislation is specifically aimed at deterring criminal money transfers using Bitcoin.
If passed, the law would allow the feds to seize anything you possess — without any kind of due process.
But if Bitcoin isn’t even recognized by most countries (including the U.S.) as “real money,” how could the feds possibly seize it?
By forcing domestic crypto exchanges to comply with money laundering law. That means keeping personal information on digital currency traders.
The bill is wide reaching — and questionably passable. But it represents a domestic Bitcoin law with teeth.
The Feds Are Coming
Bottom line: For the most part, your crypto holdings are generally safe from the government. But the feds are on the hunt, so keep an eye out.
Now, if you’re interested in making money in the crypto markets, it can be confusing to get started.
That’s why I’ve made it super simple to hit the ground running as a crypto investor in our flagship publication, True Alpha.
I’ve also identified a handful of cryptos that are rocketing higher (and faster) than Bitcoin ever did.
Click here to learn more.
Ahead of the tape,
Chief Investment Strategist, Wall Street Daily