Bitcoin’s Illusion of Scarcity

In recent days, many NIA members have been asking us about Bitcoin Gold and how it relates to GoldMoney. On August 8th, NIA published an article entitled, “Greed in the Bitcoin Community”. In this article, we addressed the false perception that Bitcoin is a safe/stable store of value like gold, because the Bitcoin supply can never exceed 21 million. NIA explained how this artificial supply limit only exists for the purpose of pumping up the price of Bitcoin and can be changed at any time – just like how the Bitcoin community recently agreed to increase Bitcoin’s block size limit.

A week earlier, a disagreement that the Bitcoin community had about the proper block size limit, led to a hard fork that spun off a Bitcoin clone with an 8MB block size limit called Bitcoin Cash. Leading up to this hard fork, many Bitcoin enthusiasts were concerned about the confusion it would create and believed it could negatively affect the price of Bitcoin. Because Bitcoin Cash would take away hash power from Bitcoin, it was expected that Bitcoin on August 1st would at the very least decline in price by an amount equal to Bitcoin Cash – just like when a publicly traded company spins off a subsidiary into a new separately traded stock.

Instead, because Bitcoin had already sold off in the preceding weeks and the hard fork occurred smoothly with no technical setbacks, Bitcoin rallied in price on August 1st – creating an appearance to Bitcoin holders that they just received free money. NIA expressed concern about this in its August 8th article and predicted, “Due to incredibly huge greed in the Bitcoin community, NIA predicts that more ‘Bitcoin clones’ will be unleashed in the months ahead – and there will be massive hype for the next Bitcoin spin-off… with everybody excited to receive more free money, printed out of thin air!”

NIA was right! On September 28th it was announced that a new hard fork would take place on October 24th to create yet another Bitcoin clone called Bitcoin Gold. As we predicted, there was massive hype leading up to October 24th with Cryptocurrency investors dumping altcoin competitors of Bitcoin to load up with Bitcoin for the purpose of receiving free Bitcoin Gold. As the hype about Bitcoin Gold spread, there were many false rumors being posted across social media about Bitcoin Gold being backed by real gold.

Apparently, some people actually believed the false rumors that Bitcoin Gold was backed by real gold! Although we’d like to believe that most people were smart enough to realize this was false – we are sure that the majority of Bitcoin buyers believed that Bitcoin Gold would somehow use “Crypto Magic” to once again create billions of dollars in new wealth out of thin air!

When the Bitcoin Gold hard fork was announced on September 28th, Bitcoin was trading for only $4,180. Over the following month, Bitcoin rallied as much as $2,000 or 47.85% to a new all-time high on October 21st of $6,180 – mainly due to people buying Bitcoin to receive free Bitcoin Gold. However, after the Bitcoin Gold “snapshot” took place late Monday evening at block 491,407  – Bitcoin immediately sold off by $400 down to $5,600 – equal to Bitcoin Gold’s initial trading price of $400.

Over the last 24 hours as Bitcoin enthusiasts began to receive Bitcoin Gold in their Crypto wallets, they immediately sent it over to the exchanges and dumped it in the open market – causing Bitcoin Gold to crash from a high of $539.72 down to a low of only $125.83 for a shocking single day decline of 76.7%! Clearly, the greedy Bitcoin community is beginning to self-destruct. There was no legitimate need for a Bitcoin Cash or a Bitcoin Gold, but suddenly there are now three Bitcoins – each with a maximum supply of 21 million – and on November 18th another Bitcoin hard fork is scheduled to take place, which will create an additional Bitcoin clone called Bitcoin 2X.

This means there will be four Bitcoins with a total maximum supply of 84 million. Maybe Bitcoin Cash wasn’t enough to confuse the public and hurt Bitcoin’s value, but having four Bitcoins will destroy the illusion of scarcity:

What do you think will happen to the price of the main Bitcoin blockchain when the public realizes that anybody can create as many clones of Bitcoin as they want and there is absolutely no scarcity?

The only difference between Bitcoin Gold and the main Bitcoin is the fact that Bitcoin Gold uses the Equihash algorithm vs. Bitcoin using SHA256. This means Bitcoin Gold can be mined with GPU hardware vs. Bitcoin miners needing ASIC hardware. This makes Bitcoin Gold mineable for NIA’s Hive Blockchain (TSXV: HIVE), which uses GPU hardware to mine Ethereum and other altcoins. HIVE on Monday reached a new all-time high of $3.74 per share up a stunning 405.4% from NIA’s suggestion one month ago at $0.74 per share!

The only digital currency backed by real gold is GoldMoney. At the end of last year, NIA announced its top two stock suggestions for 2017. NIA’s #1 overall stock suggestion for 2017 was a Potash stock that rose from NIA’s suggestion price of $0.135 to a high of $0.36 for a gain of 166.67% in only six weeks! NIA’s #2 overall stock suggestion and #1 gold stock suggestion for 2017 was GoldMoney (TSX: XAU) at a suggestion price of $2.98 per share. Yesterday, XAU reached a new 52-week high of $6.25 per share for a gain of 109.7% in 10 months!

For comparison, when NIA announced XAU on December 14, 2016, VanEck Vectors Gold Miners ETF (GDX) was trading for $21 per share. Currently, GDX is trading for $22.95 per share for a gain of 9.29% in 10 months. NIA’s #1 gold pick for 2017 has gained 11.8X more than the average gold stock!

Gold stocks increase in value the most when one of the following two events occur: 1) They report their first ever NI 43-101 compliant gold resource or 2) They commence gold production and begin to generate major revenue/cash flow. NIA predicts that the small-cap gold explorer Para Resources (TSXV: PBR) will achieve both of these HUGE catalysts in 1Q 2018 at their newly acquired Gold Road Mine in Arizona. Look for PBR to explode big time to the upside beforehand in anticipation!

Past performance is not an indicator of future returns. NIA is not an investment advisor and does not provide investment advice. Always do your own research and make your own investment decisions. This message is not a solicitation or recommendation to buy, sell, or hold securities. NIA has received compensation from a third-party for covering HIVE of $60,000 cash. NIA has received compensation from a third-party for covering PBR of $20,000 cash. Never make investment decisions based on anything NIA says. This message is meant for informational and educational purposes only and does not provide investment advice.