Homeless, Unemployed, and Surviving on Bitcoins

Paul Harrison, Chris Kantola, and Jesse Angle, scrounging for bitcoins outside a public library in Pensacola, Florida.Photo: Michael Spooneybarger/WIRED

 

Jesse Angle is homeless, living on the streets of Pensacola, Florida. Sometimes he spends the night at a local church. Other nights, he sleeps behind a building in the heart of the city, underneath a carport that protects him from the rain.

Each morning, he wakes up, grabs some food, and makes his way to Martin Luther King Plaza, a downtown park built where the trolley tracks used to run. He likes this park because his friends hang out there too, and it’s a good place to pick up some spending money. But he doesn’t panhandle. He uses the internet.

The park offers free wireless access, and with his laptop, Angle watches YouTube videos in exchange for bitcoins, the world’s most popular digital currency.

‘Bitcoin beats the shit out of regular money. We’ve resonated so well with people because it’s direct action. There’s no chaff between donation and helping people.’

— Jason King

For every video he watches, Angle gets 0.0004 bitcoins, or about5 cents, thanks to a service, called BitcoinGet, that shamelessly drives artificial traffic to certain online clips. He can watch up to 12 videos a day, which gets him to about 60 cents. And he can beef up this daily take with Bitcoin Tapper, a mobile app that doles out about 0.000133 bitcoins a day — a couple of pennies — if he just taps on a digital icon over and over again. Like the YouTube service, this app isn’t exactly the height of internet sophistication — it seeks to capture your attention so it can show you ads — but for Angle, it’s a good way to keep himself fed.

Angle, 42, is on food stamps, but that never quite gets him through the month. The internet provides the extra money he needs to buy a meal each and every day. Since setting up a bitcoin wallet about three or four months ago, he has earned somewhere between four or five bitcoins — about $500 to $630 today — through YouTube videos, Bitcoin Tapper, and the occasional donation. And when he does odd jobs for people around Pensacola — here in the physical world — he still gets paid in bitcoin, just because it’s easier and safer. He doesn’t have to worry as much about getting robbed.

Jesse Angle isn’t your average homeless person. But he shows that bitcoin is changing the world inmore ways than you might imagine. Some believe it could provide a major boost to the country’s640,000 homeless, not only in providing extra pocket change for those on the street, but by helping urban homeless shelters more quickly secure donations for hot meals, beds, and blankets.

Angle learned about bitcoin through Sean’s Outpost, a Pensacola charity that has raised about $32,000 through a program that solicits donations in bitcoins rather than American dollars. So far, it has received donations from 25 different countries, and this has bought almost 16,000 meals for Pensacola homeless.

“Bitcoin beats the shit out of regular money,” says Jason King, the founder of Sean’s Outpost. “We’ve resonated so well with people because it’s direct action. There’s no chaff between donation and helping people.” That could change, as regulators in the U.S. put the clamps on the use of bitcoin. But for now, in the world of the homeless, it reduces chaff in more ways than one.

Paul Harrison, after his computer loses battery power in the middle of a video game. Photo: Michael Spooneybarger/WIRED

Bitcoin: The Great Equalizer

Jesse Angle says bitcoins are harder to come by than spare change shared by people walking down the streets. But there are other reasons for him to go digital.

“It’s a lot less embarrassing,” he says. “You don’t have to put yourself out there.” And unlike panhandling in Pensacola, using an app like Bitcoin Tapper won’t put him on the wrong side of the law. This past May, Pensacola — where Angle has lived since April — passed an ordinance that bans not only panhandling but camping on city property.

‘It’s a lot less embarrassing. You don’t have to put yourself out there.’

— Jesse Angle

Yes, you need a smartphone to earn bitcoins — or some other device that gets you onto the internet. But the homeless carry mobile devices more often than you might expect. Angle’s homeless friends Chris Kantola and Paul Harrison also have phones, and they aren’t unlike people living on the streets in other parts of the country. At San Francisco’s Tenderloin Technology Lab — a nonprofit that provides the city’s poor and homeless access to computers — organizers say that many of its clients use personal phones to connect to the net. Android is the mobile platform of choice.

You also need power, but that’s not that hard to come by. When Angle and his pals run out of juice for their phones, they walk from Martin Luther King Plaza to the local Pensacola library, where they can plug into outdoor outlets on the side of the wall.

The bitcoin system could become an equalizer for the country’s homeless, a place where the stigma of living on the streets isn’t as pronounced. “Homeless people don’t like to raise their hands and say they’re different,” says Mark Horvath, an advocate for using the internet and social media to help end homelessness. “Nobody does.” In the bitcoin world, they don’t have to.

If you’re homeless, the great thing about bitcoin is that you can set up a wallet without an ID or a street address. And once you start filling this wallet, there are plenty of ways of converting bitcoins into cashand food and other goods, all without identification.

After earning his money with apps like Bitcoin Tapper, Angle turns to another tool called Gyft, an Android app that converts his bitcoin reserves into gift cards for places like Papa John’s pizza. He can then buy a pie online, have it delivered, and share it with Kantola and Harrison.

The next day, his friends might return the favor. They too have their own bitcoin wallets. “We’re kind of the homeless geeks,” Angle says. “We all got laptops and smartphones.”

Angle converts bitcoins into a Papa John’s e-gift card, which he uses to buy food for himself and his friends. Photo: Michael Spooneybarger/WIRED

The Rest of the Article can be Read Here

The Price Of Copper And 11 Other Recession Indicators That Are Flashing Red

There are a dozen significant economic indicators that are warning that the U.S. economy is heading into a recession. The Dow may have soared past the 15,000 mark, but the economic fundamentals are telling an entirely different story. If historical patterns hold up, the economy is heading for a very rocky stretch. For example, the price of copper is called “Dr. Copper” by many economists because it so accurately forecasts the future direction of the U.S. economy. And so far this year the price of copper is way down. But that is not the only indicator that is worrying economists. Home renovation spending has fallen dramatically, retail spending is crashing in a way not seen since the last recession, manufacturing activity and consumer confidence are both declining, and troubling economic data continues to come pouring out of Asia and Europe. So why do U.S. stocks continue to skyrocket? Will U.S. financial markets be able to continue to be divorced from reality? Unfortunately, as we have seen so many times in the past, when stocks do catch up with reality they tend to do so very rapidly. So you better put on your seatbelts because a crash is coming at some point.

But most average Americans are not that concerned with the performance of the stock market. They just want to be able to go to work, pay the bills and provide for their families. During the last recession, millions of Americans lost their jobs and millions of Americans lost their homes. If we have another major recession, that will happen again. Sadly, it appears that another major recession is quickly approaching.

The following are 12 recession indicators that are flashing red…

#1 The price of copper has traditionally been one of the very best indicators of the future performance of the U.S. economy. The fact that it is down nearly 20 percent so far this year has many analysts extremely concerned

Copper’s downward trend foreshadows a stock market collapse, according to Societe Generale’s famously bearish strategist Albert Edwards, who said equity markets will riot “Japan-style.”

“Copper is acting exactly as it did when I wrote about the impotence of liquidity in the face of the (then imminent) 2007 recession. Once again it is giving us an early warning that liquidity will not save risk assets: time to get out of equities,” Edwards wrote in his latest research note, on Thursday.

#2 Home renovation spending has fallen back to depressingly-low 2010 levels.

#3 As Zero Hedge recently pointed out, U.S. retail spending is repeating a pattern that we have not seen since the last recession…

Retail sales of clothing is growing at the slowest pace since 2010; but while major store sales are about to drop negative YoY for the first time in over 3 years, the utter collapse in general merchandise sales is worse that at the peak of the last recession at -5%. It seems tough to see how a nation with an economy built on 70% consumption is not in a recessionary environment. And while this alone is a dismal signal for the discretionary upside of the US economy/consumer; as Gluskin Sheff’s David Rosenberg points out real personal income net of transfer receipts plunged at a stunning 5.8% annual rate in Q1. The other seven times we have seen such a collapse, the economy was either in recession of just coming out of one.

#4 Manufacturing activity all over the country is showing signs of slowing down. In fact, Chicago PMI has dipped below 50(indicating contraction) for the first time since the last recession.

#5 In April, consumer confidence unexpectedly fell to a nine-month low

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment declined to 72.3 in April from 78.6 a month earlier. This month’s reading was lower than all 69 estimates in a Bloomberg survey that called for no change from the March number.

#6 NYSE margin debt peaked right before the recession that beganin 2002, it peaked right before the financial crisis of 2008, and it ispeaking again.

#7 The S&P 500 usually mirrors the performance of Chinese stocks very closely. That is why it is so alarming that Chinese stocks peaked months ago. Will the S&P 500 soon follow?

#8 The economic data coming out of the Chinese economy lately has been mostly terrible

For starters, China’s recent economic data, as massaged as it is to the upside, is downright awful. China’s PMI numbers were the worst in two years. Staffing levels in the Chinese service sector decreased for the first time since January 2009(remember that year).

China’s LEI also shows no sign of recovery. If anything, it indicates China is heading towards an economic slowdown on par with that of 2008.And if you account for the rampant debt fueling China’s economy you could easily argue that China is posting 0% GDP growth today.

#9 Things just continue to get even worse over in Europe. Unemployment in both Greece and Spain is now about 27 percent, and the unemployment rate in the eurozone as a whole has just set a brand new all-time record high.

#10 Crude inventories have soared to a record high as demand for energy continues to decline. As I have written about previously, this is a clear sign that economic activity is slowing down.

#11 Casino spending is usually a strong indicator of the overall health of the U.S. economy. That is why it is so noteworthy that casino spending is now back to levels that we have not seen since the last recession.

#12 The impact of the sequester cuts is starting to kick in. According to the Congressional Budget Office, the sequester cuts will cost the U.S. economy about 750,000 jobs this year.

UNPRECEDENTED Shortages Of Ammo, Physical Gold And Physical Silver

All over the United States we are witnessing unprecedented shortages of ammunition, physical gold and physical silver.  Recent events have helped fuel a “buying frenzy” that threatens to spiral out of control.  Gun shops all over the nation are reporting that they have never seen it this bad, and in many cases any ammo that they are able to get is being sold even before it hits the shelves.  The ammo shortage has already become so severe that police departments all over America are saying that they are being told that it is going to take six months to a year to get their orders.  In fact, many police departments have begun to trade and barter with one another to get the ammo that they need.  Meanwhile, the take down of paper gold and paper silver has unleashed an avalanche of “panic buying” of physical gold and physical silver all over the planet.  In the United States, some dealers are charging premiums of more than 25 percent over the spot price for gold and silver and they are getting it.  People are paying these prices even though they are being told that delivery will not happen for a month or two in many cases.  Some dealers are feverishly taking as many orders as they can, and they are just hoping that they will be able to get the physical gold and silver to eventually fill those orders.  Personally, I have never seen anything like this.  If things are this tight now, what is going to happen when the next major financial crisis strikes and people really begin to panic?

The shortages and rationing of ammunition at gun shops all over America just seem to keep getting worse.  The following is from an article by a gun owner down in Texas named Brad Meyer

If you’d like to see a normally sullen sales clerk chortle with derisive pleasure, just walk into just about any gun range, sporting goods store or mass merchandiser and try and buy a couple boxes of .22 ammunition.

Gun enthusiasts are up in arms about a nationwide shortage of ammunition. Handgun ammo in general is particularly difficult to find – and when you do find it, there are restrictions on the amount you can buy and how much you’re going to be paying for it.

While the list of hard to find ammo is long, .22 long rifle and 9mm handgun ammunition are particularly difficult to find in quantity. And the few places that have it are charging a premium rate and usually limiting purchases to one box, per person, per day.

Many gun owners try to find ammunition by going on the Internet, but things have gotten so tight that now any ammo that becomes available online is often gone within seconds

There are websites where people across the country post links to where ammunition is available – and it sells out within seconds. Not minutes or hours – seconds.

Unfortunately, all of this demand is also driving up prices.  Just check out what Meyer says is happening to the price of standard .22 ammo…

The demand is driving up the cost of ammunition. Six months ago, standard .22 ammo – the most common type of bullet produced in the world – could be had in bulk for around five cents apiece. It is now going for 50 cents or more on some websites – and people are paying it.

But this shortage is not just affecting private citizens.  According toNewmax, police departments all over the nation are dealing with ammo shortages unlike anything that they have ever seen before…

Sheriff Anthony DeMeo of Nye County, Nev., was told his department’s regular order of 50,000 rounds could take up to a year to arrive.

“This is the first time ever I’ve heard that there’s a problem with a law-enforcement agency getting ammo for their agency,” DeMeo told The Las Vegas Sun.

These departments are not alone. Law enforcement agencies in Oklahoma, Wisconsin, Arizona, and Georgia are among many that are having to limit how much they give their officers due to the shortage.

Could you imagine waiting for “up to a year” to get more ammunition?

A recent article posted on CNSNews.com had some more examples of police departments that are reporting that there is a massive wait to get more ammo…

Chief Pryor of Rollingwood, Texas says of the shortage:

“We started making phone calls and realized there is a waiting list up to a year.  We have to limit the amount of times we go and train because we want to keep an adequate stock.”

“Nobody can get us ammunition at this point,” says Sgt. Jason LaCross of the Bozeman, Montana police department.

LaCross says that manufacturers are so far behind that they won’t even give him a quote for an order.

“We have no estimated time on when it will even be available,” LaCross says.

This is insane.

What in the world could be causing such an ammo crunch?

Well, certainly the demand for guns and ammo has been trending up in recent years – especially since Barack Obama was elected.

But that doesn’t fully account for the shortages that we are witnessing at the moment.

So what is going on?

Well, some people believe that the federal government is responsible.  It has been reported that they have signed contracts to purchase “up to” 1.6 billion rounds of ammunition.  According to Forbes, this amount of ammunition would be enough to fight a “hot war” in America for 20 years

The Denver Post, on February 15th, ran an Associated Press article entitled Homeland Security aims to buy 1.6b rounds of ammo, so far to little notice.  It confirmed that the Department of Homeland Security has issued an open purchase order for 1.6 billion rounds of ammunition.  As reported elsewhere, some of this purchase order is for hollow-point rounds, forbidden by international law for use in war, along with a frightening amount specialized for snipers. Also reported elsewhere, at the height of the Iraq War the Army was expending less than 6 million rounds a month.  Therefore 1.6 billion rounds would be enough to sustain a hot war for 20+ years.  In America.

Could this be a way that the Obama administration is trying to restrict the amount of ammo that gets into the hands of private citizens?

That is what some people are suggesting.

According to talk radio show host Michael Savage, the ammo contracts that the federal government has signed give them priority over all other purchasers…

What Homeland Security is doing here is they’re issuing a contract to buy up to that amount of ammo if they want it…

It’s a way to control the amount of market that’s available on the commercial market at any time.

If they go to the ammo manufacturers and say give me 50 million rounds, give me another 30 million rounds… if they periodically do this in increments, they’re going to control how much ammo is available on the commercial market.

As part of their contract it stipulates in there that when the government calls and says give us another quantity, that everything they make has to go to the government priority one before any of it goes to the commercial market.

So, if  they get nervous, all they have to do is use that contract that they have in place… and they just say ‘give us some more.’

So whenever the government wants to tighten the supply of ammunition, all they have to do is invoke their contracts and order more for themselves.

Meanwhile, Obama appears to be doing other things to restrict the amount of ammo that gets into the hands of private gun owners.

For example, there are reports that the Obama administration plans to use executive orders to greatly restrict the importation of ammo from overseas.

So if anything, the shortage of ammunition is only going to get worse, not better.

Meanwhile, the “panic buying” of physical gold and physical silver that we have seen lately has really run down inventories.

According to Reuters, demand has become so intense that the U.S. Mint has suspended sales of gold coins for the first time since 2009…

The U.S. Mint said it has suspended sales of its one-tenth ounce American Eagle gold bullion coins as surging demand after bullion’s plunge to two-year lows depleted the government’s inventory. This marks the first time it has stopped selling gold product since November 2009, dealers said.

At the same time, precious metals dealers all over the country are scrambling to meet the voracious demand that they have been seeing this month.  The following is an excerpt from a letter that the CEO of Texas Precious Metals recently sent out to his customers…

The physical silver market is, in a word, ugly. There is no telling at this point when mint inventories will return to normal, but you can be sure it will not happen within the next 8 weeks. Most dealers, at this point, are selling their current customer demand forward, meaning they are selling product they do not presently have, expecting to pull from future mint allocations. Consequently, future allocations will face pressure from today’s demand. It is not my intent here to comment on the business practices of other companies, but I will say that no one can possibly predict future allocations at the time. The US mint, for example, releases its allocations weekly, and until then, dealers have no insight into allocation levels. Last week, we turned away business in excess of 100,000 ozs of silver because of stock depletion. However, we stand by the notion that it is better to lose a sale than lose a customer by delaying delivery two months (or more).

A similar thing is happening over in Asia.  According to the Financial Times, soaring demand has caused a shortage of gold at the Hong Kong Gold & Silver Exchange Society…

Haywood Cheung, president of the Hong Kong Gold & Silver Exchange Society, said the exchange had effectively run out of most of its holdings as members looked to meet a shortfall in supply amid rampant retail demand for gold products.

“In terms of volume, I haven’t seen this gold rush for over 20 years,” he told the Financial Times on Monday, adding that the exchange only had around twenty 1kg bars, and 100 five-tael bars left in its inventory. “Older members who have been in the business for 50 years haven’t seen such a thing.”

But most disturbing of all is what Jim Sinclair told King World Newsrecently.  Apparently his friend went to get his gold out of a Swiss bank the other day and they refused to give it to him…

A person that I know with significant deposits in one of the primary Swiss banks, in allocated gold, wanted to take out his gold and was just refused on the basis of directives from the central bank….

They told him the amount was in excess of 200,000 Swiss francs and the central bank had instructed them not to do it because it has to do with anti-terrorism and anti-money laundering precautions.

I really wonder whether those are precautions or whether the gold simply isn’t there. Now you tell me that a London delivery has basically failed. It has to raise our suspicions that the lack of physical gold behind the paper gold is literally so severe that we are coming to understand that it is in fact not there.

The gold that people think is stored is not stored, and the inventory of the warehouses for exchanges may not be holding deliverable gold. There has always been speculation about whether or not the physical gold the US claims to store is in fact in those vaults.

The greatest train robbery in history might be all of the gold, and it would only be something like we have described above that would happen right before gold makes historic highs.

There simply is no gold behind the paper. One example is AMRO, a second is your example with Maguire, and a third is my dear friend who was refused his gold on the basis that its value was too high. Remember this friend of mine had his gold in an allocated account in storage at a major Swiss bank. I repeat, there is no gold.

So are we going to see more of this?

Will it soon become evident that there is simply not enough physical gold to cover all of the promises that the banks have made?

Jim Sinclair sure seems to think so.

In another interview, John Embry expressed similar sentiments to King World News…

This gets back to the tip of the iceberg when the Dutch Bank ABN AMRO came out and literally said that if you have allocated gold with us, you can’t have it.

That, to me, is a default, and it gets back to what Jim Sinclair related when one of his friends went to a Swiss bank and couldn’t get his allocated gold.  I mean that’s preposterous.  If it’s allocated it should be there, but it’s clearly not there.  I think this is the beginning of the end of the massive Ponzi scheme in paper gold.  I have been talking about this for some time, and it will have an enormous impact on future gold and silver prices.

When it becomes widely known that all of the people who think they own gold in fact don’t own gold, that it’s been hypothecated and re-hypothecated so many times that there are 100 claims for every single ounce of physical gold, that is when the prices of gold and silver will really go berserk to the upside, and at that point the shorts will have serious problems.”

If those that helped engineer the recent takedown of paper gold and silver were hoping to scare people away from physical gold and silver, then they failed miserably.  For even more on this, please see my recent article entitled “10 Signs The Takedown Of Paper Gold Has Unleashed An Unprecedented Global Run On Physical Gold And Silver“.

All of this is just another example why I encourage people to get prepared while times are still relatively good.

Once disaster strikes, it may be too late to get the things that you need.

Right now there are a whole lot of people out there wishing that they had stocked up on ammo when it was much cheaper and much more readily available.

We are moving into a time when everything that can be shaken will be shaken.  Use the stability provided by the false bubble of economic hope that we are experiencing right now as an opportunity to get prepared.  The next major wave of the economic collapse is rapidly approaching and time is running out.

Eleven Economic Crashes That Are Already Underway

It would be difficult to deny with any sort of credence that the global economy is currently in anything other than dire straits. Almost everywhere you look these days, the system is broken and in desperate need of repair or major overhaul. And even though the stock market has yet to crash in the same way that it did back in 2008, there are a number of major indicators at the present time that point to a major unraveling in the near future. Here is a summary of 11 economic crashes that are currently underway, and that point to tough times ahead, as compiled by the blog The Economic Collapse:

1) Bitcoins. You are already aware of the downward spiral of this alternative, online currently. Having recently lost nearly 80 percent of its perceived value in just a few days, bitcoins have proven, at least at this current time, to be highly volatile. However, bitcoins may still be a viable alternative to central bank-issued Federal Reserve notes, which continue to be backed by nothing.

2) Gold. For the first time since July 2011, gold has dropped below $1,500/ounce, and is currently valued about 22 percent lower than its record high of $1,921/ounce back in September 2011. Though obviously manipulated by central bankers, the price of gold in fiat currency has fallen dramatically in recent days.

3) Silver. The same goes for silver, which has dropped in fiat currency price to its lowest level in nearly two years. Both gold and silver will always be more valuable in real terms than paper fiat currency, though, and the new lows for silver represent a viable buying opportunity for those who wish to protect their wealth.

4) Oil. Though a drop in oil prices is a good thing at the gas pump, any significant decrease in price could be indicative of a major economic crisis. And with oil prices currently hovering around $87 per barrel as of this writing, this may be cause for concern.

5) Consumer confidence. A measure of how the overall population feels about the current state of the economy, consumer confidence levels have been in free fall mode recently. Having dropped to a nine-month-low of 72.3 on the scale, current consumer confidence levels reflect major concerns about an impending economic crisis.

6) Retirement accounts. The number of Americans taking out loans on their 401(k) retirement accounts has risen by nearly 30 percent of the past year, indicating uncertainty about not only the viability of such accounts, but also about financial stability moving into the future.

7) Casino spending. A commonly-referenced indicator of economic health, casino spending has seen major declines in recent months. Similar declines occurred back in 2008 right before the stock market plummeted, which bodes ominous for the near future.

8) Employment in Greece. The current economic situation in Greece has gone from bad to worse, with unemployment soaring more than 25 percent in just one month to 27.2 percent. As stated by The Economic Collapse, this is an “avalanche of unemployment.”

9) European Financial Stocks. Most of the major banks in Europe are basically insolvent, which helps explain why the financial markets in Europe have plummeted to seven-month lows.

10) Spanish bankruptcies. Like Greece, Spain is currently hobbling through major turmoil, particularly with regards to its business climate. The number of Spanish companies that have gone bankrupt over the past year has risen by 45 percent.

11) Demand for energy. Another major indicator of economic turbulence is energy usage, and it is continuing to decline across the U.S. What this means is that economic activity is also slowing down, with job growth decline and unemployment rising. The writing is on the wall.

Be sure to check out the full report at The Economic Collapse:
http://theeconomiccollapseblog.com

Sources for this article include:

http://www.naturalnews.com

http://www.zerohedge.com

Bitcoin Prices Crater Further As Panic Selloff Claims 75% Loss From Bubble High

The bitcoin selloff that began less than 24 hours after has now plummeted nearly 75% from Wednesday’s bitcoin high of $266, wiping out over $1.5 billion in valuation for the crypto currency.

As bitcoin skyrocketed in value, I saw unmistakable signs of “irrational exhuberance” kicking in, with bitcoin hypsters starting to talk more like charlatans and cult members than rational investors. So I published an urgent warning and repeated the same warning live on national radio.

The very next day, bitcoin cratered from $266 to $105. Self-deluded bitcoin cultists called this “50% off Wednesdays” and urged everyone to “buy and hold.” (Because that’s how the con works.)

But the selloff had already picked up steam, and while Thursday saw some support around the $110 – $120 level, by Friday morning the bitcoin bubble accelerated its downfall, plummeting to $61.11, a loss of over 75% from its high.

Bitcoin investors are delusional fools

Even at $61, bitcoin is wildly over-valued. The crypto currency now has almost no practical use whatsoever in the world of e-commerce because its extreme volatility means no large merchant will ever accept it.

Any currency that can drop 60% (or more) in a few hours is not a reliable currency for exchange, period. You can’t argue with mathematics, although bitcoin cult members are certainly trying.

Never argue with mathematics

Bitcoin fanboys (i.e. cult members) are learning the hard way that you should never argue with mathematics. If you try to, you will lose.

As previously posted a bitcoin crash was coming because anyone could see that  2+2=4. Yes, it was that obvious. But just like all the suckers who lost their shirts in the dot-com bubble and the housing bubble, the bitcoin bubble players thought the laws of economics did not apply to them. They thought they could all become wealthy without expending effort. They were fools.

They were, technically, the “greater fools” always described in market dynamics textbooks. They got suckered by greed while abandoning mathematical reality.

The only way bitcoin could have continues to climb was if more and more people were suckered into the pyramid scheme. But now, with bitcoin’s reputation in ruins, no intelligent person is going to buy until the bitcoin price crashes another 75% or so if they do their research, meaning the bitcoin mania has been shattered.

And the bitcoin cult has been exposed as pure delusion.

We should all be happy that bitcoin crashed before it spiraled too far out of control in terms of valuation, otherwise the impact of the crash could have been much, much worse.

The Bitcoin Bubble and How To Short Bitcoins

Bitcoin is a powerful, game-changing crypto currency that may literally change the world. It’s a huge threat to centralized banks and government currency controls because it’s entirely decentralized, anonymous and virtually impossible to track. Bitcoin is the “underground railroad” of money, and it has an important role to play in the epic battle between liberty vs. slavery.

But because bitcoin is a currency whose value is based on the psychology of human beings, it is subject to booms and busts. Bitcoin has enjoyed a meteoric rise from roughly $20 per bitcoin in February to almost $200 per bitcoin today. (Yes, nearly a 1000% return in less than two months.) This has happened for several reasons, but primarily because the Cypriot bank thefts taught people that “money in the bank” isn’t any safer than money anywhere else. So why not invest in a crypto-currency that can’t be stolen by the banks?

As Europeans and Russians were funneling unprecedented sums of money into bitcoin over the past few months, Asians began to dump speculative money into the system. Today, Chinese investors (i.e. “gamblers”) are pumping huge sums of cash into bitcoin, hoping to double or triple their money as the currency continues its red hot rise.

Therein lies the problem. Bitcoin has become a speculative bubble now driven primarily by greed and risk rather than utilitarian value. More and more people are getting into bitcoin for no other reason than to jump on the bandwagon and hope to “buy low, sell high.”

Check out the chart below, derived from data at BitCoinCharts.com. Look familiar? It mirrors the dot-com bubble charts of the late 1990′s:

If this chart looks familiar, it’s because the exact same thing happened with the dot-com bubble in the late 1990′s, terminating in 2001 with an industry-gutting crash of unprecedented magnitude. Some high-tech stocks lost more than 99.5% of their value overnight. Billions of dollars of wealth vanished almost instantly, and many speculators were wiped out.

Shorting BitCoins, in Theory

Lots of people think that means we’re in a bitcoin bubble and it will eventually pop. But if you’re one of these bitcoin bears, the company doesn’t make it easy for you to “short” it—i.e., bet that its value will go down.

The usual way to short a currency is to use a currency pair—something like EUR/USD, the value of a euro denominated in dollars—which trades as a single unit. For example, if the euro was trading at $1.3000, you would “borrow” a currency pair from your broker, which you have to return within a certain period of time, and sell it on the open market, pocketing $1.30. If after an hour EUR/USD is trading at $1.2950, you can buy the currency pair at that price and return it to your broker, making a profit of $0.0050. (If you’re wrong, you lose out.)

Most of the exchanges which allow you to trade bitcoins, however, don’t currently offer anything like currency pairs, nor any other futures or derivatives. Which means you would have to amass a stock of actual bitcoins to bet on them. That gets expensive.

One day, if bitcoin becomes well established, institutional foreign exchange dealers could make markets in bitcoins. (Among the current obstacles: There are only 11 million bitcoins in existence, and there can never be more than 21 million, so it’s not a very liquid market. If a way ever emerges to break bitcoins up into small fractions, that might solve the problem.) But for those looking to short bitcoins right now, there are two notable ways to do it:

  • Bitfinex: A Hong Kong-based bitcoin exchange based in Hong Kong, Bitfinex allows ordinary bitcoin holders to act like brokers and lend bitcoins to people who want to trade them. The exchange does a lot of this automatically.
  • ICBIT: ICBIT allows traders to make bets using futures—financial contracts in which a buyer agrees to buy a security, in this case a bitcoin, at a future date at a predetermined price. Futures contracts can be bought and sold, so you can make money without buying the actual bitcoins themselves. This platform will also let you trade commodities, such as oil, in bitcoins.

Still, do you really want to short bitcoins? The market is still pretty volatile, and because it’s an unfamiliar mix of currency and equity, it’s likely to stay that way for a while. Remarks Cullen Roche, the founder of Orcam Financial Group, “You’d probably be better off just going to Vegas though. You’ll have more fun, about the same odds, and the drinks in the casino will be free.”