Part One: But This Is How We’ve Always Done Things …

There is a great story floating around the web about a married couple and a ham (full story). In brief, the wife is preparing a ham for dinner and in doing so, cuts approximately 1 inch off of two sides of the ham and throws them away. The husband, visibly upset, proclaims, “That’s a waste of good ham!” When asked what the rationale was, the wife didn’t know, simply stating that this was the way that her mother had done it.

Later, the wife called her mother and asked her why she cut the ends off, to which she replied, “That’s the way my mom prepared the ham.” The wife’s grandmother had passed, but her grandfather was still alive and when he was asked why his late wife cut the ends of the ham off he replied, “So the ham could fit in the baking pan.”

The tale revolves around cultural training at its heart, but the story is really something many of us can relate to and the notion of: this is how we’ve always done things. With ETFs, derivatives, futures contracts and long/short positions on bitcoin all coming into the space within the past few years, traditional financial may be in for a rude awakening when what they used to do, no longer works.

Big banks have been accused of price manipulation in the silver and gold markets for years; however, a debate exists in regard to if this manipulation is as pervasive as conspiracy theorists suggest, or if perhaps even worse (InvestingNews, 2022). Between 2008 – 2016 J.P. Morgan admitted to wrongdoing and agreed to pay a $920 million penalty (Reuters, 2020); one may consider how the debate has evolved since the news broke and whether conspiracy theorists were actually whistleblowers, with “scarlet-letter Ws” which needed to be removed.

The paper precious metals markets are a unique animal in regard to not only derivatives, futures and long/short positions; they are special in that instances of physical delivery are few and far between. Often, settlements are conducted through the same paper markets and no physical metal is ever exchanged, nor verified, moved and stored in another location (Journal of Financial Services, 1990). Bitcoin can be settled more quickly of course. There is no third party precious metal audit, no massive freight trucks, no armed guards and no shipping containers to move cargo overseas. In the slow, cumbersome process of precious metals validation, big banks have seized an opportunity to correctly call the bluffs of paper traders and settle positions, with additional paper versus the burden and inconvenience of physical delivery. Bitcoin removes this burden and, in an instant, liquidated positions could be required for delivery, even in paper market scenarios. The way that big banks have manipulated the precious metals markets may backfire when attempting to use the same playbook on an asset that can be verified and delivered in minutes.

Part Two: Back Up The Bus

I love the phrase, “I missed the bus.” The visual of a middle school kid sprinting to a bus stop, lunchbox firmly grasped in hand and backpack violently bouncing behind them, only to arrive and see the tailpipes of a giant, yellow, Twinkie-shaped vehicle disappear in a plume of diesel smoke, makes me want to be a kid all over again (okay, maybe not so much). The next scene is usually the same kid, head hung low, backpack slowly shifting from side-to-side, lunchbox barely being held on with a finger or two, feet dragging one painful, broken and defeated step after another as the child drags themselves through the final mile to school.

I propose that some folks see themselves as those kids when they look back at bitcoin’s price below $1, $100, $1,000 or $10,000. They wonder if they missed the bus. For regular investors, going back in time is not an option, however, for big banks in my scenario, they can attempt to bring the bus back and get on. Nevermind that everyone who was on time now has to wait while the kid who slept in steps onto the now-retreated bus and proceeds to make everyone else late.

I propose that big banks, when they finally get their legal counsels on board, when regulators capitulate and state that they personally own bitcoin and are now allowing this entity or that entity to own it as well on their balance sheets — or when corporate treasuries have increased exposure to bitcoin — will attempt to back up the bus, get on board and pretend like the price manipulation never occurred. Big money who missed the bus will work to lower bitcoin’s price via negative media, fear and the typical playbook antics of the past, in order to maximize pain on retail investors, HODLers and institutions which already have bitcoin on their balance sheets.

The cruel reality for whales — future and present — is that the same instruments used to manipulate prices in the precious metals markets are being created in the Bitcoin universe, but not to their advantage. As such, regular, hard-working people, from around the world, can set limit orders and dollar cost average into positions. When whales sell off in an attempt to manipulate the price and buy back in at lower valuations, regular investors take a little piece here and there. With around 19 million of the total 21 million Bitcoins already mined and many in cold storage (or lost), each “pump and dump” scenario is a roll of the dice for large positions to potentially not recover their previous holdings. Moreover, with centralized exchanges and confiscation issues taking center stage, cue Canadian governmental theft of protestors’ and supporters’ personal property, cold storage options are becoming the norm for regular people.