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Counterfeit Bitcoin- The Dangers of Investing In Cryptocurrency

This article discusses Bitcoin and why the star cryptocurrency could crash...

Counterfeit Bitcoin- The Dangers of Investing In Cryptocurrency by Dr. Stephen Leeb, Ph.D.

Counterfeit Bitcoin

Welcome to another edition of Ringside Politics with Jeff Crouere!

WGSO Radio Interview with Dr. Stephen Leeb and Jeff Crouere @WGSO990AM

Jeff Crouere- WGSO 990AM Host

As we kick off this interview, today we have on our show a financial author and economist, Dr. Stephen Leeb. He is going to talk about counterfeit Bitcoin. So much discussion lately about Bitcoin and a lot of people are confused. Stephen Leeb is going to have some answers for us. Good morning, Stephen, welcome! Tell us about Bitcoin…

Dr. Stephen Leeb, Ph.D.

Thank you, Jeff, for having me on your broadcast. First, I will tell you briefly what you should NOT do in regard to Bitcoin- which is buy it. Bitcoin is what they call a cryptocurrency. It allows transactions to occur independent of financial institutions- between different people. Which sounds like a great idea and in certain ways it’s positive- and there really are a lot of positive things associated with Bitcoin. The unfortunate thing is that there are a lot of negatives and a lot of things we have absolutely no control of. 

One, it basically is energy intensive. Right now, Bitcoin uses as much energy on a yearly basis as a country the size of Switzerland. If Bitcoin goes to maybe $100k or $150k and it very well may- I am not saying that Bitcoin cannot go higher from there- it certainly can. The critical point that almost no one makes- we don’t control Bitcoin. Bitcoin is almost solely controlled by another country (one that isn’t really our friend right now). It is controlled almost entirely by China.

Jeff Crouere- WGSO 990AM Host

How is Bitcoin controlled by China?

Dr. Stephen Leeb, Ph.D.

Very good question. This is the way it is…Bitcoins are mined. Their transactions have to go through expensive computer networks and this sort of ties in with all the energy that it uses. These networks are massive. They require very cheap sources of energy. Bottom line, roughly 65% of Bitcoin is mined in China. Another 15% to 20% of Bitcoin is mined by friends of China- like Russia and Iran. Basically the United States, which (I think) has been a major buyer of Bitcoin, is only mining about 7%.

Now, why is that important? Well, it’s important because China and ‘friends’ of China have 51% of the Bitcoin miners. Anybody can look this up on Investopedia and other sources. This creates a condition in which you could counterfeit Bitcoin and totally destroy it by doing so. Who wants to buy a counterfeit currency and pay $50k to $100k? That’s ridiculous! It’s worthless once you can counterfeit it.

Jeff Crouere- WGSO 990AM Host

Stephen, let’s backtrack a little. You mentioned the phrase ‘mined.’ The Bitcoin ‘mining’ and I think a lot of people are wondering just exactly what we are talking about. You know- when I hear mining I’m thinking pickaxes and dirt and striking it rich…

Dr. Stephen Leeb, Ph.D.

No shovels involved…just massive networks of computers. In order to create a new Bitcoin or in order to do transactions- you have to solve massively complex computer problems and they can only be solved by using massive computers which use massive amounts of energy. Almost all these problems right now are solved by China. Well, that in and of itself, is not so bad. What is bad and inherently the weakness of Bitcoin- are these people who have the massive computers that can solve these complex problems. And because they are solving almost all the problems- they can create a situation. I don’t want to get technical- but it’s called a double spend, which is shorthand to give you an analogy. They can create a situation which would be analogous to this…

“I have a dollar bill. I go into a coffee shop and get a cup of coffee. I take that same dollar bill and go into another coffee shop and buy another cup of coffee with that same dollar bill. Then I go get another cup of coffee and so on until I have about 500 cups of coffee with the same dollar bill. They can counterfeit what you’re paying $50k for. Once that happens- no more Bitcoin!”

The entire Cryptocurrency Market has turned into a trillion dollar market. You know, China’s done a lot of good things but it’s not a trustworthy soul at this point. 

Jeff Crouere- WGSO 990AM Host

Why should we trust a communist nation that has engaged in genocide?

Dr. Stephen Leeb, Ph.D.

We are basically saying to China…okay anytime you want that it’s convenient- and it’s probably getting to the point where it is convenient because they are engaged in their own digital currency. A competitor to Bitcoin. They don’t want competitors to their own digital currency. So if they want to- they can create this ‘situation’ where all of the sudden you have counterfeit Bitcoin floating around. Now, I want to emphasize something- maybe this is a little technical. One thing they cannot do- they cannot interfere with the records of past spending. That is true and that’s how people might try to answer you. Blockchain is totally secure and if people say that- they’re right! It is totally secure. Bitcoin is not. They can control and destroy this currency almost anytime they want because- as you said- they’re a communist nation. They’ve got control of the people that are doing this. And they can give them very nice jobs in managing their own digital currency of the digital yuan or e-yuan, which is a major threat to the U.S. dollar incidentally but that’s another story… 

Jeff Crouere- WGSO 990AM Host

As we discuss Bitcoin and why the star cryptocurrency could crash…recently Bitcoin was brought into the headlines. Fascination with Bitcoin became magnified when Elon Musk of Tesla, announced his company had bought 1.5 billion worth of Bitcoins and the price of a single Bitcoin soared and has been hovering in the $50k range. And I think that a lot of people are just scared of going in this direction- they feel like they could lose everything because they are not familiar with these kinds of transactions.

Dr. Stephen Leeb, Ph.D.

Yes, and people have the right to be scared. The general rule of investing applies for Bitcoin but for almost any investment that you make. I mean- read Peter Lynch’s books! If you don’t understand something- I know I follow this. Warren Buffett will tell you, incidentally, he’s also someone who can’t stand Bitcoin, along with his business partner Charlie Munger. 

It’s a really, really wonderful rule of investing. If you don’t understand something, don’t do it! Follow something else instead. Bitcoin is only going to get more powerful- and I have to warn you- buying it could get much more tempting. I can’t say Bitcoin won’t go up to $100k or $150k. I can’t say that’s not China’s plan to let it go up to- let’s say $150k. So, instead of being a $2 trillion dollar market, it becomes a $6 to $10 trillion dollar market that goes to zero effectively. Just as fast as this fellow just recently lost $20 billion dollars. There are always reverberations through the financial market. Just imagine what a few trillions would do. 

Jeff Crouere- WGSO 990AM Host

So, what you are telling me is that China has the ability to raise Bitcoin prices and crash it because of their own plans for the digital yuan. 

Dr. Stephen Leeb, Ph.D.

They don’t really have the ability to raise Bitcoin prices- that’s what we are doing on our own, everytime people jump on the bandwagon and buy Bitcoin! And that is what Elon Musk is doing- which is a peculiar story because Elon is almost 100% dependent on China right now for his growth. Tesla was basically a good speculation before he went to China and they let him build a major factory. They started to let him make a lot of money but he’s not in what I would call a great political situation. He’s working in China and he’s working there as long as it’s convenient for China. He’ll stay there and he’ll continue to do very well. He’s a real brilliant man. 

Jeff Crouere- WGSO 990AM Host

Elon Musk was just listed in Forbes top ranking of billionaires as #2 in the world. 

Dr. Stephen Leeb, Ph.D.

Yes, he’s done a marvelous job but it’s courtesy of China. Look at where he was a couple of years ago before he started selling cars in China. Before China said ‘come on in’ and they don’t say that to everybody! They let him sell tremendous amounts of cars in China. Now, I don’t know what his relationship is with the Chinese government. He strikes me as a wonderful man, someone totally honest, totally brilliant. 

Jeff Crouere- WGSO 990AM Host

He seems like he’s sort of a Libertarian to me. He comes across as someone who believes in freedom and entrepreneurship and didn’t seem to be a communist lover to me at all.

Dr. Stephen Leeb, Ph.D.

No, I don’t think he’s a Communist lover at all. No, completely the opposite. I think he’s a freedom lover but he saw an opportunity to make a lot of money in China. And that’s the way he has risen.

Don’t shoot me- I’m just a messenger here- but I think that Elon Musk is really one of our great hopes in this country.”

He really is doing great things but he had to rely on China. They have all the chargers- if you want an EV car- you have to be able to charge it! China is already prepared for this. The communist party, whatever it was, basically has built out an electric vehicle infrastructure which we don’t have in this country. Elon had the goods, he had the know-how, and he has what it takes to really build electric vehicles. Prior, he didn’t have a spot where he could do this- and now he does. It’s called China and at least for a while he’s going to be very dependent on China. So, it’s curious that he would advocate Bitcoin. The day or so after he did- he was called in for an industrial oversight committee because of a “fault with his cars.” He’s been really public about it but basically anything that he does right now- he’s taking a tremendous chance- unless he’s doing it with China’s approval.

Real Talk Revolution with Jeff Crouere @WGSO990AM

The interview starts after the 2:02:00 mark

Stay tuned for ‘Segment II’ of the interview with Dr. Stephen Leeb and Jeff Crouere as they continue to discuss the Ultimate Demise of Bitcoin and Cryptocurrency with a twist…


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