ANDY HOFFMAN 9/04/17 - CHINESE ICO BAN THE MOST BULLISH IMAGINABLE EVENT FOR BITCOIN

For those not yet aware, I left Miles Franklin Precious Metals last month, after having dedicated nearly all of my personal and professional resources to the PMs for the past 15 years. I still believe strongly in gold - in fact, more so than ever. However, I have as much, or more, interest in Bitcoin - which will be crystallized by the BIG NEWS I plan to announce in the coming week or so. In the meantime, I have remained "current" through my Twitter feed (https://twitter.com/Andy_Hoffman_CG), whilst I prepare to unveil my upcoming career changes.

That said, I felt the need to comment, in more than just "tweet" form, on this morning's completely unsurprising news that the Chinese government has not only banned ICOs, but is instituting penalties for financial violations incurred in previous ICO offerings. Unsurprising, because not only have the Chinese been actively considering their policy stance on crypto-currencies, but because they have consistently tried to slow their progress given the existential threat they pose to China's cancerous fiat Yuan. Not to mention, with China's upcoming National Congress commencing next month - before which, Xi Jinping unquestionably wants to portray political strength. Remember, it was only seven months ago when China banned all Bitcoin withdrawals from Chinese exchanges, before re-allowing them five months later - but only after instituting onerous, capital control-like AML/KYC regulations.

For the past year, I have said governments will fight crypto-currencies as viciously as they have Precious Metals, in what will amount to a futile effort to prevent the usurpation of their dying, world-destroying fiat regime. In both cases they will lose - in Precious Metals' case, because they simply don't have the physical metal supplies required to hold prices down; and in Bitcoin's case, the fact that, no matter what they decree, it is a decentralized network immune to attack by any and all "bad actors" - from Roger Ver, to Jihan Wu, to the Chinese government itself. To that end, the analogy I have consistently made is "flailing at windmills," Don Quixote-style.

That said, Bitcoin and ICOs are two different animals entirely - as while Bitcoin is 100% decentralized, most ICOs are not. In fact, no crypto is less decentralized than Ethereum itself - which not only is managed by Vitalik Buterin's "Ethereum Foundation" (https://www.ethereum.org/foundation), but is the platform on which nearly all ICOs are hosted. In other words, its principal "use case" is promoting ICO speculation; from a centralized "corporation," no less. As opposed to Bitcoin - and Litecoin, for that matter - whose principal use case is storing and transferring value, via a completely decentralized global network.

In recent months, I have stated my strong belief that the future of financing lies outside of traditional pathways like stocks and bonds - which themselves, have been so bastardized by Wall Street/Washington abuse, they no longer function for any purpose other than enriching the 1%. In its place, "shadow financing" - i.e., capital-raising from non-financial entities - will become the dominant financing tool; of which, ICOs will unquestionably play a significant role. Not the current "wild west" type, mind you, but a more developed market in which bad actors are shunned, and some semblance of etiquette and "shadow rules" are respected. Heck, governments may actually play some type of role in their regulation, once it becomes clear they are here to stay.

However, as crypto is still in its extremely nascent stage, there is currently very little understanding of how ICO markets work - with very, very limited public participation, and no track record of long-term results. Moreover, fiat hegemony is still a (rapidly waning) fact of financial market life, so governments will still decree this, and decree that, in an effort to maintain control. Hence, China's blanket ban on ICOs - not to mention, retroactive penalties on financial violations incurred in previously completed ICOs. Which is a laughable concept in relation to Bitcoin, because even if China "banned Bitcoin" - which they won't, as they are likely acquiring it hand over fist - exactly who would they impose penalties on?

As for this morning's news, it could not be more positive for Bitcoin (and Litecoin) - nor, conversely, negative for Ethereum and all "centralized" cryptocurrencies; i.e, nearly all of them. Not that I believe it will kill Ethereum; or, for that matter, the ICO movement. However, in the short-term, it will dramatically reduce the amount of ICOs, particularly if the SEC and other governments follow suit.

In the past, the "knee-jerk" reaction - by TRADERS, not HODDLERS - is to sell Bitcoin due to such a "negative crypto event." However, given the exponential growth rate of the Bitcoin network - and price - it's "anti-fragility" is far stronger than it was even six months ago. To the point that, just as holders no longer fear hard forks, they will not feel (as) intimidated when governments attempt to "decrees" anti-Bitcoin regulations.

That said, in this particular case, they didn't decree anything remotely anti-Bitcoin. To the contrary, they "banned" - to the best of their limited ability - Bitcoin's COMPETITORS. And by "competitors," I don't mean they actually compete with Bitcoin's use case, but for the limited supply of investment capital entering the Crypto sector. Which will in effect cause Bitcoin's "dominance" - which using fraudulent crypto-currency accounting has been "declining," but in practical usage reality has never been higher - to skyrocket. In other words, billions of dollars worth of ICOs will be sold in lieu of Bitcoin; whilst countless billions more that would have been funneled into new ICOs, will instead find its way into Bitcoin, Litecoin, and the tiny handful of other decentralized cryptos. In other words, the Chinese ICO ban is, in my view, the most "bullish imaginable event for Bitcoin."

Give it a few weeks for this news to be digested by the crypto markets. After which, I expect one of two scenarios to be most likely. One, "Bitcoin dominance" explodes, as dozens of altcoins are sold in lieu of Bitcoin. Or two - which would be even MORE bullish; altcoins turn back around and take off, as investors realize that innovative financiers will find new ways to "decentralize" ICOs - and thus, skirt sovereign bans and/or regulations.