The crypto space is an interesting place. People from all walks of life have come together to figure out how these new wonderful assets called cryptocurrencies work and how they can be used for everyone’s benefit.
So, it comes as no surprise when professionals who have been rooted in the Gold and Silver space also dip their toes in the space.
One of such people is Keith Weiner Ph.D.
If you’re into finance, the name MUST strike a bell; like it or not.
Keith Weiner Ph.D. is the President of the Gold Standard Institute (USA) and is the CEO of Monetary Metals (monetary-metals.com). He is one of those finance guys who have taken the gold market and made their mark in the marketplace.
His stance on cryptocurrencies can be best said to be interesting.
At the E-Crypto News editorial desk, we caught up with him and had a chat about himself, the crypto space, and a few other things.
Keith Weiner Ph.D. CEO Monetary-Metals
Keith Went into Crypto From Gold
After being involved with gold and precious metals for a bit, Keith went into cryptocurrencies after he studied cryptocurrencies.
“As you may know, I’m a gold guy. But, I’m also an economist who specializes in monetary science [the] economics of money and credit. So, I have made somewhat of a study of cryptocurrencies from a monetary economics perspective. Of course, my business is paying interest on gold [to] investors. My business is not cryptocurrencies”.
It is important to note that Keith from his public standpoint doesn’t go into something he doesn’t understand.
Bitcoin is an Alternative to Gold in Some Ways
It is why he also spoke about the consensus that Bitcoin is an alternative for gold. He said:
“I think in one important sense, yes. A lot of people are looking at what the Federal Reserve in the United States, the European Central Bank (ECB), the Bank of England, the People’s Bank of China (PBoC). Everyone in the world is doing the same things which are they’re abusing their currencies, and they are expecting everybody to accept that abuse.
What cryptocurrencies have done is something that the gold community has struggled to do over the last [few] decades which is [to] raise awareness of the problems of central banks and their fiat currencies.
What used to be called in a more educated Europe “the currency debate” up until Bitcoin. There were very few people that were even aware of the debate or had an opinion on it. Now everybody (I shouldn’t say everybody) but millions of people are focused on the currency question.
Whether they go all into Bitcoin whether they go all into gold, whether they’re mixing their portfolios, they are thinking about a question which I think is fundamentally important. So that’s it. They are similar. Obviously, there are many differences also”.
Bitcoin Price Targets are Difficult to Predict
When it came to Bitcoin price targets for 2021, Keith was blunt. He said: “I would not give a price target per see. I have an amusing story to share. I wrote a lot of articles that [were] critical of various economic aspects of Bitcoin from around May or June 2017 and the last one of that series was December 2017.
Throughout that series, I said: ” this is not a prediction on price. Price might go up, the price might go down”. And, I’m not the guy to try to predict that. But, ironically and interestingly, the last one that I wrote in December of 2017 in which I said nobody can predict the price.
Is it likely to go down at some point? Yes. Is it likely to go up? Yes. Who knows? I’m not going to predict that. That last article, I cleared almost exactly at the top of Bitcoin prices.
And then as we all know, it was down for quite a while and also for quite a far fall before it found a bottom”.
Bitcoin will be Replaced one Day
Many people have wondered if there is a cryptocurrency token that can replace Bitcoin. When asked about this, Keith said:
“I think there [are] two angles to look at that. One is if cryptocurrency is like any of those critical inventions that we take for granted today. You can think about inventions like the automobile, in the late nineteenth century and early twentieth century to the invention of the computer, the modern digital computer. [It] was born basically I think right before world war two.
If I remember my history I think they were doing things in the 1930s with it. It certainly became more of a thing in the late 40s. The first one to be developed was not the ultimate winner. We don’t use vacuum tube-based ENIAC computers. We don’t use any of the cars they had in 1900 today. And those [computer] companies are largely not leaders today either.
So, Bitcoin certainly could be displaced by a cryptocurrency that had technology benefits; one of which could be smart contracts. You know, the ability to not only settle pr-determined agreements but enforce that in various ways that Bitcoin may or may not be able to adapt to.
Gold-Backed Cryptocurrencies Could Work
The other would be something that I’m quite enthusiastic about and that is a “gold-redeemable Bitcoin”. So, suppose somebody had a choice of two cryptocurrencies, both with comparable technology, both cryptographically secure, and all the rest of the benefits.
One of them entitled him to the right to redeem that currency unit to get a finite amount of gold and the other one could not, which one would people prefer? And, I posed that thought experiment back in 2012 or 2013.
I coined the term “BitGold”. Later, there was a company called BitGold which later rebranded itself as GoldMoney which name came from that article. So, I think [that] a commodity redeemable or crypto-token done right which nobody has done yet but done right could ultimately rise to prominence”.
Investors as we are now getting to see like Bitcoin. They love it so much so that recent price moves have made everyone wonder what Bitcoins and cryptocurrencies are. When asked why he thinks investors like Bitcoin, Keith put in his two cents by saying: ” I think the answer is very simple: it’s going up!’.
Central Bank Digital Currencies (CBDCs) are another Tool
In the cryptospace, we have several kinds of projects that are government-oriented. One of them, of course, are the central bank digital currencies (CBDCs). Keith said about their viability as investments: “Investments? No, I would not call Central Bank issued anything an investment. I have a bit of a different view than most people about that.
And just so speaking as an American and being US-centric on this, everyone thinks that the Fed is concerned with unemployment and inflation and that’s because that is its legal mandate. But, I don’t think they really care about that anymore.
What they really care about (their mission) is to make it possible for the government and the government’s cronies to borrow more for cheaper. It’s ridiculous that the government can spend more and buy more votes.
The second thing they care about is the crony banks by making sure that the crony banks are never faced with insolvency or a crisis [like] a credit crisis [just] like what we had in 2008.
So, if you look at how the dollar works, being that the dollar is irredeemable. The dollar is itself a debt or debt instrument. If you look at the dollar bill it says “Federal Reserve Note”. “Note” is a word for credit. It’s a debt instrument that is never actually paid. So, we pay debts using debt instruments. We pay using IOUs. So, there’s no way to extinguish any debt. The debt must grow exponentially by at least the amount of accrued interest or maybe more.
So, there’s always this challenge [where] you have to increase the number of credit dollars that are flowing and not just to the government but to all of the debtors; particularly the marginal debtors. [If] the marginal debtors begin to default in large numbers, then that would threaten the solvency of the banking system.
And so, they’re always trying to force credit out. They have limited (you know the term “pushing on a string”?) They have only a limited ability to cause that expanse of credit. And, if they try all their tricks because it really doesn’t want to expand, then they are kind of “out of options”.
So, issuing your own currency whether they call it crypto or not, whether they call it digital or not with individual consumers given direct accounts at the Fed. Then the fed can expand credit through that. Even if the banking system is unable to do so or unwilling.
So, I see it as their being creative and just inventing one more tool in their inflationary arsenal. I don’t see it (CBDCs) as any kind of game changer and I don’t see why anybody would want to invest in a “FedCoin” if there should be such a thing.
Cryptocurrency Regulation Works to an Extent
World governments are now starting to try and regulate cryptocurrencies and their technologies. Some like the People’s Republic of China have taken a strict stance while others like the United States of America are taking a liberal approach towards the issues. Keith said about regulation:
“I can’t speak too much of Chinese regulation of cryptocurrencies specifically China has capital controls. So, if you’re Chinese and have Chinese Yuan inside the Country, they make it very difficult for you to get it out at least legally and so a lot of people find a lot of different paths for cheating (to get it out).
In the United States, I think the primary driver is not to make it hard for people to use cryptocurrencies per se. The primary driver is to keep pushing on this idea that is somebody is a criminal then some private businesses should be deputized to find that criminal before that criminal can commit a crime.
And so, they want to look for the banks and say: “It’s your responsibility Mr. Deputy to know if your customer is criminal or not. And they keep ratcheting it up. Obviously, no bank can ever assure the government that it would catch every criminal.
So, the government keeps tinkering with the definition of what’s called “Safe Harbor”. So, whether or not you catch the criminals isn’t the issue. You have to prove to the government you’re in a “safe harbor” [location]. So, all of this AML/KYC Anti-money laundering, Know-your-customer regulation is an attempt to justify [it] in the name of trying to catch criminals [which] ultimately like all regulatory compliance becomes a game in itself.
The purpose is compliance. They keep ratcheting that up. People have become sort of hostile to finance in general. Then they support more regulation. And so, financial institutions are obliged to do more to comply and things get more expensive.
A lot of things [involving] crypto are offshore in the United States. They are not domiciled in the United States and they are officially not open to US clients but I’m sure US clients must find a thousand ways. [It is] just like the Chinese finding ways to evade Chinese capital controls. I’m sure that US residents find equally creative ways to avoid the so-called consumer protection regulations”.
Blockchain Technology and DLTs have Real World Limitations
Blockchain technology and other distributed ledger technologies (DLTs) are rising fast. So much so that many think DLTs will replace centralized technologies. Keith had this to say about the issue:
” I think there are a lot of interesting things about decentralization. It feels like it’s one of those technologies that is going to have applications in [ways] that very few people or no one has thought of today.
That said, when it comes to assets, there is a critical boundary to where these things are limited. And that is when something exists in the real world. So, if you have a mortgage on a piece of property, and then you bundle a thousand mortgages into some sort of mortgage-backed security, you can keep track of all the securities on the blockchain.
There’s something that isn’t on the blockchain and isn’t likely to be any time in the foreseeable future and that is every one of those mortgages is recorded at the county deed recorders’ office. And, who actually owns the property is determined by this government office.
That’s offline and who has the lien on it is also determined offline. So for instance, if the homeowner hires somebody to repair the roof, the roofing contractor may file what you call a “Mechanics lien” which is a claim against the property if the homeowner doesn’t pay the roofer.
The roofer now has a lien [against which] the property can’t be sold without him being paid. Since those things are being created offline, there’s a really big challenge to ensure that those things are accurately recorded and somehow entered into the blockchain otherwise anybody in the blockchain will look at it and say the mortgage is fine and therefore the mortgage-backed security is fine but it’s not fine.
There may actually be a very big lien against that. The boundary where it hits the real world I think is one of those big problems that may be an intractable problem”.
Newbies Must Know Their Investments First
When it comes to projects that he is involved in as per cryptocurrencies, Keith was blunt. He said:
“My business is paying interest on gold so that investors can earn gold and earn a return on it. So, we are always looking at crypto as a possible [conduit] or appropriate technology to make what we are doing more effective. other than that, we’re not really focused on crypto per se”.
he also had some advice for those newbies who wanted to get their hands dirty in crypto. He said:
“If someone doesn’t really know about it, then it’s worth holding off and for the same reason, Warren Buffet talks about investing in stocks. make sure you understand the business you’re investing in.
If you’re just betting as everyone else is betting, when the price turns around and crashes, you’re sure to be the loser that’s left holding the bag when everyone else sells. But, assuming [that] you do understand how this works and what it is, you [should] be very mindful that it’s extremely volatile.
Bitcoin Prices Could Go Either Way
The price of Bitcoin has been in quite a run-up in 2020. And, the chart looks like a parabola. What we know from previous episodes of when something has gone parabolic is that there can often be a wicked crash to follow that parabola. So, everyone should be mindful of that. I realize that I’m speaking heresy.
People say you should HODL or hold on for deal life. So far, those people who have HODLed have been right. But, anybody that was able to sell out just under $20,000 by the end of 2017 and then buy it back at $5,000 would have done a lot better than the HODLers.
Ethereum Holds Promise
As regards the Altcoin that has the greatest potential to make waves in 2021, Keith didn’t want to make any predictions. But he said, ” based on my earlier comments, I think Ether is interesting because of what it can do and what’s in smart contracts. But, other than that I’m not sure I can make a prediction”.
The Crowd is running into Bitcoin
Bitcoin prices have been rising rapidly. Keith noted about Bitcoin’s price momentum that:
“Earlier I said that people like it cos it’s going up and it’s somewhat of a flippant answer. But, I think that when something shows momentum, it attracts [interest] from new people and new people come in because they see the opportunity to make easy money.
And then more people are attracted. I’m not necessarily a big fan of Elliot Wave. I think that the Elliot Wave Institute has made some catastrophically wrong calls. Like in February 2010 when [they] said go and short the S&P 500. Do not set a stop.
Anybody who took that advice would have obviously been ruined. But, there is an interesting idea in Elliot Wave (I think they could take it too far).
The idea is that a lot of times, the news is endogenous to the price action. That is the price action shapes the news. Obviously, there are tons of stories every day. One guy says “Bitcoin’s going to go to zero. Another guy says that Bitcoin is going to go to a million.
Which story gets traction with the mainstream public and you give it some time is shaped by the price action. So, Bitcoin is rising then every once in a while, the mainstream media will get some guy to say ” I think Bitcoin is going to crash”.
But, 99% out of 100% they’re going to be covering stories about how Bitcoin is going to revolutionize the world or why it’s going to go to $1 million or $10 million and those are the stories that win. [That is] until the price action turns decisively and then all the pessimism comes out. So, optimism and pessimism are in the nature of the price chart.
So, I think, right now, it’s pretty clear that you can plow some money into Bitcoin.
I see articles every day saying: “it’s not too late!”. Yeah, you would have been better off if you bought [it] six months ago at whatever price. It’s not too late. You can still make a fortune in Bitcoin. As long as people are doing that, it continues to go up. As long as it continues to go up, it attracts more people to do that.
So, things can run for quite a while. That’s why it will be very hard to predict [Bitcoin prices] even though it’s had a parabola. I think that is the reason it’s going up and that’s attractive”.
As for a practical scenario on how Bitcoin adoption will occur Keith said: ” I’m going to be the radical gold guy in Bitcoin territory when I say some of my comments.
There was an episode of south park that has become an internet classic. Everybody who is interested in business should watch that episode where this one Kid’s underpants are missing. And his parents ask: “why are you losing your underpants?” and he says “I’m not losing it”. The Gnomes are stealing it.
Naturally being South Park, they have to show that the Gnomes are in their cavern with infernal fires in the underworld. They march up this stone stairway wherever it is and come into his bedroom and still underpants.
The camera pans to the leader Gnome in front of the other Gnomes and there’s a flipchart. The flipchart says: ” the underpants business model”. Step one: steal all the underpants. Step two: a question mark. Step three: Profits! Then the Gnomes get really excited.
This has become a thing in business circles because there are startups that have that big question mark for step two. For me, I look at Bitcoin and people say well, their vendors accept Bitcoin. I say: “not quite”. They hire through an API a third-party currency exchange.
So, the vendor wants to sell a TV for $100. The customer has Bitcoin and the third party exchange says: “well, $100 is what the merchant needs to get. Therefore we have to charge the customer whatever 1/400th of a Bitcoin. Whatever that works out to. So, they make a profit for themselves obviously.
The currency exchange finds somebody with dollars who wants to buy Bitcoin. The third party is [organizing] this complicated third-party transaction. The guy who wants to buy the Bitcoin gives up his dollars. The Guy who wants to buy the TV gives up his Bitcoin. The guy who has the TV gives up the TV and the currency exchange rotates everything around. Everybody gets what they want for a fee.
The vendor himself is not accepting the Bitcoin generally onto the balance sheet. What happened a few weekends ago, Bitcoin fell over 20% between Friday and Monday. [Selling TVs] on the internet is a low margin business. You are lucky if you make [up to] 5%.
So, if you’re selling TVs and you accepted Bitcoin on Friday, and you’re going to pay your distributor on Monday, you will find that you’re 20% short. So, nobody can take that risk. Right now, I will say it’s a tool of speculation and I’m hoping something is going to happen with it.
There isn’t really a plausible plan for how that is going to happen. I’d be interested to see how that develops. A plausible plan to fill in Step two: “question mark”.
Gold-backed Stablecoins are Possible
As for Stablecoins, Keith said:
“Here is something really interesting. I proposed a gold-backed stablecoin. One interesting point that I think everybody in Bitcoin is that the price goes up and you think: “oh okay I want to take profits”. Instead of taking your profits in fiat currency, and you buy Bitcoin because you think fiat currency is going to collapse.
And Bitcoin goes up and then you sell and you get back into the fiat currency you thought was going to collapse. Instead of doing that, take your profits into gold which is stable.
So, I would love to see a really well-done gold-backed marketed stablecoin. I think there’s a real utility in that”.
The Future of Bitcoin
When asked about three wishes for Bitcoin and the crypto space, Keith was pensive. His first wish though was: ” I would wish that there would be mechanisms to stabilize it’s [Bitcoin’s] value.
Most people think it’s [Bitcoin’s] volatility right now which is on the upside is a feature but actually, I see it as a bug. I would love to see its value be stable because if its value was stable then you would recommend to your grandmother to put her life savings into it. Then it could be used for intergenerational wealth-planning.
It could be used to finance productivity. One of my criticisms of Bitcoin is that being unstable, nobody in their right mind will borrow to finance productive activity.
To finance a real business in the real world, you can’t borrow on Bitcoin because it’s going to go up 100 times. So that means your monthly loan payment is going to go up 100 times. You would be bankrupt.
I’d love to see it stabilized and then it can be used in that way”.
As for his second wish, Keith said that: “I would say that the way of stabilizing it [Bitcoin] would be if it was tied to gold. And so, it becomes a redeemable Bitcoin gold-backed stable [token] or some variant thereof.
His third wish was that ” This [Bitcoin] is used in finance for something productive in the real world and not just financial speculation.
Love him or hate him, Keith Weiner has taken his place in the world of finance and cryptocurrencies. It might just be that he might be right about certain things. Whatever the outcomes, Keith is one of the go-to guys for gold and probably crypto it appears!
