Final Warning for Long-term holders...

[Jr65]

I have done a ton of due diligence on BTC and here are my best efforts at a final and reasonable stance. If any of you think that I am anti-BTC, you could not be more wrong. I want the world to be a better place for my children and for mankind. BTC, if it ever gets to the mainstream, is going to revolution the world. After reading Marc Andreessen's New York Times article, entitled "Why Bitcoin Matters," I was thoroughly convinced that BTC goes straight to the heart of life improvement. To me, that is the most important thing about BTC. I care far less about the money aspect. Besides, the money will come if BTC gets a shot at helping the globe. Despite my high hopes for what BTC can do to help people, I am very bearish about its short/mid-range future. I am very bullish about its long-term future. (as in probably 10 years) The simple laws of supply and demand tell me that Mt. Gox's failure is going to hit the "reset" button on BTC's price. As a lawyer and someone who knows just enough about Bankruptcy, I have less than zero faith in our legal system, much less Japan's system. In a nutshell, Bankruptcy's job is to take broken companies, squeeze as much money as possible out of them and return it to creditors of all classes. As I have said before, Bankruptcy Court pays out in a specific order at greatly reduced amounts owed...very often pennies on the dollar. It usually goes 1. Employees and wages. 2. Ordinary creditors (for example, bank loans) and then 3. Customers, users, clients...or those that somehow used the Company's services. I believe that it is safe to cautiously assume that #3/Mt. Gox's account holders will get nothing. (see "The Associated Press") This point raises the question of how the Court will pay out to the creditors that do get something returned to them. If the only people that get paid in Court want cash, and I think it's obvious that they will, it stands to obvious reason that the Court will liquidate the 200k coins and not return BTC to anyone. If you lie in Court, you go to jail so I would not be shocked if someone blows the whistle on the whereabouts of the missing coins. That just means more BTC liquidation and more pain. Fact; Bankruptcy Courts liquidate quickly because their time is money. If you doubt me, I can post Bankruptcy Court websites where you can see people buying cars, boats and houses for huge discounts. Since few know about BTC, the discounts will likely be even greater. I guarantee that the Court will sell into the path of least resistance. The path of least resistance will either be to no one, in which case BTC becomes worthless or someone/s or group/s willing to put up big money for big discounts based on the strength and long-term promise of BTC. My wild-ass guess would be something like $10,000,000 for the 200k coins...or $50 per unit. Normally, I'd say less but I think that any smart buyer/s will want to make it appear like they are an industry white knight. The buyers' cost of acquiring the coins will be high because they will need lawyers, accountants, transportation costs for their team etc.) This scenario will totally reset the price of BTC and there will be a totally new set of BTC pioneers and winners. All the current exchanges will be out of business and BTC will return for sale to the public at large, reputable stock exchanges. Hopefully, by this time, BTC will have a robust infrastructure and the price will stabilize and climb at a sensible rate. There will also be heavy  regulation likely by the SEC. We will be lucky if my worthless prediction comes true because, otherwise, Mt. Gox is going to take down the baby and the bath water. I have posted three times about the enormous danger associated with the Mt. Gox's Bankruptcy scandal. Time to put my pen down, listen to your comments, enjoy Easter and hope that technologies like BTC help our world become a better place. I'll wrap this up by saying that if you think my post makes any sense, you will proceed with your investments with great care and not gamble with money that you cannot afford to lose. P.S. To all those who are angered by my posts, I'm only using my understanding of law and economics to arrive at a conclusion to help me and others move forward. I try not to get too emotional about money and investments. Worry about money has probably already shortened my lifespan. Now, I just chill, do my homework and let it play out because I know that I don't have any control over what happens! Happy Easter and best to all!

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[romneymoney]

It seems plausible that an unprecedented BTC dump could crash the price without recovery in the near term.
I'm not sure if that's the most likely outcome though.  Certainly interesting to speculate about.
I think so many are ready to buy at as the price falls, that a high volume rally to above the price before the dump is a possibility too.
I wish I had a less vague idea about what quantifiable demand would be in such a situation.

[gagalady]

Please make paragraphs because it's really annoying and eye-hurt to read integral text  

[pietje]

For the ppl who dont want to read alot:
Basicly he gives a final warning to be ready to have a rich life in a few years.

[atp1916]

OP, how many bitcoins did you sell off under $400 a couple weeks ago?

[LostDutchman]

Please make paragraphs because it's really annoying and eye-hurt to read integral text  

What you wrote!

LOL!

No paragraph breaks drives me nutz!

The real problem is that the message gets lost in the presentation!

My $.02.

[jl2012]

200,000 BTC is what? It is the reward of 8,000 blocks. At this moment we have 296,825 blocks, and the 288826th block was generated in 2014-03-04, which is 48 days ago.

So we have generated 200,000 BTC out of thin air in the past 48 days. Have we crashed to $50? No.

[Jr65]

My fault. I'll use paragraphs next time. No one knows what the future holds for BTC. That is why the price has bounced all around over the last few years. It's all about guesses at this stage and only few here can make educated guesses beyond "to da moon." I'd love to hear from a Bankruptcy lawyer but I doubt there are any here. Best always. Jr65   

[JimboToronto]

blah blah blah

TL;DR -

Inexperienced OP doesn't fully understand Bitcoin and places too much emphasis on Gox.

[bigdave]

Perhaps they will hold it like they do gold at Ft Knox. That gives the government a stake in Bitcoin that they can borrow against, etc.

[Raystonn]

This scenario will totally reset the price of BTC

Why?  There have been many times throughout history when someone got a great deal at a bankruptcy auction.  It's a one-time deal, and the purchaser isn't going to flood the market with coins afterward.  That would kill the value of their new investment.

All the current exchanges will be out of business

Why?  I see nothing that would cause this regardless of what happens to BTC price.

There will also be heavy  regulation likely by the SEC.

I don't see how.  Bitcoin cannot be restrained by government.  US officials can only insert themselves at the point of deposit/withdrawal of US dollars.  Most of the SEC's regulations in financial markets cover direct exchange activities.  This cannot be applied to Bitcoin, which is governed by decentralized consensus.  Central banks and governments have no power here.

[JimboToronto]

Perhaps they will hold it like they do gold at Ft Knox. That gives the government a stake in Bitcoin that they can borrow against, etc.

Government? Which one, and what does any government have to do with this?

This is a matter between Mark Karpeles and his creditors, administered by a trustee.

I don't know Japanese bankruptcy law, but here in Canada trustees are private.

[master-P]

If you are very bullish on btc long-term, then your warning probably shouldn't be towards the long-term holders

I think we will see a crash once gox's coins have been liquidated, but I doubt it will go as low as $50, unless someone dumps a large amount on an exchange causing a flash crash. It's unlikely to happen again, but I wouldn't write it off completely.

[GigaCoin]

couldn't read after 2 lines, you need to edit this and fix it if you want it to be readable.

[uhoh]

couldn't read after 2 lines, you need to edit this and fix it if you want it to be readable.

+1000

[uhoh]

I have done a ton of due diligence on BTC and here are my best efforts at a final and reasonable stance. If any of you think that I am anti-BTC, you could not be more wrong.

I want the world to be a better place for my children and for mankind. BTC, if it ever gets to the mainstream, is going to revolution the world.

After reading Marc Andreessen's New York Times article, entitled "Why Bitcoin Matters," I was thoroughly convinced that BTC goes straight to the heart of life improvement. To me, that is the most important thing about BTC. I care far less about the money aspect. Besides, the money will come if BTC gets a shot at helping the globe. Despite my high hopes for what BTC can do to help people, I am very bearish about its short/mid-range future. I am very bullish about its long-term future. (as in probably 10 years) The simple laws of supply and demand tell me that Mt. Gox's failure is going to hit the "reset" button on BTC's price.

As a lawyer and someone who knows just enough about Bankruptcy, I have less than zero faith in our legal system, much less Japan's system. In a nutshell, Bankruptcy's job is to take broken companies, squeeze as much money as possible out of them and return it to creditors of all classes.

As I have said before, Bankruptcy Court pays out in a specific order at greatly reduced amounts owed...very often pennies on the dollar.

It usually goes
1. Employees and wages.
2. Ordinary creditors (for example, bank loans)
3. Customers, users, clients...or those that somehow used the Company's services.

I believe that it is safe to cautiously assume that #3/Mt. Gox's account holders will get nothing. (see "The Associated Press") This point raises the question of how the Court will pay out to the creditors that do get something returned to them. If the only people that get paid in Court want cash, and I think it's obvious that they will, it stands to obvious reason that the Court will liquidate the 200k coins and not return BTC to anyone. If you lie in Court, you go to jail so I would not be shocked if someone blows the whistle on the whereabouts of the missing coins. That just means more BTC liquidation and more pain.

Fact; Bankruptcy Courts liquidate quickly because their time is money. If you doubt me, I can post Bankruptcy Court websites where you can see people buying cars, boats and houses for huge discounts. Since few know about BTC, the discounts will likely be even greater. I guarantee that the Court will sell into the path of least resistance. The path of least resistance will either be to no one, in which case BTC becomes worthless or someone/s or group/s willing to put up big money for big discounts based on the strength and long-term promise of BTC. My wild-ass guess would be something like $10,000,000 for the 200k coins...or $50 per unit. Normally, I'd say less but I think that any smart buyer/s will want to make it appear like they are an industry white knight.

The buyers' cost of acquiring the coins will be high because they will need lawyers, accountants, transportation costs for their team etc.) This scenario will totally reset the price of BTC and there will be a totally new set of BTC pioneers and winners. All the current exchanges will be out of business and BTC will return for sale to the public at large, reputable stock exchanges. Hopefully, by this time, BTC will have a robust infrastructure and the price will stabilize and climb at a sensible rate.

There will also be heavy  regulation likely by the SEC. We will be lucky if my worthless prediction comes true because, otherwise, Mt. Gox is going to take down the baby and the bath water. I have posted three times about the enormous danger associated with the Mt. Gox's Bankruptcy scandal.

Time to put my pen down, listen to your comments, enjoy Easter and hope that technologies like BTC help our world become a better place. I'll wrap this up by saying that if you think my post makes any sense, you will proceed with your investments with great care and not gamble with money that you cannot afford to lose. P.S. To all those who are angered by my posts, I'm only using my understanding of law and economics to arrive at a conclusion to help me and others move forward.

I try not to get too emotional about money and investments. Worry about money has probably already shortened my lifespan. Now, I just chill, do my homework and let it play out because I know that I don't have any control over what happens! Happy Easter and best to all!

Speed edit

[yomofo]

I have done a ton of due diligence on BTC and here are my best efforts at a final and reasonable stance..................................

it's too bad you couldn't put effort into using paragraphs.  I didnt even read your text wall.

[wachtwoord]

What a wall of text.

[Jr65]

Thanks for breaking my post down by paragraph. Your version looks a lot better than mine. I wrote my, far too long post that I now regret, in 20 minutes and I got sloppy with separating topics by paragraph. I also had my 7 year old daughter playing "20 Questions" with me as I wrote. My bad.

To the person that said, "blah, blah, blah" about my post.....congrats on your professionalism. Your parents must be so proud.

To the person that said that I'm "inexperienced." Not so fast. I have a Law Degree/MBA from Vanderbilt, I've worked on Wall St., owned and operated many businesses, (one that went bankrupt) I run my own stock portfolio and have years of experience in the Investment Banking world. I'm not blowing my horn...I have also had a ton of failures in business. I repeatedly noted in my first post on this thread that I was making (educated) guesses and, at one point, described my guess as very possibly "worthless." I was not purporting to predict the future. Again; I was trying to stick to law and economics. I thought I was helping, not hurting and I stand by most post, 100%. BTC's price is going to plummet, maybe not now but eventually. In fact, I think the price may have to plummet in order for BTC to survive.

I do due diligence for a living and if I couldn't spot holes in business spaces, I'd be living in a cardboard box. I was trying to educate my peers here on Bankruptcy rules and the deadly problems with oversupply. Saying "don't discount Mt. Gox. and its immense danger" is not enough. I wanted to flesh out my hypothesis and get your reaction. I'm telling you...Mt. Gox is the #1 pressing issue with BTC right now. I am not trying to push the BTC price down by spelling doom and gloom. Unlike most of you, I own my coins through "The Bitcoin Investment Trust" (2nd Mkt.) and they only offer once per month liquidity. When I can, I'm going to sell half of my investment and ride the storm out with my fellow coin holders, no matter how long it takes. The long-term future is bright provided we don't get "Goxed."

Apologies for the length and sloppiness of all of my posts. Doom or gloom, I'm just trying to have fun by speculating about the future. I enjoy healthy debates on this forum and I respect and appreciate everyone who has an educated opinion. Thanks for the ear! Jr65  

[Wilhelm]

Your comments on bankruptcy are good to follow and I believe you know more about the process than I do.

However some comments are hard to understand like "The buyers' cost of acquiring the coins will be high because they will need lawyers, accountants, transportation costs for their team etc.) This scenario will totally reset the price of BTC and there will be a totally new set of BTC pioneers and winners. All the current exchanges will be out of business and BTC will return for sale to the public at large, reputable stock exchanges. Hopefully, by this time, BTC will have a robust infrastructure and the price will stabilize and climb at a sensible rate."

Why would this reset the price of BTC?
What I would deduct is that the cheap coinz aren't really cheap due to all the overhead acquiring them. In effect there are loads of people feeding off of the process.
The buyer will have no incentive to sell the cheap coinz cheaply because they might not be as cheap if you add the overhead. This would not make the BTC price drop as hard since the buyer might need $100 to $150 per unit to break even.

Why would all the current exchanges will be out of business?
Yes if BTC goes to $1 a piece stock exchanges might not be viable anymore but IMO reading your post the BTC dump will never make BTC go below $50 to $100.