As bitcoin continued its downward slide Tuesday, U.S. regulators are reportedly looking into whether its record-breaking rally last year was the result of market manipulation.

~Kate Rooney, CNBC.COM

What a difference a year makes.  On December 17, 2017, Fortune Magazine writer David Morris reported:

The price of one bitcoin (BTC) reached a new all-time high of $19,783.06 early Sunday before dropping back below $19,500, according to Coindesk’s price index.

As of this writing, bitcoin’s price has risen more than 5% in 24 hours, and is up 1,824% since Jan. 1 of this year, when a single Bitcoin could be had for just under $1,000.

Funny how this precipitous increase in the value of a digital currency which operates independent of any central bank and is not backed up by any material asset such as gold or silver did not catch the attention of regulators on its way up.  Imagine, the same individuals who celebrate the virtues of a free market when they are making millions, if not billions of dollars, on pure speculation now are hopeful government regulators will step him and save their inflated earnings.  The message?  While business is great in the financial prostitution business, leave us alone.  But once the shine comes off of this substitute for real earnings, “HELP!”

Sound familiar?  Was it not 10 short years ago when  banks and hedge funds made a similar bet on mortgage backed securities and Wall Street brokers supposedly spread the risk across global markets with unsecured financial instruments like derivatives and insurance schemes like credit default swaps?  And how did the crisis get resolved?  With a $700 billion bailout of the secondary mortgage market funded by U.S. taxpayers, many of whom lost their homes when the housing bubble burst.  And how many perpetrators of these schemes forfeited the assets they accrued while gaming the system or went to jail for fraud and malpractice?  ZERO.

Perhaps its time former Major League Baseball (MLB) commissioner Bud Selig becomes chairman of the Securities and Exchange Commission (SEC).  Selig oversaw what can only be described as the sports equivalent of a looming financial disaster with the increased use of performance enhancing drugs by MLB players.

Much as the value of derivatives and bitcoins were unnaturally inflated, the number of players breaking records for home runs and power hitting was artificially high.  In 2006, there was an equally worrisome increase in PED use among pitchers.  MLB banned the use of performance enhancing drugs in 1991, but relied on an honor system without mandated testing.  In other words, when it came to steroids in baseball, “self-regulaton” was the order of the day.  However, as more and more players achieved unprecedented “success,” the guardians of the game realized something was not kosher.

Therefore, in 2003, the league introduced mandatory testing with a minimum 10 game suspension.  Between 2003 and 2014, 49 players were suspended ranging from the minimum to 162 games (the entire 2014 season) for Yankee shortstop Alex Rodriguez.  In March 2014, MLB adopted mandatory suspensions–80 games for the first offense, a full season for the second and a lifetime ban for the third.  To date, Mets pitcher Jenrry Meija is the only player to receive the lifetime ban though he is eligible to apply for reinstatement two years after the ban was imposed.

Is the steroid era for bitcoins over?  This morning the price of bitcoins opened at 4,253 U.S. dollars, a loss of more than 78 percent of their December 2017 value.  As with the Baseball Hall of Fame, maybe anyone who made the Forbes 400 list of wealthiest American based on subprime loan manipulation or by virtue of investments in bitcoins should have an asterisk next to their names. Or legalize their activity and relocate them to isolated facilities in rural Nevada counties.  Managers will still need college degrees.  Perhaps university departments of finance should start offering specialty MFBAs (Masters of Financial Brothel Administration).

For what it’s worth.
Dr. ESP