Perry Glasser


In Business, Economics, EDUCATION, Finance, Personal Finance, Political Economy, Wall Street, Wall Street Journal on March 14, 2014 at 10:37 am

Curiouser and curiouser!’ cried Alice (she was so much surprised, that for the moment she quite forgot how to speak good English); ‘now I’m opening out like the largest telescope that ever was!

Bitcoin Speculator

Bitcoin Speculator

Just when Dollar$ though the Bitcoin story was dead and safely buried, someone nibbles a few crumbs of Bitcoin Cake and we are back in Wonderland.

Beware of strange substances that are labeled Eat Me.

The Wall Street Journal reports that a Silicon Valley startup called Xapo is trying to become “the Fort Knox of bitcoin.”

Start with how the Journal ought to employ fact-checkers. Xapo is headquartered in Hong Kong, safely away from pesky US regulatory agencies. Sure, they’ve got offices in California, but so does every other financial firm in the world.

Magic Beans

The bitcoin business proposition is like the story Jack and the Beanstalk. (When it comes to bitcoins, metaphors from fantasy and fairytales are unavoidable.) Give us your real cow, and we will give you magic beans! Overnight they will grow to the sky! When you get up there, you’ll meet a giant who wants to devour you! To survive the giant, you have to be a thief and run like Hell!

Bitcoin: Give us your real money! Bitcoin value will grow to the sky. All you need is the heart of a thief!

The Xapo Proposition

Xapo claims to have raised $20 million to construct physical vaults, “the company says are in mountainous regions.” The vaults are to be guarded 24/7. You’ll need an eye scan to enter. Once each day, employees will descend into the vaults to verify passcodes for daily transactions. Indeed, Xapo indicates it will require 24 hours to complete any transaction.

There are no physical coins, of course. What will be down there will be computers Xapo promises will never be connected to the Internet.  The mountain locations are, naturally, top secret. They may, in fact, be in the back of your Mom’s lingerie drawer. What could be more secure?

Xapo has several competitors, testimony to the idea that a lot of people sell snakeoil.


The bottomless credulity of the cyber-community originates with vitamin deficiencies caused by a steady diet of cold pizza and Red Bull for breakfast, watching Goldfinger too many times, the conviction that one can get rich without ever getting out of a chair, and an unshakeable libertarian belief that the arms merchants, sex traffickers, and drug dealers MUST have an untraceable non-government issued currency for money laundering.

Bitcoin Banker

Bitcoin Banker

Criminals are famous for patience and trust. What 3rd World potentate on the lam requires liquidity? Money launderers of all sorts will  have no issue with a 24-hour waiting period.


Xapo’s website reads, “The Xapo Vault offers fully insured storage for long term savings.” The Xapo website indicates that the insurer is “Meridian Insurance.”

Dollar$ best efforts to find Meridian came up with a few casualty and auto business insurers in the Silicon Valley area. There is no chance that any of them could sustain a few million in claims should Xapo somehow go under, never mind the billions in catastrophic losses made possible by the disappearance of an exchange like the late unmourned Mt. Gox. Could Xapo be arranging employee dental care with Meridian?

But Dollar$ wonders most what currency Meridian or any other insurer will use for indemnification. Will your stolen bitcoins be replaced by dollars, yen, or more bitcoins?

Criminals will stick with fiat currency or gold. Only the naïve and stupid will pursue their bitcoin dreams in Wonderland.


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