End of 21 Million Bitcoins — Fractional Reserve Crypto Banking
Today (October 25, 2018), Mastercard has applied for a patent for Fractional Reserve Cryptocurrency Bank — application 20180308092 (this process started in 2015.)
What is Fractional Reserve Crypto Banking?
Fractional reserve (FR) Cryptocurrency banking is a system in which ONLY a fraction of deposits (generally 10%) will be backed by actual Crypto on hand and available for withdrawal. This is done to theoretically expand the supply of the Crypto asset (or Bitcoin). In the finance world, this is used for lending purpose - 10% cash on hand, allows banks additional 90% lending [on every $10 deposit, banks can lend $90], 10 times assets created from thin air.
With this patent, Mastercard Crypto Bank will be LEGALLY allowed to trade 9 times more Bitcoins than it will hold in its reserve. On every Bitcoin deposited with Mastercard Bank, traders will be able to loan 9 Bitcoins for Trading at exchanges and this is completely LEGAL.
The FR story is much bigger than this, but the above is sufficient to explain the power FR banks hold.
Please note the Filing Date of this patent: May-2015
What is a Filing date? According to Wikipedia “To obtain a filing date, the documents filed must comply with the regulations of the patent office in which it was filed.”
The Ultimate Irony: Fractional Reserve Bitcoin
Goal is to flood Bitcoin market with paper Bitcoin
Fractional Reserve Bitcoin is just one tentacle of the Octopus that wants to consume Bitcoin. Before you reject my claim as baseless, please read the entire article to understand how each tentacle is working in perfect synchronization towards the goal of flooding Bitcoin market with paper, paper and more paper.
Please note: No one believed in the cartel story initially (4th Dimension: Bitcoin-Manipulation-Cartel). After 12 months and 83% of drop, Andreas Antonopoulos talked about “Global Banking Cartel”. Most experts now agree how Futures markets have harmed Bitcoin.
What does this Octopus mean in trader’s language?
I am going to keep it short: Fractional Reserve, Commingling, Rehypothetication and Derivatives are complex words for one simple thing — increasing paper supply of something that has limited physical supply (like Gold, Silver, Bitcoin and Cryptos in general). Fractional Reserve is a magical paper copying machine invented by Wall st. and everything is legal about it.
This is how Paper Bitcoin will be created
You still don’t believe this, right?
Banks are already signing clients for paper-Bitcoin products. Goldman has on-boarded a “small number of clients” to actively trade the derivative, a non-deliverable forward, which is a cash-settled product that is comparable to a futures contract but does not trade on an exchange. Bingo! No Bitcoin involved.
[updated Sept-2019] CME Futures trading is going to do the same to Bitcoin. CME says “In response to growing interest in cryptocurrencies and customer demand for tools to manage bitcoin exposure, CME Group will launch options on Bitcoin futures (BTC) in early 2020”
Anyone remembers this from Oct-2017?
Leo Melamed is CME’s CEO and CME trades $5 T/Day (yes, it’s Dollar 5 Trillion per day).
But, there is a hope!!
This Paper Ponzi will end one day….Till that day, the Fractional Reserve will rule. The Bitcoin supply will continue to increase (just as it has been done to Gold & Silver for last 10 years).
Fractional Reserve Bitcoin is the inning #3 as explained in “Bitcoin — The 9 Inning Game”. Inning #9 is when the Paper Ponzi will be destroyed
Whether we like it or not, it is time to recognize the threat instead of putting our heads in the sand.
More at my twitter @Super_Crypto
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