If wall street enters a coin, I think this is extraordinary
Okay. Let me explain something here.
When you borrow 200,000$ from the bank to buy a home, they don't actually give you a briefcase with 200,000$ cash in it. In fact, they don't even have to have any money in their vaults to loan it to you. What they do is they write down that you owe them 200,000$. It's just an entry on their ledger.
And the guy you buy the house from, he doesn't get 200,000$ in a briefcase either. The bank just adds that amount on their ledger.
I'm not even joking here. This is actually written into law and it's called fractional reserve banking. A.k.a. the ability for the bank to loan out 200$ when they only have 10$ in their vault.
This is why your bank will give you a really hard time if you try to cash out a large enough sum of money. They'll say you could be a suspected terrorist or drug dealer. And they will try really hard to make you change your mind. In fact, here in Canada, it's actually illegal to walk around with that much cash in your wallet or in your car.
The bank won't have a problem with you if you try to deposit a million$ in cash. But if you try to withdraw just 10,000$ out of that million, you might be a terrorist.
Banks are actually terrified of the idea that everybody suddenly decide to withdraw their money in cash. Simply because they don't have it. And so they would have to tell you you can't withdraw your money. This is called a run on banks. When the banks are not capable of giving you the money you deposited in your account.
Now take this idea over to your investment broker. When you call him up and you tell him you want to invest some of your money in gold, he never actually sends you a gold bar for you to keep under your pillow. What he will do is give you paper gold. That is, he will give you a gold certificate with a serial number on it. And he will tell you that this is the serial number of your gold bar.
And he will tell you that your gold is stored safely in a vault somewhere. And every month he will charge you a small fee for your gold storage. Now the average Joe might think he owns a gold bar but he doesn't. Possession is nine tenth of the law. In other words, ,if you don't hold it in your hand, you don't own it. So the only thing that the average Joe owns is a piece of paper, an IOU for a gold bar, nothing else.
But what your broker doesn't tell you is that he is selling the same paper gold to 10 or 20 other people. So an other 20 other people are walking around thinking they own the same gold bar as you do. And most interestingly, they all pay monthly storage fees for that same gold bar.
Now, naturally the average Joe thinks that the more people invest in gold, the more the price will go up. But in fact, with paper golf, the more people invest in gold, the more worthless it becomes.
After all, gold is valuable because it's rare. Not everyone is able to walk around with a gold bar in their coat. So that's why it's so expensive to own gold.
But if everyone is walking around with a gold certificate in their coat, than suddenly gold doesn't look like it's so rare and valuable anymore.
The more you buy gold certificates, the lower the price of gold will get.
Some people call this a form of fractional reserve banking. Others call it rehypotecation. And yes, it's legal too.
Do you see now why I don't think Wall Street and banks getting involved in Bitcoin is a good idea?
Your bank and your broker will never give you actual keys for your coin. They'll just give you a Bitcoin certificate.
Bitcoin is the revolution against greedy crooked bankers and brokers. It's not supposed to be one of their tools for profit and control.
