It looks like an algorithmic stablecoin pegged to the price of Bitcoin instead of USD like most others.
Those are interesting because the economics are set up to turn greed into a stable value. If the price of the token gets too high or too low, people can make money bringing it back to the peg.
I don’t know what to say. Or the person behind this is 150 years old and was living under a stone, or is someone that obviously has 0 knowledge about Blockchain
this is hilarious: having control over supply of your currency is a good thing, as long as it’s well run.
well run? how and by whom?
“According to a study of 775 fiat currencies by DollarDaze.org, there is no historical precedence for a fiat currency that has succeeded in holding its value. Twenty percent failed through hyperinflation, 21% were destroyed by war, 12% destroyed by independence, 24% were monetarily reformed, and 23% are still in circulation approaching one of the other outcomes.
The average life expectancy for a fiat currency is 27 years, with the shortest life span being one month. Founded in 1694, the British pound Sterling is the oldest fiat currency in existence. At a ripe old age of 317 years it must be considered a highly successful fiat currency. However, success is relative. The British pound was defined as 12 ounces of silver, so it’s worth less than 1/200 or 0.5% of its original value. In other words, the most successful long standing currency in existence has lost 99.5% of its value.”
The problem is that the person doesn’t even understand the principles of BTC , why it came to be and why is there. He could just post a tweet , I don’t like BTC and spend the rest of his time brewing coffee
He started in another comment that he has a short position. I theorize that he knows what he's saying is nonsense and it's just trying to misinform the less educated by playing on common (and actively disproven) misconceptions.
> 23% are still in circulation approaching one of the other outcomes
Begging the question a bit
It's also been quite easy to predict which currencies are going to be in in that 23% and have stable value ("hard currencies") and which aren't. Traders and investors typically don't keep assets denominated in Egyptian Pounds or Colombian Pesos, they gravitate to Euros, US Dollars, Yen, and Pounds.
> In other words, the most successful long standing currency in existence has lost 99.5% of its value.”
The Pound Sterling hasn't been successful as an investment asset. That's a very different thing from being successful as a currency.
I feel like these analyses are always very well researched and set-out, but the authors lack any formal qualifications at all. Why read this when there are Nobel prize winners with polemics on Bitcoin? It ends up reading like man-waves-fist-at-cloud on how economics aught to be, rather than how it is.
I've been a mod of r/economics for half a decade, I work as a data scientist and I have a Msc. in econometrics for what its worth on formal qualifications.
I mainly wrote this one as a go-to to point people on my thoughts of the economics of BTC as pointed out in the TLDR box
BTC is Money, perhaps even more than USD , I don’t know how old are you , but currently there are things(pure physical and digital things) that are only possible to be purchased with BTC, no other payment accepted. So yes , BTC is money , I’m close to people that only use BTC as a main exchange point for value , so BTC is money , weather you want to accept it or not is up to you
Oh nice - I actually quite like the article. Probably shouldn't have come after it so hard. I like level headed people pouring cold-water on bitcoin occasionally as it can get a bit loony.
Because nobel prize winners polemics against Bitcoin (ie Krugman) are even less well argued than this.
Bottom line, Bitcoin is a very different beast than everything that's existed before in finance, and "experts" poorly reasoned opinion carry barely more weight than this article.
The truth is, no one knows what Bitcoin will become, because it's the first of its kind.
When the dust settles, the survivor opinion will - of course - write a book and become famous selling the bedazzled masses a lengthy, sophisticated "I told you so".
Ugh Krugman, has there ever been an economist that's been more consistently wrong about the economy? I'm seriously tempted to do the opposite of whatever this guy says.
It's indeed very hard to take Krugman seriously (e.g. [1]).
But unfortunately, some people in power have been doing just that, especially on the topic of (to make it simple) govt taking on more debt because it's "good for the economy long term".
Krugman is the worst kind of evildoer : someone promoting a radical left wing agenda disguised as an academic.
Even though the seams of the disguise are blatantly obvious, people in power are either too blind to see, or too happy to find an "expert" voice backing up their demagogue agenda as long as gets them re-elected for a second term.
Laundry lists of reasons have begun to have the opposite effect on me than what their authors were probably intending.
Idk how to explain it. Scott Adams puts it this way - you would probably use the very best reason if you felt strongly about it, rather than a laundry list.
I have observed that they are ineffective whenever I have used them. As I think I have only ever used them when an argument is completely wrong in every regard, it’s good to know why they are ineffective, so thank you for that suggestion.
Thanks for the info, would be curious to know by what practical means you're shorting BTC.
Also, it is traditional (and a good self-preservation move), when posting financial opinion - positive or negative - about an asset or instrument to disclose one's position if any.
I got into the short position after writing this article, someone happened to post this and make the front page of HN and now my site is down because WP caching was misconfigured.
he also says "...as a whole" so depending on how you interpret this it could be as simple as not holding any bitcoin. eg. if you held stocks in every S&P 500 company except GOOG, then you could probably say you were short google "as a whole".
;) Two consecutive flash crashes notwithstnading and the fact that we're all really enjoying our view at 30k+, I'd say says its all. I want more so let it dip longer, please!
Careful, there's only one story for Bitcoin: "the price goes up" (I hear the kids today have shortened that to "NgU"). This story is very sustainable when Bitcoin's 1% ("decentralized") have been holding coins since $1.
You can always count on the market cap being inflated any time this story is endangered, both to make life difficult for critics and trigger a flood of free advertising in the form of low-effort stories by the fintech blogosphere.
An unregulated global lotto game camouflaged in slippery futurist memery, with zero accountability by its puppet masters as a primary design feature, may well turn out to be a safer play than, say, TSLA or anything starting with a dollar sign. What this implies for us as a species is probably best left unexamined.
Decentralization of anything other than leverage over liquidity and thus price, which is what the Bitcoin 1% (more like 0.01%) holds, is nothing more than a misdirection story to furnish prospective Joe 99% Bitcoiners with the illusion that once they switch to BTC, their wealth will be placed outside interference or control by undesirable, presumably centralized forces.
When Bitcoiners say decentralized they mean, in fact, that its value (through some gating mechanic like issue or "censorship") is not controlled by a government, as if this is somehow any better than the value of one's wallet being controlled by unknown parties, front running exchange operators or mining cartels.
Bitcoin proponents pretend that government centralization of money supply is the only kind of centralization of money that needs fixing, and its mechanisms are thus designed to make an elaborate show of diffusing operational accountability while doing nothing to counteract a pathological concentration of leverage.
As a result, it doesn't actually decentralize anything, it instead relocates all of the centralization under obfuscated cover. This in itself isn't a problem, if promoters would upfront about it. But then no decentralization meme would certainly mean no Bitcoin at $30k, and what's the fun in that?
You've got bigger balls than me. Cryptocurrencies, Tesla, and penny stocks are the assets I absolutely won't short, no matter how much I think they're overvalued, because the low liquidity in them means that they can easily shoot up 10x and wreck your margin position even if you're right.
(Disclaimer: Long Bitcoin, got in at prices between $6.5-8K in 2018. Previously sold @$11K in Dec 2017, after having bought in 2014 at $800. It tends to rise 10-40x from peak to trough each time, which means we could see $100-150K Bitcoin this cycle. There's also the chance that this is "the big one" - the cycle where the dollar collapses entirely and cryptocurrency becomes the new global unit of account and medium of exchange. IMHO the tail risks facing the dollar and the U.S's hegemonic position have never been higher.)
This bull market may just be getting started, see the recent OCC news for some very positive legislative action. How much are you willing to bleed to try and make a point. Even if you don't believe in Bitcoin, shorting it at this point in time is complete lunacy. There are far better plays to make with your money.
This argues that BTC is not money based on the big 3 properties, without considering that BTC has been running only for 11 years.
BTC/Gold is probably the best way to store wealth across time on a 10+ year time horizon without losing much "energy".
Historically fiat currency has been an anomaly, we don't know yet how long it will last. Only time will tell if this is the best form of money. Either way, it's always good we have alternatives.
My one big issue with thinking about BTC as gold/commodity, is at least at the end of the day gold has actual uses. I can make jewlery, or use it in components. BTC has no inherit value at all. My only reason to own BTC is because other people also want it.
That just establishes a price floor. Gold's "inherent" value is substantially below the current price. It is, like BTC, a largely speculative asset that holds the majority of its value "because other people also want it."
None of the perks are beneficial to the consumer. The consumer just sees the onerous process of converting btc to usd, and sees the currency as speculative like a penny stock and nothing more. The only people who are long interner are the same people as they were 10 years ago. For most people, btc is a slot machine.
Censorship resistant is not useful to the consumer? If a vendor has been financially censored then bitcoin is surely useful. For instance, if you want to purchase a 4chan pass, its crypto only baby.
If you ever send a gold bar across the world, I'll send you a beer.
I won't pay the beer with bitcoin though, to expensive for normal use, that includes conversion to euro back and forth in USD/EUR to actually use it :)
gold use case is only 5-10% of it's actual market cap
- if gold price were to go up because of currency debasement, it's industrial use will decline
- if gold price were to go down because of let's say BTC, it's industrial use case will increase. Can even replace copper use cases if cheap enough
problem with gold is that there's a consistent 2% supply inflation per year and if gold price shoots up, Miners mine more and i'm technical innovation will inflate supply further(asteroid mining or atleast cheaper mining techniques). So if you're a gold holder, gold miners go against your value. in the long run gold is not a great investment but it is still better than most of the other stuff that can be produced easily with machines etc.
Bitcoin supply issuance is predictable and mathematically known and provable. If prices goes up, more people mining only increases the security and decentralization of the network. So if you are BTC holder, BTC miners are your friends not enemies unlike gold.
> Where the demand comes from does not enter the conversation
Econ 102: Where the demand comes from matters. Aka "substitute goods".
Gold has no convenient substitutes for the combination of ductility, corrosion resistance and electric conductance it offers, hence demand has a (high) floor.
BTC has an infinite number of convenient substitutes for its fundamental properties -- anyone can make a BTC substitute in half an hour, and there are hundreds you can buy already. So the floor on demand is the psychological buy-in -- which is not any better than the demand floor for tulip bulbs.
I wonder how much "inherent" value gold actually has vs how much value we ascribe to it though. I.e. nobody is holding onto a 2 inch cube of gold instead of a house because at the end of the day they could make some jewelry out of it if it comes to it.
On the flipside any currency-like concept that could come to be worth more as the raw commodity than the currency seems inherently unstable as you'd be better off using it than keeping it.
You'd have to look at a lot more than that. What are the demand/supply curves and how will the change in supply affect the value, what's the actual inherent value in the jewelry vs the value from gold having ascribed value and being used in jewelry, once you have that how much of the value in jewelry is itself an investment of gold vs other value. Repeat for each remaining sector. All that graph tells you is the demand for gold would be non-zero if its utility as a form of currency/investment went away, it says nothing of how much inherent vs ascribed value we put in it.
I don't have answers to the above, I think they'd be extremely hard to get, which is why I used the house vs 2 inch block of gold to illustrate there is at least a significant amount (likely the majority) of the value is ascribed rather than try to put a quantitative number on it.
> at least at the end of the day gold has actual uses
TBF gold doesn't really have uses outside of industrial societies.
Sure it's shiny so you can make pretty out of it (jewelry and other decorations), but for the most part it has properties: it's ridiculously stable, it's easy to work with, and it's rare enough that the supply is rather limited but not so rare that it's essentially nonexistent (unlike the platinum-group metals).
In economies which are static or very slow to grow (aka preindustrial) this makes it a convenient store of value, because it's a slowly but ever-increasing (to the approximation of your supply sinking with a ship) supply.
Outside of a few incredibly niche industrial uses that have only emerged in recent years, no one has had any need of gold except as a means of storing and exchanging value. It has been used as a store of value and as a currency throughout history and across cultures for a number of reasons, such as its recognizability (few things in nature are the same color), its difficulty in counterfeiting (gold has a number of unique properties like its density that would make it very obvious if you were trying to pull one over on a merchant), it's ease-of-use (gold is highly malleable and has a very low melting point, meaning it can easily be made into coins or bars), its rarity (supply is reasonably constrained by the difficulty of mining), its permanence (gold will not tarnish except under extreme conditions, so it's okay to leave in a vault for years on end). However an important property that also contributed is specifically gold's lack of utility - steel was very valuable in pre-industrial societies, but a pound of raw steel is worth less than the tools that could be made from that same pound of steel, so if anyone made steel coins, they wouldn't remain coins for long. If anything, the development of real uses of gold make it less desirable as a store of value - speculation artificially drives up the cost of consumer goods like electronic devices.
People need to be able to store and transfer wealth. Tools which facilitate this are valuable for being able to serve that purpose. Gold is one such tool, and a pretty good one at that.
Bitcoin is an impetus for democratic governments to implement a better system that will align us all via trust, decision making, and not be rallied through a financial system that has an MLM/pyramid scheme structure - financially incentivized to join/promote it, unnecessarily, unreasonably transferring wealth weighted towards earlier adopters from later adopters.
"Bitcoin is almost as bs as fiat money" - Elon Musk; slightly better bs than fiat money isn't the answer.
So was the Gold standard, which didn't become a thing before the end of the 19th century. Before that, the standard money system (at least in Europe & Islamic territories) for the previous 2000 years was the combination of Gold and Silver with a fixed exchange rate. It ended up not being well suited to the beginning industrial civilization and was replaced by Gold+paper money around 1870. And then, when industrialized countries grew in number and in development, gold+paper was progressively abandoned in favor of paper-only money (the US were the last, but pretty much everybody had abandoned it after WWI and WWII).
The industrial civilization itself is also an historical anomaly, and if it ends, maybe gold (or gold + silver) will come back. But in that event, I'm not optimistic about bitcoin's chances of survival…
Arguably silver sterling standard of England can be considered equivalent to modern fiat money, too - a critical component of its value at one point became the fact that tax payment was defined in pounds of sterling silver. It was just a bit easier to convert without special exchange accounts ;)
- that BTC is volatile is, hopefully, non-controversial. Do you want your stock to be volatile? (if you have large BTC assets, it should be...)
- I won't comment on deflationary/inefficient, I feel the article didn't focus too much on that. But it's a questionable store of value because it doesn't have intrinsic value - this, again, should be uncontroversial. The article lists multiple events that might absolutely destroy BTC (the section "BTC is really risky"). It's easy to imagine more (e.g. war or other catastrophic events that would make the BTC network "less interesting" and would make it really easy for a committed player to do a 51% attack, destroying all remaining trust).
It definitely feels like a fancy ponzi scheme - at the very least, BTC ticks a lot of boxes for "how to identify a ponzi scheme" (definitely 1 & 5; arguably most others, except for 2):
1. Abnormally high investment returns. The most obvious sign of any investment skulduggery is the promise of an abnormally high investment return. ...
2. Guaranteed returns. ...
3. Consistently high performance. ...
4. Vague business model. ...
5. The need for more investors. ...
6. Pressure to reinvest. ...
7. The pressure to act now. ...
8. Credibility through association.
---
Note that I'm not claiming that BTC was created with the intention of being a Ponzi scheme!!! I'm just saying it appears to have many such characteristics, and one may reasonably assume that a similar eventual outcome is not unlikely.
I never claimed that. The point is that for most hn readers, these arguments would have been brought up already and therefore as a whole the article as a whole isn't really interesting. It's like being in 2020 reading a "mongodb is bad because it's not ACID compliant" article.
That's actually a worse argument, if I understand it correctly (are you claiming that the article is not interesting for HN readers?? It's frontpage position - currently at #3 - seems to be a pretty convincing counter-argument. The article might not be interesting for you personally, but... that's not very relevant)
>That's actually a worse argument, if I understand it correctly (are you claiming that the article is not interesting for HN readers??
Yes? Not every comment has to be pigeon holed into "This article is right" and "This article is wrong".
>It's frontpage position - currently at #3 - seems to be a pretty convincing counter-argument
A long time hn reader such as yourself must know about the phenomena of "upvoted not because of article content, but because of discussion"?
>The article might not be interesting for you personally, but... that's not very relevant)
It's not only that, the article doesn't even bother going into the most basic of rebuttals (as evidenced by the replies here). Overall it's a very shallow article. It might be fine for 2013 but not for 2021.
1. Abnormally high investment returns. The most obvious sign of any investment skulduggery is the promise of an abnormally high investment return. ...
I'd argue there's no promise of any investment return. Bitcoin just allows the transfer of money nearly instantly.
2. Guaranteed returns. ...
There are no returns since it just a currency to be used.
3. Consistently high performance. ...
Bitcoin isn't a stock, it's a currency. If you're using it to invest, you're gonna have a bad time.
4. Vague business model. ...
Not a business, just a currency.
5. The need for more investors. ...
There is no need for anyone to invest in Bitcoin, there are plenty of hedge funds putting their money into it.
6. Pressure to reinvest. ...
You can go in and out of Bitcoin as you please.
7. The pressure to act now. ...
This is probably FOMO, noone's forcing you to purchase Bitcoin and I would not purchase Bitcoin during a rally unless I was doing a Monday-Friday trading run (buy Monday, sell Friday)
8. Credibility through association.
Noone is associated to Bitcoin, it's an anonymous currency.
It's not a currency. It lacks "acceptability", by design - you can never pay for your subway trips with BTC, it just wouldn't scale not even to a city like NY.
... by changing the BTC offline into fiat currency. Doesn't change anything, using the same mechanisms you could create a similar card backed by any commodity. A coinbase card transaction is not actually a BTC transaction.
Unless the entire market switches to BTC, it's not gonna be possible to do a full BTC transaction. Even if your coffee shop accepts it, it's not likely their bean providers might.
anyone throwing those critics at bitcoin needs to provide criteria for when their critic is no longer valid.
They need to provide:
- vol metric thresholds
- price targets
- adoption %
- etc...
We've had over 10 years of shifting the goalposts with bitcoin. At this point it's starting to sound like denial. Every meaningful metric has continued to improve in bitcoins favor yet we keep hearing the same critics.
"As of December 21, 2020, the Company holds an aggregate of approximately 70,470 bitcoins, which were acquired at an aggregate purchase price of approximately $1.125 billion"
Seriously... this out paced Microstraegy's core business now in just the last year's investment, and who knows how much Saylor put in of his own money without the need to disclose it. Personally, I think Saylor doesn't understand the tech very well and is more focused on selling the news to his investment Corpo class friends sitting on piles of cheap and depreciating fiat, which has it use but is waste of time as he should be using his gains to focus on development in the ecosystem in things like LN, Schnoor and other critical things like micro loan systems in Africa to really make full use of this tech.
Jack Dorsey, by contrast, has done most and all of those things and more, was actually on his way to Africa prior to COVID to embark on that.
'Badeconomics' should be what we call the advent of central bank based fiat currencies, as that has untold amounts of blood on its collective hands.
It reflects pretty badly on Microstrategy that a speculative investment of theirs outpaced their core business. Publicly traded software companies aren't hedge funds, they're not supposed to be making the kind of investments that can do that.
It's also a risk, since, at least in the UK, after you cross a certain threshold (off the top of my head, obviously not advice, I think it's actually 20% rather than the perhaps more intuitive 50%) it's considered to be your core activity, i.e. you become an investment company that for whatever reason dabbles in <whatever you consider to be your core business> which of course comes with tax implications (or it would be an easy way to avoid tax on your personal investments) and potentially an unwanted regulatory burden.
not an expert (in anything else either), but in the US, bitcoin is not a financial instrument. they might as well be buying tulips or beanie babies (no slam intended), as far as the authorities are concerned.
Ah true, and certainly that varies in different jurisdictions, I was just responding in general to the 'what are they doing investing when they're a software engineering company' point I suppose.
> 'what are they doing investing when they're a software engineering company'
Did it ever occur to you they may be accumulating a token that is required to operate on the most secure network devised by Man? And are you so immersed in your own narrative (echo chamber) that the potential value of building systems with this infrastructure at it's core never entered your mind? (Someone on a tech related community tried to relate it to Beanie Babies should say it all, FFS.)
Especially with the endless amounts of leaked information that is seen on a daily basis coupled with a situation where Nation-states (and Corps like Ticketmaster and likely larger ones with valuations that rival many country's GDP) are engaging in ever more Cyber warfare than conventional kinetic warfare, just for context: the International arm's trading racket is ~$100 billion/year Industry. Not to mention the ever expanding amount of Surveillance Capitalism tools that will eventually make it into the hands the blackhats and Cyber Military groups.
I highly doubt Saylor is doing that myself, he seems too short sighted on the media to think otherwise but it may be a facade; large institutional players are now coming with a bunch of inflated fiat holdings wanting to get in and are exploring so many more business models that it won't be long before this happens in my view. IBM certainly tried, failed and lost a lot of its potential because it tried to make its own blockchain while disparaging Bitcoin only to see Ripple (a token it focused on for its Hyperledger ecosystem) get sued by the SEC for selling unsecured securities and BTC sits at greater ATHs.
> Most people on HN have a negative view of crypto because of sour grapes. That's fine if you can afford the missed opportunity caused by this kind of luddism.
I get the sourgrapes, we all went through same regretful delays in buying in when we first heard of it as no one 'get's it' right away; but you make it seem like you can't just onboard right now and what irks me the most is the realization that it's the indignation of not having the astronomical gains from being early adopters that prevents you from doing so. It's fine to accept that mistake, we won't judge you (too much) as we've all been there to some degree and will be entirely if you just admit that mistake when you join in and try to do more than just make it a part of your portfolio and hopefully apply your skill set to earning BTC for your services rather than simply buying it.
That's when it all really sinks in and is the best watershed moment that I know of that makes everything click.
> It reflects pretty badly on Microstrategy that a speculative investment of theirs outpaced their core business. Publicly traded software companies aren't hedge funds, they're not supposed to be making the kind of investments that can do that.
We have a different vision of what traded companies do.
For me, a traded company gives either a dividen, or shows a pattern of growth that is reflected in the share price - in either case, it will give me profits in the end, which is all I care about. I do not care about the "how" - that's the CEO and board job. I care about the profits. And so do you if you are not retired, because without profit, you won't be employed by this company for long.
A company that can adapt to a new trend, cut out bad lines of business, and give me more profit is a company I can consider for investment.
All that matters is the bottomline! Unfortunately many people here focus on useless things like technical debt or CICD pipelines, while they are just tools.
>> I do not care about the "how" - that's the CEO and board job. I care about the profits.
One element is diversification. Consider a hypothetical investor that holds 50% bitcoin 50% stocks may think he's somewhat diversified, but if underneath, his stocks just hold bitcoin on their books, then he's just 100% bitcoin and completely undiversified.
> in either case, it will give me profits in the end, which is all I care about. I do not care about the "how"
This is perhaps the most telling aspect of the investment class that explains how people so many are starving, being evicted and dying from COIVD in the World'd richest country while people keep pouring into Airbnb and Doordash IPOs.
It's so absurd to me how oblivious some people are about things that will lead to inevitable consequences to Society as a while while justifying any and all practices (not least of which slave labour) because their fake paper wealth number increases--all while the currency its denominated in loses more and more purchasing power.
> many are starving, being evicted and dying from COIVD in the World'd richest country
Like every human being, you are entitled to an opinion - however, I fear you are turning that into an emotional argument, instead of logically looking at it. Your emotions are tainting your perceptions.
Most people on HN have a negative view of crypto because of sour grapes. That's fine if you can afford the missed opportunity caused by this kind of luddism.
> fake paper wealth number increases--all while the currency its denominated in loses more and more purchasing power.
Personally, the only "wealth" I believe in is the one that's in a FDIC insured bank, under your name.
As for the purchasing power, it doesn't really matter in isolation: as long as your wealth can increase more in nominal terms than the purchasing power can decrease, it means your wealth increase in real terms.
So what's the problem exactly?
Purchasing power, like everything else, is just one of the "tools" - like CICD or your favorite editor, it's a nice thing to talk about with your friends, but that's not the bottom line.
BTC has no intrinsic use as a commodity; its value is as much on faith as any fiat. Perhaps more so, since it lacks the force of a state to support it and defend its use as a currency.
Sure, some folks purchase narcotics and other folks send money to Venezuela with it, but the vast majority of BTC holdings are playing their part in a multi-level marketing scheme for tech nerds. Every schmo who pumps the price with their fractional purchases pads the value of the whales' holdings.
You have to drop the idea that scarce/finite assets can, should or need to be used as "currency".
Currencies are necessarily able to be increased in supply easily.
Even though there are debates about the actual description of central banks expanding their balance sheets as literal "money printing", this is mostly a debate about where this liquidity flows. For the wealthy and corporations who can borrow at extremely low rates, of course this means they have access to this "printing" and will then inject this liquidity into assets.
>The gains can be explained by nothing else than mania and speculation.
Sure, sort of.
But finite assets are doing their job if they rise in price (in reference to fiat currency units of account) as fiat quantities increase, and the people who have access to this fiat look for a place to put it.
This is literally the use case of Bitcoin, and so it is absolutely "being used".
But since the expansion of BTC has no flexibility (strict supply schedule regardless of economic conditions or price), unlike gold mining or central bank open market operations, it makes BTC very volatile both on the way up and on the way down.
But long term (so far) it is doing its job (of absorbing expanding fiat liquidity and supply).
> You have to drop the idea that scarce/finite assets can, should or need to be used as "currency".
Sure, but the whole premise that Bitcoin is an asset is that it has theoretical use as currency. There are plenty of other things which are limited in quantity and fungible which nobody is paying $30k for because nobody believes that they are future of money.
From a podcast I listened to, Michael Saylor does not have "future of money" in his investment thesis at all. He doesn't see this as currency. Instead, he sees bitcoin as something more like gold, but much easier to move around (and across borders), easier to audit, easier to liquidate, etc.
That this is not what was in the original bitcoin whitepaper doesn't seem to have stopped him.
Why does the supply need to increase? Bitcoin can be subdivided to 100,000,000 times. If the value of one satoshi gets too high to be a practicable then a change can be introduced to make smaller units possible. This is like a stock split.
Could you expand on this? I've heard many times that tether is what underlies a lot of the infrastructure of bitcoin trading on exchanges and that the company responsible for backing them is particularly unclear about what's going on and likely engaging in fraud.
As someone who is an amateur looking in, could you help fill in the holes in this picture? Why do we need tether? Why does it matter if tether is not backed 1:1 by USD? If the fraud really is so obvious and impactful, why 1) isn't BTC tanking and 2) why aren't there charges filed against the company?
The Gist is that Tether is a cryptocurrency that is supposed to trade at 1:1 USDT:USD. Every tether (their currency denomination) issued is theoretically backed by 1 USD. In 2017, Bitcoin prices soared in large part to the fact that so many people were trading tether for Bitcoin. It turns out that Tether may have arbitrarily issued more USDT than USD they have on hand. Therefore, the buys of bitcoin were essentially fake - trading $0.75 USD worth of tether for $1 of Bitcoin (a Tether lawyer said that Tether only had 75% of the cash necessary to back their supply of USDT).
I'm not sure how it's supposed to affect current prices, however. Tethers are still around, and as far as I know, they have not submitted to an audit, but 1 USDT is still trading for 1 USD.
> Tethers are still around, and as far as I know, they have not submitted to an audit
They promised to produce documentation that should shed significant light on the situation by January 15 of this year [0]. In recent days, they have issued up to $800M tokens a day [1].
Which either means that everything is going just swimmingly, or that somebody is stuffing a few more suitcases with cash while heading for the airport. We may soon find out.
>why aren't there charges filed against the company?
There are, it's currently under investigation, lookup tether/bitfinex new york court case.
Tether is needed as many exchanges cannot trade in USD so need a crypto-substitute in a form of a 1:1 dollar equivalent stable coin.
Not being backed matters because it means a single company can essentially print infinite money and buy up crypto, leading to fast price increases, just like the one we are seeing right now. When you see $30000 price tag on a bitcoin you don't know what percentage of it is actually fake USDT dollars. Right now it doesn't mater as you can exchange usdt for usd 1:1, but one day the music will stop and a "bank run" will happen, which will expose a giant hole and a real price of btc, collapsing the whole scheme.
>why 1) isn't BTC tanking
My current theory is that they co-opted a lot of exchanges, if you read their website https://tether.to/ they admit that they are not backed by USD and mention "loans made by Tether to third parties" which sounds like they give exchanges billions of dollars for IOUs. So exchanges get free billion dollar loans and in turn tether can print more billions and trade it for real money on bitfinex which they own.
For the first question, it depends if you bought the fifty cars for $100 each, or if your basis is less than that. Cost basis is key here. And no to the second question.
The IRS has designed crypto as a property, so you are subject to paying capital gains (or claiming capital losses) whenever you sell, convert, pay or earn. Converting one crypto to another (or to USD) is a taxable event, while transferring BTC in one wallet to another wallet is not (since you keep the same property). Further details at https://www.coinbase.com/bitcoin-taxes#paytaxes.
It's considered the same as an in-kind transfer for stocks from one broker to another.
Again, the understanding of "property" is evolving in this environment, and there are areas of regulatory uncertainty (such as synthetic assets from staking collateral in money markets). However, transferring from one wallet to another is pretty safe territory.
That's an implementation detail in service to controlling value on the ledger. Moving it around does not change that it represents ownership of a quantifiable amount of BTC, unless you sell it or trade it.
My guess is you have no idea of the underlying dynamics because you haven't done your research before deciding for yourself and stating confidently "can be explained by nothing else than..."
Here are a couple of threads describing the dynamics in play. Feel free to agree or disagree after reading but, contrary to your statement above, these can explain the price increase:
Here's Lyn Alden, regarded by many to be one of the best macroeconomic thinkers working today (who is now very bullish on BTC), playfully echoing the same idea from above:
And, just in case the tone of Lyn Alden's tweet confuses you about the caliber of thinker you're encountering here, this is a recent article of hers with relevance to BTC macroeconomically:
As I started: I believe you have not done your research to understand what you're looking at. This would be an excusable situation 5 years ago, but the BTC space is now teeming with high quality, pre-digested material that you can use to build a foundation of knowledge and understanding.
I believe you'll regret your hubris...sooner rather than later.
I follow a lot of macroeconomic and investment personas on Twitter and in the past 2 years Lyn Alden has been a rising star. But she is still young and fairly new so it will take a while before you see her more often on CNBC.
Bitcoin is voluntary! Investing in MicroStrategy is voluntary! There is absolute no coercion to buy bitcoin or invest in MicroStrategy.
If you are so certain that bitcoin is toxic, short it on one of the many platforms that allow this, or if you don't have the guts, just ignore it. No one makes you use it. That bitcoin continues to grow and gain value relative to fiat currencies is an organic decision by market participants.
- Fixed supply is not a "problem built-in", it a a feature
- Yes, it can be used as a medium of exchange using the lightning network
- The blockckain is inefficient but it was not built for efficiency but to solve the trust problem in a trust-less network.
Is any of these large amounts of money someone's individual money they've earned that they're putting into these schemes, or is it part of financial complex/capture - where decision making has trickled up to a small few - so few people to manipulate/convince into such decisions?
"Bitcoin is almost as bs as fiat money" - Elon Musk; I haven't seen any pro-Bitcoiner try to spin this quote as a positive yet, though I'm sure I'll laugh at whatever mental gymnastics are presented. Good luck betting against Elon's understanding of the holistic, exponentials.
I don't understand why people keep trying to compare Bitcoin to traditional fiat money when it is an entirely new asset class that we have never seen. It is sorta like money (or can easily be converted to "real" money), an asset, store of value, protocol, and secure network all at once. Trying to simplify it into a narrower definition of currency is like trying to fit a tesseract shaped object through a sphere shaped hole.
But in the markets, it is not about the technical definition of Bitcoin, it is about how the average market participant interprets what Bitcoin is... Being technically novel does not protect Bitcoin from being treated like currency, and it doesn't alleviate the negative impact of people's (erroneous) conceptualization of it.
At the end of the day it is being traded and speculated on like any normal asset though.
The people buying bitcoin as an investment don't need to care about the asset or secure network, in fact bitcoin's technical details have actually created negatives when exchanges/vaults/services break and assets are lost.
To most buyers it's just like buying and selling stocks, currency, gold, oil futures, whatever.
If a tanker sinks, that means nothing about the value of oil. Similarly, when there's an exchange hack, that means nothing about the value or security of bitcoin. It just means they had poor security standards.
I agree that most buyers are investing as a speculation; all investing is speculation. Bitcoin is a new type of asset that has properties never seen before. That is what my point is, that they new properties are being discounted heavily by the author as they try to force it into a traditional asset to make a shaky comparison.
But are any of those new properties at all related to its value or why it is being traded? At the end of the chain of speculation, eventually oil gets sold to a customer who wants to burn it and real estate gets sold to someone who wants to live there. If they didn't, those markets would collapse (and housing has done just that in the past).
I do agree that bitcoin (well, blockchain in general) has useful properties for certain types of transactions or record keeping.
But I think the points of the article stand. If a currency isn't useful to buy things, or is subject to wild value swings due to speculation, then it isn't a great currency. If an asset doesn't have any real value to any customers, then it's not a great asset. Bitcoin combines both of those into, a mediocre currency and a speculative asset?
Exactly! The biggest arguments I have around Bitcoin are
1: Even if you can treat it like an asset, it's an unproductive one.
2: It's too easy to have some sort of problem and lose it.
At the end of the day, I see the long term value of BTC going to zero.
I feel lucky to have had some at one point, just to have that experience. One day, I saw that Bitcoin sitting in my wallet, and realised I didn't really care anymore. It didn't solve any problems I was having, and I couldn't do anything with it other than look at the balance or send it somewhere.
I'd rather have my future wealth come from value I create, than some asset I happen to hold.
Anything that a person finds useful (or, more strictly, that a person can trade) can be an asset. Bitcoin is a new type of asset that has properties never seen before. That is what my point is, that they new properties are being discounted heavily by the author as they try to force it into a traditional asset to make a shaky comparison.
Institutional investors have to (and personal investors should) have some concrete understanding of what an asset is and why it's valuable before investing in it. If there's a better understanding than "just a currency", sure, that's worth discussing. But if it's an entirely new asset class and can't be simplified into any narrower definition, how do I figure out what a reasonable price is or what numbers I should put on my accounting statements?
> But if it's an entirely new asset class and can't be simplified into any narrower definition, how do I figure out what a reasonable price is or what numbers I should put on my accounting statements?
Markets determine which price is reasonable. It's a collective decision about how much something is worth. Is it reasonable to say bitcoin should be worth less than $10K, $1000, $100 etc...? No, because the price today is not that.
You're misunderstanding something here. It's reasonable and very common to say that the true value of a financial asset is different than its market price; anyone who makes an investment in something is expressing the thesis that the current market price is lower than it will be in the future.
No, I don't misunderstand, I agree with you. Just saying that a market price is the best guess for whatever the "true" price is / should be. Because cyrpto markets are easily accessible across the world to everyone, it will be closer to the "true" value than other markets that are less accessible.
Are you kidding? Tulip bulbs make an outstanding protocol: they are self-propagating and they come in 10+ different colors, making them more information-dense than a conventional binary protocol.
There are two aspects of "money" - store of value and medium of exchange.
> Trying to simplify it into a narrower definition of currency is like trying to fit a tesseract shaped object through a sphere shaped hole.
Which is funny because that's exactly what you did. You only compared it to store of value ("asset class") and ignored the "medium of exchange" part...which is the characteristic people are using for the comparison to fiat currency.
You can accept that BTC has a store of value and still be critical that its use for a medium of exchange is limited.
The author is saying it's lack of ability to be medium of exchange is reason for it's failure and their decision to short it, I am saying that you need to consider all facets of the technology. It might fail as currency today, but that doesn't mean it won't in the future or that it has other useful properties today
> I am saying that you need to consider all facets of the technology.
And to your point the author did assess it as a medium of exchange and deemed it a failure.
> but that doesn't mean it won't in the future or that it has other useful properties today
Just as you think it has a future, the author thinks it doesn't - hence the short position. But saying that the author didn't consider all aspects is disingenuous - they literally did, they just don't agree with you.
Also, you talked about other uses like "protocol and secure network". Aren't these just features of the technology that powers BTC (e.g. blockchain)?
Good point, a lot of the value prop is simply blockchain, which there are many "crypto" versions. Bitcoin's real value prop today is the network effect (growing in users/wallets/network hash etc).
Bitcoin should not be viewed as a currency (for the reasons outlined in the article), but the libertarian-types who were claiming it was going to replace fiat currency early on continue to peddle that about Bitcoin and other cryptocurrencies today. And the idea that BTC = money ("coin" is in the name and "currency" is in "cryptocurrency") has stuck in many people's minds, so this stuff is unfortunately necessary since the general public's understanding of Bitcoin is "obscure digital money that goes from cheap to expensive and back real quick".
And the media, being generally too lazy to do critical investigative work into obscure tech stuff, have actually reported on BTC as if it is a real currency in the past.
Futures, stocks, etc never had the public image of a potential future currency, which is why you don't see blog posts about how "High-yield debt will Replace Fiat in a few years" or other such nonsense. The same cannot be said for Bitcoin.
Technically gold isn't impossible to manufacture as there are scientists and labs fully capable of making it, but it costs more energy to make than its value... For now... Let's remember that episode of the Twilight Zone when the gold thief goes into the future only to find out gold is manufactured and worthless.
Gold lasts forever, it doesn't tarnish, rust, or corrode, that much is true. But it still could be stolen, or potentially damaged (like a big house fire). I suppose bitcoin could be stolen or lost as well though, but as it's not actually physical it should be easier to protect.
Gold is beautiful so that's an excellent point as well. It can be turned into jewelry and such.
Bitcoin isn't really the opposite though in every regard. It may not be physical but it's very difficult to "mine" and it gets harder every year. Plus there will come a day when it can no longer be mined at all, making it even more rare than gold, and impossible to produce more of.
Yeah, what?? Is the author worried his BTC will rust? Does he think BTC is easier to fake than gold? Do governments buy gold for the economic tourism produced via tours of their vault?
Maybe the author is close to solving P=NP and knows something we don’t
What is with all those articles on HN front page about bitcoin?
Is this because BTC price has risen sharply recently?
You don’t have to be genius to understand what is going on: USA printed trillions and gave most of it to already rich people. What are they supposed to do with that money? Only option is buying more real estate, buying stock of their companies, or investing in BTC.
Keep in mind that these trillions hasn’t flow into these assets yet but it will keep flowing and you will see these asset prices increasing.
In essence, if you don’t own any real estate, company stock or BTC then you will essentially own nothing because thieves already sucked all the fiat to its own end.
Exactly. Every time there is any kind of mania there is always a slew of articles on how much people are making on it, there is a remarkable dearth of articles on how much is lost when the mania ends. (Credit to Reddit's Wall Street bets group for breaking that one a little though.)
The $3 trillion+ of money printing behind all this? As you say, completely lost in the wind. But for the record here it is:
Exactly. Bitcoin has been heavily criticized on HN by some, but we're seeing its value proposition come to fruition: an asset that is resistant to artificial government fueled inflation. Perhaps also easier to get into than stocks (no need for a brokerage account, and you can buy in almost arbitrary amounts), and definitely easier than getting into property.
It is so much easier than stocks. In the US it is relatively easy but in most countries you can't just download an app and start trading. Anyone can buy a bitcoin with a credit card.
Yeah... I bought about $250 worth of bitcoins two years ago on an exchange. The exchange went bankrupt and the bitcoins are gone. At least with a stock broker your account is insured by the government up to a certain amount.
Yes, I know, run your own wallet, don't leave your bitcoins on the exchange... Except again, with stocks, you don't have to worry about that. I was personally hoping that a bitcoin exchange would have better security and backups than my home PC. As far as I'm concerned, storing bitcoins on your machine, with no insurance, is not much safer than storing gold bullion in your closet.
I'm just happy what I was wise enough not to put more money in bitcoin than I could afford to lose.
It would be wonderful to have a BTC bank account with an insurance policy denominated in BTC, but that doesn't exist yet (AFAIK). Until then... Not your keys not your coins.
Also, you don't need to store them on your PC. There are also paper wallets, hardware wallets, or you could put your wallet files on a flash drive.
> I'm just happy what I was wise enough not to put more money in bitcoin than I could afford to lose.
If I'm understanding correctly, what you are saying is that Bitcoin is fundamentally different than say a share of Amazon because inflationary activity could actually damage Amazon as a company and therefore lower the price of Amazon shares long term whereas Bitcoin cannot be damaged in such a way because it's value is not based on any real economic activity?
> whereas Bitcoin cannot be damaged in such a way because it is not based on any real economic activity
No, Bitcoin has economic activity from transactions on the Blockchain (peer-peer) and mining activity (system-miner). This activity cannot often by disrupted by another currency minting a lot of other currency.
The dollar printer went crazy in 2020: https://fred.stlouisfed.org/series/M2. This definitely had an effect on stock and property prices, and seemingly some cryptocurrencies as well.
That would be a nice theory, but inflation in terms of producer and consumer goods is lower than in previous years (PPI inflation of 0.8% for the 12 months ending on 31 November, CPI inflation of 1.2% for the same period, compared to an average of more like 2% over the previous few years).
I think the rise in BTC is also attributable to the fact that the Fed _hasn't_ been buying BTC, and therefore hasn't artificially propped up its price. The same can't be said for stocks, real estate, or anything else available on equity markets. Couple that with the fact that bitcoin has no 'intrinsic value' and therefore isn't capped at the top or bottom, and you've got an asset that:
1) May survive inflation intact.
2) Cannot really be overpriced (or underpriced) since it is not tied to anything except itself.
This makes for a pretty juicy opportunity for those who don't want to invest in assets the fed has been propping up. Of course there are downsides. The lack of intrinsic value means there is no real price cap at the top... or the bottom. Hence volatility. It can also simply be banned from being purchased with fiat currency.
> the Fed _hasn't_ been buying BTC, and therefore hasn't artificially propped up its price. The same can't be said for stocks, real estate, or anything else available on equity markets.
The Fed isn’t buying most equities. The monetary transmission channel for equities is exactly the same as Bitcoin’s.
> The monetary transmission channel for equities is exactly the same as Bitcoin’s.
Can you explain what you mean by this? From my understanding the fed has been buying corporate bonds and ETFs directly. I shouldn't have said the Fed is buying 'anything else available on equity markets'.
> Can you explain what you mean by this? From my understanding the fed has been buying corporate bonds and ETFs directly
The Fed has been buying bond ETFs as a way to buy bonds. (Bonds are illiquid, and a whale like the Fed buying them individually can create artefacts.)
When the Fed buys it puts the asset on its balance sheet and gives the seller money. That money can then be spent or re-invested. Spoiler: it's been getting re-invested. That is the transmission channel from the Fed's buying to other asset prices, e.g. stocks and non-target bonds and Bitcoin and beanie babies.
> You don’t have to be genius to understand what is going on: USA printed trillions and gave most of it to already rich people.
It's also a good time to understand "The Cantillion Effect"
> Namely, when you print money, it causes more pounds to chase fewer goods, pushing up the average cost resulting in inflation. His theory has been dubbed ‘The Cantillion effect’, and is a lesson to us all on the effects of inflation ‘financing the financiers’.
I have heard that technology has a very large deflationary effect on consumables, and you can see the inflationary effects of money printing in the prices of non-consumables like stocks and real estate. For example, check out the nasdaq composite index: https://finance.yahoo.com/quote/%5EIXIC/
Sadly asset inflation is not part of the inflation calculation.
Also there's a reason besides the technology's deflationary effect - it's the wealth inequality. If the printed money doesn't end up in the hands of the majority of people (i keep hearing real wages are stagnant), then there won't be inflation in the common goods that make the large chunk of CPI.
I have heard this before. I would like to see some an inflation penetration metric for various economic actions whether those actions come from the Fed or some other group. For example, I think about the 5 billion (or more?) in bond purchases the fed recently made. How does that kind of monetary inflation penetrate into the economy? Groups that don't own stocks won't get those dollars. However, for groups that do own stocks, they will have extra money to spend and therefore push the prices of common goods up.
You never really own real estate (almost never the land since it remains the property of the government so it's a lease at best, you own buildings and that's it) - and ownership of real estate means being taxed on it forever for the privilege of having it (with increased levels of taxes over time, of course) which is not really compatible with the concept of 'property' - when you buy an object you don't keep paying for it forever.
And don't even get me started on the fact that most countries will steal that property back at death with outrageous taxation levels. That's some kind of a property all right.
Natural rights become a social construct the minute you stop enforcing them yourself. You pay taxes to support the system that maintains the property fiction for you.
Can you describe what it would look like to "own" land in your view? Are you suggesting people should be able to buy land in a community and then sit on it forever without contributing anything back to said community?
> Can you describe what it would look like to "own" land in your view?
Not paying taxes forever on it would be a start to call it "ownership". As far as I know, on about everything else you buy, you never end up paying x years for possessing them.
> if you don’t own any real estate, company stock or BTC then you will essentially own nothing because thieves already sucked all the fiat to its own end.
In all likelihood, if you own none of these you probably don't have much wealth in the first place.
(No offense to anybody, I fall in this category. Aside from my down payment savings fund, I have no wealth to speak of)
1. The exchange rate between USD and other currencies fluctuates about as much as USD/BTC.
2. The exchange rate between BTC and other currencies is relatively stable, or at least uncorrelated to the USD/BTC rate.
But in fact you see neither of these. So either (1) all developed-market currencies are seeing massive fluctuations that are all somehow perfectly correlated with each other, or (2) BTC is the one that's fluctuating, not USD.
The author may be right in that MSTR putting the surplus capital towards BTC was a somewhat strange and potentially reckless move.
He got a lot of things wrong with what Bitcoin is and how it works. For instance he claims Bitcoin to be anonymous and a criminals' haven when all BTC transactions are publicly and permanently recorded on the blockchain. While also criticising it's inefficiencies he offers no other alternatives nor any solutions for them.
Unrelated though; There is no fighting against Bitcoin as the future of digital currency. The fast dinosaurs like PayPal have already started seeing the mass extinction ahead.
> There is no fighting against Bitcoin as the future of digital currency. The fast dinosaurs like PayPal have already started seeing the mass extinction ahead.
My experience in the past 9 months is that shopify is winning online payments for small vendors with websites, venmo is winning for individuals selling peer-to-peer (e.g. facebook marketplace), and anyone bigger has their own credit card management front-end. I've purchased from many small operations for my hobby (houseplants), and in the past 9 months only 1 of them has advertised accepting bitcoin. YMMV
That is why I said future . Bitcoin is not ready today or even tomorrow for merchant or even peer to peer payments. Takes forever to confirm transactions and is not exactly intuitive to use.
However it is a no-brainer once it matures to be robust, faster, and have cheaper fees to use. Btw doesn't have to be the winner here since Bitcoin has competitors in this space. Might take 5-7 decades for this to be fully achieved but it will eventually replace most middlemen we have today for payments.
I think we're actually on the cusp of some sort of hyperinflation/stagflation this decade, so BTC is a fantastic hedge against that.
You can't float the entire US economy along, shutter all of the businesses but keep people employed on government loans without ramifications. We should be in a terrible recession right now, but of course the government stepped in to prevent that from happening (mostly).
A functioning economy has a healthy level of financial inputs and outputs: you go to work, you spend X amount of your dollars on entertainment, food, home improvement etc. and you save Y amount.
The problem is when you shutter all of the businesses that just creates a massive surplus of money. That doesn't even get into things like stimulus checks, PPP loans, etc. People don't necessarily need more cash, people really need to produce more and start spending money again.
Too much economic input without enough output.
Needless to say the MicroStrategy investment was really smart and the author doesn't know what he's talking about. 51% attack? Really? So an individual actor is going to spin up computational power eclipsing the country of Switzerland just to take down bitcoin?
I am not expert in economics, but form what I see:
- Not being able to print money might sound really good first, but this could be the reason COVID haven't done the havoc it would have without that money. Stopping businesses from collapse is crucial, no mater at what cost. Why? You really want your local super market to be totally empty? And scavenge for food? No. We just need a way to be able to prevent it. This is what helped in 2008, and currently trying to help.
What this money printing is going to cause, we don't know, but its better than dieing because of not having the ability to intervene when we have to.
- We always need some way of policing this society as a whole. We cant really have nice things. There is a reason we have locks, and fences. Wouldn't it be good if we were are just one happy family(I just laughed myself to death saying this)? No crimes, no anything. Everybody just live a happy life without any crime. That would be wonderful. But we all know that is not really what is happening.
I feel like that's the fairy tale crypto currency is selling, and that's why it sells really good, as always, we always thrive some easy way to make a living, make money, whatever. And crypto currency checks a lot of boxes we are all want.
If you're looking to compare Bitcoin to something, it should be the (free banking) gold standard (before the Federal Reserve 'changed' it), which was similarly inflexible. In the era of the gold standard , there were depressions, but they were quite brief (usually a few months); there were no great depressions or great recessions
Before that Great Depression, the term 'Great Depression' referred to the 23 years of economic crisis which started in 1873 and ended only when gold was found in the Yukon...
Tying economic growth to the availability of gold was a disaster.
> In the era of the gold standard (before the Federal Reserve 'changed' it), there were depressions, but they were quite brief (usually a few months); there were no great depressions or great recessions
You mean The Great Depression of 1929 wasn’t a great depression?
Before the establishment of the Fed in 1913, you had the Panic of 1893, which caused a depression until ~1897; before that the Depression of 1882-1885; and before that the Long Depression of 1873 to ~1878.
All of those times also overlap with the so-called 'gilded age' when "rapid expansion of industrialization led to real wage growth of 60% between 1860 and 1890, spread across the ever-increasing labor force.[56] Real wages (adjusting for inflation) rose steadily, with the exact percentage increase depending on the dates and the specific work force."
There were definitely issues, but nothing like the Great Depression of the 1930s.
I use the example of forest fires. Small forest fires keep large forest fires at bay. But if you prevent small forest fires then it just leads to large forest fires.
System's problems were regularly removed from the economy when we were on Gold standard (like run on the banks etc). Then Federal reserve gets a hold and they start putting out these 'small fires' and it just leads to large uncontrollable depressions.
Ability to print money can be good and useful, but governments have a long history of going overboard. The benefits of printing money are immediate and tangible and the pain tends to lag and are widely distributed (hurting everyone that holds the currency worldwide).
Fiat currencies definitely have their place, but so do hard assets. And it may turn out to be useful to have a hard asset that is much more easily divisible, transferrable, and more resistant to seizure than gold.
There are more ways to give food to citizens in an emergency than printing trillions of dollars. There are more ways for the government to acquire money than conjuring it out of thin air. There are more ways to prevent local businesses collapsing than inflating the stock market.
"Before money we had to barter, which led to the double coincidence of wants problem. When everyone accepts the same money you can buy something from someone even if they don’t like the stuff you own."
Stopped reading right here. Anthropologists have widely discredited any ideas that "before money we had barter", but it's just shyly asserted as absolute fact.
If you're going to argue something isn't money, you should first have a correct idea of what is money.
The book "Debt: The 5000 Years" laboriously debunks the idea that early cultures bartered, then realized they needed money. I don't have more details unfortunately because it's been a while since I read it (and it's quite dense). I remember being convinced of the logic though!
In short, while bartering likely did exist in some forms, it was not the primary means of commerce. Within a tribe or group of people, a 'gift economy' was generally used. This makes sense, as an average pre-historic tribe had like 50 people, making a complicated economic system unnecessary.
When civilization started to form, primitive forms of money came along with it. There was never a time when you went to the market with a handful of wheat and some furs, and hoped to trade them for some salt and fruit. That idea was popularized by Adam Smith in the 1700s, who was an economist, not an anthropologist.
When I was researching this subject, what I found out is that the path was:
1. Gift based economy. Where people aren't really giving gifts... this still exists in some parts of the world, basically if you accept the "gift", you are now in debt, and is expected to do something in return, not necessarily immediately. In small villages it makes sense, for example the hunter "gifts" everyone with the meat he hunted, increasing his social standing, so when he needs medical attention, the medic will take care of him, because he is socially in debt to the hunter. In a modern economy this instead can be disastrous, for example I have a cousin that visited France, and was horrified when african immigrants kept following him and his wife, hugging him forcefully, and trying to put random crap (it was some beads to wear around the wrist) on his hands and saying it is a gift, meanwhile when a nearby tourist did take the object, they demanded a 50 euro "gift" back.
2. When society is too big to be "social standing based", currency shows up rather quickly, when you can't remember everyone or use everyone's fame as currency, you need something easier to track, can be objects (rocks, salt, gold, whatever) or a ledger (numbers on a piece of clay, bank account, bitcoin, whatever), or both.
3. Barter shows up AFTER currency, because people use the currency to know the value of what they are bartering, for example a guy wants to buy a house, and doesn't have 3 tons of salt required, so he says he will offer you this gold bar worth 1 ton of salt, his horses worth the other ton of salt, and 5 years of his work worth the last ton of salt.
Here is a reasonable article on the subject, I remember vaguely it was one of my sources at the time, it is not the best source, but is the one that pointed me in the right direction.
595 comments
[ 2.9 ms ] story [ 306 ms ] threadThose are interesting because the economics are set up to turn greed into a stable value. If the price of the token gets too high or too low, people can make money bringing it back to the peg.
[1] https://www.investopedia.com/terms/a/authorizedparticipant.a...
/s
this is hilarious: having control over supply of your currency is a good thing, as long as it’s well run. well run? how and by whom?
Begging the question a bit
It's also been quite easy to predict which currencies are going to be in in that 23% and have stable value ("hard currencies") and which aren't. Traders and investors typically don't keep assets denominated in Egyptian Pounds or Colombian Pesos, they gravitate to Euros, US Dollars, Yen, and Pounds.
> In other words, the most successful long standing currency in existence has lost 99.5% of its value.”
The Pound Sterling hasn't been successful as an investment asset. That's a very different thing from being successful as a currency.
I've been a mod of r/economics for half a decade, I work as a data scientist and I have a Msc. in econometrics for what its worth on formal qualifications.
I mainly wrote this one as a go-to to point people on my thoughts of the economics of BTC as pointed out in the TLDR box
Bottom line, Bitcoin is a very different beast than everything that's existed before in finance, and "experts" poorly reasoned opinion carry barely more weight than this article.
The truth is, no one knows what Bitcoin will become, because it's the first of its kind.
When the dust settles, the survivor opinion will - of course - write a book and become famous selling the bedazzled masses a lengthy, sophisticated "I told you so".
But unfortunately, some people in power have been doing just that, especially on the topic of (to make it simple) govt taking on more debt because it's "good for the economy long term".
Krugman is the worst kind of evildoer : someone promoting a radical left wing agenda disguised as an academic.
Even though the seams of the disguise are blatantly obvious, people in power are either too blind to see, or too happy to find an "expert" voice backing up their demagogue agenda as long as gets them re-elected for a second term.
[1] https://www.laphamsquarterly.org/revolutions/miscellany/paul...
Idk how to explain it. Scott Adams puts it this way - you would probably use the very best reason if you felt strongly about it, rather than a laundry list.
Given the accumulated evidence in the article, this seems like a no-brainer play.
I don't understand.
Unless the whole article is hot air, of course.
Also, it is traditional (and a good self-preservation move), when posting financial opinion - positive or negative - about an asset or instrument to disclose one's position if any.
You may want to consider editing your article.
I'll edit the TLDR box when I physically can
How's that going for you?
;) Two consecutive flash crashes notwithstnading and the fact that we're all really enjoying our view at 30k+, I'd say says its all. I want more so let it dip longer, please!
We'll see by March or so how it's going for me.
You can always count on the market cap being inflated any time this story is endangered, both to make life difficult for critics and trigger a flood of free advertising in the form of low-effort stories by the fintech blogosphere.
An unregulated global lotto game camouflaged in slippery futurist memery, with zero accountability by its puppet masters as a primary design feature, may well turn out to be a safer play than, say, TSLA or anything starting with a dollar sign. What this implies for us as a species is probably best left unexamined.
I don't think you understand what decentralized means.
It has nothing to do with how concentrated Bitcoin ownership is.
Decentralized means there is no central authority. For example, should the SEC go after Bitcoin, there is no one to sue.
Or, if I decide to send 10M USD to someone on the other side of the planet, no one can prevent that from happening.
In both scenarios, how much BTC is owned by "whales" is irrelevant.
When Bitcoiners say decentralized they mean, in fact, that its value (through some gating mechanic like issue or "censorship") is not controlled by a government, as if this is somehow any better than the value of one's wallet being controlled by unknown parties, front running exchange operators or mining cartels.
Bitcoin proponents pretend that government centralization of money supply is the only kind of centralization of money that needs fixing, and its mechanisms are thus designed to make an elaborate show of diffusing operational accountability while doing nothing to counteract a pathological concentration of leverage.
As a result, it doesn't actually decentralize anything, it instead relocates all of the centralization under obfuscated cover. This in itself isn't a problem, if promoters would upfront about it. But then no decentralization meme would certainly mean no Bitcoin at $30k, and what's the fun in that?
(Disclaimer: Long Bitcoin, got in at prices between $6.5-8K in 2018. Previously sold @$11K in Dec 2017, after having bought in 2014 at $800. It tends to rise 10-40x from peak to trough each time, which means we could see $100-150K Bitcoin this cycle. There's also the chance that this is "the big one" - the cycle where the dollar collapses entirely and cryptocurrency becomes the new global unit of account and medium of exchange. IMHO the tail risks facing the dollar and the U.S's hegemonic position have never been higher.)
I really don't think life tends to be as exciting as you hope it is.
(I work as a consultant, and get most of my income in cryptocurrencies, so I don't see any of these problems as impactful).
BTC/Gold is probably the best way to store wealth across time on a 10+ year time horizon without losing much "energy".
Historically fiat currency has been an anomaly, we don't know yet how long it will last. Only time will tell if this is the best form of money. Either way, it's always good we have alternatives.
BTC has some superior properties:
1. Censorship resistance / Self custody
2. Reasonably cheap to transact large value across space.
3. Network effects
Also, gold like bitcoin have a huge monetary premium so the same argument applies.
Nice dodge on the 8$ min. transaction fees :)
Also the fees are in bitcoin - if bitcoin is worthless, the fees are nothing.
If you ever send a gold bar across the world, I'll send you a beer.
I won't pay the beer with bitcoin though, to expensive for normal use, that includes conversion to euro back and forth in USD/EUR to actually use it :)
Definitely not accurate and this says nothing of the massive environmental cost of transacting on the blockchain.
problem with gold is that there's a consistent 2% supply inflation per year and if gold price shoots up, Miners mine more and i'm technical innovation will inflate supply further(asteroid mining or atleast cheaper mining techniques). So if you're a gold holder, gold miners go against your value. in the long run gold is not a great investment but it is still better than most of the other stuff that can be produced easily with machines etc.
Bitcoin supply issuance is predictable and mathematically known and provable. If prices goes up, more people mining only increases the security and decentralization of the network. So if you are BTC holder, BTC miners are your friends not enemies unlike gold.
https://nakamotoinstitute.org/mempool/
What does "actual uses" mean other than "there are people out there that have a desire to get their hands on some of it"?
In other words: things only have value because someone, somewhere is ready to exert themselves to get some.
Where that intent comes from is entirely irrelevant.
There is only one thing : supply and demand.
Where the demand comes from does not enter the conversation.
There is strictly no such thing as "intrinsic value".
Econ 101.
Econ 102: Where the demand comes from matters. Aka "substitute goods".
Gold has no convenient substitutes for the combination of ductility, corrosion resistance and electric conductance it offers, hence demand has a (high) floor.
BTC has an infinite number of convenient substitutes for its fundamental properties -- anyone can make a BTC substitute in half an hour, and there are hundreds you can buy already. So the floor on demand is the psychological buy-in -- which is not any better than the demand floor for tulip bulbs.
On the flipside any currency-like concept that could come to be worth more as the raw commodity than the currency seems inherently unstable as you'd be better off using it than keeping it.
[0] https://www.statista.com/statistics/299609/gold-demand-by-in...
I don't have answers to the above, I think they'd be extremely hard to get, which is why I used the house vs 2 inch block of gold to illustrate there is at least a significant amount (likely the majority) of the value is ascribed rather than try to put a quantitative number on it.
TBF gold doesn't really have uses outside of industrial societies.
Sure it's shiny so you can make pretty out of it (jewelry and other decorations), but for the most part it has properties: it's ridiculously stable, it's easy to work with, and it's rare enough that the supply is rather limited but not so rare that it's essentially nonexistent (unlike the platinum-group metals).
In economies which are static or very slow to grow (aka preindustrial) this makes it a convenient store of value, because it's a slowly but ever-increasing (to the approximation of your supply sinking with a ship) supply.
Outside of a few incredibly niche industrial uses that have only emerged in recent years, no one has had any need of gold except as a means of storing and exchanging value. It has been used as a store of value and as a currency throughout history and across cultures for a number of reasons, such as its recognizability (few things in nature are the same color), its difficulty in counterfeiting (gold has a number of unique properties like its density that would make it very obvious if you were trying to pull one over on a merchant), it's ease-of-use (gold is highly malleable and has a very low melting point, meaning it can easily be made into coins or bars), its rarity (supply is reasonably constrained by the difficulty of mining), its permanence (gold will not tarnish except under extreme conditions, so it's okay to leave in a vault for years on end). However an important property that also contributed is specifically gold's lack of utility - steel was very valuable in pre-industrial societies, but a pound of raw steel is worth less than the tools that could be made from that same pound of steel, so if anyone made steel coins, they wouldn't remain coins for long. If anything, the development of real uses of gold make it less desirable as a store of value - speculation artificially drives up the cost of consumer goods like electronic devices.
People need to be able to store and transfer wealth. Tools which facilitate this are valuable for being able to serve that purpose. Gold is one such tool, and a pretty good one at that.
"Bitcoin is almost as bs as fiat money" - Elon Musk; slightly better bs than fiat money isn't the answer.
So was the Gold standard, which didn't become a thing before the end of the 19th century. Before that, the standard money system (at least in Europe & Islamic territories) for the previous 2000 years was the combination of Gold and Silver with a fixed exchange rate. It ended up not being well suited to the beginning industrial civilization and was replaced by Gold+paper money around 1870. And then, when industrialized countries grew in number and in development, gold+paper was progressively abandoned in favor of paper-only money (the US were the last, but pretty much everybody had abandoned it after WWI and WWII).
The industrial civilization itself is also an historical anomaly, and if it ends, maybe gold (or gold + silver) will come back. But in that event, I'm not optimistic about bitcoin's chances of survival…
Bitcoin mining today uses as much electricity as the entirety of Portugal, talk about a lot of energy wasted on something literally useless.
* bitcoin is volatile
* bitcoin is deflationary
* bitcoin doesn't have intrinsic value
* blockchains are inefficient compared to centralized ledgers
- that BTC is volatile is, hopefully, non-controversial. Do you want your stock to be volatile? (if you have large BTC assets, it should be...)
- I won't comment on deflationary/inefficient, I feel the article didn't focus too much on that. But it's a questionable store of value because it doesn't have intrinsic value - this, again, should be uncontroversial. The article lists multiple events that might absolutely destroy BTC (the section "BTC is really risky"). It's easy to imagine more (e.g. war or other catastrophic events that would make the BTC network "less interesting" and would make it really easy for a committed player to do a 51% attack, destroying all remaining trust).
It definitely feels like a fancy ponzi scheme - at the very least, BTC ticks a lot of boxes for "how to identify a ponzi scheme" (definitely 1 & 5; arguably most others, except for 2):
1. Abnormally high investment returns. The most obvious sign of any investment skulduggery is the promise of an abnormally high investment return. ...
2. Guaranteed returns. ...
3. Consistently high performance. ...
4. Vague business model. ...
5. The need for more investors. ...
6. Pressure to reinvest. ...
7. The pressure to act now. ...
8. Credibility through association.
---
Note that I'm not claiming that BTC was created with the intention of being a Ponzi scheme!!! I'm just saying it appears to have many such characteristics, and one may reasonably assume that a similar eventual outcome is not unlikely.
I never claimed that. The point is that for most hn readers, these arguments would have been brought up already and therefore as a whole the article as a whole isn't really interesting. It's like being in 2020 reading a "mongodb is bad because it's not ACID compliant" article.
Yes? Not every comment has to be pigeon holed into "This article is right" and "This article is wrong".
>It's frontpage position - currently at #3 - seems to be a pretty convincing counter-argument
A long time hn reader such as yourself must know about the phenomena of "upvoted not because of article content, but because of discussion"?
>The article might not be interesting for you personally, but... that's not very relevant)
It's not only that, the article doesn't even bother going into the most basic of rebuttals (as evidenced by the replies here). Overall it's a very shallow article. It might be fine for 2013 but not for 2021.
This is no different than covid deniers being presented with evidence and then completely ignoring it.
I'd argue there's no promise of any investment return. Bitcoin just allows the transfer of money nearly instantly.
2. Guaranteed returns. ...
There are no returns since it just a currency to be used.
3. Consistently high performance. ...
Bitcoin isn't a stock, it's a currency. If you're using it to invest, you're gonna have a bad time.
4. Vague business model. ...
Not a business, just a currency.
5. The need for more investors. ...
There is no need for anyone to invest in Bitcoin, there are plenty of hedge funds putting their money into it.
6. Pressure to reinvest. ...
You can go in and out of Bitcoin as you please.
7. The pressure to act now. ...
This is probably FOMO, noone's forcing you to purchase Bitcoin and I would not purchase Bitcoin during a rally unless I was doing a Monday-Friday trading run (buy Monday, sell Friday)
8. Credibility through association.
Noone is associated to Bitcoin, it's an anonymous currency.
https://www.coinbase.com/card
It's just another way to spend money.
They need to provide: - vol metric thresholds - price targets - adoption % - etc...
We've had over 10 years of shifting the goalposts with bitcoin. At this point it's starting to sound like denial. Every meaningful metric has continued to improve in bitcoins favor yet we keep hearing the same critics.
Current value January 4, 2021 - $2,238 billion
https://www.microstrategy.com/en/company/company-videos/micr...
Seriously... this out paced Microstraegy's core business now in just the last year's investment, and who knows how much Saylor put in of his own money without the need to disclose it. Personally, I think Saylor doesn't understand the tech very well and is more focused on selling the news to his investment Corpo class friends sitting on piles of cheap and depreciating fiat, which has it use but is waste of time as he should be using his gains to focus on development in the ecosystem in things like LN, Schnoor and other critical things like micro loan systems in Africa to really make full use of this tech.
Jack Dorsey, by contrast, has done most and all of those things and more, was actually on his way to Africa prior to COVID to embark on that.
'Badeconomics' should be what we call the advent of central bank based fiat currencies, as that has untold amounts of blood on its collective hands.
Did it ever occur to you they may be accumulating a token that is required to operate on the most secure network devised by Man? And are you so immersed in your own narrative (echo chamber) that the potential value of building systems with this infrastructure at it's core never entered your mind? (Someone on a tech related community tried to relate it to Beanie Babies should say it all, FFS.)
Especially with the endless amounts of leaked information that is seen on a daily basis coupled with a situation where Nation-states (and Corps like Ticketmaster and likely larger ones with valuations that rival many country's GDP) are engaging in ever more Cyber warfare than conventional kinetic warfare, just for context: the International arm's trading racket is ~$100 billion/year Industry. Not to mention the ever expanding amount of Surveillance Capitalism tools that will eventually make it into the hands the blackhats and Cyber Military groups.
I highly doubt Saylor is doing that myself, he seems too short sighted on the media to think otherwise but it may be a facade; large institutional players are now coming with a bunch of inflated fiat holdings wanting to get in and are exploring so many more business models that it won't be long before this happens in my view. IBM certainly tried, failed and lost a lot of its potential because it tried to make its own blockchain while disparaging Bitcoin only to see Ripple (a token it focused on for its Hyperledger ecosystem) get sued by the SEC for selling unsecured securities and BTC sits at greater ATHs.
> Most people on HN have a negative view of crypto because of sour grapes. That's fine if you can afford the missed opportunity caused by this kind of luddism.
I get the sourgrapes, we all went through same regretful delays in buying in when we first heard of it as no one 'get's it' right away; but you make it seem like you can't just onboard right now and what irks me the most is the realization that it's the indignation of not having the astronomical gains from being early adopters that prevents you from doing so. It's fine to accept that mistake, we won't judge you (too much) as we've all been there to some degree and will be entirely if you just admit that mistake when you join in and try to do more than just make it a part of your portfolio and hopefully apply your skill set to earning BTC for your services rather than simply buying it.
That's when it all really sinks in and is the best watershed moment that I know of that makes everything click.
We have a different vision of what traded companies do.
For me, a traded company gives either a dividen, or shows a pattern of growth that is reflected in the share price - in either case, it will give me profits in the end, which is all I care about. I do not care about the "how" - that's the CEO and board job. I care about the profits. And so do you if you are not retired, because without profit, you won't be employed by this company for long.
A company that can adapt to a new trend, cut out bad lines of business, and give me more profit is a company I can consider for investment.
All that matters is the bottomline! Unfortunately many people here focus on useless things like technical debt or CICD pipelines, while they are just tools.
One element is diversification. Consider a hypothetical investor that holds 50% bitcoin 50% stocks may think he's somewhat diversified, but if underneath, his stocks just hold bitcoin on their books, then he's just 100% bitcoin and completely undiversified.
This is perhaps the most telling aspect of the investment class that explains how people so many are starving, being evicted and dying from COIVD in the World'd richest country while people keep pouring into Airbnb and Doordash IPOs.
It's so absurd to me how oblivious some people are about things that will lead to inevitable consequences to Society as a while while justifying any and all practices (not least of which slave labour) because their fake paper wealth number increases--all while the currency its denominated in loses more and more purchasing power.
Like every human being, you are entitled to an opinion - however, I fear you are turning that into an emotional argument, instead of logically looking at it. Your emotions are tainting your perceptions.
Most people on HN have a negative view of crypto because of sour grapes. That's fine if you can afford the missed opportunity caused by this kind of luddism.
> fake paper wealth number increases--all while the currency its denominated in loses more and more purchasing power.
Personally, the only "wealth" I believe in is the one that's in a FDIC insured bank, under your name.
As for the purchasing power, it doesn't really matter in isolation: as long as your wealth can increase more in nominal terms than the purchasing power can decrease, it means your wealth increase in real terms.
So what's the problem exactly?
Purchasing power, like everything else, is just one of the "tools" - like CICD or your favorite editor, it's a nice thing to talk about with your friends, but that's not the bottom line.
It doesn't reflect badly or any weird moral thing like that. It's just business.
What explains this price doubling? Certainly it's not actual use of BTC as said in the article.
Similarly, if BTC was somehow underpriced all this time, why would it see such a rapid price correction upwards?
The gains can be explained by nothing else than mania and speculation.
This was always the case for Bitcoin. Why would ever use it as a currency when its value can swing +/- 20% in a single day, that would be ridiculous.
Bulls trot out the "Bitcoin to $1M" trope all the time, that hardly seems stabilized to me.
Sure, some folks purchase narcotics and other folks send money to Venezuela with it, but the vast majority of BTC holdings are playing their part in a multi-level marketing scheme for tech nerds. Every schmo who pumps the price with their fractional purchases pads the value of the whales' holdings.
You have to drop the idea that scarce/finite assets can, should or need to be used as "currency".
Currencies are necessarily able to be increased in supply easily.
Even though there are debates about the actual description of central banks expanding their balance sheets as literal "money printing", this is mostly a debate about where this liquidity flows. For the wealthy and corporations who can borrow at extremely low rates, of course this means they have access to this "printing" and will then inject this liquidity into assets.
>The gains can be explained by nothing else than mania and speculation.
Sure, sort of.
But finite assets are doing their job if they rise in price (in reference to fiat currency units of account) as fiat quantities increase, and the people who have access to this fiat look for a place to put it.
This is literally the use case of Bitcoin, and so it is absolutely "being used".
But since the expansion of BTC has no flexibility (strict supply schedule regardless of economic conditions or price), unlike gold mining or central bank open market operations, it makes BTC very volatile both on the way up and on the way down.
But long term (so far) it is doing its job (of absorbing expanding fiat liquidity and supply).
Sure, but the whole premise that Bitcoin is an asset is that it has theoretical use as currency. There are plenty of other things which are limited in quantity and fungible which nobody is paying $30k for because nobody believes that they are future of money.
That this is not what was in the original bitcoin whitepaper doesn't seem to have stopped him.
https://link.medium.com/IeD1uR5y5ab
And almost 22 billion fake tether dollars injected into the space.
As someone who is an amateur looking in, could you help fill in the holes in this picture? Why do we need tether? Why does it matter if tether is not backed 1:1 by USD? If the fraud really is so obvious and impactful, why 1) isn't BTC tanking and 2) why aren't there charges filed against the company?
I'm not sure how it's supposed to affect current prices, however. Tethers are still around, and as far as I know, they have not submitted to an audit, but 1 USDT is still trading for 1 USD.
They promised to produce documentation that should shed significant light on the situation by January 15 of this year [0]. In recent days, they have issued up to $800M tokens a day [1].
Which either means that everything is going just swimmingly, or that somebody is stuffing a few more suitcases with cash while heading for the airport. We may soon find out.
[0] https://cointelegraph.com/news/ny-attorney-general-expects-d... [1] https://twitter.com/usdcoinprinter/status/134612804290579251...
There are, it's currently under investigation, lookup tether/bitfinex new york court case.
Tether is needed as many exchanges cannot trade in USD so need a crypto-substitute in a form of a 1:1 dollar equivalent stable coin.
Not being backed matters because it means a single company can essentially print infinite money and buy up crypto, leading to fast price increases, just like the one we are seeing right now. When you see $30000 price tag on a bitcoin you don't know what percentage of it is actually fake USDT dollars. Right now it doesn't mater as you can exchange usdt for usd 1:1, but one day the music will stop and a "bank run" will happen, which will expose a giant hole and a real price of btc, collapsing the whole scheme.
>why 1) isn't BTC tanking
My current theory is that they co-opted a lot of exchanges, if you read their website https://tether.to/ they admit that they are not backed by USD and mention "loans made by Tether to third parties" which sounds like they give exchanges billions of dollars for IOUs. So exchanges get free billion dollar loans and in turn tether can print more billions and trade it for real money on bitfinex which they own.
You only get taxed on gains when you transfer coins to "real" currencies like USD... so you can use Tethers instead and buy Bitcoins back after a drop
What if I transfer from a Bitcoin wallet to another Bitcoin wallet?
The IRS has designed crypto as a property, so you are subject to paying capital gains (or claiming capital losses) whenever you sell, convert, pay or earn. Converting one crypto to another (or to USD) is a taxable event, while transferring BTC in one wallet to another wallet is not (since you keep the same property). Further details at https://www.coinbase.com/bitcoin-taxes#paytaxes.
If you sell a car for more than you bought it for, you do owe taxes on that. https://www.carvana.com/research/2020/03/what-to-know-about-....
It is not since it is a different private key...
Again, the understanding of "property" is evolving in this environment, and there are areas of regulatory uncertainty (such as synthetic assets from staking collateral in money markets). However, transferring from one wallet to another is pretty safe territory.
Here are a couple of threads describing the dynamics in play. Feel free to agree or disagree after reading but, contrary to your statement above, these can explain the price increase:
https://twitter.com/Croesus_BTC/status/1319734166557081600 https://twitter.com/real_vijay/status/1143070383261638656
Here's Lyn Alden, regarded by many to be one of the best macroeconomic thinkers working today (who is now very bullish on BTC), playfully echoing the same idea from above:
https://twitter.com/LynAldenContact/status/13458545139457065...
And, just in case the tone of Lyn Alden's tweet confuses you about the caliber of thinker you're encountering here, this is a recent article of hers with relevance to BTC macroeconomically:
https://www.lynalden.com/fraying-petrodollar-system/
And another covering several BTC misconceptions:
https://www.lynalden.com/misconceptions-about-bitcoin/
As I started: I believe you have not done your research to understand what you're looking at. This would be an excusable situation 5 years ago, but the BTC space is now teeming with high quality, pre-digested material that you can use to build a foundation of knowledge and understanding.
I believe you'll regret your hubris...sooner rather than later.
By whom? She doesn't seem to have a wikipedia page.
Reminds me of when Google was in danger of being a mutual fund for having too much cash
If you are so certain that bitcoin is toxic, short it on one of the many platforms that allow this, or if you don't have the guts, just ignore it. No one makes you use it. That bitcoin continues to grow and gain value relative to fiat currencies is an organic decision by market participants.
and so on...
"Bitcoin is almost as bs as fiat money" - Elon Musk; I haven't seen any pro-Bitcoiner try to spin this quote as a positive yet, though I'm sure I'll laugh at whatever mental gymnastics are presented. Good luck betting against Elon's understanding of the holistic, exponentials.
The people buying bitcoin as an investment don't need to care about the asset or secure network, in fact bitcoin's technical details have actually created negatives when exchanges/vaults/services break and assets are lost.
To most buyers it's just like buying and selling stocks, currency, gold, oil futures, whatever.
I do agree that bitcoin (well, blockchain in general) has useful properties for certain types of transactions or record keeping.
But I think the points of the article stand. If a currency isn't useful to buy things, or is subject to wild value swings due to speculation, then it isn't a great currency. If an asset doesn't have any real value to any customers, then it's not a great asset. Bitcoin combines both of those into, a mediocre currency and a speculative asset?
1: Even if you can treat it like an asset, it's an unproductive one.
2: It's too easy to have some sort of problem and lose it.
At the end of the day, I see the long term value of BTC going to zero.
I feel lucky to have had some at one point, just to have that experience. One day, I saw that Bitcoin sitting in my wallet, and realised I didn't really care anymore. It didn't solve any problems I was having, and I couldn't do anything with it other than look at the balance or send it somewhere.
I'd rather have my future wealth come from value I create, than some asset I happen to hold.
He doesn't say anything about trading time for money. If he creates value that scales, he can divorce his time from the money he makes.
There is no dilemma here.
Two words: digital gold
Apart from "protocol" and "secure network" ... this sounds almost how one might have described owning a tulip bulb in the year 1636 :)
> Trying to simplify it into a narrower definition of currency is like trying to fit a tesseract shaped object through a sphere shaped hole.
Which is funny because that's exactly what you did. You only compared it to store of value ("asset class") and ignored the "medium of exchange" part...which is the characteristic people are using for the comparison to fiat currency.
You can accept that BTC has a store of value and still be critical that its use for a medium of exchange is limited.
And to your point the author did assess it as a medium of exchange and deemed it a failure.
> but that doesn't mean it won't in the future or that it has other useful properties today
Just as you think it has a future, the author thinks it doesn't - hence the short position. But saying that the author didn't consider all aspects is disingenuous - they literally did, they just don't agree with you.
Also, you talked about other uses like "protocol and secure network". Aren't these just features of the technology that powers BTC (e.g. blockchain)?
Dijkstra does a commendable job in explaining how people map new ideas to old ones and never really end up looking at things in a new way.
It is the same as paintings and other arts. It can be used for money laundry as well investiment.
It is the same as paintings and other arts. It can be used for money laundry as well as investment.
And the media, being generally too lazy to do critical investigative work into obscure tech stuff, have actually reported on BTC as if it is a real currency in the past.
Futures, stocks, etc never had the public image of a potential future currency, which is why you don't see blog posts about how "High-yield debt will Replace Fiat in a few years" or other such nonsense. The same cannot be said for Bitcoin.
> First, gold is hard to fake and impossible to manufacture.
> Second, gold (...) doesn’t rust or tarnish.
> Last, gold is pretty
to conclude
> On the other hand, BTC lacks all these attributes.
I pretty much reach the opposite conclusion with the same premises
https://twitter.com/balajis/status/1345757893161754624?s=20
Gold lasts forever, it doesn't tarnish, rust, or corrode, that much is true. But it still could be stolen, or potentially damaged (like a big house fire). I suppose bitcoin could be stolen or lost as well though, but as it's not actually physical it should be easier to protect.
Gold is beautiful so that's an excellent point as well. It can be turned into jewelry and such.
Bitcoin isn't really the opposite though in every regard. It may not be physical but it's very difficult to "mine" and it gets harder every year. Plus there will come a day when it can no longer be mined at all, making it even more rare than gold, and impossible to produce more of.
Maybe the author is close to solving P=NP and knows something we don’t
Is this because BTC price has risen sharply recently?
You don’t have to be genius to understand what is going on: USA printed trillions and gave most of it to already rich people. What are they supposed to do with that money? Only option is buying more real estate, buying stock of their companies, or investing in BTC.
Keep in mind that these trillions hasn’t flow into these assets yet but it will keep flowing and you will see these asset prices increasing.
In essence, if you don’t own any real estate, company stock or BTC then you will essentially own nothing because thieves already sucked all the fiat to its own end.
The $3 trillion+ of money printing behind all this? As you say, completely lost in the wind. But for the record here it is:
https://fred.stlouisfed.org/series/M2
You can go back 100 years in US monetary history and not see its like.
I think these days robinhood is similar.
https://twitter.com/blockbain/status/1333864682122137601
Yes, I know, run your own wallet, don't leave your bitcoins on the exchange... Except again, with stocks, you don't have to worry about that. I was personally hoping that a bitcoin exchange would have better security and backups than my home PC. As far as I'm concerned, storing bitcoins on your machine, with no insurance, is not much safer than storing gold bullion in your closet.
I'm just happy what I was wise enough not to put more money in bitcoin than I could afford to lose.
Also, you don't need to store them on your PC. There are also paper wallets, hardware wallets, or you could put your wallet files on a flash drive.
> I'm just happy what I was wise enough not to put more money in bitcoin than I could afford to lose.
That should be the default for ~any investment.
I wish I could withdraw my stocks easily, and it takes a very long time to transfer stocks between accounts or even exchanges. Thats a bug, to me.
Asking for a friend.
This assumes that you can pay for something in Bitcoin directly (which was a common thing a few years back)
No, Bitcoin has economic activity from transactions on the Blockchain (peer-peer) and mining activity (system-miner). This activity cannot often by disrupted by another currency minting a lot of other currency.
(My assumption when you said "inflation" was a drop in purchasing power of a given asset, not a rise.)
I was referring to the inflation of the US dollar. That's why property, stock, bitcoin, etc. went up.
1) May survive inflation intact. 2) Cannot really be overpriced (or underpriced) since it is not tied to anything except itself.
This makes for a pretty juicy opportunity for those who don't want to invest in assets the fed has been propping up. Of course there are downsides. The lack of intrinsic value means there is no real price cap at the top... or the bottom. Hence volatility. It can also simply be banned from being purchased with fiat currency.
The Fed isn’t buying most equities. The monetary transmission channel for equities is exactly the same as Bitcoin’s.
Can you explain what you mean by this? From my understanding the fed has been buying corporate bonds and ETFs directly. I shouldn't have said the Fed is buying 'anything else available on equity markets'.
The Fed has been buying bond ETFs as a way to buy bonds. (Bonds are illiquid, and a whale like the Fed buying them individually can create artefacts.)
When the Fed buys it puts the asset on its balance sheet and gives the seller money. That money can then be spent or re-invested. Spoiler: it's been getting re-invested. That is the transmission channel from the Fed's buying to other asset prices, e.g. stocks and non-target bonds and Bitcoin and beanie babies.
It's also a good time to understand "The Cantillion Effect"
> Namely, when you print money, it causes more pounds to chase fewer goods, pushing up the average cost resulting in inflation. His theory has been dubbed ‘The Cantillion effect’, and is a lesson to us all on the effects of inflation ‘financing the financiers’.
https://www.adamsmith.org/blog/the-cantillion-effect
https://fee.org/articles/the-cantillon-effect-because-of-inf...
https://www.lynalden.com/money-printing/
Basically, after 2011 it was mostly for recapitalizing banks when in 2020 it's to support government budget deficit
Also there's a reason besides the technology's deflationary effect - it's the wealth inequality. If the printed money doesn't end up in the hands of the majority of people (i keep hearing real wages are stagnant), then there won't be inflation in the common goods that make the large chunk of CPI.
You never really own real estate (almost never the land since it remains the property of the government so it's a lease at best, you own buildings and that's it) - and ownership of real estate means being taxed on it forever for the privilege of having it (with increased levels of taxes over time, of course) which is not really compatible with the concept of 'property' - when you buy an object you don't keep paying for it forever.
And don't even get me started on the fact that most countries will steal that property back at death with outrageous taxation levels. That's some kind of a property all right.
Not paying taxes forever on it would be a start to call it "ownership". As far as I know, on about everything else you buy, you never end up paying x years for possessing them.
In all likelihood, if you own none of these you probably don't have much wealth in the first place.
(No offense to anybody, I fall in this category. Aside from my down payment savings fund, I have no wealth to speak of)
1. The exchange rate between USD and other currencies fluctuates about as much as USD/BTC. 2. The exchange rate between BTC and other currencies is relatively stable, or at least uncorrelated to the USD/BTC rate.
But in fact you see neither of these. So either (1) all developed-market currencies are seeing massive fluctuations that are all somehow perfectly correlated with each other, or (2) BTC is the one that's fluctuating, not USD.
He got a lot of things wrong with what Bitcoin is and how it works. For instance he claims Bitcoin to be anonymous and a criminals' haven when all BTC transactions are publicly and permanently recorded on the blockchain. While also criticising it's inefficiencies he offers no other alternatives nor any solutions for them.
Unrelated though; There is no fighting against Bitcoin as the future of digital currency. The fast dinosaurs like PayPal have already started seeing the mass extinction ahead.
My experience in the past 9 months is that shopify is winning online payments for small vendors with websites, venmo is winning for individuals selling peer-to-peer (e.g. facebook marketplace), and anyone bigger has their own credit card management front-end. I've purchased from many small operations for my hobby (houseplants), and in the past 9 months only 1 of them has advertised accepting bitcoin. YMMV
However it is a no-brainer once it matures to be robust, faster, and have cheaper fees to use. Btw doesn't have to be the winner here since Bitcoin has competitors in this space. Might take 5-7 decades for this to be fully achieved but it will eventually replace most middlemen we have today for payments.
You can't float the entire US economy along, shutter all of the businesses but keep people employed on government loans without ramifications. We should be in a terrible recession right now, but of course the government stepped in to prevent that from happening (mostly).
A functioning economy has a healthy level of financial inputs and outputs: you go to work, you spend X amount of your dollars on entertainment, food, home improvement etc. and you save Y amount.
The problem is when you shutter all of the businesses that just creates a massive surplus of money. That doesn't even get into things like stimulus checks, PPP loans, etc. People don't necessarily need more cash, people really need to produce more and start spending money again.
Too much economic input without enough output.
Needless to say the MicroStrategy investment was really smart and the author doesn't know what he's talking about. 51% attack? Really? So an individual actor is going to spin up computational power eclipsing the country of Switzerland just to take down bitcoin?
Manipulation much?
Apart from this one? https://en.wikipedia.org/wiki/Great_Depression
> "The gold standard was the primary transmission mechanism of the Great Depression"
Back in 1920s, govt could 'adjust' the gold standard by changing the rate whenever they wanted.
Wanna double the money supply by 60%? Change the gold standard peg from 1.505g to 0.888g of gold.
When you didn't do that, you got a very short lived depression of 1920-1921 [1].
When you did, like FDR did in 1933, you got a long, extended deperession.
1. https://en.wikipedia.org/wiki/Depression_of_1920%E2%80%93192...
But the Great Depression began in late 1929. FDR's decision in 1933 retroactively extended the depression by 3 years?
Tying economic growth to the availability of gold was a disaster.
You mean The Great Depression of 1929 wasn’t a great depression?
There were definitely issues, but nothing like the Great Depression of the 1930s.
https://en.wikipedia.org/wiki/Gilded_Age#Economic_growth
You can argue that recessions of the 19th century are okay because other growth balances them out.
You can argue that recessions of the 20th century are bad because of their immediate consequences.
You cannot argue both.
System's problems were regularly removed from the economy when we were on Gold standard (like run on the banks etc). Then Federal reserve gets a hold and they start putting out these 'small fires' and it just leads to large uncontrollable depressions.
Fiat currencies definitely have their place, but so do hard assets. And it may turn out to be useful to have a hard asset that is much more easily divisible, transferrable, and more resistant to seizure than gold.
Stopped reading right here. Anthropologists have widely discredited any ideas that "before money we had barter", but it's just shyly asserted as absolute fact.
If you're going to argue something isn't money, you should first have a correct idea of what is money.
In short, while bartering likely did exist in some forms, it was not the primary means of commerce. Within a tribe or group of people, a 'gift economy' was generally used. This makes sense, as an average pre-historic tribe had like 50 people, making a complicated economic system unnecessary.
When civilization started to form, primitive forms of money came along with it. There was never a time when you went to the market with a handful of wheat and some furs, and hoped to trade them for some salt and fruit. That idea was popularized by Adam Smith in the 1700s, who was an economist, not an anthropologist.
1. Gift based economy. Where people aren't really giving gifts... this still exists in some parts of the world, basically if you accept the "gift", you are now in debt, and is expected to do something in return, not necessarily immediately. In small villages it makes sense, for example the hunter "gifts" everyone with the meat he hunted, increasing his social standing, so when he needs medical attention, the medic will take care of him, because he is socially in debt to the hunter. In a modern economy this instead can be disastrous, for example I have a cousin that visited France, and was horrified when african immigrants kept following him and his wife, hugging him forcefully, and trying to put random crap (it was some beads to wear around the wrist) on his hands and saying it is a gift, meanwhile when a nearby tourist did take the object, they demanded a 50 euro "gift" back.
2. When society is too big to be "social standing based", currency shows up rather quickly, when you can't remember everyone or use everyone's fame as currency, you need something easier to track, can be objects (rocks, salt, gold, whatever) or a ledger (numbers on a piece of clay, bank account, bitcoin, whatever), or both.
3. Barter shows up AFTER currency, because people use the currency to know the value of what they are bartering, for example a guy wants to buy a house, and doesn't have 3 tons of salt required, so he says he will offer you this gold bar worth 1 ton of salt, his horses worth the other ton of salt, and 5 years of his work worth the last ton of salt.
Here is a reasonable article on the subject, I remember vaguely it was one of my sources at the time, it is not the best source, but is the one that pointed me in the right direction.
https://www.theatlantic.com/business/archive/2016/02/barter-...