Dollars in your pocket (not 70%, but 100% of them) have been created out of paper, after a swap of figures on a balance sheet (that you call “thin air”). The number of paper dollar didn't increase by ~70% this year, what did is an economic aggregate called M1 which is a conventional (since the sixties) way of counting certain things. It ISN'T some fundamental value of what-money-is®. Most of the dollar every American own (their bank account, and their savings) have never been part of M1, so this money wasn't affected either.
The monetary system is a complex thing, and the landscape is changing at a fast pace since 2008, which makes it even harder to graps. Unfortunately, most cryptofans didn't even try to understand it, and they keep parroting the almost 100 years-old Autrian critique of central-banking without any kind of cognitive effort: “It's obviously broken, so I'm not going to try understanding it”.
For people without prejudices, interested in understanding the subject, I strongly recommend Perry G Mehrling's lecture on the Economics of Money and banking on coursera: https://www.coursera.org/learn/money-banking
Just naming something doesn’t invalidate it.
The academic consensus is a proxy for cultural elite; the condescending narcissists and effete.
Nothing reeks of moral superiority like brushing away opposition as "uneducated."
Most propaganda & marketing campaigns are coming out of well educated folk. Look into the Heritage Foundation, for example...
What mainstream economics has tried to convince us is that hard work is meaningless and infinite money can be printed. Scarcity is a myth. I don't need complex graphs to explain away why printing shitloads of money causes inflation and warps incentives. It's hilarious that Keynesians keep pushing the same garbage and being surprised when people respond by purchasing scarce assets like Bitcoin. What did you expect would happen?
The truth is that inflation expectations were in the hole [0], and the Fed action restored inflation and price stability as per its mandate.
I can't believe its possible to be so wrong.
The history of humans might as well be "getting economics less wrong than last time"
I know of no serious economic school that espouses this.
> The market can remain irrational longer than you can remain solvent.
That BTC is not (yet?) money should again be non-controversial, since the vast majority of economic agents anywhere won't accept it directly (so you need to exchange BTC for cash first). It does have a decent claim at "store of value". But, where is the "intrinsic value"? You claim two of them:
1. ability to independently verify the money supply
2. being able to transfer money across political boundaries without censorship
I don't understand either, to be honest:
1. You can verify the supply of other things (e.g. company shares) at an independent body. I'm pretty sure that's true for "money in circulation", too. Ok, the verification is not distributed, but is that distribution so valuable? Or do you actually mean "The supply is naturally-limited and nobody can easily produce tons of BTC out of thin air"? Then, yes, BTC has that property... but, tons of other things do! E.g. why not invest in amber, it's probably one of the rarest things in the universe.
2. Transfer across political boundaries: is there ANY inherent guarantee? Say US decides tomorrow that trading BTC is illegal, how would BTC protect you from that? Using existing anti-money-laundering laws & global institutions, you'd be effectively banned from getting back any value from your BTCs (or, doing so would expose you to all the associated risks).
What happens if you are disabled in a horrible negligent accident or defrauded in some conventional transaction and defendant hides all assets and transactions in BTC?
I can't imagine a long term equilibrium where [Americans, at least] store trillions and trillions of dollars in BTC without substantial additional regulation.
Edit: for those in relatively more corrupt, tenuous circumstances then BTC is a net positive, of course.
Even that I'm not sold on. You could argue that it gives incentives for the rich and powerful to maintain the status quo since their own riches become out of reach from the corrupt government.
Meanwhile the commoners are still very much under threat since most of their assets will be physical (their house, their clothes, their belongings, their bodies etc...).
The idea that cryptocurrencies are empowering the poor makes about as much sense to me as trickle down economics. If you are in a position to benefit from Bitcoin it means that you already have a significant amount of disposable income you can convert into bitcoin and afford to "HODL" in your wallet for a while. "Being able to transfer money across political boundaries without censorship" is completely irrelevant if you're a poor farmer in Buthan or an elderly shoemaker in rural Pakistan. Transfer what money, to whom and for what purpose?
This whole concept is just social-washing cryptocurrencies to obfuscate that it's profoundly libertarian (the USA flavor) at the core. If you consider that the government is always the enemy and it can't be fixed and should instead be thoroughly destroyed, then and only then do cryptocurrencies make sense. It's not about good vs. bad government, it's about no government.
Certainly not. As I keep telling people here, cryptos are property, not currency. Why should governments be in the business of telling people what type of property they can and can't own?
A coin is nothing but a couple of large numbers that are easy to multiply together but very difficult to factor...that's it. If the people of earth want to assign large fiat currency values to complicated key-pairs, then why shouldn't they have the right to do that?
Of course crypto-traders need government...like we need libraries and schools and police and all that, just like everyone else, right?
Uh what? That's like the second biggest thing the government does after, you know, army.
You can't own a dead lobster shorter than 6 3/4 inches in the United States without committing a felony, even if the lobster met its untimely end without your assistance.
Of course that's what the government should be in the business of doing otherwise we'd likely all be dead, and separately, there wouldn't be any more lobsters.
Private property right go back to the Magna Carta and form the basis of the US Constitution and it's Bill of Rights.
If you believe it's governments duty to control all property rights than your a Marxist and to be honest, I have no interest in debating you.
Bitcoin is regressive and would be harmful to the economy if it obtained widespread adoption, and therefore, the government has the right to curtail its use and ownership.
I mean, maybe you're claiming that I can't transfer the property, but that I have the right to own the property as long as the government approves of where it's going. Sure. That certainly reduces people's willingness to assign a large fiat currency value to my pantry.
You're registering your wallets with your government and that's about it. Bitcoin is fully transparent, so government can track every transaction and if you're doing transaction to some non-verified wallet, you have to explain it to your government.
I would argue that bitcoins are even easier to track than bank accounts.
What government can't do is to steal your money or block your access to your money.
Gov: “Here is our wallet blacklist feed. If you transact with these wallets, you go to jail.”
On the plus side, FinCEN can automate currency transaction report generation and monitoring on a public distributed ledger.
Me: "I'm already in Africa, find me, losers"
"No thanks. We're in America and have $20M of assets and 50 employees and we'd rather not lose it all and go to jail."
You should read about US sanctions, that's actually pretty close to the truth. Living outside of US jurisdiction means... living in Russia, AFAIK.
You can make it illegal to use Bitcoin, but it was designed to make it practically impossible to enforce such a ban.
"If you transact with these blacklisted wallets, your wallet also automatically becomes blacklisted, and if we find you then you go to jail. As an exception - if you receive any amount of BTC from a blacklisted walled, you have 7 days to send the same amount (or greater) to [this government wallet] and that will erase all your legal liability and make your wallet whitelisted again. We can even automate the process for you if you trust us enough to give us your wallet keys. Alternatively, register email/phone numbers with us and we'll notify you when your wallet is blacklisted, and tell you how much BTC you should pay us"
> We can even automate the process for you if you trust us enough to give us your wallet keys.
Haha seriously? Your solution is that people give their private keys to the government? You must have no experience with crypto or what it's about it all. Nor really experience with how the government works and how often it gets corrupt. A corrupt clerk now is a small nuissance, a corrupt clerk in your proposed scenario means that thousands of addresses get stolen of all of their tokens. There is zero chance that this scenario will ever be implemented in any meaningful way.
If you completely ignore how big corporations and ultrarich are able to hide their assets behind shell corporations and various other structures, then yes maybe your vision is correct. But that it not what happens in reality.
In reality right now the rich can hide whatever they can, and the poor have no recourse against frivolous seizures, lawsuits etc. What crypto does is levels the playing field.
(Roads and rubbish can easily by taxed by usage, from the people who clearly use those services, but there are other central commons that should be taxed on state or federal level.)
Yes but the amount of amber, gold, silver, etc. on Earth is a known unknown. There are presumably deposits of gold that we don't yet know about. The amount of BTC is known. You seem to be conflating rarity with fixed scarcity.
> Using existing anti-money-laundering laws & global institutions, you'd be effectively banned from getting back any value from your BTCs (or, doing so would expose you to all the associated risks).
While this is true, this is sort of the whole point of bitcoin. Like, it's a currency that is independent of any nation-state and acts as a sort of systemic-hedge against governmental incompetence/malfeasance. So the fact that it could even be banned by any particular country is kind of part of its value proposition. And, similar to VPN's, just because an IP-based technology is banned doesn't mean that it'd become impossible to use.
Aka any movement of Satoshi Nakamoto’s Bitcoins would have a huge impact on the number of Bitcoins estimated to be in circulation.
[+] Do note that I do not accept it is "currency" - because it has low acceptability, by design.
Vice also wrote an article on this: https://www.vice.com/en/article/qjppx3/iran-bitcoin-us-sanct...
There's a difference between known unknown with high variance and known unknown with low variance. As I understand it, astrophysicists have a non-controversial model for how much gold is present on earth. Geologists probably have a reasonable model for how much gold is easily accessible.
To your questions: 1. You can't know how many shares there are going to be for companies. Even if you choose to use some company's stock as a long term store of value, that company will eventually fail at making profit and will issue new shares.
2. If the US banned BTC, it's easy to move overseas with it; memorize the key (not easy, but possible) and just spend the money when you get overseas. Or if you're going to stay in the US, you could just use it the way the dark web already does (not totally clear on how all that works, but clearly it does).
Yes, there is some guarantee. The guarantee is that government already have had numerous motivations to ban bitcoin already, and yet most governments have not seriously attempted to do so, likely due to the very significant efforts that would be required to do that.
I have been hearing "The government is going to ban bitcoin!!!" For 10 years now. And for 10 years, no government has been successful, and most countries simply been dismotivated from doing so.
there is no such thing. not in bitcoin, not in usd, not in gold. all value is extrinsic and assigned by market.
> tons of other things do! E.g. why not invest in amber, it's probably one of the rarest things in the universe
and tons of other things are invested into: precious metals, commodities, etc. bitcoin is the first digital commodity, which can't be inlated by some centralized authority.
> is there ANY inherent guarantee
yes, bitcoin transaction is finite and irreversible as soon as signature is published via any possible information channel and sufficient number of blocks are found on top of the one that includes the transaction. you can morse-code it into ionosphere to be picked up by the receiver or you can flashlight it across north korean border, no internet required.
US regulation may prevent you from interacting within US jurisdiction, but that's a different issue and precludes bitcoin being money about as much as US ban of certain drugs precludes them from getting people high.
Just as a nit, there absolutely is. Food provides value in that you can eat it to survive. Housing provides value in that it provides shelter from the elements. A goat provides milk and you can eat it. Barter systems typically involve the trade of two such goods. The problem is that such goods typically spoil with time, which is a primary advantage of fiat currency -- it is not subject to physical constraints.
Historically, people also used things like salt, which had intrinsic value (for preserving and flavoring food) but didn't spoil. But the use becomes so abstract that its pointless to haul salt around. Eventually you transition to precious metals, which also have some intrinsic value (for engineering various goods) but much less concrete. Then you transition to effective "gold IOUs" (gold-backend currency).
The idea of having a currency completed untethered to anything of value is relatively new. One of the most interesting aspects of bitcoin is proponents fervently advocate for one element of the gold standard (a fixed supply), but not the other (something physical of utility).
That's what it means to say that goods lack intrinsic value.
The exception is of course money, whatever good it is that is winning the Keynesian beauty contest of "good which I think everyone else will want as much of as they can get".
> One of the most interesting aspects of bitcoin is proponents fervently advocate for one element of the gold standard (a fixed supply), but not the other (something physical of utility).
if gold became useless for exchange purpose and only it's use-value was relevant, market price would go down to pretty much nothing, the scammiest cryptocurrency exit-scams would be brought to shame by that drop. so physical utility of gold has absolutely no relevance to gold-standard. even jewelery use-value was mostly driven by exchange-value, so that would become irrelevant as well and the market would be flooded by worthless golden trinkets and rings.
According to Wikipedia: "The world consumption of new gold produced is about 50% in jewelry, 40% in investments, and 10% in industry.".
Now, there are ETFs, futures, options, etc, that inflate the speculative portion, but the valuation due to physical properties is still likely within an order of magnitude of its total market value.
> Food provides value in that you can eat it to survive.
People value food (in many cases) because they can eat it. It doesn't mean that the value is intrinsic to the food. In fact, in many cases the value of the food is zero (or even negative! -- it still needs to be disposed-of) because no one wants it.
> Housing provides value in that it provides shelter from the elements.
People value housing for that reason, but housing doesn't have that value on its own. It has value because people want to use it for something. There are many abandoned houses that show this value is not inherent, but rather conditional and context-dependent (like all other value).
> A goat provides milk and you can eat it.
Yes, some people value goats for that reason. If you put one in my house, it will immediately have negative value, because not only do I not want it, the time it will take me to find a good way to get rid of it will dwarf the amount I can sell it for.
> Historically, people also used things like salt, which had intrinsic value (for preserving and flavoring food)
Again, people value it for that reason, but the value isn't in the thing (intrinsic). The value is imputed to the salt by people.
> Eventually you transition to precious metals, which also have some intrinsic value (for engineering various goods)
Again, no, but this one is perhaps the easiest to understand -- the value is imputed by people because of what they can do with it. In situations where they can't do anything with it, it has no value, revealing that the value was never intrinsic in the first place.
> The idea of having a currency completed untethered to anything of value is relatively new.
I would argue that this is not the case, and comes from a narrow way of looking at value. Say I'm a nerd (this may or may not be a true story). In early 2012, I find out about a thing called Bitcoin. I don't understand it very well, but it sounds cool, and I mine some just to say I have it, and then tell people I have it. I value it. I can't do anything with it physically, but that's true of a lot of things. I own a number of pieces of art that I value, even though I can't really do anything with them other than know they're there, sitting in my closet or storage unit. It doesn't make the value somehow not-real, because all value (in this sense of the word) is imputed to things by people; it's not in the things themselves.
You just have to look at natural ecosystems to see the reality of this; almost anywhere there's an energy gradient creating a niche there's some lifeform taking advantage of the situation.
And what is actually being valued? Not negentropy itself; merely particular economic goods that are examples of the process of negentropy.
WRT guarantee... yes, let's say I accept that you can send BTC to somebody regardless what laws the US passes. The question is, can you receive something in exchange? Because if you can't then it means that the technology is not offering you any guarantee. So that guarantee can't be the "intrinsic value". (you don't claim that it is - you just claim intrinsic value does not exist, which is a completely new discussion that I don't want to get into right now)
Anyways yea, not harping on you too much for semantics but the rabid crypto fanboys(not calling you one) really fuck up their terminology and understanding of basic economics.
Hey, wait a second, isnt McAfee supposed to eat his dick since bitcoin didnt hit the million mark?
that is quite the goalpost shift. bitcoin allows you to send and receive bitcoin securely and without asking permission. it is not bitcoin's purpose to ensure whatever the contract you're trying to realize entails. there are escrow services and what not for that.
the guarantee bitcoin gives you is that once transaction was finalized:
- you are the sole owner of assigned bitcoin
- only you can change that record in the ledger
- nobody can stop you from doing that
- nobody can dilute your share of the asset beyond the normal issuance schedule[+] BTC is not money, but I'm going to let that slide for this part of the argument.
yes it is. no technology will suddenly make censorhip go away. but technology can allow one to circumvent censorship. bitcoin doesn't solve censorship, corruption, fascism, genocide and whatever else you may want to throw in to justify your skepticism, but it doesn't have to. it solves a very specific problem: non-debaseable digital money and permission-less transacting of it. that comes with a set of compromises and great deal of responsibility for your actions, but it's a useful and valuable tool, first of it's kind and certainly the biggest revolution in finance since gold standard.
Exactly! It also is interesting how people were berating USDT for not having their coins backed in USD. Does it matter? As long as people are amicably agreeing to trade it at 1 USD, it's working as designed.
- Bitcoin becomes less volatile over time
- Bitcoin was less volatile than AMZN or AAPL in 2020 (3-month realised volatility)
- Bitcoin becomes less risky over time (since despite increased incentives to "hack" it, no exploits happened)
So, about 14%.
It is also disingenuous to compare its volatility to stocks when it is supposed to be a currency.
I want a heck of a lot less volatility in what I use to pay my bills and buy things than I'm willing to accept in my investment portfolio. Unless bitcoin and other coins demonstrate such stability, they aren't going to become a major form of payment.
Which is good because BTC is used nowhere as a form of payment.
I suppose if it remains consistently deflationary over medium-long term periods, that could still be useful, but doesn't really fulfill the role most crypto advocates envision.
I can't buy my groceries with BTC either, but that's because no store will trust a payment method where within an hour the value of what I've paid them declines 10%.
That's the magic of fiat currency.
Put it another way, where'd you get that $400M from? Did you earn it, or get it from venture capitalists? If the asset is such a sure bet, why did the VC give you the money to sit on instead of investing it directly themselves?
And why is it that companies that pay dividends tend to do better in the stock market and be more stable? Essentially a dividend is admitting you have more money than you know what to do with, so you give it back to the shareholders rather than getting distracted from your core competency.
BTC has higher volatility than other assets on short timescales (e.g. < monthly and particularly, daily). But once you calculate over >3 months you get volatility comparable to stocks. And an investment in the size of $400M doesn't feel like they are worrying about daily volatility a lot.
This chart covers January - November and includes an almost 50% drop in march. And it is still not as volatile as e.g. TSLA.
>stocks represent a real stake in a real company which may generate real cash. Crypto is thin air and trades on the greater fool theory alone.
There is no such thing as "real cash" - you can exchange Bitcoin for dollars like you would with stocks.
The reason Bitcoin is worth as much as it is, is precisely that many Bitcoin "hodlers" are not selling, because they understand that Bitcoin has a fixed supply while the USD continues to inflate, which increases wealth inequalities and enables government to spend money with less democratic oversight. The rich get bailouts they use to buy up stocks and real estate in order to protect themselves. Poor people who can't afford this and who are sick of this are the ones buying Bitcoin.
...and if you don't cherry pick one of the most volatile, well known stocks in the market? We can keep doing this, but TSLA is not "the market", it's a single company and trades completely on hopes and dreams. It's not a good surrogate for every other company.
>There is no such thing as "real cash" - you can exchange Bitcoin for dollars like you would with stocks
Yes, you can trade fake currency for real currency so that you can actually use it. And companies represent real assets; BTC is thin air. This is not a difficult concept to understand. BTC has _zero_ intrinsic value as an asset.
>The reason Bitcoin is worth as much as it is, is precisely that many Bitcoin "hodlers" are not selling, because they understand that Bitcoin has a fixed supply while the USD continues to inflate, which increases wealth inequalities and enables government to spend money with less democratic oversight.
Stocks hedge against inflation as well, so do many other asset classes. BTC trades like it does because a whole lot of people want to get rich quick. Of course some people share your opinion, but we're talking about something that provides no actual value.
If you have to trade it in for a currency you can actually use and it goes up with inflation then... it's no different than stock in a good company from that perspective. It goes up more because it trades 100% on speculation and the greater fool theory.
Bad transaction rate? It’s not a currency, it’s a store of value! Why does it have value? Because it’s more stable than fiat! What about the volatility? Ignore daily volatility, it’s going to the moon! But why is it worth more? Because you can buy stuff with it, like a currency!
Round and round it goes.
The argument for bitcoins price from even bitcoins advocates usually seems to ultimately boil down to “It’s valuable because the price of it is going up”. If you ask why the price is what it is, the answer is basically that it’s high because it’s going to be even higher in the future!
It might be even higher in the future, but this has no economic fundamentals behind it.
With all the free money that is currently floating around bitcoin is again slowly moving towards its saturation point where the pool of potential buyers is exhausted and the prices have become unsustainably high. The psychology of the market will reverse causing a "run on the bank" (which apparently is a good thing by some gold standard advocates in this thread) and it will again sink like a stone without anything to stop its fall. A good thing to remember is that bitcoin has yet to face a real depression akin to dotcom bubble. If and when it falls to levels so unfathomably low that it would incur losses so heavy that would shake the whole industry to its core, then it might forever lose its status as a digital store of value which price increases forever to infinity.
One thing I must say and what most people forget is that bitcoin is also a form of gambling and which actually explains some of its success. It has the characteristics of a sport which is fun to discuss, interesting to research and easy to bet on with a lot of volatility that can be as addicting as gambling in a casino (which again shares a lot of similarities to traditional stock investing or the collection of art pieces). Can we explain why gambling or sports are so addicting or necessary to the whole society? We humans are emotional creatures that believe in the most silliest of things that defy normal logic yet which we can not unravel like the people living in a cave in Plato's allegory. What in the end is real? God is dead said Nietzsche and therefore we are constantly seeking something "valuable" to cling onto.
Not digital gold, but pharmaceutical grade gold as Saylor put it in a recent Odd Lots pod, and it's hard to argue that...also quoted from the same pod..[not a perfect transcript]
"...so that took us to cryptos and we looked at 6500 cryptos and we found that BTC is the dominant network. its 25x bigger than the next closest thing that looks like it, and has more than $200bil monetary energy in it. it is basically Facebook or Google for money.
and this is the nuance that most people haven't realized yet..what you have is a dominant digital network that has been engineered to host a safe haven treasury reserve asset superior to gold in all respects.
it's pharmaceutical grade gold [love this line]. if God [blurb] gold as a treasury reserve asset to hold for 100 years, he would create 21mil gold coins, he'd make it impossible to make any more, he would make it possible to audit it from anywhere on earth from any node every 10 minutes, make it unhackable and make it an open architecture where you could build it into an iphone or into Square or paypal or any other exchange without permission, and he would distribute it everywhere on earth with these crypto SHA256 miners so hat no company controls it, no CEO controls it, no country controls it, and no regulators control it..."[0]
[0] https://play.acast.com/s/oddlots/6b8b72d0-455c-11eb-b9ed-377...
I feel like this whole pitch makes sense until you get to that part.
Do you care who owns your real estate before you buy it? Or who mines your gold before you wear it? Probably not.
Yes I suppose there is some political aspect to that side of it, but the crypto itself...it's about as apolitical as it gets.
Cryptocoins are subject to majority attacks and rules that can change at any time based on the miners preference. Who mines it is very important.
You would also care about who owned some real estate before you buy it if it was some company known for dumping toxic wast into land and then selling it. Those things are not as apolitical as they look like in an organized society.
If I decided that I could profitably use toxic-waste laden land, then yes of course I would still buy it and, yes of course, still not care because that's what due diligence is about.
Your liquor store sells alcohol that kills more people under the age of 30 than any other way...why aren't you standing in front of it demanding it shut down?
They get to censor transactions, they get to decide what makes it and what doesn't, they get to double-spend if they want to. That's how authoritarian government works.
This is a natural consequence of the proof-of-waste system employed. The hashpower goes to the place where waste would be the cheapest, and that's China.
[1] https://news.bitcoin.com/65-of-global-bitcoin-hashrate-conce...
Let's say Dalai Lama decided to follow MicroStrategy with a 400M purchase.
His BTC could be near unusable if China were to control some amount over 50% of mining capability.
How could that happen? The blocks you mine you simply not process any of "undesirable transactions".
If any of the lesser miners find a block and try to add a transaction to the ledger you perform a double spend attack.
This hinges entirely on control of mining, in fact you could argue who mines it is one of the most important questions to ask.
The Bitcoin Cash fork and Litecoin made scaling choices that make it better for payments.
But they made it deflationary and a good currency needs to be inflationary otherwise you just hold onto it instead of spending it. Which had made it more like a digital gold.
It has totally failed as a system for payments for this and other reasons. It is also too slow and too expensive per transaction.
Contrary to what many people who only recently discovered Bitcoin probably believe, it was not created in a vacuum as some Ponzi scheme. Instead it was a concept that had been iterated on for decades until Satoshi discovered the right combination of cryptographic technologies and economic incentives to make a so-far-unstoppable decentralized digital currency.
> Instead it was a concept that had been iterated on for decades until Satoshi discovered the right combination of cryptographic technologies and economic incentives to make a so-far-unstoppable decentralized digital currency.
You know how that sounds right? Like religion, not clear-headed thinking.
My opinion is neither of those is a religion. The development of Bitcoin in particular sounds more like following the scientific method to me, but you're entitled to your own interpretation.
The Bitcoin project lives on and most real users and developers moved to other projects like Ethereum, Bitcoin Cash and Monero the same time Blockstream wrestled control of the Bitcoin Core GitHub repo.
What is this a chart of? bitcoin nearly tripled from jan to nov, and has had daily volatility, both pos and neg, that doesnt seem representable by a flat line.
Jeesh...I don't know where to start...
I know this is against HN guidelines to say this, but your top level comment needs to get downvoted into oblivion. This is not grounded in any evidence worth of value.
2) I am saying, they think they missed the boat. Bitcoin (capital B) is here to stay.
3) The Bitcoin Core chain was long ago hijacked by corporate interests and failed to live up to the White Paper. Bitcoin Cash, Ethereum and Monero have been around a long time and have real use cases.
But even as a “store of value”, that’s an issue. Ignoring the fact that everyone values BTC in USD (or a local fiat currency of your choice), a “value” that you never access is meaningless. One day you will want to do something with it, and on that day the risk of a 20% fluctuation is a big problem you’ll have to deal with.
A 20% daily fluctuation is not a problem if you made 1000% on the value you stored on the past year.
Currency isn’t supposed to appreciate. If currency does appreciate, everyone has the tendency to stop spending as much as possible because it’ll be worth more tomorrow. This causes the money supply to drop, reinforcing the deflation, and dropping the demand for labor as the real cost of wages rises, triggering more savings as consumers worry about losing their jobs. Oh, and if you have any debt denominated in BTC, it’ll bankrupt you. There’s that too.
This is a classic example of there being no free lunch; you can’t have an economy based on a currency like Bitcoin deflating rapidly without there being serious side effects. The idea that currency could become 1,000% more valuable in a year without those side effects being disastrous is just laughable.
Secondarily, one has to ask why is Bitcoin going up 1000% year over year. Bitcoin isn’t a stock, it can’t generate revenue. It’s a pretty awful currency at 4 transactions a second. So what’s the underlying thing that makes it worth so much in USD? Usually the answer is “something something finite”, but rarity doesn’t confer value, it sure doesn’t look like anyone is actually using it for anything other than speculation.
When you get down to it, it sure looks like the value prop is “it went up a lot in value last year, maybe it’ll do it again”, which sounds extremely bubble like to me.
BTC is mainly appreciating against fiat currencies whose values is being driven down the toilet by their own governments, printing billions day in day out. There's no such thing as intrinsic value, everything is relative.
No, like gold, the more it is used as a savings asset, the more it gets tied to the real economy, the more it becomes unstable.
When gold had too much ties to the real economy, it became unstable enough to cause the great depression.
This happens because, people, businesses and banks start hording tokens instead of investing in building and maintaining production capacity of consumables and the ratio of value of tokens meant to buy consumables vs actual production of consumables gets out of wack.
When the music stops, people realize that people are sitting on tons of seemingly valuable tokens but stuff to buy with them is getting scarce because capacity is not being maintained, they reverse their trade, prices of stuff go up, volatility ensues, and the destructive cycle resets.
Savings being tied to too popular tokens instead of assets that create real value results in a massive coordination failure, a terrible Nash equilibrium, a prisoner's dilemma where the first to invest in production are disadvantaged so everyone hoards tokens instead. Companies hoarding Bitcoin is the first sign that this might be happening now.
This is what central banks and sound currencies are designed to prevent.
Gold did not cause the great depression, people invested in gold after the economy crashed.
If people are hoarding Bitcoin, again it will be as a hedge against the inflation that is occurring.
So, here's what I don't get about Bitcoin. Those capabilities are great. But those capabilities exist whether a Bitcoin is priced at $1 or $25,000. Why are those capabilities enough to drive the price of a Bitcoin up?
To me the "value" and the "price" of Bitcoin seem to be completely unrelated, and that makes me skeptical that it is an investment.
It feels like investing in a hammer -- I love what a hammer can do for me when I want to hit a nail, but that doesn't mean that the price of a hammer should be related to the house I can build with it.
What am I missing?
This is simply false. If the value of Bitcoin was $1, you would not be able to store or transfer large amounts of wealth with it. Based on current circulating supply (not accounting for lost coins) the market cap at $1 per Bitcoin would be $18,590,606. At that market cap, there's simply no way to store/move a billion dollars, because there just isn't enough value in the network.
Price going up makes the network more valuable, which allows you to store and transfer more money. Since money storage and transfer is the whole point of bitcoin, price is actually a very important feature, and a proxy for the usefulness of the network. Currently you can store and move billions using the Bitcoin network, and I believe within the next 5-10 years you'll be able to store and move trillions.
Higher prices means Bitcoin is capable of moving bigger capital. At $1, you can't move around $10m worth of bitcoin (that's like half of the possible supply). At $35k, moving $10m and trading it is a piece of cake. $10m liquidity is available in many markets now and do no move the price.
Since the supply is limited, the price is just a gauge for demand.
"BTC will always go up as demand for it will always go up" is nicely self reinforcing as long as it is believed by enough to be true, but the price can go to $1 without issue once it is not.
But since it seems quite likely to at least 3x or 10x or who knows before that sad end occurs, I'm not exactly recommending you short it.
Isn’t that just because there is a limited supply of bitcoins and lots of people want to buy them? Just the same as saying that an expensive fast sports car is great, but would be just as great if it cost $1.
(Arguably, Bitcoin's rise is precisely because of the incumbent really screwing up. If someone created a new currency in the 1970s or 1990s - and people did - folks would laugh at them. It's only because trust in the government and mainstream financial system is so low - and the Fed continues to print trillions of dollars to paper that over - that Bitcoin has gained a foothold.)
"If we collectively wanted to..." is never an answer. People don't make collective decisions, they make individual ones. Adoption requires convincing lots of people, individually, that your new solution is better. You can get a boost from peer pressure, but you have to start the flywheel going yourself.
Wallets, miners, etc won't really matter at all if Square and Amazon etc have a plugin that uses a stable coin of each currency along with BTC. The world will have infinite transfer capabilities of other "scarce" non-fiat and fiat pegged coins without BTC (including other electronic currency based services).
Quite a few projects have tried exactly this, and none of them have succeeded. What makes you think your attempt would succeed?
I don't mean "if we collectively wanted to" to suggest that people will just up and choose to do so tomorrow, only to say that it's that lack of collective will, rather than true scarcity, that restricts the number of bitcoins.
Makes you wonder if you could get people to buy shares in a company that promises no revenue but markets itself as "exchange traded gold".
The USD is created out of nothing currently and does not show revenue (if anything, the US government only creates massive debts that will have to be paid in the future thru massive taxes hikes, or inflation, or both). The only reason why the USD has any value is because it's the single piece of paper that is authorized as a currency in the US, and that people 'trust' it somehow (especially outside of the US). The day the trust is gone, it will be worth absolutely nothing.
I think it is sort of similar to why gold stands alone among the precious metals as the biggest one that people hold onto purely as a token.
I don’t really know what the long term picture is though. Or whether Bitcoin and friends are a “good thing” at all.
The market values those capabilities because it is the only asset in the entire universe of fungible assets that has that feature.
A) Bitcoin's ability to support that assurance is tied to the consensus model of bitcoin. The harder or more expensive it is to change anything at all let alone contentiously, the greater amounts that people will want to store as bitcoin.
B) Other market participants value other things about bitcoin, or at least demand it. So there simply is a market.
If those capabilities are useful, more people flock to BTC. Price goes up.
This is similar to the valuation of the many tech stocks which are not necessarily grounded on the present revenues of the respective companies.
Bitcoin will never have earnings. It's pure speculation.
If we actually needed a lot of cross border transfers, you can print an infinite amount of different coins/systems to duplicate that function (this is ignoring BTC actually has more money printing via Tether than any other "currency"). This isn't even including just having new systems for moving electronic US dollars around in Apple wallets etc, and cashing into local currency as needed through other services.
Bitcoins "real" value is a storage of value, which is currently based on speculation desires of holders, which in theory could hold forever (or at least longer than you can remain solvent as a short or long enough for you to 10x or 100x so who cares) but could also disappear forever and not be missed once gone.
The only moat is belief, which really who knows if that is sticky or not. There is no tangible functional moat.
But what does it take to bootstrap trust? The idea of conjuring instruments to move money has a long history. I found value in knowing that such a system already exists: Hawala[0] which means "transfer" or "trust". Its existence clamps, in my mind, the possibilities of the "how do we make value transfer systems" question. The Bitcoin network with its proof of work clamps the other side of that question. In some way, the altcoins and other various systems of payments exist somewhere between these two systems.
Bitcoin's current speculation is based on the theoretical "it'll replace fiat", otherwise what other utility does it have?
Gold technically can be melted down to be used for jewelry, wiring, etc. so in theory it would never go zero. If BTC doesn't work out and no one ever uses it to transact, then in theory it can go to zero.
Also, there are multiple factories producing hammers and there is no one entity to tell others what hammer price is/should be.
If the world economy were held in fully minted bitcoin, each bitcoin would be worth ~$4.2 million USD.
Investing in bitcoin is like investing in abstract gold without an industrial or art use fallback. Rather, the transfer across boundaries piece is the fallback, the actual goal is to claim a deflationary estate and then get the world to use the medium to drive up value. Of course when popularity really increases fees will have to counter the rate of deflation, which will roughly equal economic growth, or nobody would ever trade out of it, and at the point it's the real collapse.
Sure, the code says that it will stop when 21 million are mined, but there's no real guarantee that the code won't change before we reach that point. Or, the blockchain might fork (again) and now there are double the coins.
There are already multiple forks of Bitcoin, yet it doesn't seem to change market's perception and valuation of the original Bitcoin.
That's not how it works… think about it.
How can bitcoin be inflationary when the number of coins being produced decreases every 4 years?
There's a fixed supply—over 88% of all the bitcoin that'll ever exist have already been mined.
Yes, every 10 minutes or so, 6.25 new bitcoin come into existence but every 4 years, the block subsidy is cut in half and will continue to be cut in half until the final block is mined. The next halving is May 7, 2024.
The amount of new coins mined will continue to decrease until 2140. You might want to read about bitcoin's stock to flow: https://medium.com/@100trillionUSD/modeling-bitcoins-value-w...
Sure, the code says that it will stop when 21 million are mined, but there's no real guarantee that the code won't change before we reach that point.
There's over $500 billion (and growing) in market capitalization that is based on the limit being 21 million bitcoin and not ever changing. This was already litigated by the bitcoin community.
Or, the blockchain might fork (again) and now there are double the coins.
Again, this isn't how it works.
There could be dozens of forks; that doesn't matter. Only the longest chain with the most work on it matters. All of the hashing power would continue on the one true bitcoin chain while the forks languish.
Bitcoin is open source; anyone can download the source code, make a few changes and launch a new chain. But it would get virtually zero support.
You may not be aware of the number of bitcoin forks that have been attempted and failed… Bitcoin Cash, Bitcoin XT… you might want to do some reading: https://www.exodus.io/blog/bitcoin-fork/
Or just a basic understanding of monetary economics... the Fed's actions aren't an exogenous variable, they were taken precisely because of deflationary expectations in the market.
They see the big scary market, they don't understand it, and are trying to re-invent it from first principals. As such they're just speedrunning the history of finance, and quickly finding themselves exactly where they started.
They are the anti-vaxxers of finance.
"...people who forgot to attend ECON-101."
The real problem is people that think the neokeynsian and econometrics nonsense they learned at school is valid in the real world. Easy to detect members of that crowd, they are generally clueless about scarcity value, bitcoin/hard-money and will inevitably end up poorer than the less ignorant.
You don't even have to be a neo-keynesian, you really just have to recognize that not all price changes are "secret inflation." The markets (ie. the "real world") tend to agree with me [0].
Anybody buying the 2% inflation number doesn't recognize the actual 15-20% hurdle they have to jump over every (non-covid) year and will inevitably get poorer unless they are directly tied to a "cantillon channel"... in which case they will only stay rich thanks to what amounts to fraud.
More accurate inflation calculation - https://chapwoodindex.com
Chapwood "Index" is produced by the same person behind many of the conspiracy theories around Seth Rich's murder [0], not really a brilliant objective source of inflation metrics. I'm not claiming the CPI is perfect, but taking a look at market expectations of inflation also gives you a pretty good picture of what is going on, and it's not a 4 year doubling of prices.
You have absolutely no evidence to support this.
The only reason the cost of living goes up in the major metros listed there is because housing went up there, and that's not inflation or the cantillon effect (which I concede exists but is nowhere near as big as you make it out to be) -- that's because city councils aren't permitting new construction.
Your comment is a manifestation of proportionality bias. You think a big change in the affordability of housing in SF has to have a big cause like the global economy string pulling illuminati cantillon magic. The reality is far more banal. It's straight-up simple supply and demand. Strong economy in and around SF creates demand for living in SF. The city council doesn't permit new construction. This limits supply. Low supply, high demand, big prices - which the well paid tech workers can afford. That's it and that's all man.
Naturally when demand fell as a result of the pandemic prices went with it.
Do I think those who stay wealthy in real terms are able to do so via "what amounts to fraud?" No. Nor do I buy your 15-20% hurdle assertion: if your annual salary of say $100,000 was worth just 10% less each year (as in, real inflation of 15% minus 5% worth of nominal income growth, a generous income growth assumption) $100,000, over just five years, it would be worth the equivalent of ~$60,000 in year 0. It seems like a stretch to suggest that everybody but the rich are seeing their real incomes almost sliced in half every five years. Use the 20% number or a more conservative assumption for income growth and the numbers start to square even less with reality.
Asset price inflation is such a weird metric to rail on because that's the whole point of investing. Literally the point of assets is they go up in price over time. If you bought AAPL at $50 and it hits $300 is that "asset price inflation"? No! It's a good return on investment.
There's no personal need for affordable AAPL stock is there? Are you going to die if you can't afford AAPL? Of course not.
You know what's gone down though? Housing. Which, by the way, costs exactly the same amount now on an inflation adjusted dollars per square foot basis as it did in the 1970s across the whole of the United States according to the BLS. [1] Certain major metros are of course higher but that's simply because the city councils stopped permitting new construction to benefit existing landowners while demand increased due to the booming economy in and around these metros.
Inflation is literally defined as CPI and it factors in the necessities of life. AAPL stock is not a necessity. It doesn't matter how far up it goes if bread costs the same.
Wanna stop the inequality it leads to? Bring in a wealth tax.
[1] https://fee.org/articles/new-homes-today-have-twice-the-squa...
This crowd in particular has plenty more examples than economy and immunology. We never learn.
I keep trying to tell him that if he'd tell me tomorrow's lottery numbers we'd be much better off but alas I think he's a lost cause.
I bought my first AAPL stock at ~$40 a share the first time, which I believe was about a year before their previous stock split. If I'd held it continuously I'd have 8x as many shares and a basis of $5 a share, which would mean I'd have 25x as much money as I started with.
But my portfolio would be unbalanced as hell, and I would have missed out on a lot of run-ups for WWDC and such. So I sold some, did profit taking on the rest, and occasionally bought back in, not always at the best times. So instead I have about 5x as many shares, and my basis is more like $45 a share, but now with some dividends on top, which is nice. If anything, my portfolio still has too much AAPL in it (I sold about 10% a few weeks ago)
By the time you see a thread on Bitcoin going up 10% this week, you have failed to secure a position.
I've made some decent cash by shifting some money into Bitcoin on a Monday and cashing out my positions by Friday during these rallies to the tune of 30-70% profits but it's not for the faint of heart.
All of this is gambling, not some rational modeling of how the bitcoin price will move.
I'm glad that it has worked out for you.
Bitcoin's price is irrelevant if you're planning on using it as a deflation countering method but if you're looking at pricing, you're basically gambling on you not being the bigger fool.
How does bitcoin function as a "deflation countering method"?
Whether it's a pizza that later on is worth billions, or a car or something else. Your bitcoin is worth something, and is just another method of payment.
Wouldn't that make it a hedge against inflation?
Many people in this thread on the wrong side of the Dunning-Kruger curve.
The anti-vaxxers of Finance have been pretty lucky so far. Much more than actual anti-vaxxers.
Sounds like your analogy is off.
The parallel I was drawing was that anti-vaxxers don't understand vaccines and have gotten it into their heads that they are bad. The same is true of a lot of the arguments that bitcoin maximalists make, about inflation, about the central bank, about fiscal and monetary policy, about how their magic beans can save the Venezuelans.
In current popular fashion everything is political.
But also, anti-vaxx is an obviously denigrating term that’s part of the whole liberal orthodoxy. You’re drawing very broad characterizations between disparate topics.
Even the vocabulary you use is odd and one-sided. Should I call you a credit expansion maximalist?
[1] https://www.investopedia.com/terms/b/bitcoin-maximalism.asp
Is there any danger of a K-shaped recovery in which the fed is forced to accept massive inflation in parts of the economy in order to prevent deflation in others?
Has the wealth gap and ensuing social unrest caused by this bifurcated inflation historically caused nations to fall?
Inflation is an increase in prices as money becomes worth less. "Differing rates of inflation/deflation" are just the price system at work.
Since during Covid, velocity decreased, inflation dropped substantially, which required an increase in base in order to prop back up inflation.
> Has the wealth gap and ensuing social unrest caused by this bifurcated inflation historically caused nations to fall?
The wealth gap is not caused by "bifurcated inflation." It is caused by rapidly rising equity prices, among other things, but that is not the same thing as inflation.
Suppose that for every dollar the fed prints, 95 cents ends up in equities and 5 cents ends up in PCE. We can argue about what to call it but that doesn't change the outcome.
This is opinion, not a fact.
The problem with bitcoin as a currency (and arguably all currencies) is that its value isn't stable, and can never be, because value is arbitrary and subject to opinion.
But if you don't agree, just look at how it's deflationary. Most don't realize it, but deflationary currencies are equally problematic to inflationary currencies in that both deflation and inflation are natural drivers of inequality.
Generally speaking, with inflationary currencies, the rich who get richer are those who own assets, and/or those who control the money printer. Those who are at a disadvantage, are people without a money printer who hold onto the devalued currency, and those who have fewer or no assets.
With deflationary currencies it's the opposite. The rich who get richer are the hoarders and earlier adopters of the currency. Those at a disadvantage are those who own other things, and those with fewer or no amounts of the currency.
As so, if the world mass adopted bitcoin, society would be no better off in terms of the problems people behold to inflationary fiat... (problems regarding inequality). But that's not to say, it wouldn't solve some problems as your statement suggests, but it also introduces new problems. As an example, your very argument above could be changed to "the inability to exchange money without a computer is probably amongst the worst intrinsic value one could hope for". Is it worse/better - again, that's subject to opinion.
In short, the only reason to grab bitcoin, is so you can trade it to someone else later who thinks it has value, which means it only has or holds value because people thinks it does or will - same as anything else.
I don't follow; how does real estate and stock become less valuable in a Bitcoin world? Or do you just mean relative to the returns on owning Bitcoin?
One way to think of the economy is by money flowing between people and industries. The more the money flows the healthier the economy, as it becomes easier to create companies, get a job, etc.
When the money is stagnant, it becomes harder to convince people to spend it.
Economically speaking, goods and assets will HAVE to become cheaper if no more bitcoin is to be made. Why? Well, if all the bitcoin has come into existence and is already owned by members of society, how will new born people who come to exist in the world - come to acquire bitcoin to do trade with? Especially considering that those 30 people/institutions had hoarded so much of it, and as the number of goods and people in society grows, there are fewer and fewer bitcoins available for everyone else to do trade with as time goes on?
Thus, in order to prevent liquidity crises - the price of wages, goods, and assets (even stocks) MUST become cheaper relative to bitcoin as more people and goods enter the world. Eventually, the price of things will eventually no longer be measured in bitcoins, but fractions of a bitcoin (satoshis).
One day a house may cost 700,000 satoshis. Decades later, as more houses and people come to in existence, a house may cost 70,000 satoshis. Those who held onto their bitcoin in their digital wallet, over the that timeframe, would be able to buy 10x more house simply because of the deflationary nature of the currency. Those who bought a house decades earlier would not be able to buy 9x more house just as easily...
Again, the numbers and scenario here I made up, but hopefully demonstrates the point. The hoarders and early adopters of the currency will be the rich who get relatively richer as time goes on, as more goods and people come to in existence forcing the cost of goods, assets, and wages to become cheaper. Those who don't own the currency (such as those yet to be born into the world) or those who have fewer amounts of it, would be at a relative wealth disadvantage as time goes on.
Mind you, I'm not arguing that bitcoin couldn't work. Just that it's inherently no better/less problematic than the inflationary currencies we already have (economically speaking), despite many proponents claiming otherwise.
It also benefits those who can spend less and defer spending, since any money not spent will become more valuable rather than less.
This is the (imo) fundamental intrinsic value of Bitcoin, and something that very few people seem to understand (or understand the value of).
... now what? How do you “transfer money across political boundaries without censorship” into or out of China?
If you’re a Venezuelan, then Bitcoin is great for you. But there aren’t that many Venezuelans, and it seems like most of the speculators are American.
I think I've been hearing this for the last 11 years, and haven't seen any spikes in inflation.
Food subsidies and the aforementioned weather have kept food prices relatively low...although you might notice that non-McDonalds food will cost you about 10$ a meal, as food prices have doubled in 11 years. Give it a bit more time.
Now that the QE has ramped up to ridiculous levels, you can sit back and watch the inflation continue at 4x instead of 2x for the most affected verticals.
The stock market and real estate aren't goods and services, they are assets. The price of assets can vary quite wildly based on the interest rates (Looking at a net present value calculation explains why). But these fluctuations are unrelated to fluctuations in the prices of goods and services.(i.e. inflation)
Food prices definitely haven't doubled in the last 10 years.
https://www.ers.usda.gov/data-products/food-price-outlook/fo...
People complaining about inflation are usually asking us to trade a very real current harm-underemployment for a hypothetical harm that hasn't materialized in the last 13 years despite repeated warnings-inflation. This seems like a bad trade especially since mainstream macro theory says the risks of rampant surprise inflation are low.
Not all foods. Again, food has a number of factors that's countering the inflationary forces.
> The price of assets can vary quite wildly based on the interest rates
That's irrelevant to the spike in value that has occurred while the rate has sat at 0. The inflation of the prices of stocks and property assets are evident and the realization of no other way to invest wealth - bond returns are less than 1% now, which is why they are basically useless.
He discusses volatility when it comes to currencies, and the impact a volatile currency has. It doesn't really have anything to do with the stock market.
The speculative bubbles are a bigger problem. Bitcoin looks like at best a $5K-$10K thing in the long term (just look at the 2018 bubble). The argument was always "with limited supply bitcoin price will go to infinity!" but there isn't limited supply because bitcoin isn't the only cryptocurrency. The Bitcoin-cash split doubled the supply. Every new cryptocurrency product increases the available supply. Smart investors will diversify cryptocurrency holdings and bitcoin will eventually be priced accordingly; the cryptocurrencies that can grow appropriately with the economy will have the most stable prices. At least difficulty adjusts more frequently than the block reward decays so that it's very unlikely to have a giant crash where over-invested miners all go bankrupt on a downturn and no one bothers to mine the next block.
I can spend USD almost anywhere I want at maybe a 1.5% transaction fee depending on merchant, with 1%-2% cash back (I calculated a 1.67% rebate for 2019). Technically this is only nominally government currency since it's just bank credit denominated in USD.
Bitcoin's blockchain does around ~100K BTC in volume a day at ~100 BTC in fees and ~1000 BTC mined (since May) which both are effectively costs going to the miners' electricity. 1.1% vs 1.5% with cash back isn't a huge argument for bitcoin. If transaction fees stay around .1% until the block reward hits .05% then the efficiency argument eventually goes away because miners will be competing on transaction efficiency and not block rewards any more.
I like the technology; it's cool and the fact that it works at all is amazing. If overall costs were closer to .1% and speculators were not the primary users it would be revolutionary.
It already works. https://why.cardano.org/en/introduction/proof-of-stake/
The reason the US dollar is valuable worldwide is because if you run into trouble, you can use the US courts to be made whole, and if that doesn't work, assuming the dollar amount is high enough, the US military or Secret Service will use violence to make you whole again.
Same thing with the Euro and all the other major currencies (and even a lot of the minor ones). They have the threat of legal recourse and military violence back them.
Bitcoin does not have that. If someone takes your Bitcoin, there is little recourse to be made whole again. Now maybe if the US government decided to buy up a significant amount of bitcoin, they would have an interest in using the courts and military to enforce it. But the US government doesn't like competition, so most likely they would be buying up bitcoin to get people to exchange bitcoin for dollars, making the dollar even stronger.
I have heard dollars are popular with crime orgs all the world over, who are unlikely to use or be able to use the dollars in US courts. Dollars are valued by people (and they exchange goods/services for it), and Americans need them to pay their taxes.
> If someone takes your Bitcoin
This is one big if, and it will still be prosecutable by courts, as evidenced by all the current legal cases about crypto theft.
> Same thing with the Euro and all the other major currencies (and even a lot of the minor ones). They have the threat of legal recourse and military violence back them.
Military might matters only so far as it defends the country and makes it possible to produce stuff that other people want. A lot of countries with good military might (e.g., North Korea) don't have valuable currencies.
I think once you've laundered drug money into dollars, it's spendable just like dollars are spendable. But it also makes sense they want dollars because dollars can pretty much be spent on anything anywhere.
>> If someone takes your Bitcoin > This is one big if, and it will still be prosecutable by courts, as evidenced by all the current legal cases about crypto theft.
Well first you have to find the perpetrator -- then you have to find the money. Do enough transfers and mixing currencies together and it becomes near impossible to trace. This gets worse if it's state sponsored hacking (Russia or China, say)
> A lot of countries with good military might (e.g., North Korea) don't have valuable currencies.
That's because NK doesn't have a lot of trust. Saddam Hussein hoarded US dollars [1] even though he could have used Iraqi currency instead (since afterall he was the leader of Iraq and the currency had his face on it). That's because nobody really trusted Iraq's currency -- not even the leader himself.
[1] https://www.nytimes.com/2003/04/20/world/nation-war-baghdad-....
The speculative and tech aspects of it provide enough of a veneer to keep authorities from entirely cracking down (though banks really really don't like touching it!).
I dunno how long that can go on, it seems like eventually someone will start making stricter KYC rules and the whole thing will come tumbling down. The feds are currently sniffing around Tether, which might be the start. That or the bitcoin system invents another part of traditional finanical systems, the bank run (tether is already backed by loans and crypto neither of which will assuage depositors looking for dollars).
For USD it’s also the fact that oil is sold in USD, which is why a lot of foreign debt is also denominated in USD.
They're not fallacies; you _hope_ that someday it will be able to accomplish the goal you've described, but it certainly doesn't today, and it's price is completely based on the greater fool theory. Gold is desirable; crypto is not. It's a "currency" that isn't one and has ZERO intrinsic value.
> completely based on the greater fool theory
No, it's not. People desire it for what it can be used for. It has some intrinsic value. Crypto has exactly zero value outside of being a store of value, and because it cannot be used as currency, it's value is determined by what it can be exchanged for in actual currency.
By your logic I would think everything trades on the greater fool theory because it's only worth what someone will pay. Well, yeah, that's true across the board, but people pay for things because they see value in it. Crypto's value is only what it can be sold for.
> Bitcoin was less volatile than AMZN or AAPL in 2020 (3-month realised volatility)
Have you got a source for both of these statements?
[0] https://inflationdata.com/Inflation/Inflation/DecadeInflatio...
If interest rates come anywhere near historical norms we will be spending all revenue just to pay interest.
"How does the debt actually effect the economy? (Does it?)" and "What is the long-term impact of various debt-maintenance strategies?" and "Will political deadlocks prevent effective management of the debt?" (among many others) are better questions.
The constitution always congress can if they want to.
Bitcoin is far too volatile ever be used as money.
"not your keys, not your coins"
The Chapwood index offers a good alternative view as to the actual cost of living - https://chapwoodindex.com
Bitcoin really has been absurdly resistant to security flaws given the immense and growing incentive to break it. How is it this good when every other major software vendor in the world has to issue weekly security patches?
But Bitcoin also has a primary implementation which is software and that hasn’t had any major heists either.
Well, they're probably not in your pocket, since most of the new money goes to well-connected special interests (banks, megacorps, etc).
I'd wager a guess that most of those new dollars didn't end up in our pockets.
Why? What is the mechanism?
Less liquid investments tend to be a lot more volatile, because there are fewer people with orders in the order book and fewer people paying attention to take advantage of market inefficiencies. With some altcoins you can cause a 10x increase in price with a few thousand dollars. Why? Because with a few thousand dollars, you've bought up all the supply in the order book, become the monopoly provider, and can name your price for anyone that comes around after you wanting to buy.
With more participants, there's going to be someone out there that undercuts your 10x ask and offers a more reasonable price.
For the statistically inclined, you could look at this as an application of the central limit theorem. One random variable (the price you're asking for an asset) could be all over the place. A million random variables (each a market participant) added together tend toward a normal distribution with the sample mean converging to the population mean.
At the same time it has the best Sharpe ratio amongst all assets (gain rescaled by volatility).
This is stated as an article of faith. Is there anything about bitcoin that would make this be true?
>Bitcoin was less volatile than AMZN or AAPL in 2020 (3-month realised volatility)
Not sure what you are smoking. Bitcoin literally just went between about 27k and 34k today. That's about a 20% swing.
Ethereum had a 60% swing.
Not volatile at all! Nope, nope, nope not at all.
But even on daily %-change in 2020, BTC doesn't look different to other stocks: https://imgur.com/a/mE7bSI4 (the green one is TSLA by the way).
Since we are talking about a company putting $400M of BTC in their balance sheets, I doubt they are worried by daily volatility.
Now you are retreating to stocks for a comparison. Indeed, if Bitcoin is supposed to be treated like individual stock, volatility of Bitcoin becomes reasonable, but it is still very high. That is why you do not put all your money into a single stock. You diversify, like in an index fund. Compared to an index fund, Bitcoin volatility is ridiculous.
Unlike with stock, there is no index fund for cryptocurrency that is substantially less volatile than Bitcoin itself.
New in this post was the author's stance to trust the Fed to keep inflation predictable:
However, the Fed increased M1 money supply by ~20% just in the 2 months following that blog post and by ~70% in the total of 2020 - an increase unprecedented in the history of the US dollar. 2 of the 3 dollars in your pocket have been created out of thin air in 2020.Believing that inflation rates in the next years won't spike as a result requires an amount of trust even more artificially inflated than the USD today.
[0]: Daily %-change of TSLA,BTC,NFLX,AAPL,AMZN: https://imgur.com/a/mE7bSI4 (TSLA is green)