I can certainly see its value for overcoming transaction barriers, whether they exist due to incompetence/corruption/backwardness of the financial system involved, or due to rule of law and anti-fraud legislation.
When it comes to storing wealth, it seems to me that it's either speculative or illicit, and not much else. Illicit users find it attractive because its anonymity and "transaction smoothness" benefits outweigh the potential losses, much like losing 30% when laundering money is just cost of doing business.
If you don't plan on leaving your country, useful land is a much better hedge.
Other than that, the thought is that you can always flee your country with a digital wallet. IMO crypto is a terrible "societal collapse"/"dollar collapse"/"fleeing authoritarianism" for Americans.
A much better hedge is a set of skills that allow you to easily emigrate, a globally distributed personal+professional network, and a portion of your portfolio held as hard assets outside the reach of your country (eg a new life startup fund held as physical currency in another country outside their banking system -- or a personal network that has the same effect). But that's a very difficult set of things to cultivate for most people.
What? Land is about the easiest thing for a government to seize (and protect, for that matter).
> portion of your portfolio held as hard assets outside the reach of your country (eg a new life startup fund held as physical currency in another country outside their banking system -- or a personal network that has the same effect)
I don't see why you're ruling out crypto as not satisfying the desiderata here. There's no need for it to be physical, so long as it can be converted to a currency you want, and maintains most of the value you put in. Stablecoins would work, then, and avoid the need to keep them in a physical location in the target country.
Terra has implemented stablecoins for ~20 currencies other than the US Dollar, including the IMF's special drawing rights (a basket of the five big ones): https://station.terra.money/swap
...and just killing people even easier. What's your point?
The purpose of "If you don't plan on leaving your country" is to describe situations where the threat is exogenous to governance. E.g., starvation-level crop failures/grid failure/energy shock/etc. Or even just a massive depression during which I can't find employment. In those cases, I'm less concerned about governmental overreach than figuring out where the next year of food and energy come from.
The moment I'm thinking about the government taking my land unexpectedly, I'm FAR outside of "If you don't plan on leaving your country" territory. That risk is hedged in other ways.
But, most importantly, I can enjoy land independent of its hedging value. I try not to invest significant chunks of time into acquiring pure hedges. How am I supposed to use stablecoin to ride a horse to a hilltop or sit around a fire with friends...
> I don't see why you're ruling out crypto as not satisfying the desiderata here
This is like asking why I would rule out a humanoid robot for vacuuming my floors. Because I already have an existing solution that is easier, safer, and simpler. Social connections and hard skills are an indisputably better asset to have in "fuck this I'm leaving the country" situations.
And, again, having friends & family all over the place is its own reward. As is cultivating useful skills. Not sure how I'm supposed to enjoy a vacation or find meaning in life with a stablecoin.
...also, all of this is independent of the fact that crypto really isn't even a good hedge for these sorts of long-tail risks in the context of the USA.
That a hedge needs to be robust against the threat you're using it to hedge. Land ownership becomes the most precarious during exactly the times you're using it as a hedge for, which is a bad idea. Times of crisis are exactly when land seizure is the most likely and ease of protecting and securing it is the highest.
>But, most importantly, I can enjoy land independent of its hedging value.
Not in a crisis, when (in addition to the above) governments have the least resources available for protecting your land from randos.
I'm imagining you with a grain silo during a famine, thinking "no biggie, of course the government will protect me against theft of this super valuable food".
>This is like asking why I would rule out a humanoid robot for vacuuming my floors. Because I already have an existing solution that is easier, safer, and simpler.
I'm sorry, do people generally have a hard time understanding the concept of "a better alternative exists" that you need an analogy to explain it? I don't know what the purpose of that analogy was other than to intimidate others from asking honest questions about your argument.
>Social connections and hard skills are an indisputably better asset to have in "fuck this I'm leaving the country" situations. And, again, having friends & family all over the place is its own reward. As is cultivating useful skills.
Right, I got that part. Do you remember the rest of your post, where you said:
>But that's a very difficult set of things to cultivate for most people.
So what is it? You said it's difficult. Why is it hard to understand, then, why I would suggest crypto satisfies the desiderata here? I guess it must have something to do with me thinking that you should use a humanoid robot to vacuum your floors.
So yes, you may have already accomplished the difficult thing. But before you moved the goalposts, you seemed to be concerned with the average person. And now that you've moved the goalposts, you can't help but brag about what a jet setter you are.
>...also, all of this is independent of the fact that crypto really isn't even a good hedge for these sorts of long-tail risks in the context of the USA.
I agree you should have started with this, as a better argument than "holding physical banknotes in another country is easier than holding stablecoins".
You enjoy your tulips, I'll enjoy my hilltops an friends.
> You enjoy your tulips, I'll enjoy my hilltops an friends.
If only all people who are not interested in crypto would be like this.
It does not have to be for everyone, but if it is so useless, I wonder, why it makes so many fiat enthusiasts so anxious to the point that they attack crypto enthusiasts.
I do not live in a 3rd world country.
Actually, Ukraine ranks above average and median when it comes to HDI. At least a couple of weeks ago.
What it does do is provide a speculative bubble with no backing assets.
The informal market rate for the Lebanese Pound is even more absurd, though:
The value of bitcoin is predicated on the belief there is a limited supply, just like gold. The difference is that in one case the mechanism for limited supply is the Earth and the other is proof of work (which is more fallible than Earth obviously).
In any case I don't think BTC is meant to be _used_ as a daily transaction medium (just like gold is not), no matter how much BTC bulls would have you believe it should be. But as a long term store of wealth holding BTC is like a riskier version of holding gold, with the same fundamentals driving the price.
[1] https://cdn2.vox-cdn.com/assets/4718370/siegel_returns.png
The few legit / non-speculative uses of crypto are denominated in pegged stable coins like USDC, USDT, and some lower volume options denominated in EUR and other currencies. You can deposit these into crypto banks for a ~3-8% APY. A few of these options are even FDIC insured (e.g. Gemini's GUSD).
(this is unrelated to Bitcoin, which is more or less a volatile meme asset)
So if there's an exploit where GUSD can be stolen/duplicated, or if Gemini defaults the insurance is meaningless.
What it means is that if a bank where Gemini holds an account defaults, the government will pay Gemini up to $250k.
You're right that if you store your GUSD off Gemini and it gets stolen, then you're out of luck. I am not sure what happens if Gemini closes but my impression is that since they are a NYS trust they would have to their customers the 1:1 backing (rather than paying creditors with that money).
1. It can act as an actual alternative currency and 2. Those governments do not adopt it their citizens' alternative currencies themselves or choose to tax it
It seems like in this story the actual alternative currency the Lebanese are "foreign currencies", and crypto is seen as a potentially profitable speculation in the midst of an economic downturn.
The extent to which cryptocurrencies actually server as currencies, and therefore actually hedge against national currencies, is inversely proportional to the extent to which they are used as a speculative asset class. People have a really low tolerance for price volatility, and if the value of currency swings up and down it can make it really stressful to participate in an economy.
Adding this to my increasingly long list of "things that bitcoin actually is".
That is, the sort of thing people do when writing a product review.
If this were the case. The benefits of using a foreign card would depend on the exchange rate in which card payments are settled.
Are Lebanon's card transactions with foreign cards settled at the official or at the market exchange rate? Is the difference between both rates still significant?
Think about it - Bitcoins stated aim is to remove government control of currency, something some governments have gone to war over. Yet bitcoin has relatively received very little attention from the US government.
I believe thats because while the US government sees bitcoin as a threat to their currency monopoly, they also see it as more of a threat to other smaller countries with weaker economies. Hence, overall it benefits the USA.
Honestly, I don't think the US government sees Bitcoin as a threat to anything.
Cryptocurrency proponents have often indoctrinated themselves into thinking it is a powerful technology of world-shattering importance ("just give it time!"), but what if that just isn't so? Maybe it's just a cultish sideshow that's occasionally pushed up into fad territory.
Bitcoin is no threat to the U.S. We have an open capital account. If Congress made Bitcoin legal tender tomorrow virtually nothing would change overnight. (Hell, if Congress abolished the Fed tomorrow and switched to exclusively Bitcoin, we'd just have to dust off old central banking books from the specie days. We'd also enter a deflationary recession.)
For a capital controlled country, on the other hand, cryptos enable currency flight. Hence the lockdowns in China, Russia and India.
I believe the current US Gov strategy is to get entities submitting under their control to work in controlling bigger and bigger stakes of BTC. If they outright ban it before it is the case, they will create a scenario where people withdraw their BTC to private holding instead of using exchanges. The only way USGov comes out unscathed is if the exchanges are under its control and they control most of the BTC in the world.
However, I think even this scenario is not ideal for them, as BTC outside the system will be worth differently than the one inside USGov. The question will be which one will be worth more, and the bigger the diffference, the more the other BTC will flow in that direction
This is so well put, I am going to take it.
I would add that it is also a extralegal & illiquid medium to acquire fiat.
The order books on Bitcoin is thin, its even thinner for Ethereum, even more so for Monero and dogecoin etc.
Companies like Coinbase and Binance recognizes this, if they were to sell all the bitcoin in posession it would tank the prices due to illiquidity. Thus their main business model becomes quite similar:
- easy onramp of fiat to crypto
- difficult offramp from crypto to fiat (when price moves around, you can't even login as servers frequently "go offline")
- in Binance's case, they are able to see all the orders in their books and routinely cause short/long position to be margin called
- wash trading and other classic unregistered securities manipulation.
Hm.
buys ETH
It sounds as if nobody in Lebanon is using Bitcoin to pay for milk and bread. Instead, they're exchanging it for a stable non-local fiat, which in turn pays for the milk and bread.