Hacker News Reader

Comment by loeg | Hacker News Reader

BTC prices have approximately zero relation to inflation in the real economy (for whatever definition of that you want to use). Rising BTC prices are driven by pyramid scams, fraud, and speculation. There is no useful signal here related to anything else.

View on HN

Is there a useful signal in the dollar price? Price of silver? They are all used in hedging bets. Same for BTC, people with a lot of cash are looking for a safe spot while we have the possibility of hyper inflation.

The entire BTC market cap is minuscule -- about 600bn as of this writing.

That seems like a lot, but compare it to Apple -- the market cap of just this one company's stock is currently ~2,238bn.

The market cap of gold, US dollars, Euros, etc. are all many times more than Apple. The value of all BTC is a tiny microscopic speck compared to the amount of USD or gold in the world.

This means (among other things) a few small players (with tiny capital relative to, say, the size of all USD) can swing the BTC market either way with a comparatively tiny amount of value moving around.

That would seem to greatly limit BTC's usefulness as any kind of inflation gauge for the broader economy.

To give an another view:

600bn is more than gdp of majority of countries.

For individual humans that’s like saying ”My net worth is $100k and that is more than most people earn in a year”. Yes that is true, it is larger. But it is meaningless comparison and misleading at best.

Correct, and those countries' economies also give us little to no signal about US dollar inflation. The proposition was that BTC prices somehow inform us about that.

Market cap is a stock. GDP is a flow. Comparing the two is nonsense.

GDP is income. What you are doing is the equivalent of comparing your mortgage payment with the price of the house when you bought it.

comparing GDP to market cap is also a very irrelevant kind of comparison. Just because the use the same dimension (like dollar) doesn't mean they are directly comparable.

There is no meaningful threat of hyperinflation in first world economies until China's GDP per capita has reached $20k - $30k and even then there are investment opportunities in India (if they get their corruption under control) or other Asian countries.

Look at the Money Velocity. It’s decreasing. You cannot have hyper inflation with a decreasing velocity.

Hey leopict, strange question... I saw your comment about the PG::Internal Error in the 'Is Apple Silicon Ready' thread but wasn't able to reply there. I've been experiencing the same thing for two weeks and have tried everything. Did you have any luck resolving the issue?

No, it continues to happen in dev env.

Same. By any chance, are you using thoughtbot/parity to restore your dev environment from production?

How much has the velocity of Venezuelan Bolivares increased in the last few years?

(or) you are wrong and there are some people who see asset inflation caused by stupid governments printing for everything and moving away wealth from these systems into Bitcoin.

BTC prices have been driven by institutional demand and federal monetary policy.

Or 21 billion fake tether dollars.

I have serious questions about tether.

As far as I know, they have not proven they even have 1 billion on reserve. How can they claim 21 billion?

Is this pyramid scheme the real reason bitcoin prices are so high?

I've seen sources to corroborate institutional demand, but is there a source for your claim on the link to federal monetary policy? Ideally beyond correlation to show causation.

I don’t, but it is one of the core reasons why Bitcoin is attractive to anyone.

Asset prices are up across the board.

Do you believe that speculative activity is not related in any way to inflation or expectations of inflation?

IMO BTC's relation to inflation in the real economy is the same as any alternative investment like gold - it's usage as a "safe haven".

In theory the USD price of bitcoin is tracking the inflation of the USD but with excessive volatility. However, it is possible for it to grow slightly faster than inflation if a significant portion of the central bank money is arriving in cryptocurrencies. In practice it's getting dwarfed by the factors you mentioned. Lots of irrational investors are pumping BTC until it crashes.

Over the long term (several decades) you can expect it to perform like gold once it has turned into a mature market.

Sorry, the USD price of bitcoin is tracking the inflation of USD in theory? What theory's that?

Ponzi schemes give an INCOME RETURN

Bitcoin gives a PRICE APPRECIATION RETURN

One could call this then a “greater fool” play except it has algorithmic reduction in supply which repairs “greater fool” aspect.

If the limited supply was the only thing bitcoin had going for it then it would merely perform exactly like gold but it is over performing which means there is an additional irrational component driving bubbles and busts.

I guess "I want to invest in crime, but I don't want to have to do crime to invest in it" falls under speculation.

If I wanted to invest in crime I'd buy bank stocks and US bonds.

Reply on news.ycombinator.com