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Comment by frankenst1 | Hacker News Reader

Like most posts critical of Bitcoin it ignores that

    - Bitcoin becomes less volatile over time
    - Bitcoin was less volatile than TLSA, AMZN or AAPL in 2020 (3-month realised volatility) [0]
    - Bitcoin becomes less risky over time (since despite increased incentives to "hack" it, no exploits happened)

It also repeats typical nocoiner fallacies like "it has no intrinsic value" and "gold is used for jewelry", ignoring that the ability to independently verify the money supply and being able to transfer money across political boundaries without censorship is probably the most important intrinsic value one could hope for in a MoE/SoV.

New in this post was the author's stance to trust the Fed to keep inflation predictable:

   "as long as the Fed isn’t run by spider monkeys stacked in a trench coat, the inflation is likely to be within reasonable bounds"

   "well-run currencies like the USD, GBP, CAD, EUR, etc. all lose their value at a low and most importantly fairly predictible rate"

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)

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> 2 of the 3 dollars in your pocket have been created out of thin air in 2020.

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

> M1 is the money supply that is composed of physical currency and coin, demand deposits, travelers' checks, other checkable deposits, and negotiable order of withdrawal (NOW) accounts.

https://www.investopedia.com/terms/m/m1.asp

> and they keep parroting the almost 100 years-old Autrian critique of central-banking without any kind of cognitive effort

Just naming something doesn’t invalidate it.

Naming something tells you what to look for in the academic literature (or even Wikipedia), where you will find in this case that the academic consensus has mostly moved on from the view named here

> the academic consensus

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."

Someone is coming up with these theories, and it usually isn't Joe the Plumber.

Most propaganda & marketing campaigns are coming out of well educated folk. Look into the Heritage Foundation, for example...

Now I'm not sure if you're still talking about BTC or we switched to vaccines...

Economics is not a very difficult subject. Most people intuitively grasp supply and demand and other basics.

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?

There used to be massive economic crises all the time while people still were using your "intuitive" grasp of economics.

The truth is that inflation expectations were in the hole [0], and the Fed action restored inflation and price stability as per its mandate.

[0]: https://fred.stlouisfed.org/series/T10YIE

> Economics is not a very difficult subject

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"

Economics is not complicated. It is people who try to confuse us by wrapping mismanagement in the veneer of econometrics and "science" that try and make confusing what is actually relatively simple.

Both the US and Japan have ran enormous fiscal surpluses for decades with low inflation. How does your plain, simple intuition account for this gap between what you say must happen and what has happened?

Scarcity is a myth

I know of no serious economic school that espouses this.

The idea conveyed here is that scarcity being the foundation of value is a myth. No economist believes that just because something happens to be rare makes it inherently valuable. I dont think any real economist really believes that. I think it was a pop culture, snake oil salesman thing that brought it into the zeitgeist. Yet to this day, the myth still prevails and bitcoin is mostly based on that concept. Just because something is "limited" doesn't mean it already has value.

Scarcity is necessary but not sufficient for something to have value. There are plenty of rare things that are worthless. Various forms of toxic waste, for example, aren't particularly common and have negative value.

Keynes actually had a nice quip for things like Bitcoin:

> The market can remain irrational longer than you can remain solvent.

> ignoring that the ability to independently verify the money supply and being able to transfer money across political boundaries without censorship is probably the most important intrinsic value one could hope for in a MoE/SoV.

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).

If you are living in the US or EU then being able to hide assets and transfer without censorship is mostly a bug, not a feature. And eventually the governments will have to do something about it in order to preserve the rule of law.

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.

>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.

> 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?

> 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?

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.

Are you really comparing baby lobsters to key-pairs?

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.

Not all property rights no, of course not, however it's fairly obvious that the government has the freedom and/or duty to impose restrictions on property as necessary.

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.

Are you claiming that if instead of sending millions of dollars to ISIS (currency) I send them millions of dollars worth of food (property), the government has no business telling me that I can't do that?

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.

I don't see anything particularly hard about regulating bitcoins.

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.

> 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.

> Gov: “Here is our wallet blacklist feed. If you transact with these wallets, you go to jail.”

Me: "I'm already in Africa, find me, losers"

"Hi, I'm in Africa hiding from the USG and my wallet is on the FBI blacklist. Can I buy a phillips screwdriver?"

"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."

If the entire world will bend under US regulations and will respect their white-lists and black-lists, it might be an issue. But that means losing independence (because surely US won't respect Russian blacklists) and plenty of countries won't agree with that. So there will always be escape routes as long as you're physically outside of the US.

>If the entire world will bend under US regulations and will respect their white-lists and black-lists, it might be an issue.

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 know that it takes some USD cents and a couple of network confirmations to transfer any asset to a different wallet, right?

Come on. It also takes a couple of USD cents (per operation) for the government to automatically blacklist all wallets that "touched" (received any amount of transfer from) a blacklisted walled. The great advantage of BTC is that the ledger is public...

Blacklisting addresses based on where they received money from doesn't make any sense. Blacklisted wallets can just send microcents (dust) to whitelisted wallets, which would now have to be blacklisted as well.

You can make it illegal to use Bitcoin, but it was designed to make it practically impossible to enforce such a ban.

You just need to modify the rule a little bit.

"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"

So people need to watch all their wallets every 7 days? What if it's a cold storage wallet that is 2of3 signature protected and signatories are in different countries? What if you go on several weeks vacation? What if it's in a vault along with your gold, are you going to walk to the bank every week, open the vault, load the keys, then export them to some other cold storage? What if you have a virus that makes you have to restore large chunks of your infrastructure from backups that takes longer than a week? This is simply ridiculous. What you propose is just not realistic, no one who deals with crypto often will ever think that this is a solution.

> 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.

So it would be enough to send any amount to any public wallet to make it blacklisted and additionally also make SWAT teams come to the owners of those accounts? Yeah "good idea" /s. You know there is no way to prevent receiving bitcoins right?

Hardware wallets generate a new address for each transaction (receive & transmit). It's impossible to maintain a blacklist feed.

You can receive every time with a new address generated by HD Wallet. But transmission can only happen from an address which has positive balance. And after receiving the money, destination balance becomes positive, and you are bound to use that destination address as a source to transfer assets further.

Oh I wouldn't worry, they'll find a way. It's only 7 tx/sec lol, that's literally nothing. Not that hard to put 2 and 2 together.

> What government can't do is to steal your money or block your access to your money.

https://xkcd.com/538/

> If you are living in the US or EU then being able to hide assets and transfer without censorship is mostly a bug

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.

But then surely - if you take the position that generally some kind of government and law is a good thing, and generally they're not out to hurt the everyman - the idea that anyone should be hiding anything (away from taxes) is destructive to the detriment of the things that hold society together (laws, roads, having the rubbish collected, etc?)?

Yes there are useful things that the government does. But I believe there are ways to tax for things which are more fair than what is being used today, and crypto is not a detriment to that.

(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.)

Your point about a personal liability suit is interesting, but there are many ways to hide money before an incident occurs, Bitcoin is just one possibility that has its own risks. If you’re trying to hide money after an accident then it will be obvious so you will still be on the hook.

> 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.

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.

The total amount of Bitcoin in circulation is an unknown as lost wallets are a huge thing. At most you can say Bitcoin is less than X, but that’s true of many many other man made things.

Aka any movement of Satoshi Nakamoto’s Bitcoins would have a huge impact on the number of Bitcoins estimated to be in circulation.

Like Retric says below, it's easy to put an upper bound to all of the other commodities on earth (and especially so to amber, since no amount of asteroid mining is going to increase that). I think the appeal of BTC is that it's a commodity [+] that's easily transferable across large distances & incurs very low storage costs. I get that. However, that alone does not necessarily make it a good store of value in my eyes; for that to be true, there'd have to be an extremely low risk of the value suddenly degrading to less than 1% essentially overnight(e.g. in less than a week). I guess here is where I disagree with lots of BTC proponents - I don't see it as "independent" of anything, certainly not of big nation-states. I don't see what would persuade people to continue to assign value to BTC in the face of events like those presented in the article.

[+] Do note that I do not accept it is "currency" - because it has low acceptability, by design.

I would add that it’s also extremely unlikely that all countries in the world would ban bitcoin. For example I read somewhere that Iran is using Bitcoin to avoid some of the sanctions the US out on Iran.

Vice also wrote an article on this: https://www.vice.com/en/article/qjppx3/iran-bitcoin-us-sanct...

> 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.

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.

The last time I looked into this, the mined gold supply seemed to be increasing at a fairly steady 2% per year, over the last N decades I was able to find good data for.

That may have more to do with the pace of mining investment than the total amount of gold, which won't change (until the next meteor impact).

First, it does seem like it's a form of money. You can trade it for all sorts of things. Some of them directly. Some you make a trade. But it's super liquid; accepted more widely than a lot of country-specific currencies (e.g. I could pay my friends in BTC because they can use BTC, but they're not going to take rubles).

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).

> Transfer across political boundaries: is there ANY inherent guarantee?

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.

BTC now is only 0.6T. When it approaches M3 money supply, expect an attempted government action. Whether it's successful or not, is a separate question: it would have to be coordinated across G20 to be "successful".

Do note that I don't claim (or think) that it's very likely for this to happen. But the comment I replied to made a strong claim: that (technologically?) BTC offers this ability. This is not just some nice property that it currently has, it's part of the "intrinsic value" of BTC. This to me sounded like a claim of "guarantee", not just a claim that "nobody banned it yet, and maybe they won't ban it in the future, either".

> where is the "intrinsic value"?

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.

> there is no such thing. not in bitcoin, not in usd, not in gold. all value is extrinsic and assigned by market.

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).

The value to a particular consumer of food and housing can be zero, presuming they have enough and are not in the market for those goods.

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".

i didn't express myself correctly. the use-value exists, definitely, but it's effect on exchange-value of the commodity is diminished as that commodity becomes widely used medium of exchange/store of value. gold's use-value in tech and jewelery is a small fraction of gold's exchange-value.

> 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.

> gold's use-value in tech and jewelery is a small fraction of gold's exchange-value

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.

jewelery produced and stored is not necessarily jewelery used. jewelery inflates speculative portion as much if not more as other instruments you listed and if gold was stripped of it's exchange value, most of the jewelery in the world would be up for sale to recover at least some of the "investment" (even if that investment was inherited, which it is in vast majority of cases).

Gold is actually less deflationary that bitcoin - the gold supply grows with improved technology and general global expansion of industrialization.

Sorry if this seems even more nitpicky; I spent about a year in grad school thinking I wanted to do monetary theory for the rest of my life, and the main thing I got out of it was that "intrinsic value" is a bad concept that runs cover for muddy thinking and ultimately confuses everyone much more.

> 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.

I am pretty confident that negentropy has inherent value. Relative to a particular person or entity on short timescales it may have negative economic value but averaged over all possible economic transactions it's almost always the case that available energy can be transformed into something that someone/something wants.

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.

Eh, this seems semantic, and expands us from talking about economic goods to talking about abstract concepts.

And what is actually being valued? Not negentropy itself; merely particular economic goods that are examples of the process of negentropy.

To clarify my position: I 100% agree that bitcoin is the first digital commodity. I disagree that it's appropriate to call it "money" (based on the fact that, by design, it has low acceptability - if enough people would use it for their daily transactions, the entire network would break down). I'm also really uncertain that it's an appropriate store of value, and lean on the side of "it's not".

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)

I know where you're getting at, but I think investment vehicle is a better term than commodity. Bitcoin is traded around as bitcoin to speculate that it'll have future value upon a traded upon nationalized currency. Commodities, while do get traded, are eventually consumed outside the investment market. You might trade and hold corn on the market, its end goal is to end up (consumed) as doritos or cornbread. Or iron gets consumed as steel for a car. The end goal of trading bitcoin ends up to be continously traded for a direct return on investment in the future. This is partially the issue with the housing crisis. Houses were constantly market traded without being consumed. Both in home investment speculators, folks that just bought the house to flip it the next week without ever living in it (a paper in florida at the time did an article showing a lot of homes in neighborhoods would go through about 6 owners in 2 or 3 years before someone lived in it right before the bubble burst) then there was the investment vehicle constant trading of the mortgages themselves. That was a twofer of shit hitting the fan.

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?

> can you receive something in exchange?

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

Again, the claim I objected to is "transfer money[+] across political boundaries without censorship". That's what I'm objecting to. Yes - you can make a transfer of bitcoin/ it's very hard for the state to stop or reverse that transfer. But is that what we mean when we say "without censorship", really? We're getting into the joke territory here, this sounds very much like "USSR had freedom of speech, what it didn't have was freedom after speech".

[+] BTC is not money, but I'm going to let that slide for this part of the argument.

> But is that what we mean when we say "without censorship", really?

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.

> there is no such thing. not in bitcoin, not in usd, not in gold. all value is extrinsic and assigned by market.

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)

My dude bitcoin dropped 20% last night. I'd run those numbers again if I were you.

Also - I'm not sure I see the point being made - if my company had $400M lying around, I wouldn't want them to throw it all into ONE other company's stock, exactly because of the volatility.

Its a fair view to have, but Microstrategy did disclose the plan to shareholders and offered to buy them out with a premium to the market before buying. So you had the chance to get out if you didn't agree with the decision.

Here is the daily chart [1]. Can you point me at a 20% drop?

[1] https://ibb.co/YpYqxH9

The 1-day price chart via Google shows a drop from ~33,700 @ 4:00 am UTC to ~28,900 @ 10:30 am UTC

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.

> 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.

Which is good because BTC is used nowhere as a form of payment.

And I don't see how it will become one without stability, which leaves it the nominal role of "currency" but a defacto role of "security" or "commodity" that doesn't happen to be backed by assets as such things tend to be.

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.

Come on, you can do better than that. Volatility isn't measured exclusively on a, what is that, weekly chart? Did you really need me to zoom in for you?

https://imgur.com/a/tPV0CVa

To be fair, that's a 10% drop for the day, but for me at least the argument still holds. 10% in one day is a pretty big swing, doubly so if that's a regular occurrence.

I'm not familiar with stock market, but looking at a daily AMZN stock price [1], I honestly can't see a huge difference with Bitcoin. Could it be that BTC is slightly more volatile because of the nature of the market? a) it's open 24/7 b) it's much more accessible.

[1] https://ibb.co/N9y7yxB

I can't buy my groceries with AMZN shares, and they're not intended to be able to do that. No one is pretending AMZN shares are going to be a peer to peer currency.

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%.

Nobody is arguing about that. The idea that BTC is a currency is long gone. Bitcoin is a store of value, similar to gold (which you also can't use to buy your groceries).

You absolutely could use gold to back your personal economy. Put dollars into an InteractiveBrokers account, buy GLD. Use your IBKR debit card to borrow against your GLD on margin. Pay it off at the end of the month. You can back your personal economy with literally anything you want that way.

That's the magic of fiat currency.

Nobody would keep all of their liquid assets in AMZN stock either.

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.

its certainly not measured on 15minute candles either ;)

It most certainly is. The upward movement on the daily chart is also volatility. Volatility isn't exclusively toward gravity.

Here is a chart[0] of the daily changes showing BTC, AMZN, AAPL, NFLX, TSLA from January to November. Can you tell me which one is BTC (hint: the green one is TSLA)?

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.

[0]: https://imgur.com/a/mE7bSI4

And if you don't cherry pick a time period which contains a market crash? I'd also point out that 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.

> And if you don't cherry pick a time period which contains a market crash?

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.

>This chart covers January - November and includes an almost 50% drop in march. And it is still not as volatile as e.g. TSLA.

...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.

But didn't Bitcoin want to be a currency and not stocks?

Bitcoin is Schrödinger’s program. Whenever it’s deficiencies are pointed out, it suddenly becomes something else.

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.

10/10 best explanation of Bitcoin I have heard yet.

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.

It's psychological anchoring and a mixture of greed combined with a technical innovation which isn't terrible per se, but which does not in fact solve the problem it was originally designed to do. Made artificially inefficient to compute to stop the evil governments and organizations which were apparently making life impossible before the existence of cryptocurrencies. Now it has become inevitability because its price is going up and therefore by induction it has become more valuable and necessary for the whole society.

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.

More like digital gold. Calling it a currency is really not an apt description.

BTC has already been legally ruled as property, not currency, I believe if I read the ruling correctly.

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...

But given the dynamics of PoW mining, isn't bitcoin defacto controlled by a handful of Chinese mining cartels, which are themselves controlled by the CCP?

I feel like this whole pitch makes sense until you get to that part.

Yeah, the distributed part failed because of economies of scale and how they apply to the miners.

So in a way...who cares who mines it?

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.

> who cares who mines it?

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.

Your straw-man argument hardly settles our debate.

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?

It's not about who created the coins, obviously. It's about the fact that more than 65% of the hashpower securing the network is in the hands of a small group of mining pools in the PRC. Adopting BTC is de facto handing over sovereignty of your currency to the PRC [1].

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...

Crypto can be extremely political if those who mine get to decide what goes on the blockchain.

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.

> make it unhackable

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 first sentence of the bitcoin whitepaper is literally "A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution."

I think it's safe to say that the BTC community has pivoted to a more fitting use case for their technology.

The Bitcoin Cash fork and Litecoin made scaling choices that make it better for payments.

It doesn't matter what it was marketed as. It matters what it is.

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.

And if they said it were a unicorn, would that make it true? It's not a currency because you can't use it as a currency.

Unfortunate they called it a 'coin' then. Maybe it should've been Bitgold. Digimetal.

The name Bit Gold was already recently used for a similar project by Nick Szabo when Bitcoin was announced: https://nakamotoinstitute.org/bit-gold/

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.

Well, Satoshi was more than likely Paul Calder Le Roux who wanted a way to launder the proceeds of his crime network.

> 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.

I expect Bitcoin to affect monetary systems in a way similar to how FOSS changed software.

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.

It says in the title of the paper, Digital CASH. But, ever since Blockstream (Adam Back and Greg Maxwell) hijacked the GitHub repo years ago Bitcoin (BTC) has purposefully failed at this central use case. However, the project and White Paper live on in projects like Monero, Bitcoin Cash and Ethereum.

Bitcoin (capital B) still is! The Bitcoin Core project (BTC) was hijacked years ago by corporate interests (Adam Back's Blockstream) and crippled to push their "second layer" solutions to the problem they themselves created.

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.

Disclaimer: im finance uninitiated

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.

So, your statement of "it has higher volatility" is based on observing the colors of the graph (i.e. not a calculation of the underlying data)?

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.

Volatility should not be measured on one time events or short-time events. Short time-frames, bitcoin is still very volatile comparing to the most used currencies.

It's hella volatile on any timeframe. Volatility is both increases and decreases in asset price.

If you compare with the value of BTC 6 months ago you are largely in the green. Looking at daily fluctuations is useless.

I mean, unless if you need to actually use that value. Then daily fluctuations matter a lot.

Who uses BTC as a spending asset on a daily basis?

To a first order approximation, nobody. But it was supposed to function as a currency, so if everything had worked as planned it (daily volatility) would matter on a regular basis.

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.

> 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.

Yeah, it actually is.

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.

> Currency isn’t supposed to appreciate.

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.

Oh no, Bitcoin has "crashed" to where it was at the start of the year! That is only double what it was a month before, and only 10x what it was a year ago!

last night was in 2021, last time i checked.

"Bitcoin becomes less volatile over time"

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.

I believe you are making incorrect extrapolations.

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.

fascinating take on the economic incentives, do you have any books or studies you can share if I want to learn more about it?

I'm not an economist but David Beckworth's blog, especially posts during and after the global financial crisis is a good starting point: https://macromarketmusings.blogspot.com/

> ..., ignoring that the ability to independently verify the money supply and being able to transfer money across political boundaries without censorship is probably the most important intrinsic value one could hope for in a MoE/SoV.

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?

> But those capabilities exist whether a Bitcoin is priced at $1 or $25,000

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.

> 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?

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.

But BTC will never be the best or only way to do that, so once it actually is priced to a real function (transfer capability) it won't be scarce or unique. You can print an infinite amount of alternative coins or stable coins (or even other services without crypto at all) to do transfers including intl transfers.

"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.

> 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?

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.

But is there really a limited supply? A second bitcoin chain with the same rules but a new genesis block would provide the same technical capabilities. The limiting factor is just the willingness of people to spend compute mining original bitcoin vs this hypothetical second chain. If we collectively wanted to, we could create an arbitrarily large number of bitcoin-like tokens

You'd have to convince the whole ecosystem - miners, exchanges, wallets, buyers, sellers, etc. - to switch over. It's the same network effect that protects Microsoft or Google or Facebook or even Nike: changing peoples' behavior is hard, and in general beyond the resources of new entrants unless the incumbent really screws up.

(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.

You don't need to convince miners at all. If BTCs future is in using it, it has to convince the future companies and stores to not use other coins or services. Or to a buyer today to still have as much demand even after the speculation is gone (which is currently its main/only function).

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).

> You'd have to convince the whole ecosystem - miners, exchanges, wallets, buyers, sellers, etc. - to switch over. It's the same network effect that protects Microsoft or Google or Facebook or even Nike: changing peoples' behavior is hard, and in general beyond the resources of new entrants unless the incumbent really screws up.

Quite a few projects have tried exactly this, and none of them have succeeded. What makes you think your attempt would succeed?

That's my point - the thing that makes bitcoin "scarce" is not that there is a fundamental limit to the number of bitcoin-like tokens that exist, it's just that there's inertia against creating more.

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.

And not only that. Once the last block is mined, the only revenue for the miners will be transaction fees. If anyone insists on a large future valuation of BTC, it follows there will be massive future transaction fees. Massive transaction fees dissolve any advantages stemming from network effects.

Indeed there are already many forks of bitcoin and alternate cryptocurrencies like monero, ether, etc. It's fascinating how people assign value to an asset created out of nothing that will never show revenue.

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".

> It's fascinating how people assign value to an asset created out of nothing that will never show revenue.

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.

The USD also has the full backing and power of the largest military on the face of the planet. It will last as long as that empire does.

Well as a citizen of the US I also have to pay taxes with it, giving it at least a small amount of utility that other objects do not have. But in general this is true, yes.

There are tons of crypto forks that have essentially no market value. How do you explain that, if anyone can simply create more value out of nothing? It seems clear that this is not what is happening.

People have created hundreds of “bitcoin-like” tokens. Go look at coinmarketcap.com. They aren’t fungible with Bitcoin though. It seems Bitcoin has maintained much higher demand due to its first mover advantage and network effects. The other coins don’t seem to offer a compelling reason to pay the very high costs of having everyone switch over.

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.

Indeed, the value of actual bitcoins relies not just on the theoretical capabilities of the software, but also the fact that lots of computers are actually running that software. I don’t see that as surprising or paradoxical at all.

> Why are those capabilities enough to drive the price of a Bitcoin up?

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.

> But those capabilities exist whether a Bitcoin is priced at $1 or $25,000.

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.

The difference is people expect stocks to have earnings (at least eventually).

Bitcoin will never have earnings. It's pure speculation.

you're missing scarcity and the idea of it at a store of value longer term. i.e. that it won't be devalued by additional printing.

It's only scarce when it isn't very useful and the market has little real adoption, as now, where the only real reason 99% of people have it is 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.

>you can print an infinite amount of different coins/systems to duplicate that function

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.

[0] https://en.wikipedia.org/wiki/Hawala

Every investment is speculation.

Right but speculation based on what?

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.

That would be a very bearish take on Bitcoin, since any investment that is only speculative has an eventual future price of $0

Gold has the same capabilities whether it's priced at $1 or $2k..... do you see where your logical fallacy lies?

If BTC was $1 then all the BTC in the world wouldn't be enough to transfer $30,000,000.

Hammers should cost $10, but it is new invention and not everybody is convinced yet. Early adopters are selling hammers for 0.03$ waiting for more people to want to buy hammers.

Also, there are multiple factories producing hammers and there is no one entity to tell others what hammer price is/should be.

Bitcoin is deflationary (fixed supply) and cyclic.

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.

It's inflationary, since more bitcoin are mined every ten minutes or so.

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.

If you don't trust a coin to operate according to your expectations (e.g. a 21M limit), you can verify the source code and/or run a node yourself. This way you can yourself guarantee that all transactions happening on the network (that your node is part of) operate according to rules that you agree with.

There are already multiple forks of Bitcoin, yet it doesn't seem to change market's perception and valuation of the original Bitcoin.

It's inflationary, since more bitcoin are mined every ten minutes or so.

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/

The limit could only be changed through consensus. It‘s s democratic process. People holding BTC would have no incentive to devalue their own holdings, so they are unlikely to agree with raising the limit. This is why people treat the 21M cap as fixed.

> 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.

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.

It's really just this. All the crypto maximalism comes from people who forgot to attend ECON-101.

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.

Asset price inflation was actually close to 30% this year...meaning real inflation is much higher than the bogus CPI formula the US government uses.

"...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.

> Asset price inflation was actually close to 30% this year...meaning real inflation is much higher than the bogus CPI formula the US government uses.

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].

[0]: https://fred.stlouisfed.org/series/T10YIE

Keynesian/neo-keynesian "soft money thinking" kills enough brain cells that people start to believe the CPI formula (that was altered 2-3 times since we closed the gold window to hide rampant inflation) is valid...that is the primary purpose of fiat education and fiat propaganda.

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

You're telling me prices double ever 4 years or so? I don't think so.

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.

[0]: https://en.wikipedia.org/wiki/Murder_of_Seth_Rich

> 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.

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.

One of CPI's big limitations is that it only considers consumer goods and services (the "consumer" part of "consumer price index"). But "consumers" themselves spend a good deal of money on other things, namely health, education, and housing. SlateStarCodex had an article about that: https://slatestarcodex.com/2017/02/09/considerations-on-cost...

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.

Whim, when you do eventually find out you are wrong, come back and upvote my last comment, lol.

Ok, hold on now.

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...

Every new programming language, or at least the ones that aren't built around a relatively new concept, does the exact same thing.

This crowd in particular has plenty more examples than economy and immunology. We never learn.

If there were any greater signal that bitcoin is not a safe bet right now, my dad has started buying it. He keeps saying thinks like "if I'd have put in £100 4 years ago".

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 personally found it more convincing to think of what I would have done the first time the asset doubled. There is no way I'd 'let it ride'. At some point you rebalance your portfolio and you 'miss out' on some of the upside by hedging your bets against an isolated downside.

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)

I disagree with most of this thread but this is a common sign that you have missed the boat for entering a market.

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.

> 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.

Of course it's gambling... just like putting money in Tesla, Zoom or any other stock that made cash during Covid.

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.

> Bitcoin's price is irrelevant if you're planning on using it as a deflation countering

How does bitcoin function as a "deflation countering method"?

As long as you can find someone willing to trade something for Bitcoin, your Bitcoins are safe from USD printing.

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.

> your Bitcoins are safe from USD printing.

Wouldn't that make it a hedge against inflation?

Many people in this thread on the wrong side of the Dunning-Kruger curve.

I believe USD printing would 'deflate' your savings. But English as a third language so maybe I'm wrong...

Literally every asset is safe from USD printing. Each and every one. As soon as you don't hold literal physical dollars in your possession what matters isn't inflation but the performance of the asset. Beanie babies, shoes, bitcoin, bond funds, stocks. All of them.

"If there were any greater signal that gold is not a safe bet right now, my dad has started buying it."

Is gold a safe bet? Seems pretty speculative to me.

hoo boy. I hope you aren't counting on an inheritance.

Thankfully he has a guitar collection that means more to me than any amount of money could! (one Les Paul he has owned for over 30 years and some guitars he has built by hand).

What about people who use bitcoin but don't believe in crypto maximalism? Can you share some information with those people that would convince them not to use bitcoin?

> They are the anti-vaxxers of finance.

The anti-vaxxers of Finance have been pretty lucky so far. Much more than actual anti-vaxxers.

Sounds like your analogy is off.

I'm sure anti-vaxxers were lucky for a period of time too, until they weren't. You're immortal until you die.

Anti-vaxxers? Really? Way to engage an argument by generalizing and politicizing with a completely irrelevant comparison.

Is being an anti-vaxxer political?

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.

It was a valid comparison

> Is being an anti-vaxxer political?

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?

Bitcoin maximalism is a thing I didn't make up, sadly [1]

[1] https://www.investopedia.com/terms/b/bitcoin-maximalism.asp

Doesn't monetary economics also point out that various goods, services and assets have differing rates of inflation/deflation?

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?

> Doesn't monetary economics also point out that various goods, services and assets have differing rates of inflation/deflation?

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.

The fed generally uses PCE to measure inflation which does not include equities.

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.

> the ability to independently verify the money supply and being able to transfer money across political boundaries without censorship is probably the most important intrinsic value one could hope for in a MoE/SoV.

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?

In a deflationary economy, holding money becomes more valuable over time, so why would anyone spend it or invest it if you're guaranteed 5% - 20% more per year by leaving it in the bank?

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.

Imagine this hypothetic scenario just to demonstrate the point: Bitcoin becomes mass adopted, but not after 30 institutions end up hoarding ~60% of bitcoin in existence by some time in the next decade or two. Then by the year 2147, bitcoin is mined out, with the majority of those 30 institutions still holding the majority of their bitcoin stashes. The population is 17 billion with more being born into the world without any bitcoin to inherit...

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.

For deflationary currencies, debt becomes a serious issue, since the rate of deflation is effectively tacked onto the interest rate of the debt, rather than subtracted.

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).

Let’s say Xi wakes up cranky (maybe somebody embeds criticism of him in the blockchain) and bans BTC throughout China. It is now illegal to operate an exchange, buy or sell Bitcoin, or run a Bitcoin node anywhere in China.

... now what? How do you “transfer money across political boundaries without censorship” into or out of China?

It’s also illegal to access many of the sites on this list (https://en.wikipedia.org/wiki/List_of_websites_blocked_in_ma...), but it still happens.

Are you not aware that China has already done that? Multiple times in fact.

I get it, I also understand that the legitimate demand for that is nowhere high enough to command such prices.

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.

> 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.

I think I've been hearing this for the last 11 years, and haven't seen any spikes in inflation.

There's a handy set of compounded effects at play. The inflation is pretty evident in the stock market and real-estate, which are the assets being bought up. Consumerism and efficiency in delivering consumer goods has kept pace with inflation. It's there (from QE), just not where you're measuring. It will seep into others over time (like agri) as food supply needs to increase. Luckily, with global warming, land that was good for farming and living has been affected negatively (floods, droughts, etc) allowing people, farmers and meat to move farther north. eg The cattle that now sit on the California central valley land instead of southern CA like the city of Corona. The land is relatively cheap north, much to the chagrin of Idaho natives and such, who face a deluge of immigrants with relatively vast wealth.

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.

So inflation is usually used to describe how the reduced purchasing power of a dollar with respect to goods and services.

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.

> Food prices definitely haven't doubled in the last 10 years.

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.

The short term rate has sat at 0, but the long term rate has always been above 0.

- Bitcoin was less volatile than AMZN or AAPL in 2020 (3-month realised volatility)

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.

What can't be ignored is the ludicrous energy waste that goes into bitcoin and its speculative nature. The energy cost may go down over time as the block reward decays, but the economics of transaction fees taking over isn't totally clear yet. Block difficulty still hasn't reached stability.

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.

Energy "waste" is in the eye of the beholder. The energy is doing useful work by making the system more secure (at a rough rate of 50%, which is actually rather efficient as energy consumption goes). Of course, having some better solution that doesn't need energy as its source of trust would be great, and perhaps proof-of-stake will one day work. But the fact of the matter is that there is no better alternative today, and the traditional governmental currencies don't count.

> But the fact of the matter is that there is no better alternative today, and the traditional governmental currencies don't count.

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.

> perhaps proof-of-stake will one day work

It already works. https://why.cardano.org/en/introduction/proof-of-stake/

That link has no description of the consensus algorithm they are using, and links to a youtube video, not a paper. Not that I feel like reading new crypto papers, there are dozens of unproven claims around. When something gains actual traction, I’ll read its paper to see how rigorous and secure it is.

It's not gold that gives fiat currency value. It's the courts and their enforcement arm, the US military, that do.

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.

> 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.

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 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.

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-....

Bitcoin does have a source of value: money laundering. That could be enough to prop up the value as new crime generates new dirty money which ensures new demand (you can include "evading capital controls" as "crime" but that won't generate dollars). That would peg the value of bitcoin with the general "dark economy", making bitcoin sort of Stripe-for-crime.

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).

Specifically it’s the requirement that taxes be paid in the local fiat currency, with the police there to back it up. The fact that you are obligated to get your hand on USD to pay taxes has an effect of tying USD to the real economy, giving it value.

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.

>It also repeats typical nocoiner fallacies like "it has no intrinsic value" and "gold is used for jewelry", ignoring that the ability to independently verify the money supply and being able to transfer money across political boundaries without censorship is probably the most important intrinsic value one could hope for in a MoE/SoV.

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.

> Gold is desirable

> completely based on the greater fool theory

>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 becomes less volatile over time

> Bitcoin was less volatile than AMZN or AAPL in 2020 (3-month realised volatility)

Have you got a source for both of these statements?

Not to mention, if you look at inflation rates by decade, the Fed has historically done a terrible job of keeping inflation rates at the 2% target level since Bretton Woods [0]. That isn't even considering that most government inflation figures don't include investment vehicles, which certainly can absorb inflation. Take the 2020 stock market for example, after the Fed injected trillions directly. Eventually some of that will trickle out into more expensive food, materials, etc. (and it already is to some extent) but for now their policy is still assuming there has only been a small amount of inflation this year. And because of the fascinating link between the mortgage market and the Fed Funds rate, commercial interest rates are shockingly low, resulting in a tremendous increase in borrowing which will further increase inflation over the next couple years.

[0] https://inflationdata.com/Inflation/Inflation/DecadeInflatio...

Other than inflation I’m not sure how the U.S. maintains let alone pays off their > $27.5 trillion in debt. Considering total tax revenue is about $3.5 trillion per year, even at ridiculously low interest rates we are spending 10% of total revenue on interest.

If interest rates come anywhere near historical norms we will be spending all revenue just to pay interest.

"Can the US pay it's debt?" is the wrong question. The US can pay off any amount of debt, because their debt is measured in USD and congress can issue new USD as needed.

"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.

Congress can't issue USD directly.

https://constitution.congress.gov/browse/essay/artI-S8-C5-1/...

The constitution always congress can if they want to.

The US Gov will never have an issue paying their debt because they are sovereign over the currency they use (USD). Furthermore, they have an extra advantage because the USD is the most popular reserve currency and because of this demand around the world, it's easier to maintain its value or relative strength to other currencies. That being said, long term it's not looking good for the USD. If you check the DXY index, the USD has been trending lower against a basket of currencies, and the FED had to buy a lot of treasury bills in 2020, because of lower demand from other entities. Another bad thing for the USD is the long term liabilities of the US Gov, which will only be able to be satisfied by printing dollars. (https://www.youtube.com/watch?v=YpgfIfD_cRs)

But you are comparing stocks to a (digital currency). Compare USD or EUR volatility to Bitcoin.

For reference, here is a chart of the last year's prices of USD, GBP, JPY, and BTC compared to the Euro: https://i.imgur.com/7OHdaWw.png

Bitcoin is far too volatile ever be used as money.

The huge risk that I see with Bitcoin is the introduction of capital controls. The United States, if we have a crisis may not allow capital flight. It could move against companies such as coinbase, that provide a means to move capital out of the country. These ideas are already being discussed with limits on how much and to whom you may send bitcoin to from coinbase.

That sounds like more of a risk with Bitcoin IOUs that are held on central exchanges, rather than with Bitcoin itself.

"not your keys, not your coins"

I think a lot of people very fond of crypto for its more anarchist features overestimate the mainstream's willingness to break from "the system". If regulations come down on exchanges or the crypto space more broadly, it will send prices into a catastrophic downward spiral. This is likely to happen earliest in vulnerable developing nations like Venezuela.

Anybody wanting to understand inflation vs. the CPI index should familiarize themselves with the concept of "hedonic adjustment" -

The Chapwood index offers a good alternative view as to the actual cost of living - https://chapwoodindex.com

Let's see what happens when there are less people who want to buy bitcoin than people who want to sell bitcoin. Sellers without buyers will end up holding a bag of excrement. Almost no one buys it to use as a currency (except criminals) but because of fear of missing out and desire to make a quick buck.

> since despite increased incentives to "hack" it, no exploits happened

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?

Bitcoin is not a software program it's a protocol. It's better to compare it to HTTP which also hasn't had exploits.

Since we’re interested in security features, an even better comparison would be with SSL, which has had many exploits.

But Bitcoin also has a primary implementation which is software and that hasn’t had any major heists either.

I don't think the comparison to TSLA et al makes sense. Companies don't move their cash into stocks like that so it isn't something that was an alternative for this use case.

> 2 of the 3 dollars in your pocket

Well, they're probably not in your pocket, since most of the new money goes to well-connected special interests (banks, megacorps, etc).

> 2 of the 3 dollars in your pocket have been created out of thin air in 2020.

I'd wager a guess that most of those new dollars didn't end up in our pockets.

"Bitcoin becomes less volatile over time"

Why? What is the mechanism?

More people trading it.

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.

When the price of bitcoin goes up, it becomes harder for smaller amounts of money to move the market. I like to think of seeing the water rise when I step in to a bathtub versus stepping into a lake.

Bitcoin has 4 year cycles because of the halvings, and it's extremely volatile, I don't think it changed.

At the same time it has the best Sharpe ratio amongst all assets (gain rescaled by volatility).

Agreed, it's quite ridiculous seeing people who need a store of value using corporate stocks as a store of value... It's like if you need to sit and decide to use a table as a chair.

> Bitcoin becomes less volatile over time

This is stated as an article of faith. Is there anything about bitcoin that would make this be true?

Are you long TIPS spread?

>Bitcoin becomes less volatile over time

>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.

You have a point, but so does he, considering today took place in 2021, not 2020.

I was talking about 3-month volatility in 2020, you are talking about daily volatility today.

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.

If Bitcoin is supposed to be a currency like the dollar, its volatility is ridiculous. If it is supposed to be a store of value, like gold, its volatility is ridiculous.

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.

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