Bank of Canada Deputy Says Crypto Boom Is `Speculative Mania` | Hacker News Reader

Bank of Canada Deputy Says Crypto Boom Is `Speculative Mania`

bloomberg.com

19 pointsstunt18 comments

Every time someone has attempted to explain to me why bitcoin has value, they instead explain why blockchain technology is cool or why they don't like "the man" in a monetary sense. Those are both interesting discussions, but they don't address why there would be any floor whatsoever to bitcoin's value, specifically.

USD, for all its issues, is required for the payment of taxes. So as long as anyone wants to do business or live in the United States, there is a legally mandated demand for USD. (If an event has occurred to cause no one to want to do business or live in the United States, money of any kind is probably the least of your concerns.) Then on top of that confidence of an absolute floor in demand, you can build more layers of demand like the petrodollar, etc.

Bitcoin could go to zero tomorrow without any real change in the real world. For USD to go to zero, the United States and perhaps the world order itself would have to collapse.

Bitcoin gets its value from its anti-authoritarianism.

It's interesting to look at cryptocurrency on a philosophical level-- what does money mean in an era when it's no longer just abstractions that eventually reference a hoard of gold coins somewhere. The "you need it in order to pay taxes" is a solid argument. In a way, the inverse also holds true: cryptocurrency's volatility problems are in part because there are no real-world anchors to its price, like real-world products priced in it or having to settle an annual tax bill in it.

But "value from anti-authoritarianism" is sort of a concerning argument. If its value is based on being compelling to a certain community, it creates some severe shock risks.

Say that Bitcoin goes mainstream in a big way-- Wells Fargo starts putting bitcoin kiosks in every branch, McDonalds introduces the 10-satoshi value meal, and every payment processor figures out how to hammer it into a shape ordinary consumers will find palatable. The enthusiasts who bought in for the anti-authoritarian message will probably flee for something else-- Monero, Zcash, Transdnisterian plastic roubles-- and then you lose their interest in trying to guide the platform forward.

TBH, I suspect we passed that moment years ago. The primary stakeholders now are speculators-- anyone with mere technical or philosophical vision doesn't have the hash-clout to steer these protocols. So the value is the old joke about the old woman in a strapless dress: what's holding it up? The combined will of everyone in the room!

I totally agree. There is absolutely no earthly reason for why a Bitcoin should be worth $40k+. Cryptocurrencies can be useful, but they aren't useful enough to replace the financial system or be valued more than any actual asset. The whole ecosystem is rotten to the core, with scams, inefficient and stupefyingly complex technology, and a foundation built on dreams. Don't be surprised when it all comes crashing down.

The market cap of bitcoin isn’t even $1 trillion. This is not even the size of one major tech company. I think for what it does and how it’s used, it could be worth a lot more.

You and many on HN are very ignorant. You don’t understand the tech. You are shaking your fist at a cloud. Just ignore crypto if you don’t want it! It’s voluntary. The extreme hate on HN towards this tech is exhausting plus the market has determined you are 100% incorrect.

Imagine if every time an article on rust was posted, I replied with scathing nonsense about how worthless it is despite a zillion metrics showing how widely used it is? Just shut the fuck up already! No one caresssss

I think crypto is unpopular in Silicon Valley precisely because of how much power the investor class has in that setting. Those angel investors understand crypto just enough to know they don't want to get disintermediated.

It might also be so unpopular because we are smart enough and technically inclined enough to make our own conclusions on the technology without relying on ideology. And the more we look into it, the more dubious the siren song of crypto becomes.

Crypto VCs close deals for hundreds of thousands or millions within 10 minutes without any lawyers or legal contracts. It’s just a different world and the traditional VC insider game is going to end. Will be quite amusing watching it collapse!

I would argue that VC investing is actually a renaissance in providing bountiful cheap funding for startups to get off the ground. It is only going to expand. And if you know anything about the process, there are ample lawyers and legal contracts to set out terms and equity. Investing is less about insiders and more about innovation than it has ever been. If you are waiting for its collapse, you are going to be sitting in your gaming chair for quite a long time.

> I think for what it does and how it’s used, it could be worth a lot more

How is something that has a $28 USD fee per transaction being used outside of speculation?

Every central banker is basically required to publicly keep this opinion. Otherwise they would be undermining their own authority and autonomy. The thing that eats you is always initially dismissed as a toy.

Ironically, central bankers are the best informed about how broken fiat and monetary policy is. Cryptoassets must be something they spend a lot of time thinking about.

I doubt anybody in an important position would lend much thought to crypto. A glance at it and you can see that its just a Rube-Goldberg machine trying to replace the trust and authority of central banks with "decentralization". And for what? So you can get your wallet hacked and have nobody to go to for restitution?

So you can get a bug found in your smart contract and have no way of fixing it? So you can lose your net worth by gambling on DogeCoin?

Crypto is a big bucket of problems, and the fact that a small group of idealogues call big bankers names and call their little toys "assets" doesn't change that the entire ecosystem is garbage. It will never replace the financial system.

Sure. It's just a toy for nerds. It breaks often, is hard to use, has a limited audience. You can't do anything interesting with it, just put numbers and data on it. Why would companies, let alone governments, be interested in this?

Oh I'm sorry, you must have thought these were critiques of blockchain. I was talking about the first personal computers. What a terrible idea that turned out to be.

The thing is, early PCs were solving actual consumer problems fairly early in their life cycle. Even if the problem was "I don't want to have to pay a quarter and walk to the arcade every time I want to play Space Invaders."

Blockchain solves an interesting technical problem. The question is finding the right application FOR that problem. A decentralized currency is a good demo application because it demonstrates the problem well, but it fails to answer the question "Why is it better than a classic centralized system" outside of some niche cases.

The existing financial system has left itself open for disruption, but that means there's a lot of potential for them to deliver the "faster horses" style solutions people want (faster settlement, lower fees, easier onboarding, less international hurdles) without completely scrapping the ecosystem.

Conversely, if you want to treat today's cryptocurrency platforms as analogous to early PCs, what's their answer to the 1984 Macintosh, or a modern Threadripper workstation? By the time cryptocurrency's polished to a mainstream consumer product, will we have filed off a lot of the things current enthusiasts celebrate? Maybe "unreversible transactions" and "no-recourse self-banking" will be as quaint as "storing programs on standard audio cassettes" and "toggling in boot code from front panel switches"

I think you're both right and that there's a lot of nuance.

Central banks (who, let's be honest, are not terribly tech savvy folks nor advised by such) are still coming to the realization that a currency can be replaced with code, compute, and apps. Yikes. That sort of disruption is a kick in the teeth to folks who previously have held significant power (a currency is an expression of power). A monetary hegemony works until it doesn't. I will be the first to go on the record as a huge crypto skeptic, but I can buy crypto through my brokerage and am (unintentionally) invested in it by way of SPY->TSLA->Bitcoin, so the financial system has lent credibility to crypto (you can also trade bitcoin futures on the CME, the same exchange you can trade soybeans, oil, eurodollars, and all sorts of "legitimate" financial derivatives [1]).

Crypto is best suited for trustless systems. Can you trust central banks to not race each other to devalue their currencies? You cannot, nor is it likely their interests are aligned with yours. Their allegiance is to the system and the status quo.

I don't know what the future holds, but if technology can provide a store of value that can't be devalued on a whim, I believe there will be a demand for that service. Bitcoin and similar are the first iteration, one should expect improvements as the technology evolves. At the highest levels, this is less about a currency you can spend and about power and control, with such struggles previously confined to relations between nation states, and historically it is very rare anyone with this amount of power gives it up willingly [2].

[1] https://www.cmegroup.com/trading/products/

[2] https://www.lynalden.com/fraying-petrodollar-system/ (long read, worth it)

"I doubt anybody in an important position would lend much thought to crypto"

I don't think you're deliberately being absurd unless I missed the sarcasm?

Joe Biden's nominee to head the SEC, Gary Gensler, is an MIT professor who teaches a course on blockchain and Bitcoin. Would you consider SEC chief an important position?

Did not know that, I'll have to check it out! I feel like the news cycle makes a lot more sense in light of that.

Ok no coiner. How is my ledger going to get hacked?

I can gamble on doge, sports, games of chance, etc. Why do you care that some people are into gambling?

Crypto is the future. Half of my net worth is in crypto and if it goes to zero, whatever, yolo. But for real decentralized finance is the future.

Reply on news.ycombinator.com