Why the ‘Big Short’ Guys Think Bitcoin Is a Bubble
nymag.com
nymag.com
However, if you look at the motion that has been happening recently, the declines have initially manifested as 2x faster, both in the most recent Bitcoin correction but especially in the "altcoin" prices, indicating leverage-covering behavior. This tracks with the increasing participation of trad finance (aka indirect leverage-backed prices) and the increasing availability of secondary products (options, shorts) which are also leveraged positions.
Fwiw, in all past Bitcoin price rises I have consistently said "it's not a bubble" -- you can search hn if curious. This time it's different.
Good luck out there folks.
When in the past the cute phrase was, "I knew when to pull out because my shoeshine boy was giving me advice" maybe now it's, "I knew when to pull out because George Soros is in" (as an indicator of leverage participation)
I had a forcing function that made the sale timely, but $62k/BTC was close-enough to my ~$100k/BTC target that it seemed silly to try to squeak out the remaining ~50% gain given the downside risk. It is strange no longer holding any cryptocurrency, but it is harder to see the future of crypto, as an investment, now than it was back at $30.
Blockchains are here to stay and the underlying technology is proven, but as a fraction of M1, it is harder to know where the prices might go and which crypto will emerge as the ultimate winner. Alternatively, if crypto is to go through a "First they ignore you, then they laugh at you, then they fight you, then you win" experience, I believe we're just beginning the "then they fight you" stage, which may be challenging for investors.
Over all of this is my feeling that, looking with a logarithmic perspective (the only way one should view Bitcoin), there is now a lot more distance for prices, especially of any one currency, to fall than there is for prices to rise. I asked myself the perpetual question, "If markets were to close for the next five years, would I be happier holding BTC or USD at the present price?" The answer was no longer emphatically BTC.
Congrats on getting out in the money. I am not far behind you, let's see if I wind up okay or wind up pulling a Newton
the fed creates 1.25 trillion and makes the assets that the poor seeks more expensive than it would have been if their price were allowed to fall. This is not nominally stealing from the poor, but it's activity like this that steals the value from the earnings of the poor, and steals their economic potential. It's stealing because it's not a voluntary contract and it's a one-sided power move, not a "natural consequence of the universe", like "inflation resulting from an earthquake" would be.
In this case, I am, of course, arguing against my interest, since this activity is propping up the price of the house I bought this year. But the fed does a whole lot of damage otherwise, mostly by printing money and giving it to the banks.
However, this does not seem like some unforeseen accident or an unfortunate side effect of fiat money, it seems to be a deliberate policy that will not quietly go away if Bitcoin becomes more fashionable. In addition to outright bans (like the ban on gold from '30s to 70s), there are tons of more subtle ways to either suffocate daily Bitcoin adoption if it becomes a threat, or find ways to control it such as KYC, tax reporting, etc at the main exchanges. Also, even if Bitcoin does replace fiat as the medium, the lending regulation will still remain - to lend money to you, anyone needs to first know who you are, calculate your risk, and charge you an APR for that risk, and that will probably remain regulated no matter what is used to move the actual transactions.
And that’s both buying and selling, it isn’t liquidation.
So yes, good question indeed. $27 million in selling is expected to drop the price by 2% says Coinmarketcap
This is not historically correct. Consider the South Sea Bubble, which the cryptocurrency bubble is most similar to.
The truth is that if you get squeezed out of a short you were wrong. The result is all that matters.
This kind of stuff is why most investors do not ever short anything at all (best example: Buffett & Munger), as you can be "right" and still lose. On the long side you cannot be squeezed out of a position. Traders, market makers and other "technical" participants such as HFTs - that's a different story, their use of shorting is kind of more sensible.
The idea that the market can be irrational presumes some sort of external correctness, but it can become a circular definition: either Burry is right or the market is irrational, there is no space to say that he's wrong.
It's useful to remember that all models, including looking at fundamentals and value based investing, made to approximate reality, not reality itself.
"I was right, it's just that the whole market keeps being wrong". Denial at its finest.
Just feel bad...for us.
Using defi is how I would imagine typing in a chatroom or accessing a website felt back when the web was just in its infancy.
Welcome to HackerNews, a place that should think startup-like progressive, but really is technology conservative.
Or Ethereum2?
Nobody is universally brilliant. Newton spent as much time on alchemy as he did physics. Maybe NFTs are just the modern alchemy, as they do seem to turn random items into digital gold.
I don't think that was an act of unbrilliance. It just didn't happen to work out.
Nobody is privy to the full content of Newton's mind and his mental processes. One could also argue that his metaphysical preoccupations positively influenced his scientific accomplishments. Heck, at a meta level, is not Newtonian Physics intellectual 'Gold' end result of processing the 'Lead' in his head? That's alchemy.
https://www.businessinsider.com/isaac-newton-lost-a-fortune-...
Why does that surprise you? As the article from this discussion shows, there is strong evidence supporting the idea that crypto in general "it's just a big scheme".
Who's doing the scheming, I wonder?
As with all pump-and-dump schemes, obviously those who pump it.
Let's put it differently: what concrete, real-world, tangible value is there driving crypto speculation? Is there any at all?
It boggles the mind how crypto proponents try to frame crypto in general and their own investments in particular as something that has this sky-high intrinsic value based only on potential popularity and a belief that they can pump them up indefinitely.
For a possible answer, please read my other post in this thread.
You've posted an awful lot of messages, but the only one remotely related to crypto's intrinsic value was the following post which makes no relevant point at all.
https://news.ycombinator.com/item?id=28902307
In it, your main thesis is that you allege that crypto offers a way to "completely shield value", which is outright and patently false.
Even so, trying to portray crypto in general and BTC in particular as serving as a store of value is an absurd notion from the start, as it's renowned for being highly volatile and so prone to crashes that halve it's value that crypto's hardline proponents already invented the concept of periodic corrections.
Ah, but this time it's different?
Distributed technology eats everything.
Getting into a pyramid scheme early does not grant anyone any special insight onto how it is not a pyramid scheme. All they get is the benefits from getting in early, confirmation bias, and an irrational belief that not only past performance guarantees future results but also there is absolutely no growth ceiling.
But that is not the case with crypto is it.
Maybe take a look what pyramid schemes really look like. Here is the wikipedia article: https://en.wikipedia.org/wiki/Pyramid_scheme
> Matrix schemes use the same fraudulent, unsustainable system as a pyramid; here, the participants pay to join a waiting list for a desirable product, which only a fraction of them can ever receive.
You pay dollars expecting to get a lot of dollars in the future. This is why most pay for bitcoin, and since it is impossible for everyone to make money it is a pyramid scheme. The future payoff can only happen if a lot of other people pay more dollars, which will be used to pay you. And since the system constantly extracts money to pay for all the hashing it is impossible for everyone to even break even, people will lose a ton of money in the end.
This is different from normal currency trading. When you buy dollars you are betting on the US government and the US market to be strong so the dollar gains value. Bitcoin however doesn't have any backing like that, it is a negative sum game.
Edit: The core concept of pyramid schemes is this, basically it is a business model which requires infinite new entrants to be sustainable. Bitcoin is like that, it only works as long as bitcoin enthusiasts continue to recruit new people to invest in bitcoin. Hence bitcoin is a pyramid scheme, even if there isn't any tax on sub transactions.
> Pyramid schemes are based on network marketing, where each person in the pyramid is tasked with bringing in their own subordinates and in turn profiting from their sales or recruitments. This fails because it essentially requires an infinite number of people to join the company.
Second of all, I didn't buy crypto because it will give me an infinite supply of money given to me by subordinates.
I buy crypto when I think it's undervalued. I sell when I think it's overvalued. Doesn't everyone????
I'm also not recruiting any subordinates. So sorry, but your pyramid scheme theory falls short.
How is this relevant to a Bitcoin conversation?
Many things have actually no intrinsic value (like art) yet don't lose value over time that much.
Although I’m hopeful maybe someone will find a decent use case for them.
That's IMO a very reductive view. While - true - art is used to launder money, that's not the only thing that lends it value.
If that wasn't the case, there wouldn't be any brick and mortar museums left in the world and you could buy the original Mona Lisa for a dime - since everyone else would have a 16k x 16k reproduction of it, essentially identical to the original.
Somehow, that does not happen.
One shows off your wealth in person, the other will let you show it off online.
Then what if someone mints new NFTs based on (say) the same images used for the cryptopunks cartoons?
You could get your extremely online bragging rights for an affordable price.
How do you handle someone minting multiple nfts of the same image on different chains?
Twitter seems to have too many engineers.
The watch example is apt, similar to a Richard Mille being a flex that 99% of people won’t ever notice or understand it conveys status.
We already have strong social taboos about flashing bank accounts. The whole point of status good is they convey wealth rather than tactlessly showing a total.
See if this feels familiar:
Paris Hilton buys NFT of Hello Kitty! creator's DNA, says "crypto is the future"
Besides, expensive watches look really pretty and shiny. NFT is not.
Exactly like NFTs. Not defending NTFt's just pointing out your argument isn't making much sense as presented.
I can create some trillions digital bits, then mint trillions NFTs for each of them.
> One shows off your wealth in person, the other will let you show it off online.
That's some pretty faulty logic, there. You're looking at it from the wrong end: it doesn't matter if you can imagine an object could be used as a wealth-status symbol, what actually matters is if it's actually recognized as one by a community with enough power for their recognition to matter.
Also, expensive status-bauble watches are stupid, too.
Huh? That doesn't make any sense.
1. "if they ever get stranded in a messy situation": I'm interpreting that as a situation where they need to barter the watch or use it as a bribe. However there's hard limits on how much they could realistically get for a watch due to the seller's desperation and the buyer's risk (I'm guessing a few thousand dollars), even if they paid tens of thousands or more for it. The cheapest gold Rolex you can find (or maybe even a knock off) makes far more sense for this use case than some elite status watch.
2. "if ... their wealth is confiscated": anyone confiscating their "wealth" to the point where they're in the "poverty zone" more than likely will confiscate valuables like $100k watches, jewelry, art, etc. Planning for that to be your "back up wealth" is about as dumb as planning on living in your garage if you ever lose your home.
Hint: it's not about status. It's about pumping the price of eth.
They literally have no value other than what is attributed to them, so if you want to clean up some money you just have to buy an NFT with legit money for X, then sell it to yourself using less-than-legit money.
Now you own all legit money, and have only spent some minor transaction fees.
But thank you, that’s the most concise explanation I’ve seen for exactly how people could use NFTs to launder money.
If this is happening, would you expect to see a bunch of NFTs go from nothing, then sell for a large amount, then not move again?
Oh also I think you’d also have to declare capital gains tax to do it properly, but that’s better than laundering money via income.
it is supposedly something that happens often with physical art, and there have been a lot of attempts to prevent it via regulation, e.g. the AML Standards for Art Market Operators[0].
In crypto space as usual we're at the "frontier" state where lack of regulations allow shady behaviours, and they will until the authorities catch up and crypto becomes "normalized".
[0] "Once purchased, the art can disappear from view for years, even decades." https://www.moneylaunderingnews.com/2019/03/art-and-money-la...
But the most damning aspect of all is the fact that despite common knowledge of the pervasive fraud, USDT maintains it's peg.
This indicates collusion by the market making exchanges in perpetrating this widespread, pervasive fraud. This essentially makes the entire crypto marketplace as we know it one big huge fraud.
A run the bank would bring it all down.
Just like in real life.
Real life has safeguards in place to prevent a bank run from "bringing it all down".
Crypto has no safeguards.
Additionally, you can't redeem all your money at once ( except when you're musk probably)
A lot of people can’t cash out at once. Teather isn’t obligated to redeem to USD, it’s not just a scam (them not having backing), it’s just overall an absurd situation. “Give me your money and I’ll give you a note that says I have your money, and then I’ll never give you the money back, but perhaps you can exchange the note to others for money?”
1)exchanges need Tether so they get it from the Tether inc. while depositing equal amount of USD with them
2)if they don't need some of it anymore they can redeem it
We know depositing USD part never happens. It's likely some shady paper or more likely some promises are deposited instead.
It's also very likely they buy BTC with freshly printed Tether (not directly but through some of their other entities) causing constant buying pressure for BTC and other cryptocurrencies. This may just work if enough people FOMO into crypto seeing the skyrocketing price as then the gang can sell their BTC for real USD.
Therein lies the fraud and the collusion between Tether and the exchanges in perpetrating it.
The grand fallacy of the crypto market is the idea that the exchanges are honest brokers and market makers just like in regulated markets --- despite the complete lack of oversight or regulation requiring as much.
Currently, people are coming in with their own USD and willing to buy Bitcoin at a price of 60K. That has nothing to do with Tether. It has everything to do with people willing to pay that price.
I don't own Tether, so I really don't care.
The problem is that the price is propped up by Tether printing tokens which are then used to buy BTC. This is like the NFT fraud where you pass your NFT around your wallets to create an illusion of artificial demand and the price going up. There is a reason wash trading is illegal. "People are coming with their own USD to buy" isn't an excuse in such case.
It has everything to do with Tether.
Tether is being minted with an illusionary value of $1USD and "loaned" to favored insiders which use it to buy Bitcoin and inflate the price.
The fact that Bitcoin trades for $60k is the result of this being done in the past. The reason new investors pay $60k is their expectation it will continue into the future.
More than half of all Bitcoin trades involve Tether. The two are inextricably linked whether you realize it or not.
What you have described is an aspect of most classic financial fraud schemes --- an influx of new investors is required to keep the scheme going. While it continues, everyone is happy. But when the music stops (as it always does) someone is inevitably left without a chair at the table.
> More than half of all Bitcoin trades involve Tether
So how much of this Tether is fake money?
When I buy crypto, I do that with fiat coming from a fractional reserve bank. So basically 1% is money the bank has now, and 99% is lended and "should be available at some point".
This all seems like a system that just begs for a cryptocurrency solution :p. Tether is part of the fiat system, not cryptocurrency. I would love to see someone making Bitcoins or Ethereum out of thin air. Because if Tether is creating dollars out of thin air as you say, that's a serious flaw in the fiat system.
LOL!
Tether has no role in the fiat system other than it's fictitious claims of relative value.
To do "better", submit to an audit to show their cash backing. Instead they claim 100% backed by "something" that is not even clearly defined and has changed over time. And the exchanges play along and collude to keep the "market" price at $1USD.
Like I said before: problems that cryptocurrency fixes :D.
BTC = 60K * (0.4 USD + 0.6 USDT)
Now let's say USDT is only backed by USD at 50%, that would make:
BTC = 60K * (0.4 USD + 0.3 USD) -> 0.7 USD, which would put the price of BTC at 42K USD.
I can live with that :D.
Besides, not being backed by real USD doesn't mean people didn't pour in real money. So in the end only the Tethers that were created out of thin air count towards the price inflation. So the ones people paid money for are still 'legit' in that sense.
So worst case still seems OK for me.
Finally, normal people want service. I got scammed online while purchasing a leather good. My bank helped me to charge my money back. Paypal does that, too, here. Alone this feature makes cryptos a nightmare for regular users.
For national payments I can use the account number, the phone number, or simply the name of the person using an app (vipps). Everyone has it,also elderly people, and it's actually instant and verified transactions for real.
I’m Canadian. I just tried transferring my free Coinbase crypto to another wallet to withdraw and the process was slower than had I done a transfer between my two bank accounts. And much more fraught!
That's not a wallet to wallet crypto transfer.
That's a Coinbase transfer.
Coinbase is awful as are the majority of other onramps.
In 10 seconds I can my friend’s account and they can use that money to pay online with debit, instantly. Or, spend an extra $100 on their credit card, instantly, knowing their checking account has the room to pay it on bill date.
Tell me how a wallet transfer beats that.
Compare that to crypto, where buying a cup of coffee takes 3 days, and even failed the last time I tried, where I ended up having to borrow credit from a local. The Cafe only “took crypto” but since transferring such a pain, they actually had a piece of paper with credit/debt notes that people would settle once a month.
How is that shit-fest in any way preferable?
Let's say Biden tomorrow actually came out and said "enough malarkey, we're banning crypto". What do you think are the actual chances of Congress passing that legislation of the GOP-dominated SCOTUS from upholding those laws. At least half the politicians in this country actively want to see the federal government go through a financial crisis (particularly when the opposite team holds the White House.)
Crypto skeptics point to Executive Order 6102 but ignore the fact that Biden is no FDR. If we actually had a strong executive, like LBJ, Nixon or even GWB post-9/11 I'd agree. Crypto's playing loose with the rules and basically taunting the US Treasury to play whack-a-mole. But this country's so polarized and dysfunctional that we'll never have a strong executive again in our lifetime.
With crypto I need to keep care of my keys and the address of receiver might change lot more. Where as bank account number is static for years...
On paper, it's a perfect crypto. Really fast and fee-less transactions, proof of stake avoids the environmental impacts, completely pre-mined, distributed as equitably as you reasonably can, and truly decentralized.
But it has one major flaw - no way to get rich quick. No celebrity hyping it up. Nobody is "in it for the tech", it's all a glorified game of chicken
It would recover later probably if investor confidence is not completely destroyed. Because as we all know, the entire space is still completely without any real world use case and entirely useless other than speculation.
A saying goes: pessimists get to be right, optimists get to be rich.
YMMV...
COVID and the massive supply of dollars since last year is not one?
In a general recession with declining asset values crypto would likely fall more than general assets, and also risks simply having a massive plunge if Tether breaks at the same time.
And given enough time for irrational price levitation, something else can fill the bubble void and the price justifiable at some level. Maybe you short BTC at $30k. It then goes to $300k. You’re licking your wounds but anticipating the drop back down to 0. Except somehow price snaps back to $45k and you’re still a loser.
Every time Bitcoin goes through a major move, the "bubble" crowd comes out of the woodwork, while having done absolutely no effort in understanding what Bitcoin is.
(And please spare the tech; people really do understand it, at least to the level that matters)
It used to be a currency quite a while ago - people would actually use it in contracts, most importantly long term debt contracts (long term contracts is where the value/acceptance of the currency really shows; imagine taking or issuing a 30yr mortgage in Bitcoin, as in the homeowner is obliged to pay fixed X Bitcoin per month, lol). A big part of the great depression fighting/relief was to make debt contracts denominated in gold unenforceable.
Says who? Your Econ. 101 book?
You flippantly decide that no new class of asset can ever come into being and decide to present it as one of the fundamental laws of nature?
Also see this video: https://www.youtube.com/watch?v=8iNeXCAM_Ik
Just to be clear: bitcoin (or some other existing or future crypto) could become for example a currency one day. But it clearly isn't one now.
To see its value, I don't need to make an effort to understand what a pear is, or a bar of gold, or a house.
I and others have looked at Bitcoin, and its trillion dollar market cap (which means Bitcoins are worth more than JP Morgan Chase and Johnson and Johnson put together) and realized it has absolutely no value.
At least subprime mortgages, 1999 dot-bomb stocks and the like had some value. Bitcoin has no value. On the next market contraction like 2008 or 2000 or the like Bitcoin value will collapse. Maybe even before that.
I wonder how long ago that "realization" occurred, and if you have since then "realized" how much the market has disagreed with your conclusion, or if you've "realized" the size of the opportunity loss?
There is a language of such bubbles - not, here is why it has value, like a loaf of bread or chair or bar of gold, but think about FOMO and that type of thing. There have been fly by night scams since Ponzi's postal reply coupons, or Dutch tulip bulbs and before that - I don't worry too much on missing out on the latest scam.
You say it's 'the reason' which I'm not sure means 'the only reason' or 'a reason'.
If it's the former: How will crypto, let alone any collectable or sentimental item fit into this framework?
If it's the later, then yes, but utility varies by recipient and then there are other factors which play into price, especially in the short term.
A digital trading card that's used for speculating and buying drugs?
I understand what fundamentally motivates people to trade it and that they tell themselves all sorts of stories about a "new financial system" because it feels better than saying they invest in Charizards. I also know not to touch it.
To Bitcoin's credit, it made a lot of people think about what makes something a currency, the differences between investing and speculation, consequences of deflation, etc.
> “My view is that bitcoin will ultimately end up going to zero. And I think we are in the final stages right now.”
Bitcoin's market value will never go to zero. Let me explain - bitcoin was borne out some internet guy's (we call him / her "Satoshi Nakamoto") idea of what money could be and how to implement it on the internet. It was not theorized in a white paper by PhD economists from MIT or U-Chicago. It proved itself in the internet's black market, and made its way to the main stream. It is fundamentally a bottom up proven technology, it did not come from the top down like the modern fiat dollar. In the event that bitcoin does not have value in the main stream, it will always have some value in the internet's dark market, and it won't be zero.
> “And the U.S. dollar is backed by the full faith of the United States. Does bitcoin have an army?”
Money does not need an army. The army gets paid in money, the money does not make the army. Humans traded in coinage before organized nation states or even city states. Contemplate this - what good is an army when they do not know who the anonymous holders of the internet money are? Who do they attack? And when the fiat money gets in inflated to zero, who protects the civilian government from a hungry and angry army that has all the guns?
> “Nothing is priced in bitcoin"
Bricks of cocaine are priced in bitcoin. So is fiat currency. I could go to a local bitcoin meetup and trade bitcoin for dollar bills, no KYC. I can do the same on the dark web, and have USPO deliver me dollars. That makes my bitcoin as good as cash, and everything is priced in cash. By the transitive property, bitcoin is cash.
> Despite a steep sell-off in May and the growing certainty that the Securities and Exchange Commission, the U.S. Treasury, and even the Department of Justice are getting ready to clamp down on the cryptocurrency world, retail and institutional investors alike have kept buying. When China announced on September 24 that it would ban all cryptocurrency activities, bitcoin fell less than 6 percent.
Fun fact - chairman of the SEC teaches courses on blockchain and crypto at MIT.[1] Doubtful that the US will go the way of China. And if it does, so what? The Chinese ban was a non-event. And if you think you can ban bitcoin, you do not understand bitcoin.
> “As I dug into the actual underpinnings, it just became very clear that what was actually going on was cultlike behavior with no real understanding of the asset or the economic implications for the model that it was proposing,” he says.
This is a better description for fiat currency than bitcoin.
> “What a crazy concept this is that we as a country embrace so many bright, young, talented people to come up with a replacement for our reserve currency,” he said at the Economic Club of Chicago.
..."so many smart, bright, young, talented people"...I think this quote speaks for itself.
> Bitcoin, its critics like to say, is nothing but electricity. “To tell me that something that’s constructed as a computer program, where you engage in some process of sitting there in front of your computer and, after a period of time and the expenditure of a bunch of electricity, a message appears on your screen that you have created something, that’s ridiculous,” Singer said on an investment podcast earlier this year. “It’s nothing.”
Yes, this how the bitcoin protocol defines the value of coins, but so does the fiat denomination that people are willing to pay for bitcoin. It's a traded market now, and that's where most of the value is coming from.
> As Roubini put it in the Goldman report, “Bitcoin and other cryptocurrencies have no income or utility, so there’s just no way to arrive at a fundamental value.”
Yes there is - go on a bitcoin exchange, see the fiat exchange rate for bitcoin, that's the fundamental value.
> He also scoffs at those who call it digital gold. “Bitcoin could disappear one day, but gold won’t.”
Highly unlikely that a globally distributed electronic ledger that can fit on like 500gb hhard drive would ever disappear. SMH, these people need to do more research on the subject of crypto.
> Green estimates that 40 percent of bitcoin’s real-world transactions are still criminal in nature (don’t forget, the first killer app was black-market bazaar Silk Road), including recent ransomware hackings. Bulls argue that the real number is a lot lower. A report by industry firm Chainalysis pegged it at less than one percent in 2020 — less than than comparable figures for cash.
Mr Green is lying and ignorant on the subject of bitcoin.
> “I would broadly describe what’s going on with El Salvador as they’re trying to make money-laundering the national business,” says Green, who contends that El Salvador is at risk of becoming a narco state.
Holding morality, legality, and potential human suffering aside, what El Salvador is going to be good for the value of bitcoin. Sad but true.
> hedge-fund mogul Ray Dalio of Bridgewater Associates, who dabbles in cryptocurrencies, said he believed regulators would “kill” bitcoin if it became too successful.
Again, if you think you can ban bitcoin, you do not understand bitcoin.
> “I can see why governments need to fight this thing. They are probably going to shut it down at some point.”
The fact that governments already see it as a threat (China, especially) signals the vulnerability they see in the legacy fiat system.
> Beyond all the specific arguments and counterarguments, the fact remains that those from the “big short” set making the case against bitcoin are generally not making the same kind of real-life short bets that made them so much money in 2008.
Face palm Speaks for itself.
> “You can’t be short it in scale,” agrees the short seller. Like some of the others who fundamentally dislike it, he even has a small position in bitcoin. “If it goes up, I’ll make a little bit of money. If it goes to zero, I’ll be so happy, I will gladly lose the money.”
Hubris and schadenfreude - these do not mix well for the incumbents in a legacy, obsolete system.
*Fundamentally, bitcoin and the mechanics of crypto are challenging how people think about money - what it is and how it fits into our lives. That is a good thing.*
[1] https://ocw.mit.edu/courses/sloan-school-of-management/15-s1...
Direct effects of USA/EUR making private wallets illegal?
Does it, though? I’m on the sidelines, but it seems like all the excitement/money flowing into crypto these days is into blockchains with higher transaction throughput and more advanced smart contract interpreters. I know there are some maxis trying to build things like DeFi and NFTs on Bitcoin but it seems to have really taken a backseat in the latest crypto hype cycle.
There are DeFi and NFT platforms on Bitcoin? I haven’t heard of those. Are you talking about Ethereum?
Other than that, there already are some "NFT's" embedded in the Bitcoin blockchain.
To give you an example of what I mean, consider the Genesis block, which, while its reward can't be spent still has a private key attached to it.
I'm willing to bet that the day the person who owns that key (Satoshi, assuming he's still alive) decides to put it up for auction, the bids won't be zero :)
Maybe they're the minority. But if they aren't, I think there's eventually going to be a rude awakening.
Do you have a reference for this?
For another, payments infrastructure is a problem but not a huge problem. There is a ceiling on how much it's worth to solve. And the traditional banking system remains a competitor. Not to say you can't get paid for helping me with a payments problem, but orders of magnitude profit? For such an ancillary contribution of having the currency prior to me (or my customers)? Color me skeptical.
It's 2017 all over again.
500 million? From what I can see, it's 50 million here:
https://www.scmp.com/business/china-business/article/2172413...
Elsewhere I see 65 million
https://asia.nikkei.com/Spotlight/The-Big-Story/China-s-hous...
So maybe you added a zero accidentally?
Either way, the 50 million figure is supposed to be 1/5 of all urban homes. Let's see if that checks out.
64% of China is urbanized according to https://www.statista.com/statistics/270162/urbanization-in-c...
So they estimate 840 million urbanized and a fifth of that is 50 million? That means 250 million homes for the 840 million people. That would be 3.4 people per home, on average.
Statista says Chinese household size is 2.92
https://www.statista.com/statistics/278697/average-size-of-h...
So in that case, with 840m urban pop., we'd expect 288 million homes, urbanized so a fifth would be 58 million, about half-way between 50 and 68. My guess is that they did a sample and found about a fifth unoccupied, rather than trying to count all unoccupied homes.
So let's ballpark and say 60 million homes.
But if you look at the same urbanization graph from statista, it's climbing at about 1% per year (ignoring the sharp climb from 2019 to 2020). Moreover, household sizes are falling by 0.1 per year. Both of these are sources of demand for more homes -- people moving to cities and moving out of their parents homes to create smaller households.
So together, the growing demand for homes would be the 14 million people from urbanization (1%) corresponding to ~4.8 million new homes, and decreasing household sizes, corresponding to 1.6 million more homes, so 6.4 million homes per year.
But there is also a demand coming from homes being torn down. Let's say homes last for 50 years (assuming not very well built, as China was poor when the oldest homes were built). So they'd need to build ~9.6 million new homes each year just to replace the obsolete old homes.
So now ~16 million homes need to be built each year (assuming my estimates).
Let's see if we can double check that number.
From one of the housing glut articles, we see that 15 million homes are built each year
https://www.businessinsider.com/china-empty-homes-real-estat...
snaps suspenders. Seems like a good enough double-check for back of the envelope calculation. So if we need 15 million per year, a ~60 million supply of empty homes is only 4 years lead.
Let's compare that to the U.S.
We have 17 million empty homes.
https://247wallst.com/housing/2019/09/30/there-are-over-17-m...
Out of a base of 141 million
https://www.statista.com/topics/1618/residential-housing-in-...
And we're building about 300K. So the US ratios of %vacant homes and vacant/annual_production are 12% and 57.
Whereas the Chinese ratio of vacant homes/total and vacant/annual_production is 12% and 4.
Now many of the US vacant homes are vacation homes. But then why can't China also have vacation homes? In other words, it doesn't seem that the Chinese market, in terms of number of vacant homes, is really extreme. I suspect what happened is that a reporter stumbled on a statistic that said 1 out of 5 urban homes were empty, and they freaked out; then the story went viral. There's so much terrible reporting happening now.
The difference seems to boil down to the fact that Chinese use their homes not as second homes but investments, and they leave the home unfurnished (like a concrete box), in the expectation that they will sell it for more later. And if you borrowed to buy the home and are leveraged, then you may be in trouble. But if you didn't, you can turn it into a vacation home. So maybe there is a problem there, but it doesn't seem to be an enormous problem.
But this is me just googling and applying some arithmetic.
The attitude that pervades HN in regards to crypto. This website is not a good place for discussion regarding blockchain technologies.
HN appears to me more full of people (like me) who were fired up by the initial promise of (a) blockchain technology (b) intermediary- and free-free transfer of value.
What happened instead was that the technology turned out to be one of the worst threats to global warming since farting cows (yes,yes, i know, ethereum makes it all better), the intermediary- and fee-free part never actually worked out at all (because people need accounts somewhere, sorry, wallets), and finally, bitcoin and others turned into a speculating collectors' frenzy that while technically, perhaps, not as absurd as beanie babies or dutch bulbs, is generally adjacent to such historical fancies.
Given the energy problems (yes, yes, i know ethereum makes it all better), the attitude towards blockchain itself remains remarkably positive. But the quoted position above isn't about blockchain, it's about bitcoin, and you're distorting facts and also "the HN attitude" (which doesn't really exist) by attempting to conflate the two.
This has been overstated by critics. It's currently at something like a half a percent of world electricity usage. Which as an absolute number is really big, but as a contribution to global warming it's just not a meaningful percentage. And even ignoring something like proof of stake or Chia, it gets solved the same way as the rest of the problem -- replace generation capacity with non-carbon sources. Institute a carbon tax. Then people will mine Bitcoin using renewables and that'll be the end of it.
> the intermediary- and fee-free part never actually worked out at all (because people need accounts somewhere, sorry, wallets)
It turns out people often want this because they don't want to lose all their money if they accidentally drop their phone in a river.
The key is to make sure that it's still possible to do it without an intermediary, because that's what keeps the intermediary from becoming an abusive chokepoint for authoritarian policies, since any attempt to implement them there would only overtake the benefit of their convenience and cause people to switch to direct transactions.
> bitcoin and others turned into a speculating collectors' frenzy that while technically, perhaps, not as absurd as beanie babies or dutch bulbs, is generally adjacent to such historical fancies.
This was made significantly worse by the design of Bitcoin in particular since there is a limit to the amount of Bitcoin that will ever exist. Which makes it not only not inflationary but heavily deflationary, which promotes speculation.
It's plausible that some other cryptocurrency that limits volume only in proportion to some scarcity (whether or not it's still compute) but has no fixed maximum number of coins would be less subject to speculation and therefore less volatile. And then the lower volatility might cause it to have higher adoption in the long term.
There have to be some interest rate in fund transfer, otherwise there will be no reason to keep transaction records.
> HN attitude
There are some opinions which endorsed here and some which suppressed, for example eco-terrorists and police-hating criminals are holy cows here.
Potential legal penalties often work quite well.
There is a IMO a very tangible market demand for a financial product that allows one to completely shield value from the myriad of value-eroding propositions that have been baked into the traditional financial system to essentially bleed you dry on a long enough timeline.
- "management" fees
- capital gain taxes
- death taxes (inheritance taxes)
- asset seizures (divorces, bankruptcy, random court decisions against you, Cyprus Bank Disaster [1], etc...)
- inflation (govt mandated or otherwise)
- etc ...
For example, many of the traditional way to shield your wealth (stock market, commodities, real-estate) fail to be prone to some of the events I list above.
You may not agree that Bitcoin solves all of the above, in which case please list something that gets as close.
The fact that some of the things listed above will be viewed by some as "morally reprehensible" is irrelevant to the conversation: moral or not, the demand still exists.
And for folks who look at Bitcoin for this (shielding wealth) the fact that Bitcoin has gone parabolic in the last 10 years is kind of a nice cherry on the cake.
Yes, if you decide to use BTC to shield value, you are taking a rather big risk (volatility, BTC could be hurt by govt cracking down on it, there will be a huge "event" when Tether finally implodes, etc ...).
But again, please list something that comes any closer to solving the problem.
The above is why I believe people who claim Bitcoin has no "intrinsic value" (a term I consider to be entirely meaningless) are wrong, even using their own definition of "intrinsic value".
[1] https://en.wikipedia.org/wiki/2012%E2%80%932013_Cypriot_fina...
Specifically:
“ - capital gain taxes - death taxes (inheritance taxes) - asset seizures (divorces, bankruptcy, random court decisions against you, Cyprus Bank Disaster [1], etc...)”
And
> The fact that some of the things listed above will be viewed by some as "morally reprehensible" is irrelevant to the conversation: moral or not, the demand still exists.
Isn’t it more a legal issue than moral? Evading tax is a criminal matter I thought.
In the US it is.
Other, more humane jurisdictions view it as an infraction: if caught, you'll get fined, but you won't go to jail.
You mean the anglo world?
Their laws all look the same. That doesn't make them moral or right.
To answer your question, I am not 100% certain, but I believe CH falls in the category I describe.
Bitcoin does not shield you from capital gains taxes [0] or asset seizures since it's classified as property by the government. At least not in the US.
0: https://www.cnbc.com/2021/02/19/do-you-owe-taxes-on-bitcoin....
It is my admittedly limited understanding of US tax law that - as long as you don't sell - you aren't getting taxed on gains (unrealized capital gains).
Should you then decide to use your coins to directly buy - say - a house in Japan: since no actual Yen-denominated price is ever involved in the transaction, how will the US government evaluated your realized capital gains?
Also: the US is but one place in the world. There are quite a few folks on this earth that aren't burdened with a US passport, and quite a few places that don't have capital gains on crypto sales.
Many other countries are taxing bitcoin as well. In fact it's the rare exception (Google seems to indicate about a dozen) that doesn't tax bitcoin. Your original statement about bitcoin being a way of avoiding capital gains taxes is simply false for most people.
> It is my admittedly limited understanding of US tax law that - as long as you don't sell - you aren't getting taxed on gains (unrealized capital gains).
And of course capital gains only happen when you sell. That's why it's a gain (the difference between the sale price and purchase price). That's the same way selling stocks works too. You only pay the capital gains tax when you sell.
Only if they decide to sell.
Also, only if they're not willing to do what it takes (i.e. move to a jurisdiction with no taxes on realized cap. gains and toss the US passport out the window for something better).
Finally, you haven't addressed the "barter" case (trade BTC directly for goods). I'm sure the US has found a way to tax this on paper (the IRS seems to be the only functioning part of the US govt these days), the question of enforceability is a different one.
This is pretty common around the world: barter doesn't get around taxes (at least at large enough sums)
> cryptocurrency users must deal with capital gains and losses in addition to whatever sales taxes they might face at the point of sale.
> For example, let's imagine you bought $10 worth of Bitcoin two years ago and it has since appreciated to $100 in value. If you sold it on an exchange, you'd have $90 of realized long-term capital gains, just like you would with any other capital asset.
> If you instead used that same $100 worth of Bitcoin to buy groceries from the supermarket, you'd still have to pay long-term capital gains taxes on the $90 difference between appreciated value and your cost basis.
https://www.kiplinger.com/taxes/capital-gains-tax/603117/how...
> If the fair market value of property received in exchange for virtual currency exceeds the taxpayer’s adjusted basis of the virtual currency, the taxpayer has taxable gain. The taxpayer has a loss if the fair market value of the property received is less than the adjusted basis of the virtual currency.
[EDIT]: never mind someone answered this above with the whole doctrine of "fair market value".