Evidence that no one cares about crypto-denominated wealth
blog.kevmod.com
blog.kevmod.com
To give concrete critique, the author is using a complex financial instrument on an obscure exchange to make the case that sophisticated crypto traders would rather be paid in USD than Bitcoin. (with a meaningful, but overall small premium)
As anyone who knows how professional Crypto markets work, its very nascent with a lot of arbitrage opportunity. When you see a 2-3% arbitrage in traditional markets, you can safely assume "market preference". But in Crypto land, it wasn't long ago that you can get a nice 20% arbitrage just by selling/buying Bitcoin between YEN/USD markets. It didn't mean that people had a preference between equal amounts of YEN/USD, it just meant an inefficient market with not enough professional market makers to arbitrage away the inefficiencies. (which how SBF of FTX made his money).
The only reason one of the readers here won't arbitrage away that premium is they don't know how, or if they know how - they have bigger fish to go after.
One big problem with derivatives in the cryptocurrency space is that the counterparties may not be that strong financially and/or may not pay up if they lose. Or, even if the hedge is enforced by some smart contract, the contract might not have enough staking behind it to survive a major price change. And there's a war on. So we should expect mispriced derivatives.
Is there data available for cashout rates, such as USDC redemption and USDT being traded for USDC? That's more relevant here.
> Strong evidence that no one cares about VTSAX-denominated wealth
> So in the end the market is clear: when money is on the line, people value their wealth in fiat, not VTSAX.
You bet I care more about the number of dollars I have than the number of shares of VTSAX, but that doesn't take away from the value of VTSAX.
Crypto projects all seem to be using $COIN as a token you must purchase in order to access some resource on the network (Gas/Storage) or as a currency swap / investment (Bitcoin).
Edit to everyone downvoting but not commenting -- name one. Name a crypto of any real success where the endgame is average joe being able to walk into starbucks and pay for his coffee with it.
I would not compare.this to crypto
This doesn’t mean that people don’t value crypto, it means they live in the real world.
Then, everything will be valued in terms of some more stable and widely available value reference.
Will this be a cryptocurrency? Probably not, unless some viable non-Fiat "stablecoin" become popular, or ETH and BTC reach a more stable plateau of valuation. More likely, a widely available relatively stable coinage like Silver would be used.
has anyone published a whitepaper / theory describing how this might be possible?
A stablecoin has to be denominated in something -- that's what it's stable in.
Is that even useful? It would have to be a commodity with extremely stable (everywhere in the world) non-zero price in "real" terms. Potatocoin? Sandcoin?
https://makerdao.com/whitepaper/White%20Paper%20-The%20Maker...
DAI is currently pegged to the USD but the long-term goal is (was?) to have an asset following a more general notion of stability according to some international index.
I wasn't able to find a source or specifics for that last part but I did find this overview from 2019 that I think looks quite good.
https://www.ecb.europa.eu/pub/pdf/scpops/ecb.op230~d57946be3...
This would be necessarily centralized if any of those goods are physical, or services physically rendered. If it excludes all physical nexuses, e.g. an in-game currency, one could do away with that centralisation, but it's no longer stable in any meaningful sense.
Until? What event do you refer to? Are you predicting the invention of rapid (fiat) currency trading?
Unlike say house. Which might retain the same value to me even if its market dollar value doubled overnight.
I think this needs to be thought carefully. A house, because it's saleable, represents an opportunity cost. If the market value doubles overnight, a rational actor should re-evaluate whether it is still the best course to continue to live in it, rather than sell it.
If the rational actor's home has doubled in value, does the actor live in an exceptional home, or have all homes similarly doubled in value?
Does a rational actor factor in where they intend to live in their calculation? How does that weight against the dollar value of the house they own?
Only so far, this will hopefully change in the future. People are tired of the government being able to print money at will and devalue their hard work.
Hmmm, yes. I think most people don't realize this.
Regarding the apple example, the customer and grocer do not disagree on the value of apples. The trade takes place because of the marginal value of apples and the pre-existing difference in apple inventories between the parties.
Real wealth is in relationships. There isn't any other kind.
For instance, if you have a relationship with someone who has a list of cars, that says you own a car, then that's wealth.
If you have a relationship with someone who has a list of accounts, that says you have $20,000, then that's also wealth.
Property is always abstract and dependent on other people.
I agree with your basic point.
I'd just offer that Siegels paradox (which is interesting to read about)[1] applies if you have two currencies where some consumers price their end-consumption good in each of those currencies. But crypto currencies aren't something you want to consume later. If bitcoin has a 50% chance of doubling and 50% chance of halving in value, it is simply a good investment (expected payoff = 5/4 of investment) best held by dollar current dollar holders and bitcoin holders alike.
So, yeah, wealth is what matters and the Siegel's argument is a red herring. But erudite one, ha.
Wrong, and wrong.
The trade does not occur due to inventory differences between the parties. For example, I have zero apples in my household inventory and no amount of inventory disparity (grocery store vs my house) causes apple trade to happen with me.
Trade happens because each party has a coincidence of wants AND each party values the item differently. Each party believes they are gaining by the trade, so the value of the item is different in the minds of each party.
USD denominated wealth is also a requirement for managing taxes and USD equivalents like stablecoins are used to survive deep dips and progressively take profit on the way up...so that you have "dry powder" to buy the next dip.
There is however a sizable group that does denominate their wealth in crypto: those that dollar-cost-average. For Bitcoin, also called "stacking sats". They express their progress in crypto, not in USD, as the USD input is fixed.
Give me all the formulas and statistics you want, but if I see a fast car, I'm calling it a fast car.
Or at least answer this question: Can a broke dummy like me make money from their observation and how?
Edit: Thanks for the downvote. I didn't know asking an honest question to better understand a topic (which I'm sure I'm not the only one who's confused about) was against the rules. Or maybe my sense of humor flew over someone's head, who knows.
Essentially, covariance evaluates the directional relationship between the returns of two assets. No two currencies are eternally correlated, so you can also think of using the correlation or lack thereof in this endeavor.
Some articles exist because the author wanted to write it, not because anyone was supposed to read it.
Just blanket asking for an ELI5 without elaborating on what aspect you understood, or specific questions you have about the topic, or just demonstrating some effort on your part is low effort and places way too high of a burden on someone else to give you a good quality answer.
The poster likely didn't want any of that but what he asked, "Can a broke dummy like me make money from their observation and how?" He was asking for the practicality of using the contents of the article.
I really hope that isn't something people need to be told though.
See also: <Topic> for Dummies books.
mywittyname's reply nails my intention and thought process, and IncRnd's reply perfectly answers my question, so I hope this thread amounted to a positive contribution after all.
There are atomic trades happening on DeFi that have to be denominated by ETH, because of gas costs.
Looking at the fiat price doesn't mean you don't care about crypto.
Not looking at the fiat price doesn't mean you care about crypto.
Personally, I don't look at the price until end of the month when I need to pay the bills.
Although people are more familiar with the value of 1 USD at any given time, they instinctively (and correctly) feel that it's a depreciating instrument which loses value over time. On the other hand, when people think about 1 Bitcoin, they feel that it's an appreciating instrument which gains value over time. Not only do people instinctively (without having to do a mental conversion) understand that 1 Bitcoin represents a lot of real-world economic wealth, they understand that it represents an increasing share of the world's wealth.
It's a bit like shares of a big corporation. How many laptop computers can I buy with 1 Google share? Essentially any Google shareholder will still need to do a conversion to USD (or their local currency) in their minds in order to give an answer. But this means nothing in terms of perceived value. The Google shareholder knows instinctively that GOOG is an appreciating instrument which gains value over time and this is what makes them want to hold it and not use it as a currency.
The reason why Bitcoin is valuable is because Bitcoiners understand that the main mechanism of wealth accumulation in the modern fiat-based global economy has nothing to do with value creation. Wealth in the modern era is all about tribalism and social networking. Bitcoiners are confident that their tribe is best positioned to acquire the world's wealth in a flawed system founded on money printing.
In a world of printed money wherein wealth is acquired primarily on the basis of value extraction (not value creation), wealth accumulation depends primarily on the size of one's tribe and the ability of its members to reach consensus and to conspire together.
By the way, this conspiracy element is not unique to Bitcoin; it's also an intrinsic part of all big corporations... Bitcoin is just the most effective mechanism for taking advantage of it due its substantial network effects and low-friction barriers to entry.
IMO in a world without money printing, the value of conspiring would be near 0 at scale because the focus (and incentive) would be value creation, not extraction.
...that doesn't make the Japanese Yen worthless.
It's a bad line of reasoning.
In Canada, we just went through a 10-day period where, in an afternoon, the government casually made it retroactively illegal to have supported a peaceful cause -- and began locking up peaceful, law-abiding citizens' bank accounts.
In Russia, citizens have been instantly locked out of international financial transactions, and non-local currencies have become unavailable. It is likely that further, dramatic interventions in ingress/egress of wealth are forthcoming.
In China, random decisions regarding the legality of Cryptocurrencies are regularly enacted. Huge businesses doing legal, ethical mining are one day accepted, and the next -- made illegal.
Sorry, but anyone who doesn't find this worrisome is ... naive, for lack of a more charitable term.
Yes. We, as a society, have decided (rather quickly too) to use our financial resources to do what we can to fight back against these war crimes. That's not a bad thing at all.
The only other thing that may serve as a deterrence is a proper and full war. If you've got other ideas for a deterance, now is the time to issue suggestions.
Complaining that we've found a non-war way to deter Russia and their actions is callous, when compared to the millions of lives who suddenly had their lives upended last week.
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> Sorry, but anyone who doesn't find this worrisome is ... naive, for lack of a more charitable term.
Of course its worrisome that we have to deploy offensive tools (albeit financial tools rather than actual bombs). But what other choice do we have? Are you saying that Russia shouldn't have to pay for what they did? Are you saying that we should just forget about Ukraine's pains? Etc. etc.
Money is a social construct. That's a good thing, for times like this. No, we don't want to live in these times and wish that things were more peaceful. But if someone hits you or someone else... you have to respond and deter them from striking yet again. Basic diplomacy.
My understanding is that those citizens were using their money to support people who were intentionally blocking one of the main functions of a national government (regulating international trade).
> In Russia, citizens have been instantly locked out of international financial transactions, and non-local currencies have become unavailable. It is likely that further, dramatic interventions in ingress/egress of wealth are forthcoming.
Russians have no right to perform transactions using US Dollars, and as an American citizen I have no right to perform transactions in Rubles. Our governments regulate that (again, international trade).
> In China, random decisions regarding the legality of Cryptocurrencies are regularly enacted. Huge businesses doing legal, ethical mining are one day accepted, and the next -- made illegal.
In China, many government decisions are like that. Like when they overnight decided to restrict vehicle access to Beijing to try to reduce pollution leading up to the 2008 Olympics. I doubt actions like these come as a surprise to Chinese citizens. And, again, it's largely related to international trade.
In our modern world of nation states, the individual citizen does not have unfettered access to all the world markets. Our governments place restrictions on trade, and they will do the same with cryptocurrency. You can try to evade it, either through bitcoin or gold bullion, but it is not your right.
Yes, peacefully. A large fraction of the hundreds of thousands who supported these truckers have, themselves, been blocked from employment, international travel, etc., because they refused an experimental medical treatment. Which, apparently, they felt strongly about. Strongly enough to demonstrate that blocking civilians from trade and employment is ... distressing.
Are you proposing that only ineffective peaceful blockages should be allowed? Or, that only those whose politics and beliefs you agree with should be allowed to resist (even violently and destructively -- so long as you agree with them)?
As for "it is not your right" as a citizen to access world markets. A government that prevents its citizenry from surviving by blocking access to viable money and trade should rightfully expect to be resisted -- to whatever level of intensity is required to protect its innocent citizenry. Wouldn't you agree?
Blocking a bridge isn't violent. But it isn't peaceful protest either.
Overseeing international trade routes is one of a government's core responsibilities. Deploying its monopoly on violence is justified. Peaceful protest (including striking) doesn't shut down critical infrastructure.
If a government lets random hooligans repeatedly shut down large sections of the economy, it's an ineffective government. In the long run, ineffective governments get replaced by more effective (read: less democratic) ones. All that said, I do think the Canadian government went a bit far. Peacefully dispersing the protests would have been more than enough.
To overthrow the state. That is obviously not peaceful protest. It’s insurrection.
At what point is this going to stop being a talking point? Billions of doses, well over a year of data, at what point will people be satisfied? Every day this seems less and less valid, and it didn't seem terribly valid when vaccines initially started rolling out.
Probably when we actually know the long-term effects instead of just making assumptions? Maybe we'll even get to see the science someday [0], exciting!
[0] https://www.nytimes.com/2022/02/20/health/covid-cdc-data.htm...
Except Cov19 Vaccines are in fact not an experimental medical treatment. That aside though, whether someone peacefully blocks the government from doing its job or not doesn't really matter. If they block the government from doing it's job then it is only fair for the government to try and remove that blockade.
If someone was blocking ambulances from going to emergencies then i wouldn't care if they do it peacefully or not.
In fact, CDC says natural infection and recovery is good protection.
https://www.cdc.gov/mmwr/volumes/71/wr/mm7104e1.htm 'By early October, persons who survived a previous infection had lower case rates than persons who were vaccinated alone.'
Is it a good, or bad, thing that we removed Russia from our collective financial systems?
That's really all there is to it. If its a good thing, you need to be happy with the power to do so (and you must keep and protect the power during times of peace).
If its a bad thing, then I'm curious why anyone would take Russia's side on this particular conflict. Its clear to me that the Russian economy is already getting pretty hampered due to these sanctions, so no one can really argue against their efficacy anymore.
This does nothing to harm the "oligarchs". They have plenty of wealth stashed in non-extradition jurisdictions.
As long as the Moscow Stock Market is closed due to these events, your suggestion is laughable. We're already seeing those oligarchs cave to pressure and start talking about peace. They're clearly hurting from this.
We hit Russia where they hurt: their economy. Oligarchs, the literal business leaders of Russia, care about their money, flow of business, their stock exchange, etc. etc.
Yes, its a shame that the Russian people are also getting hit over this. But not as much as the shame as the countless Ukrainian neighborhoods that literally don't exist anymore. I'm sure Russian troops don't want to "harm civilians" either, but their actions have consequences. And the counter-actions also have consequences.
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The only way you change my mind over this, is if YOU explain what kind of deterrence works __better__. I know there were talks about actual military action (no fly zones, US troops, etc. etc.), but presumably direct military action is also off the table, as its a dramatic escalation upwards from simple financial sanctions.
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EDIT: Case in point, Russian Oligarch Vagit Alekperov has lost 60% of his networth in the past week. Are you seriously trying to tell me that doesn't hurt him?
Biden withdrew the remaining US troops from Ukraine three weeks ago. That was not deterrence. That was a giant green light for Russia to walk in to Ukraine. https://www.trtworld.com/americas/us-withdraws-nearly-all-re...
Says who? Specific citation please.
People should forget for a moment whether they agree with a protest/sanction or not, that's not the point at all. The larger conceptual point that people should think about is the extreme fragility of digital/online money.
I'm old enough to have lived in a largely cash-based society, and I'm still only middle aged. In such a society, it is extremely impractical and difficult for any entity (government or business) to seize or freeze your assets.
Now we have a dramatically different situation where with the push of a button, your fortune is gone. Could be because you joined the wrong protest. Or because you were born a Russian. Or because you live in China and didn't live up to social standards.
The reasons will vary but in any case it's an extreme power grab by authorities. The assumption that you're a great person living in a stable country so it won't happen to you is naive.
I'm under no illusion that it will not continue, but at the very least I think there should be laws protecting individuals against the arbitrary seizure of assets.
That, and systems that solve the "network partition" failure mode endemic to Global Consensus cryptocurrency systems: https://holo.host.
In the mean time -- create and fund a personal Cryptocurrency wallet with secure and reliable SLIP-39 backup Mnemonics: https://slip39.kundert.ca/macos
While I wildly disagree with this description I do think international sanctions on Russia are an interesting test case for cryptocurrencies. Will normal people start using them when they're locked out of normal financial tools? Or are there more barriers to a wide use of crypto than boosters make it sound like?
But I can't really shed many tears for the situation in Russia right now, with the caveat that I hate that regular Russian people (many of whom are against the Ukraine invasion) are getting hurt by this stuff as well.
Money isn't (and IMO shouldn't be) just something you have, for often arbitrary reasons, something that allows you to do whatever you want without repercussion. Russia's leadership should not have access to the world's financial markets after the actions they've taken. Cryptocurrencies could help enable their bad behavior in this case. Yes, crypto can also help insulate regular people from the bad behaviors of their governments. But it's not all positives.
Financial system access is a lever that can be used to influence behavior. On the scale of current Russia-Western relations, there are not many viable levers. One of them is armed conflict. I would much rather we mess with Russia's financial system than start sending NATO troops into Ukraine, and risk starting WWIII.
I still shed a tear, even for the Russian soldiers.
The poor Russian soldier who was killed had his text messages (to his mom in Russia) read out to the UN. He didn't know why they were attacking Ukraine, is "only following orders" kinda setup. He was flabbergasted at how much the Ukrainians were angry at him.
And then he died in battle.
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That doesn't mean that Ukraine should stop attacking the Russian soldiers. It is clear that they are being forced into this as much as everyone else. If Russia simply pulls back their troops to the Russian border, then this war is over. But as long as they're in Ukraine, the world has to use every means necessary to try to help the Ukrainians out.
Even if it means killing Russian soldiers. I don't think they "deserve" to die, but what choice does Ukraine have?
Biden purposefully allows Russia to continue to sell oil and gas into the world markets.
https://time.com/6151493/russia-oil-gas-embargo-sanctions-uk...
Crypto is better on government getting worse whilst simultaneously absolving yourself of the responsibility of doing anything about it.
No donor accounts were frozen according to the RCMP. And no verifiable information proving otherwise has arisen (tweets are not verifiable info). There were around 210 accounts frozen, belonging to less than 200 people. The majority of which were unfrozen after less than a week. The accounts belonged to those that were organizing or materially supporting a protest that had been deemed unlawful, or participating unlawfully in that protest.
In other words the Canadian government briefly seized accounts that were being used to support a protest that was judged at least partially illegal by the courts system. Those affected by seizure are now allowed to request compensation under the same law that was used to seize the accounts.
https://thehill.com/policy/international/595526-freeze-lifte...
Did this happen, except in unsubtantiated tweets?
2. that said, in the initial news reports, the criteria for who to freeze was quite vague. One source said
>The emergency orders require virtually every participant in the Canadian financial system — banks, investment firms, credit unions, loan companies, securities dealers, fundraising platforms and payment and clearing services — to determine whether they possess or control property of a person who is attending an illegal protest or providing supplies to demonstrators. If they find such a person in their customer list, they must freeze their accounts and report it to the RCMP or Canada’s intelligence service, the regulations say.
https://nationalpost.com/news/politics/emergencies-act-debat...
That understandably made some people concerned.
3. regardless of whether they're actually "peaceful, law-abiding citizens" or not, that's for the courts to decide, not the executive branch.
The social contract that citizens sign with their government doesn't guarantee them the right to untraceable global wealth. You have to use the currency of your nation to pay taxes and support your society.
The Russian oligarchs that have profited from decades of draining wealth from the Russian people are potentially able to move their money via crypto, and you see efforts to stop that as "worrisome"?
A world where currency isn't under the influence of nations is one where warfare is more likely to be waged by the oligarchs who feel none of the consequences.
Actually up until recently the social contract has anyone could put an anonymous coin into a newspaper box and pick up a news paper to read as much as they want without anyone knowing which articles they read and what they thought about them.
Now we live in a world where the very basic act of consuming media is meticulously analyzed by hundreds of entities and logged for all time and that massive and that obsessive stalking behaviour is making its way into all of our transactions as we switch to digital payments.
This wasn't the social contract I was born into and that goes the same for the current majority. I'm all for regulations that and actual enforcement of existing regulations against wealth people but don't try and tell me that the extension of digital surveillance to everyday little people transactions is anything more than a blatant power grab of unprecedented levels.
If you're a working-class slob, you get to pay 50%+ tax on every dollar you earn, and then get your after-tax money in your bank account frozen if you dare to contribute to a cause you believe in.
I do not consent to your fake contract that gets changed every couple years. No thank you.
Seems like these harmful and destructive use cases make most people hate crypto and despise its advocates.
Wouldn't it be better for avocates to demonstrate the good crypto can do instead of how it enables ignorance and catastrophe?
For example, how about crowdfunding bounties for Russian soldiers to surrender?
Since rubles are becoming toilet paper, how about one full bitcoin to each soldier who turns in his vehicle and weapons.
That might actually do some good and give crypto a more positive image among most people.
There are much more sustainable ways to deal with situations like the ones you quote… none of which require a complicated use case misusing technology to create the illusion of independence or decentralization.
For example, the peaceful cause you’re mentioning can be mitigated by providing better education and access to information for people in underdeveloped regions (e.g., clearly misunderstanding how medicine works or how to stage a peaceful protest).
> You might argue that this is a pretty lightly traded product these days so the evidence is weak, but this product used to be one of the dominant ETH products and exhibited the same behavior.
If in the past this was one of the dominants products, and now it is not, it could be because the market now cares _more_ than before about crypto-denominated wealth, and therefore stopped investing in it. Now, there are less people than before who prefer fiat-denominated. What are people trading these days mostly, and what does _that_ instrument tell in terms which denomination is preferred?
I will rephrase this to make it accurate: ->>except crypto as it was worthless in getting a loan.
becomes
->> except crypto as it was worthless in getting a lien against crypto.
In other words, they can't lien your 1000 ounces of gold coin you claim to have in your basement.
This is true. But crypto traded like a safe asset this time. As equities and even gold plummeted, Treasuries and crypto rallied.