# The impact of Bitcoin "Halving"



## Duke of Marmalade

Apparently the main driver of the bitcoin bounce is the "halving" expected around May 12th.  All the usual suspects are running countdown clocks and constantly reminding their gullible patrons of the boost to price from earlier halvings, even going so far as to justify this based on supply and demand arguments.  Really can't get my head around that.  The new supply is going to fall from 1,800 per day to 900 per day.  That is out of a total supply of 17,000,000.  Besides we have known about this halving coming for 11 years - the fact that the price ramps up in the few weeks before it actually happens is just another manifestation of the total irrationality of bitcoin pricing.

_Edited courtesy of clarification from tecate_


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## Brendan Burgess

Thanks for the update Duke.

Reminds me of the share splits during the dot.com bubble. 

A rumour that a company with a share price of $50 was going to issue one new share for every share held would result in a price rise.

And then the split would happen.

Instead of having one share worth $50, you would end up with two shares worth $60.

I remember a guy saying to me in all seriousness about a company he had invested in "One more share split, and I will be a millionaire".

With Bitcoin back at $9,000 maybe it's time to short it again.

Do I sell off some of my buy and hold shares to do so?

If the stock market crashes, will Bitcoin crash?  Or as it's "digital gold" maybe it will rise.

I wonder what event will trigger the realisation that it is a bag of hot air? 

Brendan


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## tecate

Firstly, for anyone reading this and unsure what the bitcoin halving is, here's an explanation.


Duke of Marmalade said:


> Apparently the main driver of the bitcoin bounce is the "halving" expected around May 20th.


It's May 12 your dukeness.  There was little talk of the halving coming out of the covid conundrum.  It was coming back up in any event.  Now that the halving is fast approaching, there has been more consideration of it.  However, I don't think that's in any way feverish.

On a more organic basis, towards the end of last month, we reached the latest milestone of in excess of 3 million bitcoin wallet addresses with a balance of more than 0.1 BTC.


Duke of Marmalade said:


> All the usual suspects are running countdown clocks and constantly reminding their gullible patrons of the boost to price from earlier halvings, even going so far as to justify this based on supply and demand arguments. Really can't get my head around that.


This is a concept you're not used to Dukey - it's called Quantitative Tightening - not this Q.E. unlimited social experiment brought to you by the Fed/ECB/BoJ/BoE, etc.  Can you tell me please why anyone had to pay taxes all these years when it seems the ECB could have just printed this off?



Duke of Marmalade said:


> The new supply is going to fall from 3,600 per day to 1,800 per day. That is out of a total supply of 17,000,000. Besides we have known about this halving coming for 11 years - the fact that the price ramps up in the few weeks before it actually happens is just another manifestation of the total irrationality of bitcoin pricing.


The notion of an efficient market hypothesis is a fair point.  Some believe it's priced in - and some don't.  However, you're wrong to single out the bitcoin market for irrationality given what we're seeing right now in the conventional markets.  The worst jobs figures ever are released and the market goes up!  The conventional markets are the greatest live example of irrationality right now - powered by hopium and magic money.



			
				Brendan Burgess said:
			
		

> Reminds me of the share splits during the dot.com bubble. A rumour that a company with a share price of $50 was going to issue one new share for every share held would result in a price rise. And then the split would happen. Instead of having one share worth $50, you would end up with two shares worth $60. I remember a guy saying to me in all seriousness about a company he had invested in "One more share split, and I will be a millionaire".


It's an interesting anecdote Brendan but it betrays a misunderstanding of the bitcoin halving.  The halving is Quantitative Tightening.  Bitcoin miners expend energy and resources in confirming bitcoin transactions.  A reward of 12.5 BTC is provided every ten minutes for the confirmation of blocks of transactions.  As of block 630000 (expected to be reached on May 12), that reward is cut in half to 6.25 BTC.

It's a case of reduced supply.  If we assume the same demand as pre-halving, reduced supply is likely to induce an upward pressure on price (albeit not immediately afterwards).  That's the opposite of the analogy that you present with.


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## Duke of Marmalade

tecate said:


> Firstly, for anyone reading this and unsure what the bitcoin halving is, here's an explanation.
> 
> It's May 12 your dukeness.  There was little talk of the halving coming out of the covid conundrum.  It was coming back up in any event.  Now that the halving is fast approaching, there has been more consideration of it.  However, I don't think that's in any way feverish.
> 
> On a more organic basis, towards the end of last month, we reached the latest milestone of in excess of 3 million bitcoin wallet addresses with a balance of more than 0.1 BTC.
> 
> This is a concept you're not used to Dukey - it's called Quantitative Tightening - not this Q.E. unlimited social experiment brought to you by the Fed/ECB/BoJ/BoE, etc.  Can you tell me please why anyone had to pay taxes all these years when it seems the ECB could have just printed this off?
> 
> 
> The notion of an efficient market hypothesis is a fair point.  Some believe it's priced in - and some don't.  However, you're wrong to single out the bitcoin market for irrationality given what we're seeing right now in the conventional markets.  The worst jobs figures ever are released and the market goes up!  The conventional markets are the greatest live example of irrationality right now - powered by hopium and magic money.
> 
> 
> It's an interesting anecdote Brendan but it betrays a misunderstanding of the bitcoin halving.  The halving is Quantitative Tightening.  Bitcoin miners expend energy and resources in confirming bitcoin transactions.  A reward of 12.5 BTC is provided every ten minutes for the confirmation of blocks of transactions.  As of block 630000 (expected to be reached on May 12), that reward is cut in half to 6.25 BTC.
> 
> It's a case of reduced supply.  If we assume the same demand as pre-halving, reduced supply is likely to induce an upward pressure on price (albeit not immediately afterwards).  That's the opposite of the analogy that you present with.
> 
> 
> Fill yer boots.
> 
> 
> Entirely speculative on my part but I suspect that the steaming mess in the conventional markets has not ended - and will play out over the coming weeks/months.
> 
> 
> I thought this was ground we'd already covered but apparently not.  Bitcoin crashed hard in those market panic conditions only to recover later.   Gold crashed in those market panic conditions only to recover later.  People have ran the numbers.  Over its 11 year history, bitcoin has largely been uncorrelated with the conventional markets.  As it stands today, it is once again, the best performing asset class in 2020 - as it was in 2019 and as it has been over the course of the last decade.
> 
> In a note to clients on Thursday, Chris Wood - Global Head of Equity Strategy with Jefferies  (the world's 9th largest investment bank) - wrote this:
> 
> _"Investors should own both gold *& Bitcoin*... [BTC] should be a source of diversification... its decentralized nature... [&] fixed supply, makes it a hedge vs central bank manipulated fiat $."_
> 
> I guess he and his clients are the latest in a long list of 'greater fools'.
> 
> 
> I ponder a similar question but yet one that is the antithesis of yours =>  'How long will it take for yourself and his Dukeness to get to that Eureka! moment?  The one that goes along the lines of an understanding that bitcoin is hard digital money which is divisible, censorship resistant and digital gold (or an uncorrelated asset class in it's own right).


Ahh!  Nothing to beat a good bitcoin slanging match to pass the time 
Thanks for the clarification on the Big Date _tecate_, I have updated my post.  I have also corrected the effect of the halving which will be a mere drop of 900 a day in the supply of new bitcoin which the miners dump as soon as they have wiped off the dirt.  If that can have a pricing effect when the existing supply is 17,000,000 it is a very strange dynamic indeed.  Of course the halving is influencing the price but not because of fundamental supply/demand dynamics but because of all the hype stirred up by the Coindesks of this world.


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## Brendan Burgess

Tecate

I am trying to get my head around this.

There are 17m Bitcoins in existence.
The limit is set at 21m (?)
1,800 a day are issued at the moment, so the annual number increases by about 700k
From next month, the annual increase will be reduced to 350k.

This is part of a programme set out when Bitcoin was started, so it's not news.

So, if you assume that Bitcoin is worth $9,000 today, how much, if at all, should the halving change its value?   I appreciate that there are many other factors affecting its value, but I just want to isolate the impact of the halving, all other things being equal.

Brendan


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## tecate

Brendan Burgess said:


> The limit is set at 21m (?)


Brendan, the last bitcoin will be minted on May 7, 2140 - with the controlled limit set at 21 million.



Brendan Burgess said:


> So, if you assume that Bitcoin is worth $9,000 today, how much, if at all, should the halving change its value?   I appreciate that there are many other factors affecting its value, but I just want to isolate the impact of the halving, all other things being equal.


Bitcoin's 'monetary policy' is an open book.  It's been set out from the genesis block onwards.  I assume that your point is that an efficient market hypothesis should apply and that this should be priced in already.  Perhaps it is.  And perhaps its (comparatively) meager market capitalisation of $163 billion is indicative that most people don't give a stuff about it and have not given it proper consideration (in which case maybe its not).

We've touched upon this subject in the past i.e. determining the fair value of bitcoin.  The fact is that it remains in price discovery mode as its not a mature asset class yet.  There are no models that have been developed for bitcoin in determining its fair market value - other than Stock to Flow (which has been used for gold and other commodities) - but that only considers supply side and not the demand dynamic.

*Net Positive Demand Required to Maintain BTC Price - Pre & Post Halving*
As regards the halving itself, here's a sample calculation showing before and after.  For the sake of the example, we are assuming that a price of $9,000/BTC is to be maintained.


Pre-halving: 144 blocks/day × 12.5 BTC/block × $9,000 = $16.2 million
Post-halving: 144 blocks/day x 6.25 BTC/block x $9,000 = $8.1 million

There would need to be net positive demand to the value of $16.2 million/day to maintain a bitcoin price of $9,000.  Post halving, there would need to be a net positive demand of $8.1 million/day to maintain a bitcoin price of $9,000.


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## Duke of Marmalade

tecate said:


> There would need to be net positive demand to the value of $16.2 million/day to maintain a bitcoin price of $9,000.  Post halving, there would need to be a net positive demand of $8.1 million/day to maintain a bitcoin price of $9,000.


IMHO the vast majority of bitcoin supply/demand is speculative. So the whole 17m x $9k constitutes supply/demand. The physical change in supply/demand driven by the halving is about 1 in 20,000 of existing natural supply/demand.  That has no implications for price.
But it does have implications for price not because of physical supply/demand considerations but because of the hype generated by those who benefit from enabling and therefore promoting bitcoin speculation. Lock them up!


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## Brendan Burgess

tecate said:


> *Net Positive Demand Required to Maintain BTC Price - Pre & Post Halving*
> As regards the halving itself, here's a sample calculation showing before and after. For the sake of the example, we are assuming that a price of $9,000/BTC is to be maintained.
> 
> 
> Pre-halving: 144 blocks/day × 12.5 BTC/block × $9,000 = $16.2 million
> Post-halving: 144 blocks/day x 6.25 BTC/block x $9,000 = $8.1 million
> 
> There would need to be net positive demand to the value of $16.2 million/day to maintain a bitcoin price of $9,000. Post halving, there would need to be a net positive demand of $8.1 million/day to maintain a bitcoin price of $9,000.



That analysis might apply to potatoes or oil.  If the supply doubles, the price halves. 

But it wouldn't apply to houses.  Let's say that there are 1m houses in Ireland and we build 50 every day. If we build 100 per day, the price of houses won't halve. 

So if there is a stock of 17m bitcoin and it increases by 864, it is increasing the supply.  If the "demand" remains the same, the price should go down.

Brendan


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## tecate

Duke of Marmalade said:


> IMHO the vast majority of bitcoin supply/demand is speculative. That has no implications for price.


To suggest that supply is speculative is wholly inaccurate.  It's all set out in the bitcoin whitepaper.  Now the supply of Euro's and dollars - that's completely speculative because from one second to the next, there's no way you can tell me how many €/$ have been printed off and are in circulation.



Duke of Marmalade said:


> The physical change in supply/demand driven by the halving is about 1 in 20,000 of existing natural supply/demand.  That has no implications for price.


That's either a deliberate misrepresentation or a misunderstanding of bitcoin supply.  It's exactly as I set out above.  Right now (to continue to support a price of $9,000) - people have to go out onto the market and buy $16.2 million bitcoin each day.  That's to support the price standing still at $9,000.  As of block 630000 (most likely from May 12) onwards, people need to go out onto the market and buy half that - i.e. $8.1 million of bitcoin each day to support the price standing still at $9,000.  You can say what you want about the demand variable but if we were to make the assumption that the demand rate today holds and remains unchanged (neither goes up nor goes down) after the halving, that's likely to have an upward pressure on price.



Duke of Marmalade said:


> But it does have implications for price not because of physical supply/demand considerations but because of the hype generated by those who benefit from enabling and therefore promoting bitcoin speculation. Lock them up!


Again this hype narrative.  Firstly - insofar as I am aware, it's your good self that brought up the halving here.  You have expressed your disgust for the crypto media - so presumably this is something you heard about in the mainstream press or mainstream financial media.  Are you accusing them of hyping this (if so, to what end?)? You think it could possibly be that it's a newsworthy event in financial media?

People that engage with bitcoin have an interest in it - because despite your tantrum - it's a significant event.  However, having followed this space over many years, I can tell you that the hot steaming mess in the conventional markets and the fallout from markets that were already overpriced (covid is just the trigger - not the actual problem) is what everyone in crypto circles is truly looking at.
- The 'hype machine' consists of governments and central banks of a whole host of countries - take your pick but the current hotspots - Lebanon, Iran, Venezuela, Zimbabwe, Argentina, Turkey, Sudan, etc.  - who've  evaporated the life savings of ordinary people via hyper-inflation (through mismanagement or corruption).
- The 'hype machine' consists of those governments and banks that steal from people's savings through bail-ins - eg. Greece, Cyprus, etc.
- The 'hype machine' consists of the inequity that's brought about by QE - which disproportionately favours the wealthy.  We saw it in 2008 and we're seeing it again right now.
There is no central office to pimp bitcoin.  Once people understand the proposition, it doesn't need any pimping. 



Brendan Burgess said:


> That analysis might apply to potatoes or oil.  If the supply doubles, the price halves.


I don't think you're grasping this Brendan.  Supply is not doubling.  Supply is being cut in half as of block 630000/May 12.



Brendan Burgess said:


> But it wouldn't apply to houses.  Let's say that there are 1m houses in Ireland and we build 50 every day. If we build 100 per day, the price of houses won't halve.


Once again, supply is being cut in half - not increased by 100%.



Brendan Burgess said:


> So if there is a stock of 17m bitcoin and it increases by 864, it is increasing the supply.  If the "demand" remains the same, the price should go down.


If a net positive $16.2 million is spent right now each day on newly minted bitcoin and that $16.2 million is spent each day AFTER the halving (when 50% less new bitcoin is being issued), it's likely to induce an upward price movement as a scarce asset becomes scarcer still.


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## Duke of Marmalade

tecate said:


> To suggest that supply is speculative is wholly inaccurate.  It's all set out in the bitcoin whitepaper.  Now the supply of Euro's and dollars - that's completely speculative because from one second to the next, there's no way you can tell me how many €/$ have been printed off and are in circulation.
> 
> 
> That's either a deliberate misrepresentation or a misunderstanding of bitcoin supply.  It's exactly as I set out above.  Right now (to continue to support a price of $9,000) - people have to go out onto the market and buy $16.2 million bitcoin each day.  That's to support the price standing still at $9,000.  As of block 630000 (most likely from May 12) onwards, people need to go out onto the market and buy half that - i.e. $8.1 million of bitcoin each day to support the price standing still at $9,000.  You can say what you want about the demand variable but if we were to make the assumption that the demand rate today holds and remains unchanged (neither goes up nor goes down) after the halving, that's likely to have an upward pressure on price.
> 
> 
> Again this hype narrative.  Firstly - insofar as I am aware, it's your good self that brought up the halving here.  You have expressed your disgust for the crypto media - so presumably this is something you heard about in the mainstream press or mainstream financial media.  People that engage with bitcoin have an interest in it - because despite what your tantrum - it's a significant event.  However, having followed this space over many years, I can tell you that the hot steaming mess in the conventional markets and the fallout from covid is what everyone in crypto circles is truly looking at.
> 
> 
> I don't think you're grasping this Brendan.  Supply is not doubling.  Supply is being cut in half as of block 630000/May 12.
> 
> 
> Once again, supply is being cut in half - not increased by 100%.
> 
> 
> If a net positive $16.2 million is spent right now each day on newly minted bitcoin and that $16.2 million is spent each day AFTER the halving (when 50% less new bitcoin is being issued), it's likely to induce an upward price movement as a scarce asset becomes scarcer still.


This is Alice in Wonderland stuff.  The supply of bitcoin is increasing daily.  That rate of increase halves on May 12.  It is still increasing.


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## tecate

Duke of Marmalade said:


> This is Alice in Wonderland stuff.  The supply of bitcoin is increasing daily.  That rate of increase halves on May 12.  It is still increasing.


You're misrepresenting this.  We're talking about the active ongoing supply of newly minted bitcoin onto the market.  The rate of *supply* reduces by 50% on May 12.  This is bitcoin minted by bitcoin miners - who expend resources each and every day to confirm transactions on the bitcoin blockchain.  They need to cover substantial costs and make a profit.  Ergo, all of this bitcoin finds its way onto the market on an ongoing basis.  That supply to the market will be cut in half come May 12.  As of May 12, there will be a supply shock to the market.  

Leaving all other factors aside, the rate of supply of bitcoin is a fundamental part of bitcoin price discovery right now. It's a significant component in how the current price has been arrived at.  All other factors being equal, cut that supply in half and its likely to have an upward pressure on price.


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## Gordon Gekko

Am I missing something? Whatever’s happening is common knowledge and should therefore be reflected in the price.


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## Duke of Marmalade

tecate said:


> You're misrepresenting this.  We're talking about the active ongoing supply of newly minted bitcoin onto the market.  The rate of *supply* reduces by 50% on May 12.  This is bitcoin minted by bitcoin miners - who expend resources each and every day to confirm transactions on the bitcoin blockchain.  They need to cover substantial costs and make a profit.  Ergo, all of this bitcoin finds its way onto the market on an ongoing basis.  That supply to the market will be cut in half come May 12.  As of May 12, there will be a supply shock to the market.
> 
> Leaving all other factors aside, the rate of supply of bitcoin is a fundamental part of bitcoin price discovery right now. It's a significant component in how the current price has been arrived at.  All other factors being equal, cut that supply in half and its likely to have an upward pressure on price.


That’s were we differ.  To me the supply of bitcoin to the price dynamic is the whole stock of existing bitcoin especially as most of it was purchased for speculative purposes.  To you the supply is just what is mined.


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## tecate

Duke of Marmalade said:


> That’s were we differ.  To me the supply of bitcoin to the price dynamic is the whole stock of existing bitcoin especially as most of it was purchased for speculative purposes.  To you the supply is just what is mined.


Your dukeness, YOU brought up the halving - and the halving is all about the ongoing supply of bitcoin onto the market from miners.  You can scream blue bloody murder (as you have been for over 2 years now) about what the price of bitcoin should be.  The fact of the matter is that it's around $9,000 today - and the ongoing daily supply of newly minted coins onto the market is a very important constituent in that price formation.  If 50% less bitcoin is being dumped onto the market each day, that affects the supply dynamic....which in turn (leaving any other factors aside)...is likely to have the effect of upward pressure on price.

I can't clarify it any plainer than that.


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## tecate

Gordon Gekko said:


> Am I missing something? Whatever’s happening is common knowledge and should therefore be reflected in the price.


It may very well be.  However, that's not a given.  Markets are not 100% efficient - in the same way the conventional markets don't in any way reflect current economic conditions today.  We're talking about a piddly little market with a market capitalisation of $163 billion that most as of yet are not paying full attention to.  It's a market that's years off maturation yet.  You say it's priced in.  I say that we'll find out over the course of the next 12 months.


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## Brendan Burgess

Hi tecate

Your analysis makes absolutely no sense to me.  

You seem to be distinguishing between newly mined BTC and existing ones?  But are they not the same thing? 

If I buy a BTC today, it won't matter to me whether it was one of the original ones mined 10 years ago or a new one mined yesterday. 

There were 17m yesterday. Today, there are 17m and 864. That is an increase and not a decrease. 

Brendan


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## Brendan Burgess

tecate said:


> If a net positive $16.2 million is spent right now each day on newly minted bitcoin and that $16.2 million is spent each day AFTER the halving (when 50% less new bitcoin is being issued), it's likely to induce an upward price movement as a scarce asset becomes scarcer still.



But I can buy any of the 17,000,864 and not just the freshly mined ones?  I am not limited to the ones mined yesterday. 

What you are saying is the equivalent of "If you want to buy a house in Ireland, you can only buy a house built yesterday". 

So there were 100 houses built yesterday and with 10,000 eager buyers, the price would be quite high.
If they announce that on May 12th, there will be only 50 houses built every day, the price should rise as the demand won't change. 

But if we knew about that for the last ten years, then house prices should be very high today in anticipation of the reduced supply from 12th May.

Brendan


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## Brendan Burgess

tecate

Try pressing the reset button.

If you could look at your arguments as a third party with no preconceptions,  you would see how bizarre they really are. 

Or at least, document your arguments in your diary. It will be very instructive for you to look back at them in a few years and you will wonder how you couldn't see through them.

Brendan


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## Brendan Burgess

I have looked for some independent analysis of this.

The Independent quotes only Bitcoin fanatics.

Forbes have two articles, but I can't access them:

Prominent Investor Says Halving won't have a big impact...
How the Halving will impact Bitcoin's Price and production.

Bloomberg explains it well but reaches no conclusion

Tecate - have you found any sceptical analysis of the price impact? 

Brendan


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## Duke of Marmalade

_tecate_ You must be concerned that btc is testing it’s Fibonacci Retracement levels


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## JSnowWinterfell

Objectively.....If I own a manufacturing business producing exercise bands and sell them for $100 today, if tomorrow I only receive $50 for them, my profitability is severely impacted. 

Bitcoin 'miners' are businesses and from 12th May their BTC revenue will be cut in half, so they need to validate more transactions to earn the same amount of BTC. The concept of BTC planned for a BTC world, it wasn't intended that the price of Bitcoin still being quoted in terms of dollar. 

The dollar value of BTC is speculative with many factors, I don't think you can cleanly strip out the price impact of the halving given the market variables, but as pointed out is does make for a good story to attract investors.


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## tecate

Brendan Burgess said:


> Your analysis makes absolutely no sense to me.


And the reason for that Brendan is that you are approaching consideration of the bitcoin halving all the while saying to yourself that bitcoin doesn't have one redeeming factor.


Brendan Burgess said:


> You seem to be distinguishing between newly mined BTC and existing ones? But are they not the same thing?


You seem to believe that every one of the 17 million bitcoin are available to you right now - they're not!



Brendan Burgess said:


> But I can buy any of the 17,000,864 and not just the freshly mined ones?


No, you can't.  To suggest that every single bitcoin in existence is available to you right now is completely wrong.  You're going to buy my BTC that's in cold storage?  Good luck with that.
In any given day, when you look at the order books for leading exchanges and you aggregate the numbers, are you telling me that you have the opportunity to buy 17 million bitcoin?...because you don't.
There's 170,000 tonnes of gold in the world (above ground).  Are you trying to tell me that if you go out onto the gold markets today, all 170,000 tonnes are available to you to buy?  Are you trying to tell me that if its annual production supply - which averages out at 2,700 tonnes/year -  increases or decreases, this has no effect on the price of gold?



Brendan Burgess said:


> I am not limited to the ones mined yesterday.


You are not limited to the ones that were minted yesterday BUT you do not have 17 million BTC available to you to buy....in the same way as there are not 170,000 tonnes of gold available for you to buy.  On the bitcoin and gold markets, I'm sure there are average weekly volumes as people move in and out of the market.  Now when it comes to newly mined coins, these are not going to be hoarded for any length of time.  Bitcoin mining businesses have significant costs - those bitcoin will find their way onto the market - that's inevitable.  Therefore, when you cut that production output, it's going to have an effect on the supply dynamic...and price (leaving the demand component aside...assuming equal demand rate pre and post halving).



Brendan Burgess said:


> What you are saying is the equivalent of "If you want to buy a house in Ireland, you can only buy a house built yesterday".


That's not what I'm saying.  What I am saying - and correcting you on - is that if the CSO tells us Ireland has a housing stock of 2 million, all 2 million are not available to you to buy when you present yourself as a buyer of irish property.  In the same way, when you tell me that 17 million bitcoin are available to you when you present yourself at a bitcoin OTC or crypto exchange, that's incorrect.



Brendan Burgess said:


> What you are saying is the equivalent of "If you want to buy a house in Ireland, you can only buy a house built yesterday".
> So there were 100 houses built yesterday and with 10,000 eager buyers, the price would be quite high.
> If they announce that on May 12th, there will be only 50 houses built every day, the price should rise as the demand won't change.
> But if we knew about that for the last ten years, then house prices should be very high today in anticipation of the reduced supply from 12th May.


This is a different point and it's been asked and answered.  You're saying that the bitcoin supply halving should be priced in (and the next halving in four years time, and the next one after that, etc.).  My position on that remains unchanged.  It's intuitive to me that it *should* be.  However, maybe it is or maybe it isn't.  We'll see over the course of the next 12 months.  Bear in mind that the conventional markets are not 100% efficient either. There's no way in the world that the markets as they stand today reflect the state of the world economy.



Brendan Burgess said:


> Try pressing the reset button.  If you could look at your arguments as a third party with no preconceptions,  you would see how bizarre they really are.


I've got the same proposal for yourself Brendan.  Let's see how you react to the above - because I'm already expecting you to say that you talk of gold and you talk of bitcoin in the context of supply but that's irrational because it's gold!  Tell me i'm wrong?  Tell me that you are not approaching this specific consideration without putting aside your own overriding bias (which is that Brendan believes that bitcoin is hot air and has no value).  In the context of this specific consideration, it doesn't matter your view - because there are enough of us out there that disagree.
If you want to make a list of my 'bizarre' beliefs surrounding bitcoin, by all means create another thread and lets go through them.  I'm a believer in the contrarian view - so by all means, lets hear it.



Brendan Burgess said:


> Or at least, document your arguments in your diary. It will be very instructive for you to look back at them in a few years and you will wonder how you couldn't see through them.


It's all documented here on AAM if I'm to suppose you keep paying for hosting 
I dare say that it will be very instructive to all of us.  Duke mentioned the venerable Paul Krugman in support of his argument yesterday.  I dare say it would be constructive for him to consider his view in 1999 that the fax machine would be the clear winner in terms of impact vs. the whole internet by 2005.

As regards what I 'can't see through' - I've identified shortcomings in crypto and bitcoin - that's all on record here.  There are issues that it still has to overcome.  However, as regards what you think I have not been able to 'see through', well that might be something for another thread.



Brendan Burgess said:


> I have looked for some independent analysis of this.
> The Independent quotes only Bitcoin fanatics.


Again with the bias.  How are the three people quoted 'fanatics'?  Lets go through them:
Danny Scott - CEO of CoinCorner - a UK Crypto exchange.  Scott has worked with CoinCorner - and thus in the industry - since 2014.  He's a contributor to Bitcoin Core (i.e. he submits code for consideration as part of Bitcoin Improvement Processes (BIPs).
Don Wyper, COO of crypto ATM network, Digital Mint.
Raoul Pal - Former Goldman Sachs Hedge Fund Manager; Founder of market research service, Global Macro Investor.

In the case of the first two, they work in the industry.  It's fair to assume that they have some belief in that industry.  However, you are the one that has added the prejudicial 'fanatics' tag.  You may not agree with them but they are well placed to comment on the bitcoin halving.
As for Raoul Pal, his background is in the conventional markets.  That's where he built his career - as a macro analyst - identifying seismic changes and innovations before the herd.  He didn't come up with crypto - but over the course of the last year he has become a strong supporter of the potential of bitcoin and cryptocurrency.



Brendan Burgess said:


> Tecate - have you found any sceptical analysis of the price impact?


There is one main consideration with regard to speculation on the halving and its one that has been discussed here - is it priced in or not?  There are differing views on that in the industry.
What you present with otherwise (see above) - that has not been mentioned by a soul - in the mainstream financial media's consideration of the halving or in the crypto media's reportage on the halving.



Duke of Marmalade said:


> _tecate_ You must be concerned that btc is testing it’s Fibonacci Retracement levels


Your dukeness, technical analysis tools such as the Fibonacci Retracement predate bitcoin and cryptocurrency.  They are used by day and swing traders in the traditional markets.  I don't have strong knowledge on their use and don't have strong opinions on technical analysis but if you want to have a go at that, then that's a separate discussion/argument - and one that I would suggest that would be equally if not more at home in the 'investments' sub-forum rather than 'alternative investments'.


----------



## Duke of Marmalade

It is difficult to get a precise handle on the supply/demand dynamic of the btc/$ exchange rate.  But let me try using the following facts.
There are 18.3m btc in existence (apologies for the fake news initiated by me that there are 17m)
There are c. 300,000 transactions per day on the blockchain
There are c. 1.800 new btc mined per day, due to fall to c.900 after the halvening
The two figures we are looking for but which are not available (so far as I can see) are:
How many of the 300,000 transactions represent exchange in or out of FIAT and what value does that represent?
How many of the newly mined btc are dumped on the market and how many are hoarded?
Here are my guesstimates but I could have them wildly wrong:
There would only be a limited amount of the transactions that would be purchasing latte so I would say that we could surmise that half are in fact exchanges with FIAT, that is 150,000 transactions.  What value?  $10K on average??  That's up to $1.5bn.
Let's say the miners dump half of their btc on the market that would roughly constitute say $10m per day, due to fall to $5m per day.
That is a 1 in 3,000 fall in the active FIAT/btc market - totally irrelevant.
What about the 18.3m btc (c. $200bn) in existence.  Like any liquid asset (shares for example)  they are all to some degree part of the price dynamic.  Some folk like _tecate _are attached at the hip to their btc and so they do not enter the dynamic.  But my view is that, to quote the same _tecate_, btc is in a formative phase and a great amount of these btc are held for speculative purposes and this would swamp any price impact of the newly minted coin.


----------



## Brendan Burgess

tecate said:


> To suggest that every single bitcoin in existence is available to you right now is completely wrong. You're going to buy my BTC that's in cold storage? Good luck with that.



Hi tecate

You are missing the point completely. 

I can buy   a Ryanair share today.  It does not matter if you don't want to sell yours, there are plenty of sellers. 

The price is determined by the total supply and demand. 

You seem to be suggesting or implying that the only supply is the newly mined BTC.   The newly mined BTC is an insignificant fraction of the total supply today.

Brendan


----------



## Brendan Burgess

I will say it again, BTC is not like potatoes.

If a drought halves the production of potatoes, the price will rise because there isn't a massive storage of them equal to 52 years production.

If we were able to store potatoes and keep them as good as new and we had 52 years production in the warehouses, a halving in the harvest would have no impact on the price. 

Maybe oil production would be a better comparison as we are more familiar with the price.   If Saudi cuts the supply, the  price rises and vice versa. 



Brendan


----------



## Brendan Burgess

You mentioned gold and I thought that was an interesting comparison. In theory , the price of gold should not be related to the mining output.  And in practice, it's not. 

However, you will see that some consultants produce data to show when there is a deficit or surplus of gold, but according to this author, they are flawed. 

He makes the point I am making but much better.



			https://seekingalpha.com/article/4311836-essence-of-gold-supply-and-demand-dynamics
		


Brendan


----------



## tecate

Duke of Marmalade said:


> It is difficult to get a precise handle on the supply/demand dynamic of the btc/$ exchange rate.  But let me try using the following facts.


The broader consideration of demand-side is one for another day.  However, looking at supply in more detail in this instance (since we're talking about a 50% cut in supply), then it's not difficult at all.  As of block 630000/May 12, bitcoin miners will receive 50% less BTC, creating a supply shock by comparison with what the market currently experiences.  The same thing happens 4 years from now and the same again 4 years from then.



Duke of Marmalade said:


> There are 18.3m btc in existence (apologies for the fake news initiated by me that there are 17m)


Don't fret yourself Dukey...if you or anyone here wants to check precisely how many bitcoin have been issued by a given time, you can find that information here.



Duke of Marmalade said:


> How many of the newly mined btc are dumped on the market and how many are hoarded?


When coins are mined, that process is carried out at substantial cost.  The crypto mining sector is now highly professional - with the involvement of substantial firms.  They may strategise as regards when they sell their bitcoin but for the most part, the vast majority - if not all - of those coins are going onto the market.  The sector couldn't sustain itself otherwise.



Duke of Marmalade said:


> Let's say the miners dump half of their btc on the market that would roughly constitute say $10m per day, due to fall to $5m per day.
> That is a 1 in 3,000 fall in the active FIAT/btc market - totally irrelevant.
> What about the 18.3m btc (c. $200bn) in existence.


Your thesis is fundamentally flawed from the outset.  Firstly, of the 18.3 million bitcoin, it's estimated that 4 million bitcoin are lost/unredeemable (as in the very early days when bitcoin was not valuable, people didn't take care to store their bitcoin properly).  I only mention that as an aside because it's incorrect to consider every single bitcoin in existence.  What is correct - is to consider circulating volume.  You can look at trading averages for example in the year leading up to this halving.  When the supply component within those parameters is reduced by 50% (in terms of newly minted coins), it's significant.



Duke of Marmalade said:


> Some folk like _tecate _are attached at the hip to their btc


That's not correct.  I do see the potential in the cryptocurrency - I've acknowledged both its plus points and its drawbacks right here on this forum.  That doesn't make me 'attached to the hip' to BTC.



Duke of Marmalade said:


> But my view is that, to quote the same _tecate_, btc is in a formative phase and a great amount of these btc are held for speculative purposes and this would swamp any price impact of the newly minted coin.


So there are speculators in every conceivable asset class.  Implicit in the Dukes thesis is the notion that everybody is lined up and ready to sell btc.  Bitcoin has been around for 11 years now.  In that time, it has had more than its fair share of shocks in terms of pricing.  It has proven its resilience.  Furthermore, it achieved the milestone of 3 million bitcoin wallets holding in excess of 0.1 BTC for the first time recently.  Therefore, it makes perfect sense to look at average supply/demand over the past year, consider the supply/demand quantities over that time and then consider the effect of the coming supply shock in that context - NOT against every single bitcoin ever issued.



Brendan Burgess said:


> You are missing the point completely.


I beg to differ - the inverse in fact.



Brendan Burgess said:


> You seem to be suggesting or implying that the only supply is the newly mined BTC.


I'm not.  See my explanation in response to Dukey above.



Brendan Burgess said:


> The newly mined BTC is an insignificant fraction of the total supply today.


Weighing it up against all bitcoin that were ever issued is likely to lead to a wayward calculation outcome.  It should be considered in terms of circulating bitcoin supply (again, as outlined above).



Brendan Burgess said:


> I will say it again, BTC is not like potatoes. Maybe oil production would be a better comparison.


I never mentioned a comparison with potatoes - so we don't need to go down that route.  
Equally, I don't think comparison with oil is useful in this instance (although at -$37/barrel, it's definitely in the same league as potatoes).



Brendan Burgess said:


> You mentioned gold and I thought that was an interesting comparison.


Bingo!



Brendan Burgess said:


> In theory , the price of gold should not be related to the mining output.  And in practice, it's not.


  Well, first off the bat, the reason that it's fitting to consider bitcoin alongside gold in this context is because gold is first and foremost a monetary metal.  That is to say that the vast bulk of its value is derived from a store of value use case.  That makes it an appropriate means of comparison with bitcoin.

As to your point that the price of gold isn't related to production output, that's not what most gold bugs believe insofar as I'm aware.  My understanding is that Stock to Flow modelling is used in the gold sector - as a tool to determine (ultimately) price.  The World Gold Council refers to the supply/demand dynamic here:

"_Like any freely-traded good or service, the price of gold is determined by the confluence of demand and supply_".  Thereafter, it goes on to consider production supply within the overall supply/demand dynamic as it relates to price .   That seems to do away with your theory that the gold sector doesn't take it into account when considering price.


Brendan Burgess said:


> However, you will see that some consultants produce data to show when there is a deficit or surplus of gold


Well, that citation above is from a report by the World Gold Council - a non-profit association of the world's leading gold producers and a market development organisation for the gold industry....not just any old consultant.



Brendan Burgess said:


> He makes the point I am making but much better.
> 
> 
> https://seekingalpha.com/article/4311836-essence-of-gold-supply-and-demand-dynamics


He may well be right.  He just needs to get the now $9 trillion gold industry on board with that.

Lets refresh ourselves as to how this discussion emerged in the first instance.  Dukey brought the bitcoin halving up for discussion - aghast at the notion of the halving and some peoples consideration that it might lead to upward pricing pressure going forward.  If the crypto sector is equally mistaken as the main proponents of and stakeholders in the $7 trillion dollar gold industry, I can live with that.

At the end of the day, I never expressed a view on price increases post halving.  What I will say right now is that over the longer term - a scarce asset becoming scarcer sounds bang on to me.  Gold and bitcoin are scarce assets.  Meanwhile, this is FIAT money => $$$$£££€€€€


----------



## Duke of Marmalade

Interesting stats on the demand for Gold from the World Gold Council.  Jewelry 61%, Investment 27%, Industrial 12%.  I do think that Gold is an Armageddon hedge, of which more later.
Compare this to the demand for bitcoin produced by the MSO.




_Speculation 89.1%
Buy to hold 6.1%
Bragging rights 2.9%
Criminal activity 1.5%
To buy things 0.4%_
Interestingly, the MSO splits investment between speculation and buy to hold (the _tecate's _of this world)
I myself was surprised at the small share attributed to criminal activity


----------



## Duke of Marmalade

I said I believed that Gold is a hedge against monetary Armageddon.  It has genuine intrinsic human value over the centuries and it is encouraging that insurance/investment demand at 29% possibly does not have too great a distorting affect on price.
So I ask myself why am I not availing of this insurance especially as we enter unchartered waters in monetary management.  A few reasons.
For a start to have meaningful insurance for my fixed income I would have to place all my investible assets in Gold.  I would be substituting balance sheet volatility in place of fear of Armageddon.  I can put the latter out of my head most times but I think I would be in a permanent state of anxiety if I were fully invested in Gold.
And how would I go about it?  I know there are Gold ETFs.  But a piece of paper saying I have so many units in an ETF has the same zero intrinsic value as an entry in my bank account or on a blockchain ledger.  True it purports to be tethered to Gold and I am sure it is.  But in an Armageddon scenario would I really be sure to get my hands on the Gold?  For me it would have to be a Gold bar (a v small one I assure you) buried in the back garden.  Not worth the effort.
Third point.  A monetary Armageddon in the Western world is likely to be accompanied by a real Armageddon - WWIII, just as the depressed economic conditions of the thirties was a contributory factor in WWII.  To paraphrase Barry Maguire what good would my Gold bar be with the world in a grave?


----------



## Leo

Brendan Burgess said:


> Forbes have two articles, but I can't access them:



A lot of the Forbes coverage falls into the hype bucket, much of it attempting to justify predictions of massive price rises based purely on comparisons of price movement patters with previous price spikes with no attempt to look at the drivers behind the spkies. 

On sceptical analysis, some commentators are concerned about the impact in mining profitability and increasing Chinese influence there, and in the specialist mining hardware too.


----------



## tecate

@Duke of Marmalade :  My understanding was that this was a discussion of the upcoming 'halving' event - you seem to be going off on a solo run on posts #28 & #29 but no matter.  Who is the MSO?

The suggestion is that gold has all sorts of use cases whereas bitcoin is just speculative, right?   Firstly, on the breakdown of use cases you provide, we have 88% between jewelry and investment.  Have a look through the World Gold Council's report and particularly, their section on jewelry.  They identify China, India & Turkey as accounting for the majority of gold jewelry demand.  They go on to explain that in these countries, gold jewelry is treated as a store of value and an asset within families.  These are not people who invest in gold ETFs.  Gold jewelry is their ETF and their investment.  Ergo - to my original point - when commentators say that gold is a 'monetary metal' - they mean that it's largely used as a store of value and an investment.   According to your stats, that's an 88% investment use case.

That brings us on to your comparison with bitcoin.  Bitcoin and digital assets are a new asset class.  That asset class is formative and bitcoins position within it is formative.  With any newly emerging technology or innovation, there will be speculation.  However, based on this and previous posts, you seem to treat speculative investment as if its wrong in some way - but only wrong to your mind when it comes to bitcoin.

Speculative investment is pervasive in every asset class.  Your comparative analysis is skewed as one data set itemises speculative investment (for bitcoin) and the other doesn't (for gold).  Are you going to tell us that there is no speculative interest in the gold market? - because there is.

Bitcoin brings the same value to the table as gold and then some.  Value is derived in both as they're scarce assets and a hedge against the FIAT money system.  Around the world, the FIAT money system vapourises the savings of ordinary people on an going basis.  Last week, we had the  going down the toilet and Lebanese banks preventing citizens from withdrawing their money.  Yesterday, yet another FIAT currency died.  The Iranian Rial has succumbed to hyperinflation and will be replaced by a new version (which, within months will be in the very same position).

It's for these reasons that the Global Head of Equity Strategy of a leading Investment bank advised his clients last week to buy bitcoin.  No doubt when they do so, their investment will go down as 'speculative' also.


----------



## Duke of Marmalade

tecate said:


> @Duke of Marmalade :  My understanding was that this was a discussion of the upcoming 'halving' event - you seem to be going off on a solo run on posts #28 & #29 but no matter.  Who is the MSO?


It wasn't moi who brought up the subject of gold.  You don't want me checking that all your posts are strictly addressing the title of the thread do you?  You mean you haven't heard of that respected organ the Marmalade Statistics Office?


----------



## tecate

Leo said:


> On sceptical analysis, some commentators are concerned about the impact in mining profitability.


At every halving there is a shake out in terms of miners.  Those using 2nd generation mining equipment and more expensive electricity will fold (although that may already have happened following the covid induced crash back in March).  After the shakeout, the mining hash rate will adjust back a bit - and the most efficient miners who remain will find themselves in more profitable conditions.



Leo said:


> and increasing Chinese influence there, and in the specialist mining hardware too.


The fear of mining centralisation has been a perennial subject in crypto and not something that's halving-centric as such.  I don't believe it represents the big risk to bitcoin that some suggest.  I'd be in agreement with Andreas Antonopoulos' view on it.  More recently, new mining hotspots have been emerging in New York State and the Pacific North-West of the U.S where there is abundant cheap and stranded hydro power.  In Texas, Japanese conglomerate SBI has invested in a large bitcoin mining project.  A company backed by Paypal co-founder Peter Thiel is investing $50 million in a solar/wind based mining project in the same state. 
The writer of the article that you cited is the head of mining operations at Genesis Mining - who base their mining operations in Eastern Europe.  It's probably not in his interests to talk up mining activity in China.


----------



## tecate

Duke of Marmalade said:


> It wasn't moi who brought up the subject of gold.


Gold was discussed in the context of the halving.


Duke of Marmalade said:


> You don't want me checking that all your posts are strictly addressing the title of the thread do you?


Do as you see fit, your dukeness.


Duke of Marmalade said:


> You mean you haven't heard of that respected organ the Marmalade Statistics Office?


I hadn't although I suspected it was a Marmalade statistic.  But good to get official confirmation


----------



## Brendan Burgess

Hi tecate

The fact that people speculate in gold which has a use and a value does not mean that it is ok to speculate in BTC. 

The only "value" in BTC is speculation. You are speculating that a greater fool will come along. 

Brendan


----------



## tecate

Brendan Burgess said:


> The fact that people speculate in gold which has a use and a value does not mean that it is ok to speculate in BTC.


Asked and answered many times already Brendan.  Gold is a *'monetary* metal'.  The value you speak of is peripheral (as in 12% peripheral).  Its actual value is scarcity.  Bitcoin's value is also scarcity (along with divisibility, censorship resistance, portability, global peer to peer transactability without the need/cost/interference of an intermediary).  It's programmable money - with designed in scarcity.



Brendan Burgess said:


> The only "value" in BTC is speculation. You are speculating that a greater fool will come along.


That's an opinion and not a fact.

You speak of the 'value' of gold.  Tell me - why is the price of gold so far removed from its production cost?  It's a store of value and a hedge against the conventional markets and FIAT monopoly money.  Explain how the World's 9th largest investment bank is advising its clients to buy both gold and bitcoin right now?


----------



## Brendan Burgess

Hi tecate

We had discussed gold extensively.  It has a real value because it has a use in industry and in jewelry.  I don't personally have much use for it myself.

If someone is recommending Bitcoin as a store of value, it's only because they have taken leave of their senses and they can't see through the mania. A lot of clever people are the same. 

Scarcity is not a reason for buying BTC. My poetry is scarce.  It doesn't make it valuable. 

Brendan


----------



## Duke of Marmalade

Brendan Burgess said:


> Scarcity is not a reason for buying BTC. My poetry is scarce.  It doesn't _necessarily _make it valuable.
> 
> Brendan


Ah _Boss_, you are too modest.  I have recommended a qualification.


----------



## Leo

tecate said:


> I don't believe it represents the big risk to bitcoin that some suggest.



I'd have thought people who put forward the argument of Bitcoin as a safe haven form meddling governments wouldn't have thought giving China such control was a good idea


----------



## tecate

Brendan Burgess said:


> We had discussed gold extensively.  It has a real value because it has a use in industry and in jewelry.


See above Brendan.  You're talking about a 12% use case for other purposes.  It is a monetary metal and its price reflects that.  Its price doesn't reflect the peripheral use cases you speak of - it's price reflects its use as a store of value.  If new sources of gold were found (not that I'd expect that to be a thing any day soon), the value of gold would plummet.  That relates to one of the cornerstones of value/currency - scarcity.



Brendan Burgess said:


> If someone is recommending Bitcoin as a store of value, it's only because they have taken leave of their senses and they can't see through the mania.


Again with the emotive and prejudicial turn of phrase.  What 'mania'?  We had a market bubble in bitcoin at year end 2017.  It's 2020 - and bitcoin has been around for 11 years.  Where's the mania?



Brendan Burgess said:


> Scarcity is not a reason for buying BTC.


Incorrect.  It's a core characteristic of what makes for sound money (alongside divisibility, portability, censorship resistance, durability, fungability, etc).  That you blatantly ignore the fundamental characteristics that are necessary to provide for sound money/store of value is your own shortcoming.



Brendan Burgess said:


> My poetry is scarce. It doesn't make it valuable.


Score your 'poetry' against the characteristics of sound money/store of value as per the chart below and see how it compares.  Then you'll have your answer.  It might actually rival FIAT.

*The Attributes of a Good Store of Value*​





(For anyone who would like to delve a little deeper into the characteristics of sound money, you can find that analysis here.)


----------



## tecate

Leo said:


> I'd have thought people who put forward the argument of Bitcoin as a safe haven form meddling governments wouldn't have thought giving China such control was a good idea


Indeed...and it's a question of how much 'control' they have.  Don't get me wrong, I'd encourage a greater distribution.  However, if you are saying that China can flip a switch and 'end' bitcoin this very day, that's not the case.  Could they cause short term temporary disruption? - sure.


----------



## Leo

tecate said:


> China can flip a switch and 'end' bitcoin this very day, that's not the case.



I think you underestimate their abilities. Whether they want to or not is the more important factor.


----------



## tecate

Leo said:


> I think you underestimate their abilities. Whether they want to or not is the more important factor.


You could well be right in both cases, Leo - quite happy to accept that.  I just don't see it as a concern this very day.  To your second point, the longer this goes on, the harder it becomes to snuff out bitcoin and cryptocurrencies.


----------



## Duke of Marmalade

*WARNING This post is not about the halvening.*



tecate said:


>


Care to givuz a source.  Just to see if there is a bias (as you are fond to accuse others of).  I see that Established History was thrown in, at which we all know Bitcoin is a bit of a dunce.  However, this could be a ruse to impress us of the objectivity of the exercise.  A few subjects were left out of the exam which are by no means negligible:

*Intrinsic value or tethered thereto* - this to me is the fatal flaw in bitcoin.  Paul Fax Machine Krugman agrees as do most eminent economists.  I am aware that bitcoin enthusiasts don't rate this. Nonetheless the fact this subject wasn't even on the exam suggests heavy bias on the part of the compilers
*Price stability
Possibility of going to zero or thereabouts* (I have noticed that those in the investor community who recommend btc as an uncorrelated asset invariably do a CYA and concede that it could go to zero)
*General acceptability* as a transaction currency
*Sustainable low transaction costs* (watch the fees balloon after a few more halvenings, maybe even after this one)


----------



## tecate

Duke of Marmalade said:


> *WARNING This post is not about the halvening.*


That's very perceptive of you, your Dukeness - impressive.  Indeed it's not.  However, it is in response to a post on this thread - which wasn't about the halving....just as I responded to your post...which wasn't about the halving.  Thanks for helping to clear that up.



Duke of Marmalade said:


> Care to givuz a source.


Indeed I do care to provide a source - it's at the very end of the post.



Duke of Marmalade said:


> Just to see if there is a bias (as you are fond to accuse others of).


Ah, we need to verify that?  Well the evidence is stacking up against you, your Dukeness.  You took issue with my last post not being halving related and conveniently skipped over the previous couple of posts by another contributor (the posts that I responded to) and yet you have no commentary for them on the matter.  Could it be that it's because they support your equally skewed view of the world as it relates to bitcoin and crypto?



Duke of Marmalade said:


> A few subjects were left out of the exam which are by no means negligible:
> Price stability
> Intrinsic value or tethered thereto
> General acceptability as a transaction currency


Discussed in the analysis.


Duke of Marmalade said:


> Possibility of going to zero or thereabouts (I have noticed that those in the investor community who recommend btc as an uncorrelated asset invariably do a CYA and concede that it could go to zero)


You mean like oil?  No, that's a mistake - it can't be like oil because oil goes into minus money.  Bitcoin ticks a hell of a lot of boxes but even it can't stretch to that.  No, I guess you mean the currency that died yesterday - the Iranian Rial.  Or was it the FIAT currency and banking system that hit rocks last week - The Lebanese Pound?  Hell, we have not got all day.  Let's not go through them all - as it is a case of going through them all as ALL FIAT currencies fail at one point or another - with the average lifespan being 27 years.  You mentioned the CYA which comes with ALL investment products.  Tell me - do they provide that warning for Euros, Lebanese Pounds and other sorts of monopoly money?



Duke of Marmalade said:


> Sustainable low transaction costs (watch the fees balloon after a few more halvenings)


Well, firstly - have you and your fellow travellers not been telling us that bitcoin is going to zero?  If that's the case, how would this be a thing?  Let me help you with that just in case anyone 'has lost leave of their senses' and doesn't at the very least accept the opposite as a possible outcome...
Systems surrounding bitcoin (i.e. exchanges and exchange infrastructure) are much improved since the last market high.  I expect that they will perform better next time round.  Furthermore, a layer 2 solution in the form of Lightning Network continues to emerge.  The eco-system surrounding bitcoin and crypto continues to be built out.  This will all play a part in terms of transaction fees.

Just for kicks, here's an example of a bitcoin transaction fee - .  Tell me this....what would AIB or BoI charge for that type of transfer?  I mean, there is the €100,000 banking guarantee to be bought n' paid for so I wouldn't be so mean as to expect it to cost any less than $0.68 cents.


----------



## Duke of Marmalade

tecate said:


> Indeed I do care to provide a source - it's at the very end of the post.


And to be fair it makes its bias clear - it is headed The Bullish Case For Bitcoin

The rest of your post indicates that you might have misinterpreted the thrust of my post - it happens.
I was not seeking your written answers on the subjects - I am well aware of what they would be.  I was merely pointing out that some very important subjects were omitted from the exam. 
I see now that the bias was unashamedly upfronted in the source though there may be others like me who would have missed this key point in your post.


----------



## tecate

Duke of Marmalade said:


> And to be fair it makes its bias clear - it is headed The Bullish Case For Bitcoin


Hilarious!  This is your critique of the guy's analysis?  Bravo!  If that's the best you can muster. If you were approaching this discussion with any objectivity, you'd go through his analysis and critique it.  I guess you're not capable of that.



Duke of Marmalade said:


> The rest of your post indicates that you might have misinterpreted the thrust of my post - it happens. I was not seeking your written answers on the subjects - I am well aware of what they would be.


You want to silence me?  Eh, no - respectfully - no.  And anyone shouldn't want that.  Anyone should be able to walk away from a public discussion having seen all facets and sides to it - and go away and make up their own mind.  



Duke of Marmalade said:


> I was merely pointing out that some very important subjects were omitted from the exam.


Except - as I pointed out - but it seems you're not happy with - he has addressed them in his analysis.  Please read it and go through it.



Duke of Marmalade said:


> I see now that the bias was unashamedly upfronted in the source though there may be others like me who would have missed this key point in your post.


Hilarious!  The guy carried out his analysis and that's his take away.  If you truly believe in discussion (rather than trying to lord it over someone with your smart alec comments), then you'd go through his analysis and point out the inaccuracies (if that's what you believe).


----------



## Duke of Marmalade

I was pointing out that the graphic was misleading, very misleading in its glaring omissions.  I don't think that is smart alicky.  
I will as you recommend read the source, though I cannot in any way pretend to do so with an open mind on the subject no more than I would have an open mind on an article with a headline proclaiming evidence of the existence of the tooth fairy.


----------



## tecate

Duke of Marmalade said:


> I was pointing out that the graphic was misleading, very misleading in its glaring omissions.


As a store of value, it doesn't have glaring omissions.  The items you brought up refer to day to day currency use - and as I informed you, he covers those items in the study itself.  The graphic is not a stand alone item.  It comes part and parcel with his analysis.



Duke of Marmalade said:


> I will as you recommend read the source, though I cannot in any way pretend to do so with an open mind on the subject no more than I would have an open mind on an article with a headline proclaiming evidence of the existence of the tooth fairy.


If you have a genuine interest in discussing the topic, then that's very much within your ability.  You may however choose not to  - that's a personal decision.

Essentially, what you are saying is that you don't like the conclusion that he had arrived at.  If he had arrived at the conclusion that digital assets and currencies are rubbish, then you wouldn't even bring this up.  If you find deficiencies in his work and his analysis - kindly point them out.  Disprove his thesis  - have at it.  As it stands right now, what you came up with - they're items that he covers in the analysis.  They're items largely that implicate a day to day transactional currency as opposed to a store of value (which his graphic specifically addresses).


----------



## Bronte

Based on this thread I think I'm going to buy a load of tulip bulps from the Dutch as an investment in these uncertain times.


----------



## tecate

Bronte said:


> Based on this thread I think I'm going to buy a load of tulip bulps from the Dutch as an investment in these uncertain times.


That old chestnut hasn't been rolled out since 2017 and the 'blockchain not bitcoin' mantra from the banks.  Tell me this - how long did 'tulipmania' last?  And for bonus points, how do tulips score in terms of the fundamental characteristics of a good store of value below?






An oil futures contract around about now would be perfect for you.  How about some crisp Iranian Rials?

Mischaracterise to your hearts content.


----------



## Duke of Marmalade

Bronte said:


> Based on this thread I think I'm going to buy a load of tulip bulps from the Dutch as an investment in these uncertain times.


Better than bitcoin for sure.  But how are you going to store them?


----------



## Bronte

Duke of Marmalade said:


> Better than bitcoin for sure.  But how are you going to store them?


Well you know me and my preferences, I’m heading for more bricks and mortar when the recession kicks in. Ups and downs and still property stands.


----------



## Bronte

tecate said:


> That old chestnut hasn't been rolled out since 2017 and the 'blockchain not bitcoin' mantra from the banks.  Tell me this - how long did 'tulipmania' last?  And for bonus points, how do tulips score in terms of the fundamental characteristics of a good store of value below?
> 
> 
> 
> 
> 
> 
> An oil futures contract around about now would be perfect for you.  How about some crisp Iranian Rials?
> 
> Mischaracterise to your hearts content.


If I were O’Leary even an oil futures contract, however tempting,  is no good when faced with grounded planes for a future of no determinate length.

I’ve no skin in the Bitcoin game/pyramid/word that would be unacceptable/trend/sure thing/investment. But you clearly do.


----------



## tecate

Bronte said:


> If I were O’Leary even an oil futures contract, however tempting,  is no good when faced with grounded planes for a future of no determinate length.


I guess the irony was lost on you but as a rebuttal to your 'tulipmania' jibe, a reminder to people here that the world changes.  When was the last time an otherwise solid asset class not only goes to zero but goes well beyond zero.



Bronte said:


> I’ve no skin in the Bitcoin game/pyramid/word that would be unacceptable/trend/sure thing/investment.


Another one with the tar and feathers out with your 'pyramid' and 'sure thing' reference.  I mean, it's far easier to go with snide remarks than to actually elaborate and demonstrate/prove your point (if you even have one).  Your 'pyramid' reference is just as empty as your 'tulipmania' reference - but believe that if you want to.  Everyone can make up their own minds.



Bronte said:


> But you clearly do.


If by that you mean do I think that blockchain technology and cryptocurrencies (in some cases - in conjunction with the emergence of AI/5G/IoT) - can be a positive development for society, I most certainly do.

If that 'skin in the game' refers to my firm belief that whilst the current monetary system served its purpose during its era but that we can do better for the benefit of society as a whole, then you better believe it.  And by that I mean that cryptocurrency can provide a means for ordinary people to retain their wealth in the event that a central bank screws up (which sooner or later they invariably always do).

If on the back of that, you are trying to identify some issue in my contributions here if I believe that and also hold BTC (which I do), then I don't see that as a disqualifier in any way. shape or form.  Why would it?  You think if I was to have some sort of affect on people's view of bitcoin here, that's going to matter a jot from an investment point of view?  Bitcoin is a globally accessible digital asset, with a $160 billion + market capitalisation.  I also hold a number of other cryptocurrencies (which don't have a digital gold/money use case) which I've never mentioned here.  I mean, I'm really doing a remarkable job of shilling those here, right?  (if that's the inference).

But I'm not the only one here with 'skin in the game'.  The early proponents of bitcoin are often disliked (and bitcoin along with them) by some as they hold the opposite socio-political view.  Committed statists who are fundamentally against a plan b for oftentimes inequitably run FIAT currencies.  That's another form of skin in the game.  I couldn't care less if they change their opinion.  These are our very own fax machine people.

Everyone else can make up their own minds but for me, bitcoin is the native digital currency of the internet and the people's money.


----------



## Duke of Marmalade

Brendan Burgess said:


> My poetry is scarce.
> 
> Brendan


_Boss_ you may have found the missing link Satoshi was desperate for. If you do launch a new coin tethered to your poetry you will have to undertake to halve your creativity every so often.


----------



## Duke of Marmalade

So I have read Mr Boyapati's promo of bitcoin.


			
				Vijay Boyapati said:
			
		

> Bitcoins are not backed by any physical commodity, nor are they guaranteed by any government or company, which raises the obvious question for a new bitcoin investor: why do they have any value at all? Unlike stocks, bonds, real-estate or even commodities such as oil and wheat, bitcoins cannot be valued using standard discounted cash flow analysis or by demand for their use in the production of higher order goods. Bitcoins fall into an entirely different category of goods, known as monetary goods, whose value is set game-theoretically. I.e., each market participant values the good based on their appraisal of whether and how much other participants will value it.


I don't think I could have put it better myself. *"each market participant values the good based on their appraisal of whether and how much other participants will value it"*  exactly as Mr Fax Machine and the vast majority of mainstream economists have argued.  It is pure speculation as to what the other speculators will speculate - a game.  As soon as the satoshi drops that it is a BOHA it goes to zero, a risk that even the enthusiasts admit exists.

*"Bitcoins are not backed by any physical commodity, nor are they guaranteed by any government or company, which raises the obvious question for a new bitcoin investor: why do they have any value at all? " * Indeed.  And it is the question that I ask. But the question doesn't even appear on the exam paper!  In fact there are two key questions here, *intrinsic value *and *government backing*.  Bitcoin would of course have scored an F on both and maybe for bitcoin enthusiasts those would be good scores on these questions.
Having looked at the exam paper again I think I would probably agree with the allotted scores but as I have repeatedly said I agree with the mainstream view that since it is tethered to nothing that is a fatal flaw.  

It is like applying for a STEM course and handing in your Leaving Cert and the university asks "where are your maths resuts?".  Oh, I'm hopeless at maths, didn't bother sitting that exam.


			
				Vijay said:
			
		

> Scarcity is perhaps the most important attribute of a store of value as it taps into the innate human desire to collect that which is rare. It is the source of the original value of the store of value.


The _Boss_' poetry is scarce.  That is not trying to be smart alicky but it is my riposte to your Mr Fax Machine riff.


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## Leo

tecate said:


> To your second point, the longer this goes on, the harder it becomes to snuff out bitcoin and cryptocurrencies.



I think there's a risk that the pandemic is accelerating the move away from cash to contactless payments and centralised digital currencies like China are rolling out. Such moves may make it more difficult to cash out of cryptos, as you still can't really use them to buy stuff, any significant increase in restrictions on cashing out could lead to a collapse.


----------



## Duke of Marmalade

_tecate _you are wont to roll out Lebanon, Venezuela, Zimbabwe etc.  in your demonisation of FIAT.  Let me pose a similar question.  Do you think an official  police force is good for society?  Of course, you may say no - there are those in the bitcoin community who appear to be of an anarchist persuasion.  In which case ignore the rest of this post.
So if you have reached thus far I take it that you do think an official police force is a good, nay necessary, thing in a modern society.  But it is very clearly open to abuse.  Indeed one can cite many instances where it has been grossly abused; interestingly the Venn intersection of these instances with your own FIAT rogues' gallery is far from the empty set.
By analogy I put it to you that a well functioning FIAT currency can be very beneficial, nay necessary, for society and the fact that it is open to abuse and has indeed been abused should not mean that we should abandon it.


----------



## Bronte

tecate said:


> That old chestnut hasn't been rolled out since 2017 and the 'blockchain not bitcoin' mantra from the banks.  Tell me this - how long did 'tulipmania' last?  And for bonus points, how do tulips score in terms of the fundamental characteristics of a good store of value below?
> 
> 
> 
> 
> 
> 
> An oil futures contract around about now would be perfect for you.  How about some crisp Iranian Rials?
> 
> Mischaracterise to your hearts content.


BTW I love your chart.  Hands up I've no clue what it means.  But I do know what real money is.  What is funible? And is Fiat cars or something else? I suppose now that's probably a very stupid question.


----------



## tecate

Duke of Marmalade said:


> So I have read Mr Boyapati's promo of bitcoin.


Again with the bias with your 'promo' jibe.  As outlined to you previously, you don't like the conclusion that he arrived at - so you kick up with this prejudicial nonsense.



Duke of Marmalade said:


> I don't think I could have put it better myself. *"each market participant values the good based on their appraisal of whether and how much other participants will value it"*  exactly as Mr Fax Machine and the vast majority of mainstream economists have argued.  It is pure speculation as to what the other speculators will speculate - a game.


So let me get this straight.  You are surprised when market participants determine the value of something?  What of it?



Duke of Marmalade said:


> As soon as the satoshi drops that it is a BOHA it goes to zero, a risk that even the enthusiasts admit exists.


Ok, so we're 11 years in - how long more will this realisation take and people reach your higher level of thinking?  Will the Euro have managed to weather its next crisis by then?  I can more than accept bitcoin going to zero as a possibility (albeit a very unlikely one).  To exactly the same point, do you accept that the Euro could come to an end over the next couple of years (just like it almost did in the aftermath of the last financial crisis)?  Do let us all know your thoughts on that.



Duke of Marmalade said:


> *"Bitcoins are not backed by any physical commodity, nor are they guaranteed by any government or company, which raises the obvious question for a new bitcoin investor: why do they have any value at all? " * Indeed.  And it is the question that I ask. But the question doesn't even appear on the exam paper!


What are you talking about?  You're saying it's not considered yet you're quoting from the guys own analysis.  Pure brilliance.



Duke of Marmalade said:


> In fact there are two key questions here, *intrinsic value *and *government backing*.  Bitcoin would of course have scored an F on both and maybe for bitcoin enthusiasts those would be good scores on these questions.
> Having looked at the exam paper again I think I would probably agree with the allotted scores but as I have repeatedly said I agree with the mainstream view that since it is tethered to nothing that is a fatal flaw.


Firstly, the graphic deals with the properties of a store of value as opposed to a means of exchange/transactional currency.  There is a distinction.  And before you claim otherwise, he still discusses all three functions of money (Means of Exchange, Unit of Account and Store of Value) in the complete analysis - and all facets implicated by those functions.

His analysis is tainted it seems (because he had the misfortune to arrive at a conclusion that you are diametrically opposed to).   outlining their six characteristics of money (as opposed to a store of value) as Divisibility, Portability, Acceptability, Durability, Scarcity and Stability.  Where's the mention of intrinsic value and government backing?
And other than that, are you a hypocrite much - or only on this subject?  You're walking around with FIAT money in your pocket that has NO intrinsic value.  On government backing, what comfort is that to the holders of every FIAT currency that has ever failed?  (and they all fail eventually - given that the average lifespan of a FIAT currency is 27 years).  We've had 2 of them fail in the last 10 days alone!
Should the euro be dissolved within the next couple of years (which is a real possibility) and your euros are converted into Punt Nua's, the value of your wealth is going to take a major haircut.  What does your government backing stand for in this situation?  I'll tell you - nothing! There was considerable discussion here on AAM ten years ago on that very subject.  People were scrambling to open bank accounts in Germany/Holland/Belgium.  No-one mentioned anything about government backing.

And by the way, we had this yesterday =>


			
				Brendan Burgess said:
			
		

> Scarcity is not a reason for buying BTC


Even the Federal Reserve agrees that scarcity is a fundamental characteristic of store of value and money.



Duke of Marmalade said:


> The _Boss_' poetry is scarce. That is not trying to be smart alicky but it is my riposte to your Mr Fax Machine riff.


 And this betrays a total lack of understanding.  I invited him to examine his proposed money or store of value against the other essential characteristics.  Scarcity is fundamental - but not without holding its head above water with regard to the other essential characteristics of money/store of value.
And the point I made about Krugman and his fax machine is equally valid for yourself and Brendan. There's no doubt that he's a scholar of one particular school of economics (Keynesian).  I'm sure that serves him well in the Keynesian economics gravy-train. However, the fax machine incident betrays a total lack of understanding of technological impact.  That's significant in this discussion - not just because you decided to underpin your argument with his opinion.  It's significant because blockchain/crypto/bitcoin is new found innovation which is in the foundational stages of disrupting all manner of aspects of finance.  Everything doesn't just stay the same.  FIAT may have served us reasonably well but that doesn't mean that it isn't fundamentally flawed and that we shouldn't look to improve and consider alternatives (or provide those that manage FIAT with motivation not to screw up!).
Many people have a difficult time appreciating the value of a digital currency given that you can't see it, you can't touch it.  The irony is that you can do those things with a euro note but all it is - is a bacteria-riddled promissory note made of cotton.  Bitcoin may not be backed by a physical good but its integrity is locked in by its code as it's programmable, decentralised money.  It can't be tampered with - whereas you can print off FIAT money to your hearts content.
Digital money is only one of the technological changes we're seeing.  There are other facets of technology that are already in the process of having a fundamental effect on the FIAT monetary system.  Given his fax machine howler, I certainly wouldn't trust Krugman in his consideration of how new forms of technology and innovation impinge on finance and monetary systems.



Leo said:


> I think there's a risk that the pandemic is accelerating the move away from cash to contactless payments and centralised digital currencies like China are rolling out. Such moves may make it more difficult to cash out of cryptos, as you still can't really use them to buy stuff, any significant increase in restrictions on cashing out could lead to a collapse.


China is a totalitarian regime.  So they're much more likely to go with a full court press against bitcoin than other governments.  But no matter  - there are all sorts of twists and turns in the road over the next few years where crypto and regulation is concerned.  I still liken it to the war on drugs.  A government can go in with both feet and they will surpress it in the short term.  However, whatever chance they have at controlling it out in the open, in the longer game, they won't ever be able to stop it.  More so than the actions of governments, I think its far more important that innovators in the space manage to find a way to make it easier to use - that's a bigger issue (if it's to be used on a mass market basis).



Duke of Marmalade said:


> _tecate _you are wont to roll out Lebanon, Venezuela, Zimbabwe etc.  in your demonisation of FIAT.


I've recognised that FIAT has (and continues) to serve society - but I've also recognised its flaws (or rather the flaws of the people implicated in managing it).  On the flip side, you can't manage to be objective about it (and the same re. bitcoin).



Duke of Marmalade said:


> _tecate _you are wont to roll out Lebanon, Venezuela, Zimbabwe etc.  in your demonisation of FIAT.  Let me pose a similar question.  Do you think an official  police force is good for society?  Of course, you may say no - there are those in the bitcoin community who appear to be of an anarchist persuasion.  In which case ignore the rest of this post.
> So if you have reached thus far I take it that you do think an official police force is a good, nay necessary, thing in a modern society.  But it is very clearly open to abuse.  Indeed one can cite many instances where it has been grossly abused; interestingly the Venn intersection of these instances with your own FIAT rogues' gallery is far from the empty set.
> By analogy I put it to you that a well functioning FIAT currency can be very beneficial, nay necessary, for society and the fact that it is open to abuse and has indeed been abused should not mean that we should abandon it.


The political stuff I'm not getting in to as for the purposes of this discussion, it's pointless (and in your case, it's clouding your ability to be objective when it comes to consideration of bitcoin).  However, to your point on a 'well functioning FIAT currency', see my comments on FiAT above.  FIAT isn't the issue in principal.  People are always the variable.  The expectation is that we should trust someone when it comes to FIAT money.  Sooner or later, that will fall apart.  It's for precisely that reason that the average lifespan of a FIAT currency is 27 years.  It's for that reason we have inflationary systems as a stealth tax against ordinary people (as they don't understand it and its implications).  It's for that reason we have QE that has proven to be totally inequitable - favouring the pigs with their snouts closer to the trough.

On the flipside, Satoshi recognised this problem and in designing bitcoin, he/she assumed the principal of trustlessness from the outset.  Don't trust - verify.  Decentralised programmable money can't be screwed with in the way that FIAT money is being tampered with. Government backing is the last thing it needs in achieving that.


----------



## Duke of Marmalade

Replied twice


----------



## tecate

Bronte said:


> BTW I love your chart.  Hands up I've no clue what it means.  But I do know what real money is.  What is funible? And is Fiat cars or something else? I suppose now that's probably a very stupid question.


I trust you're happy with your contributions here.   It seems to have been really worthwhile...we all learnt so much.


----------



## Leo

tecate said:


> However, whatever chance they have at controlling it out in the open, in the longer game, they won't ever be able to stop it.



True, but if they stop real money going in or out, then it doesn't matter what share of whatever crypto you have, it's all worthless. To the Duke's point on societal benefit, if cryptos ever take off to a point where they threaten government management of their finances, their ability to fund social welfare, etc., the clamp down will be quick and hard.


----------



## Brendan Burgess

"fungible" is a very important concept.

The euro in your pocket is the same as the euro in mine.

Or as Wictionary defines it : Able to be substituted for something of equal value or utility; interchangeable, exchangeable, replaceable. 

I have no idea why Bitcoin is less or more fungible. 

Could it have something to do with the fact that newly mined BTCs are, in some way, different from the original ones?

Brendan


----------



## tecate

Leo said:


> True, but if they stop real money going in or out, then it doesn't matter what share of whatever crypto you have, it's all worthless.


There's no doubt that consideration of this is important, Leo.  I'm fully attentive to this.  There's a couple of things here though.  China is one single jurisdiction.  Bitcoin doesn't respect borders.  Perhaps if all governments came together (and it would have to be all), then they can snuff it out.  I don't see that being possible. 
There's no doubt but that the virus has prioritised central bank digital currencies (CBDCs).  At the start of the Covid shítshow, Pilosi tried to get an emergency bill through the house that also included provision for a digital dollar.  One thing that they've found lacking is the ability to get funds out to citizens fast in the midst of a crisis/pandemic.  Other than that, nobody wants to touch those bacteria/virus infested notes anymore.  The Chinese have upped their schedule for the development of their own CBDC.  However, these are still not likely to be used at a retail level any day soon. 

If you mean that they already have electronic centralised payment systems like Wechat, etc. - sure.  But as this develops, who's to say that people will take their money out of the crypto system or even want to?  Bitcoin's volatility may be an issue that's only going to stabilise over many years (as it's market capitalisation continues to expand and it goes through the iterative process of price discovery).  However, alongside Bitcoin, stablecoins are another tool that can be used.  Over the past couple of months, stablecoins have grown in market capitalisation by a few billion. 



Leo said:


> To the Duke's point on societal benefit, if cryptos ever take off to a point where they threaten government management of their finances, their ability to fund social welfare, etc., the clamp down will be quick and hard.


That eventuality is many years away should it ever happen.  And it may never happen.  It may be that cryptos serve a complementary role alongside FIAT currency (and as a motivator for CBs and governments not to screw up).  However, if we ever get to that scenario you mention, then there are other ways that taxes can be structured.  We have IoT coming down the tracks also.  The technology is there to move to pay per use taxation systems.  But...that's a long term consideration.

This is significant - more-so in terms of those who speculate on crypto and in the developmental timetable for crypto.  They will never kill it completely - but they could hold it up.  That's why - to my mind, making bitcoin/crypto far more usable for ordinary people is the bigger issue.


----------



## tecate

Brendan Burgess said:


> The euro in your pocket is the same as the euro in mine.


For the most part although there are some exceptions.  You might have difficulty at times in using a €500 euro note.  A government might withdraw a particular note from circulation (eg. India last year and their sudden withdrawal of 500 and 1000 rupee notes) - which kind of made it hard to exchange!  Try using a NI or Scottish £10 note in England or in a Bureau de Change overseas.



Brendan Burgess said:


> I have no idea why Bitcoin is less or more fungible. Could it have something to do with the fact that newly mined BTCs are, in some way, different from the original ones?


With cash, there's no knowledge of where it's been.  It could have been used to finance a drug deal or some other illicit practice.  With bitcoin, there is pseudo-anonymity but the blockchain itself is totally transparent.  The irony here is that people tar and feather bitcoin as being the tool of criminals when in actual fact, law enforcement agencies love it - as unlike cash, it's traceable.

For me personally, I don't give a fiddlers where my cash or bitcoin has been before it arrived in my possession.  However, for the regulatory world, it's not something they like.  For this reason, institutions pay a premium for virgin/newly minted bitcoin. 
This needs to be addressed in bitcoin from a privacy standpoint anyway  - regardless of perception surrounding fungibility.  To that end, there are proposed code improvements waiting in the wings to deal with this.  However, bitcoin development improvement processes move at a snails pace and are done by consensus.  That will be resolved but there will be a wait.


----------



## Leo

tecate said:


> Perhaps if all governments came together (and it would have to be all), then they can snuff it out. I don't see that being possible.



It is all hypothetical and I don't see it happening any time soon, and if it was to require all governments to take action, I think we'll agree the likelihood of that ever happening is slim to none. However, it's not as far-fetched to imagine the US getting spooked about loss of control, or China's growing influence enough to see them ban their institutions from allowing money to flow into or out of crypto. If that were to happen, it's going to be very difficult for anyone living there to get into or out of crypto.


----------



## tecate

Leo said:


> However, it's not as far-fetched to imagine the US getting spooked about loss of control,


I couldn't agree with you more.  Look how spooked they got at the Libra hearings last year.  And yet, people think Libra is dead but it's gone back to the drawing board, revised and will come back again.
In the case of a decentralised crypto, it's not as straightforward.  The decision to take a full court press strategy is not one they will take lightly. They may go from some control to zero control as it could backfire completely.



Leo said:


> China's growing influence enough to see them ban their institutions from allowing money to flow into or out of crypto. If that were to happen, it's going to be very difficult for anyone living there to get into or out of crypto.


They already have a ban in place.  They're changing tact as it suits them or as they try to deal with it - going back and forth.  They told miners to get out...now they're not.  They've banned exchanges effectively - although there are a couple of exchanges they seem to be turning a blind eye to.

As regards getting into or out of crypto, to my previous point, perhaps they won't want to get in and out of it - and can work on two tiers...the first one with their government approved money and the second track being with the money people keep in the crypto ecosystem.  Like I said, it doesn't just consist of bitcoin - there are stablecoins in existence also.  This article seems to support that development already.
Here's another thing to consider....if we accept that ultimately (and this may take quite some time yet at retail level), we're going to have digital CBDCs...isn't it going to be harder to prevent exchange from one digital form into another?
To your general point, nobody knows for sure how this game will pan out - we'll find out over the next few years but from what I can see in the short term, bitcoin won't face that adversity - and in the meantime, the ecosystem continues to be built out and its network effect continues to develop.


----------



## Leo

tecate said:


> As regards getting into or out of crypto, to my previous point, perhaps they won't want to get in and out of it - and can work on two tiers...the first one with their government approved money and the second track being with the money people keep in the crypto ecosystem.



But if they face restrictions on converting their government approved money to crypto how do they buy in, and if this money is locked within the crypto ecosystem with no way out, it's not money any more. 



tecate said:


> Here's another thing to consider....if we accept that ultimately (and this may take quite some time yet at retail level), we're going to have digital CBDCs...isn't it going to be harder to prevent exchange form one digital form into another?



I think it would actually be much easier, controls in a digital system are just code. You can't control who I hand a tenner to with code. With a centralised digital currency, the central authority will have complete control on what it can be used for, who it can be transferred to, etc..


----------



## tecate

Leo said:


> But if they face restrictions on converting their government approved money to crypto how do they buy in, and if this money is locked within the crypto ecosystem with no way out, it's not money any more.


Well, how are they doing that right now with a ban in place?  And perhaps it's not a case of buying in.  Perhaps it's a case of the exchange of goods and services for proper (decentralised) digital currency.  You have a concern about money being locked within decentralised crypto.  As every day passes, that becomes less of a concern for me.  As I said, there isn't just Bitcoin.  There's a range of cryptocurrencies and in particular, stablecoins.

So I guess my point is that - sure, it's a totalitarian regime and they can push it back - but it's peer to peer money - I'm not sure how they can prevent its use.



Leo said:


> I think it would actually be much easier, controls in a digital system are just code. You can't control who I hand a tenner to with code. With a centralised digital currency, the central authority will have complete control on what it can be used for, who it can be transferred to, etc..


I'm a bit hazy as to how this pans out - in the same way as when I considered Libra when it was proposed last year, I wondered about the ability to trade it back and forth with decentralised crypto.  I'm unsure how this pans out - in the Chinese context.  Could decentralised exchanges be used?  If it's being tracked and it gets blacklisted somehow, can mixing services be used.  I have no idea.  So - your point is valid - but we'll have to wait for it to come out to see for sure what the nature of chinese CBDC is like in practical terms.

We don't know how people will start to react to totalitarian-friendly CBDCs either.  It could end up being the greatest on-boarding initiative for decentralised currency.  Who knows.


----------



## Duke of Marmalade

tecate said:


> So let me get this straight.  You are surprised when market participants determine the value of something?  What of it?


Are you deliberately missing my point?  Vijay described it as "an entirely different category of goods...whose value is set game-theoretically".  I'm a simple sort of fella but I interpret that is meaning that the bitcoin price is determined in a sort of game between the participants where they try to second guess each other.




> Ok, so we're 11 years in - how long more will this realisation take and people reach your higher level of thinking?


The lowest form of wit.



> What are you talking about?  You're saying it's not considered yet you're quoting from the guys own analysis.  Pure brilliance.


And getting lower.  
I thought you were following the metaphor.  The "exam" is the list of questions you posted under the title "The Attributes of a Good Store of Value".  And you didn't see fit to include intrinsic value or government management?  To be fair to Vijay he did not have that title on his graphic and it was fair enough in context.




> Firstly, the graphic deals with the properties of a store of value as opposed to a means of exchange/transactional currency.


 Intrinsic value and government management are very relevant to "store of value" IMHO.


> And other than that, are you a hypocrite much - or only on this subject?  You're walking around with FIAT money in your pocket that has NO intrinsic value.


I explained how it was tethered to the real economy in what you described as a long winded and off topic way.  I will not repeat it. I did not regard a picture of bank notes in a Lebanon street as a refutation of my assertion no more than I would regard a picture of some third world police brutality as proof of the evils of policing for my society.


----------



## tecate

Duke of Marmalade said:


> Are you deliberately missing my point?  Vijay described it as "an entirely different category of goods...whose value is set game-theoretically".  I'm a simple sort of fella but I interpret that is meaning that the bitcoin price is determined in a sort of game between the participants where they try to second guess each other.


Game Theory is the study of mathematical models and would be entirely relevant in the design of a decentralised digital currency. What's your problem with it?



Duke of Marmalade said:


> The lowest form of wit.


Oh no you don't, _il duca_.  Brendan split this thread off from another one.  In that original thread, there were two complaints from others about your smarmy arrogant commentary (one was removed - the other one is still there).  So on that basis, I don't care for this particular grievance of yours. What's good for the goose...



Duke of Marmalade said:


> And getting lower.


See above.



Duke of Marmalade said:


> And getting lower. I thought you were following the metaphor. The "exam" is the list of questions you posted under the title "The Attributes of a Good Store of Value". And you didn't see fit to include intrinsic value or government management?


I don't care for your faux nomenclature.  The graphic clearly is a comparison of BTC, Gold and FIAT from the point of view of the attributes of a good store of value.  As regards the consideration of 'intrinsic value' and 'government management', show me where those 2 items are set out by the Federal Reserve in their consideration of such characteristics ?



Duke of Marmalade said:


> To be fair to Vijay he did not have that title on his graphic and it was fair enough in context.


It was explained to you that the graphic is part and parcel of the overall analysis.  It appears within it - under a section titled _'The attributes of a good store of value'._



Duke of Marmalade said:


> Intrinsic value and government management are very relevant to "store of value" IMHO.


In the case of the first one, you're a hypocrite - because right now in your wallet you have Euro notes that have NO intrinsic value - nada.  Other than that, the Federal Reserve disagrees with you - the writer of that analysis disagrees with you and I disagree with you.  Provide an authoritative independent citation that includes these two characteristics as fundamental to the formation of a store of value.



Duke of Marmalade said:


> I explained how it was tethered to the real economy in what you described as a long winded and off topic way. I will not repeat it. I did not regard a picture of bank notes in a Lebanon street as a refutation of my assertion no more than I would a picture of some third world police brutality as proof of the evils of policing for my society.


Ahh...we're back to the wrong type of FIAT money again!  Brilliant.  I think you need to think that through a bit more.  What you are saying is that you could have a FIAT in one country and a similar FIAT in another country and depending on who's in the monetary wheelhouse, it may or may not have intrinsic value based on that?  Yeah, that makes complete sense!


----------



## Duke of Marmalade

tecate said:


> The graphic clearly is a comparison of BTC, Gold and FIAT from the point of view of the attributes of a good store of value.  As regards the consideration of 'intrinsic value' and 'government management', show me where those 2 items are set out by the Federal Reserve in their consideration of such characteristics ?





			
				The Feds said:
			
		

> Last year, you sold your game system to your friend Jimmy for $125 in cash. You’ve been saving that money in a shoebox under your bed. You are saving the money to buy a new computer next year. What is the primary function of money exhibited here? (Store of value)


I include this to put in context the level of explanation of money that we might expect from your link.  The tether to the real economy which I explained (badly) would I think be a tad over the head of someone who is expected to stash their money in shoe boxes under their beds.  Heck, you found it difficult to understand your good self.

Anyway, amongst the 6 attributes of money your link cited were _acceptability _and _stability_.  I see Vijay dropped these two from his graphic.  Bitcoin would certainly be bottom of the class on these two subjects - no, no I am not accusing Vijay of bias.

A key instrument in _stability _is the integrity of the balance sheet of the banking system - that lending is for credible economic purposes.  This is the tether to the real economy which I tried to explain and which you refuted by showing pictures of bank notes in a Lebanon street.  I do not live in the Lebanon.


			
				The Feds said:
			
		

> Who’s largely responsible for ensuring that people continue to trust that our currency is valuable? (The Federal Reserve)


Ooops!  I've had my Fax Machine moment.  I was wrong about "government management" - indeed I agree with you that that could be a bad thing.  I meant to say it was managed by a central institution independent of government but endowed with powers to achieve its main aim of maintaining stability in the price level.


----------



## Firefly

tecate said:


> Bitcoin and digital assets are a new asset class.


I believe you have made this point more than once. Bitcoin is on the go for about 9-10 years. It received widespread coverage 18 months ago in relation to its value. 

Would you mind telling us when you think it will no longer be "new"? An approximate year would suffice.


----------



## Leo

tecate said:


> Well, how are they doing that right now with a ban in place?  And perhaps it's not a case of buying in.  Perhaps it's a case of the exchange of goods and services for proper (decentralised) digital currency.



With difficulty where bans are in place I'd imagine. I still don't see much evidence of any broad adoption for buying goods or services. With the lack of real options there, the lack of guarantees about being able to retrieve money from cryptos will put a lot of people off.



tecate said:


> So I guess my point is that - sure, it's a totalitarian regime and they can push it back - but it's peer to peer money - I'm not sure how they can prevent its use.



Pretty much every developed nation restrict access to certain portions of the internet, totalitarian regimes take that a lot further. China tolerate a certain amount of VPN usage that bypasses the great firewall, but they can and do occasionally restrict that access. 



tecate said:


> I'm a bit hazy as to how this pans out - in the same way as when I considered Libra when it was proposed last year, I wondered about the ability to trade it back and forth with decentralised crypto.  I'm unsure how this pans out - in the Chinese context.  Could decentralised exchanges be used?



I haven't seen full specs of the Chinese offering, I doubt the full details will ever be made public. But they could very easily restrict or block use of their centralised currency based on the user's Social Credit Score as the already do with interest rates on credit for example (j-walk, your loan rate goes up!)



tecate said:


> We don't know how people will start to react to totalitarian-friendly CBDCs either.  It could end up being the greatest on-boarding initiative for decentralised currency.  Who knows.



Very true, perhaps China might leverage it's position over developing nations to force them on-board. I wouldn't be jumping on board with those, but people will always take risks where they believe there might be money to be made.


----------



## Duke of Marmalade

tecate said:


> Oh no you don't, _il duca_.  Brendan split this thread off from another one.  In that original thread, there were two complaints from others about your smarmy arrogant commentary (one was removed - the other one is still there).


It's a well known feature of these internet debates that the "winner" attracts accusations of arrogance whilst the "loser" gets sympathy votes.  Both have been observed in this debate. At the personal insult level I couldn't care less but from the point of view as to who is making the most persuasive argument I prefer to be on the arrogant receiving end.


----------



## Firefly

tecate said:


> *The Attributes of a Good Store of Value*​
> 
> 
> 
> 
> 
> 
> (For anyone who would like to delve a little deeper into the characteristics of sound money, you can find that analysis here.)



In the picture above Bitcoin scores an A for "Censorship Resistant". Doesn't seem right to me given what you are saying below..



tecate said:


> With cash, there's no knowledge of where it's been.  It could have been used to finance a drug deal or some other illicit practice.  With bitcoin, there is pseudo-anonymity but the blockchain itself is totally transparent.  The irony here is that people tar and feather bitcoin as being the tool of criminals when in actual fact, law enforcement agencies love it - as unlike cash, it's traceable.


----------



## Firefly

Leo said:


> It is all hypothetical and I don't see it happening any time soon, and if it was to require all governments to take action, I think we'll agree the likelihood of that ever happening is slim to none. However, it's not as far-fetched to imagine the US getting spooked about loss of control, or China's growing influence enough to see them ban their institutions from allowing money to flow into or out of crypto. If that were to happen, it's going to be very difficult for anyone living there to get into or out of crypto.


With it being traceable n'all


----------



## tecate

Duke of Marmalade said:


> I include this to put in context the level of explanation of money we might expect from your link.


From the bizarre to the sublime...
I see - the link - which is from the Federal Reserve (a CB which you are the champion of - not me!) - is below your standards?  Sure, that makes sense.

Clearly, it's an example of someone using dollars for the _purpose_ of a store of value.  Who's suggesting it's a good store of value though!!?? As per your fax machine guy and the Keynesian monetary policy he spouts and we're all currently stuck with, poor little Jimmy is getting screwed and he doesn't even know it - with the few per cent inflation each year that comes off of the value of his $125. Have a look at that graphic/comparison again there Dukey...I think you'll find that little Jimmy needs to take a hard look at his choices in life (He's obviously been led astray by some condescending tool along the way).



Duke of Marmalade said:


> The tether to the real economy which I explained would I think be a tad above someone who is expected to store his money in shoe boxes.


Clearly, little Jimmy isn't going to understand it - most people don't really appreciate the stealthy effects of inflation when they try to use FIAT money as a store of value.  Little Jimmy doesn't understand how the intrinsic value was taken out of FIAT money when they dropped the actual gold standard at Bretton Woods in 1944 and the USD based gold standard in 1971.  That's the point at which FIAT stopped having intrinsic value.



Duke of Marmalade said:


> Heck, you found it difficult to understand your good self.


What I understood was that whilst what you had written was very interesting, it had nothing to do with intrinsic value.  If the gold standard was in effect, then it would have intrinsic value. Without it, it doesn't.



Duke of Marmalade said:


> Anyway, amongst the 6 attributes of money it cited _acceptability _and _stability_.  I see Vijay dropped these two from his graphic.


You seem to have a comprehension difficulty.  Boyapati produced a graphic that itemised the characteristics of a good store of value.  The items from the other list relate to good money (as in transactional money).  Although related, there is a distinction between the two and the characteristics between the two.  So it's not a case that Boyapati 'dropped' them.  He discusses both items in the course of his analysis.

Under the section titled _'The Evolution of Money'_,  he has listed the stages in the evolution of money.  No.3 is that of Medium of Exchange.  It comes into play once that money is established as a store of value.  As I've mentioned in umpteen posts over the past week, bitcoin is at a formative stage in terms of its development as Digital Gold and a store of value in it's own right.  Covered in the same section is the question of stability.  Ergo, once established as a store of value, volatility drops.  So you're quite happy to accuse Boyapati of bias (because of your own) by conveniently overlooking this detail.  He didn't 'drop' anything.



Duke of Marmalade said:


> no, no I am not accusing Vijay of bias.


See above - you were but that's been exposed for what it is (your own bias).



Duke of Marmalade said:


> A key instrument in _stability _is the integrity of the balance sheet of the banking system - that lending is for credible economic purposes.  This is the tether to the real economy which I tried to explain and which you refuted by showing pictures of bank notes in the Lebanon.  I do not live in the Lebanon.


And I'll explain to you again - FIAT money has not had any intrinsic value since the dropping of the gold standard.  It's covid infested cotton.  On a good day, it can be used as a means of exchange.  On a bad day, it could end up discarded in the gutter as per that picture I posted of a Caracas street).



Duke of Marmalade said:


> Ooops!  I've had my Fax Machine moment.  I was wrong about government management - indeed I agree with you that could be a bad thing.  I meant to say it was managed by central institution independent of government with the main aim of maintaining stability in the price level.


You're more than welcome to link to any authoritative source to back up your claims....or I guess 'any' source would be useful.  Whenever you're ready - in your own time your Dukeness.



Duke of Marmalade said:


> It's a well known feature of these internet debates that the "winner" attracts accusations of arrogance whilst the "loser" gets sympathy votes. Both have been observed in this debate. At the personal insult level I couldn't care less but from the point of view as to who is making the most persuasive argument I prefer to be on the arrogant receiving end.


A measure of the 'man' right there.  Neutrals can make up their own minds, your dukeness.


----------



## Duke of Marmalade

tecate said:


> It's covid infested cotton.


You think that is a useful contribution to the debate? Maybe Vijay when he revises his graphic will include Covid resistant.


----------



## tecate

Firefly said:


> I believe you have made this point more than once.


That digital assets (to include bitcoin) are a new asset class?  Damn, first challenge I've ever heard to the notion.
You wan't to call them an 'old asset class', have at it.  I mean, it would be inaccurate - but whatever makes you happy.



Firefly said:


> Bitcoin is on the go for about 9-10 years.


11 actually.   



Firefly said:


> It received widespread coverage 18 months ago in relation to its value.


Indeed it did Firefly -although it existed before that 'widespread coverage' and after that widespread coverage.  What of it?



Firefly said:


> Would you mind telling us when you think it will no longer be "new"? An approximate year would suffice.


And as much as I have (and will continue to...) refer to it as a new asset class, you've presented before with the notion that a technology and its supporting eco-system - just unpacks itself out of a box - all complete and ready to go.  Write it off today.  Ignore that a volume of work is being done in the space - I don't care!  Here's the timeline for the development of the internet.  Had you even known what it was in the mid 70s it seems you would have thrown up your hands and told everyone to pack up their stuff and go work on something else.  You may not even have gotten to the stage of Dukey's friend, fax machine guy.  That takes some beating!

The answer to your question though is when everyone else in crypto circles and fintech stops calling it a new asset class and when everyone else refers to the technology as being a mature technology.  How long has AI and IoT been around?  Years - and we're only beginning to see their real value around now.



Firefly said:


> In the picture above Bitcoin scores an A for "Censorship Resistant". Doesn't seem right to me given what you are saying below..


I think you're getting a tad confused.  What you reference relates to Fungibility - not Censorship Resistance.  Fungibility implicates anonymity and traceparency.  However, as I mentioned, for those savvy with the technology, those issues can be overcome.  For everyone else there are software updates waiting in the wings.  They won't be applied any day soon but they will be applied in time.
Censorship Resistance refers to the ability of the user to custody bitcoin themselves and to send and receive bitcoin on a peer to peer basis.  No third party can interfere in that process.  Nobody can stop you from sending or receiving and so long as the user self custodies their bitcoin competently, nobody can confiscate your bitcoin.


----------



## tecate

Leo said:


> With difficulty where bans are in place I'd imagine. I still don't see much evidence of any broad adoption for buying goods or services. With the lack of real options there, the lack of guarantees about being able to retrieve money from cryptos will put a lot of people off.


I'm sure its with greater difficulty.  I have not checked it out more recently but my understanding is that interest (and use) amongst Chinese is still decent.  That article I linked to on stablecoin use is indicative of that.  But we're talking about use to move bigger amounts around.  It was a couple of years back that the Chinese really clamped down on ALL means of citizens in getting money out of the country.  Crypto got caught up in that.  But my point is that the starting point was with that type of money movement.  Not the purchase of goods and services. 
You're aware that the bitcoin project has gone down the road of a store of value/digital gold/uncorrelated asset in the first instance.  There's a lot of work to be done before it becomes palatable at point of sale - that comes much later.
Again, you have greater concerns on retrieving money from the crypto eco-system.  Every day that goes by, I get happier with the notion of leaving them within that eco-system - with the ability to utilise stablecoins, diversify into other tokenised assets.  Tokenised equities and real estate offerings are already out there in the case of the latter and imminent in the case of the former. 



Leo said:


> Pretty much every developed nation restrict access to certain portions of the internet, totalitarian regimes take that a lot further. China tolerate a certain amount of VPN usage that bypasses the great firewall, but they can and do occasionally restrict that access.


Like you say, VPN can get round that.  It's also possible to transact bitcoin without internet - via the infrastructure blockstream have put in place via satellite.  In the near future, there will also be mesh networking.  In Venezuela, its also possible to transact bitcoin via text message (not something that would be useful in the Chinese context but an interesting alternate approach).



Leo said:


> I haven't seen full specs of the Chinese offering, I doubt the full details will ever be made public. But they could very easily restrict or block use of their centralised currency based on the user's Social Credit Score as the already do with interest rates on credit for example (j-walk, your loan rate goes up!)


Well, lets wait and see what they come out with.  There's no doubt it will have totalitarian hands all over it.  But it doesn't necessarily mean that they can snuff it out.  Like I mentioned before, I'd sooner hope that there are folks working on the user experience - that's far more important.  Bitcoin has already achieved a level of success and can continue to do so in the digital gold/uncorrelated asset use case.  However, for further down the road and mass use as a transactional means of exchange, intuitive UI is key.



Leo said:


> Very true, perhaps China might leverage it's position over developing nations to force them on-board. I wouldn't be jumping on board with those, but people will always take risks where they believe there might be money to be made.


Absolutely.  I've heard commentors speak to that.  It makes sense.  They've locked horns with the yanks and they want to get out from under the US dollar as the world reserve currency.  They're going to pimp this digital renminbi and force trading partners to use it as per their rules (with all the nasty elements of that - that you were referring to above).


----------



## Duke of Marmalade

I'm all of a quiver. It is only 40 minutes to the bitcoin halvening.


----------



## tecate

Duke of Marmalade said:
			
		

> You think that is a useful contribution to the debate?


That cash is riddled with Covid?  Yes, I do.  Less cash is being used in recent months and the whole covid saga is going to speed up the digitisation process for sure.


			
				Duke of Marmalade said:
			
		

> Maybe Vijay when he revises his graphic will include Covid resistant.


His 'store of value' graphic isn't in need of editing due to any discussion which has taken place here.

On the halving, a milestone in Quantitative Tightening - built in via tamper-proof programmable money. An improvement on the magic money syndrome of the FIAT system subject to the ongoing tinkering of Central Banks and the influence of governments.  Bitcoin's latest convert ->  Paul Tudor Jones:  _"The digitization of the world benefits bitcoin". . . "We're watching the birthing of a store of value"_. PTJ has a net worth of $5 billion with his fund estimated to have $40 billion AUM.

In his  last week, he stated that bitcoin is a hedge against the 'great monetary inflation'.


----------



## Brendan Burgess

So nothing much happened last night? 

It fell about 10% in the immediate run-up to the halving but it had risen by more than that in the previous few weeks. Just its normal volatility.


----------



## tecate

Brendan Burgess said:


> So nothing much happened last night?


I'm not sure what you were expecting yesterday Brendan - fireworks?     The mining reward decreased by 50% at the halving (block 630,000).  We're now at block 630,085 as I write this - the network goes onwards but with the emission of half the supply of newly minted coins onto the market.



Brendan Burgess said:


> It fell about 10% in the immediate run-up to the halving but it had risen by more than that in the previous few weeks. Just its normal volatility.


You can see its performance over the past month/quarter/year to date in the graphic below.  It's the best performing *asset of 2020 (thus far), 2019 and the last decade.
The volatility of the bitcoin price has been acknowledged (here and elsewhere) a long time ago.  That doesn't disadvantage it much as a store of value but it does as a medium of exchange/money.  Its market capitalisation is just $160 billion.  As that expands and as the asset matures, volatility will dissipate.  Whilst everyone accepts its current volatility, oddly it's not the most volatile asset class right now (oil has been in 2020).





*Edited from 'asset class' to 'asset' as per Brendan's post below.


----------



## DublinHead54

'The Halvening' did not turn out to be a Hollywood blockbuster....not yet anyway.

In my opinion, the performance of Bitcoin YTD vs the rest of the market shows it has some way to go before it and other cryptocurrencies have real relevance in economy / financial markets.

We are experiencing a global pandemic / idiosyncratic event and financial markets have sold off across the board (Equities, Rates, Credit Spread, Oil) with the exception of Gold. Bitcoin is a closed ecosystem, the exchange of coins happens only with market participants and the coins don't enter the real economy. The last few months it has been trading on the halving, rather than it being a store of value / hedge against financial markets.

It will be easy to say "Hedge fund Manager is now looking at Bitcoin as a hedge", but that is forward-looking and maybe Bitcoin will accidentally thanks to its performance during pandemic become a hedge play.

I love the anti-authoritarian Orwell esque rhetoric that comes with Bitcoin, but I can't see it being around forever and I don't see that as bad thing. The first car that rolled off the Ford production line was a great invention, but thanks to innovation we have better options today.


----------



## tecate

Dublinbay12 said:


> 'The Halvening' did not turn out to be a Hollywood blockbuster....not yet anyway.


The halving did as it said on the tin - and cut the supply of newly minted coins in half.  If you're thinking in terms of price action, then we only have two other halvings to compare it to.  In those cases, price increased 12-18 months after the halving.  That may or may not be the case in this instance - perhaps it's priced in already. That said, we had 7 consecutive weeks of an increasing bitcoin price leading up to the halving.



Dublinbay12 said:


> In my opinion, the performance of Bitcoin YTD vs the rest of the market shows it has some way to go before it and other cryptocurrencies have real relevance in economy / financial markets.


  I'm not sure what 'performance' you were expecting from it. However, its market cap is around $160 billion  - vs. gold which has a market cap of $7 trillion.  Therefore, yes - this is at a nascent stage.



Dublinbay12 said:


> We are experiencing a global pandemic / idiosyncratic event and financial markets have sold off across the board (Equities, Rates, Credit Spread, Oil) with the exception of Gold.


Both bitcoin and gold sold off initially too following the March 12 crash but as per the graphic above, they both recovered later on.



Dublinbay12 said:


> It will be easy to say "Hedge fund Manager is now looking at Bitcoin as a hedge", but that is forward-looking and maybe Bitcoin will accidentally thanks to its performance during pandemic become a hedge play.


I think it's fair to say that we have not had broad participation of institutions in bitcoin/digital assets yet.  However, we have had two recent examples of interest from that world with Chris Wood - the global head of equity strategy at Jefferies (Worlds 9th largest investment bank) advising clients to hold some bitcoin.  Then we had Paul Tudor Jones of Tudor BVI Global saying he's keeping 2% of his portfolio in bitcoin with his fund having taken steps towards buying bitcoin futures.
It seems to me that covid is just the trigger here and the overall economic and market conditions may move bitcoin's formative digital gold thesis toward greater relevance.  We'll have to see how things pan out.



Dublinbay12 said:


> I love the anti-authoritarian Orwell esque rhetoric that comes with Bitcoin, but I can't see it being around forever and I don't see that as bad thing. The first car that rolled off the Ford production line was a great invention, but thanks to innovation we don't need to.


I'm very much onboard with the notion of further innovation - and that's actively happening in the space (there are other subsets of conventional finance which will be disrupted).  However, for that store of value use case, I'm not seeing anything that fits the bill comparatively but lets see how things unfold.  In the case of CBDCs and Facebook's Libra, I agree with Tudor Jones when he says that _"they will make the understanding, utility, and ease of ownership of Bitcoin a much more commonplace option than it is today"_.


----------



## DublinHead54

tecate said:


> Then we had Paul Tudor Jones of Tudor BVI Global saying he's keeping 2% of his portfolio in bitcoin with his fund having taken steps towards buying bitcoin futures.



Bitcoin Futures are cash settled? So Paul Tudor is taking exposure to Bitcoin without physically purchasing Bitcoin, so it has little impact on the Bitcoin Network. It does have an impact on legitimizing Bitcoin in Financial Markets, but not sure hedge fund owners really help legitimize it. It is more interesting that custodial services are being set up by Financial Institutions.



tecate said:


> I'm very much onboard with the notion of further innovation - and that's actively happening in the space (there are other subsets of conventional finance which will be disrupted).  However, for that store of value use case, I'm not seeing anything that fits the bill comparatively but lets see how things unfold.  In the case of CBDCs and Facebook's Libra, I agree with Tudor Jones when he says that _"they will make the understanding, utility, and ease of ownership of Bitcoin a much more commonplace option than it is today"_.



The involvement of facebook and Central governments will legitimize the technology, and I really believe that in the next 5 years we will see some form of a CBDC, in essence money is already digital. 

The biggest problem with Bitcoin is the design never fully considered the costs associated with operating the network. The Miners are operating a business and when it becomes unprofitable they will stop, or increase transaction fees to the point the network has no benefit vs traditional payment systems.


----------



## tecate

Dublinbay12 said:


> Bitcoin Futures are cash settled? So Paul Tudor is taking exposure to Bitcoin without physically purchasing Bitcoin, so it has little impact on the Bitcoin Network. It does have an impact on legitimizing Bitcoin in Financial Markets, but not sure hedge fund owners really help legitimize it. It is more interesting that custodial services are being set up by Financial Institutions.


I agree with all of the above.  There are some physically settled bitcoin futures options - so depends on what service provider he utilises.



Dublinbay12 said:


> The involvement of facebook and Central governments will legitimize the technology, and I really believe that in the next 5 years we will see some form of a CBDC, in essence money is already digital.


Agreed.  It probably will take quite some time until that gets to retail level but above that, we will see CBDCs for sure.  China's digital Yuan (DCEP) is the favourite to be first out of the blocks.



Dublinbay12 said:


> The biggest problem with Bitcoin is the design never fully considered the costs associated with operating the network. The Miners are operating a business and when it becomes unprofitable they will stop, or increase transaction fees to the point the network has no benefit vs traditional payment systems.


That's a good point.  It depends on how it pans out.  It may be that bitcoin - as the main net - in a network with multiple sidechains - will be utilised for substantial money movements.  As an example, lightning network is being developed as a layer 2 solution ( a network that runs on top of the bitcoin network ) for micro payments.  Increased transaction cost on main-net may be feasible in such an instance.  And of course it depends on the level of network activity also.  In a worst case scenario, bitcoin could fork to a different mining algorithm.  This is much further down the road so we will have to see how it pans out.


----------



## Duke of Marmalade

I have lost the link to Paul Tudor Jones letter but the following is written from my recollection.
He argues quite persuasively that there is a danger of a Great Monetary Inflation arising from these unprecedented monetary initiatives.  He by no means argues that a GMI is certain but that it is possible that Central Banks' capability to put on the brakes and wind back the QE might not work.  I agree there is that danger. _(This is not Zimbabwe where the car was raced to 200 kph in the knowledge that there were no brakes). _
He then runs a horse race to see which is best placed to meet that challenge, Financial Assets, Gold, Fiat Cash and Bitcoin.  They are judged by some focus panels or such on the criteria of Purchasing Power, Trustworthiness, Portability and Liquidity.
For a start the stewards should not have allowed Fiat Cash to enter.  As the panels observed, since the CBs have a stated aim to devalue FC by 2% per annum this poor beast was carrying a hopeless top weight.  Instead Monetary Assets should have been entered, meaning deposits (in more normal times) and for humble folk like myself State Savings.  Monetary assets have quite a good track record in matching inflation.
Bitcoin did well on Portability and Liquidity  but got trounced on Trustworthiness.  Exactly how I would have rated it except for me no amount of doing well under the other headings (where at best it is only equal to Monetary Assets) could make up for my zero trust in its long term future.
Bitcoin came last.  Financial assets won.  Amazing how the bitcoin community are hailing this modest endorsement, if you could call it that, as a major breakthrough.
PTJ seems to take the detached view that if folk are prepared to buy and sell it then it deserves consideration as an asset. He doesn't even attempt to consider its fundamentals, which in most economists' eyes condemn it outright.  PTJ more or less admits that he would have found a rôle for tulips in his portfolio.  As he says himself Bitcoin is a pure speculation.
I understand that the Great Halvening block contains some media references to the unprecedented monetary interventions, echoing similar references in the Genesis block.  In fact, in terms of the rationale for bitcoin current conditions could hardly be more auspicious. The threat of a GMI will underpin the bitcoin price for a while yet.  If the GMI fear dissipates in a year or two then the rug will have been pulled form under that rationale.


----------



## tecate

Duke of Marmalade said:


> I have lost the link to Paul Tudor Jones letter but the following is written from my recollection.


PTJs letter can be found.



Duke of Marmalade said:


> He argues quite persuasively that there is a danger of a Great Monetary Inflation arising from these unprecedented monetary initiatives. He by no means argues that a GMI is certain but that it is possible that Central Banks' capability to put on the brakes and wind back the QE might not work. I agree there is that danger. _(This is not Zimbabwe where the car was raced to 200 kph in the knowledge that there were no brakes)._


I don't think anyone has said that there are known outcomes here.  There's potential for inflation in the wake of the current money printing on steroids. Equally CBs may not win the battle with deflation either.  As regards Zimbabwe, CBs & governments can mismanage FIAT money to varying degrees.  It doesn't have to be as bad as what's going on in Lebanon right now to qualify as mismanagement.  Once programmed appropriately from the outset, that's not the case with decentralised digital currency.



Duke of Marmalade said:


> He then runs a horse race to see which is best placed to meet that challenge, Financial Assets, Gold, Fiat Cash and Bitcoin. They are judged by some focus panels or such on the criteria of Purchasing Power, Trustworthiness, Portability and Liquidity.
> For a start the stewards should not have allowed Fiat Cash to enter. As the judges observed, since the CBs have a stated aim to devalue FC by 2% per annum this poor beast was carrying a hopeless top weight.


Well done you on finally recognising that FIAT money is a bad store of value.  Little Jimmy would be proud of you.



Duke of Marmalade said:


> Bitcoin did well on Portability and Liquidity but got trounced on Trustworthiness. Exactly how I would have rated it except for me no amount of doing well under the other headings (where at best it is only equal to Monetary Assets) could make up for my zero trust in its long term future


I don't think there's any surprise here given that it is very much the relative newcomer with an 11 year vintage as opposed to the other contenders that are established.  However, he also believes it to be mispriced in this context:
_"It scores 66% of gold as a store of value, but has a market cap that is 1/60th of gold’s outstanding value. Something appears wrong here and my guess is it is the price of Bitcoin."_
Through the course of these discussions on AAM, I've suggested that bitcoins development as a store of value/digital gold is formative.  PTJ is confirming the same thing - as per his CNBC interview yesterday, he said that we could be _"watching the birthing of a store of value"_.



Duke of Marmalade said:


> He doesn't even attempt to consider its fundamentals, which in most economists' eyes condemn it.


Duke of Marmalade falters at Becher's Brook.  That's incorrect.

On bitcoin's scarcity, PTJ had this to say:  _"[Bitcoin represents] the quintessence of scarcity premium"_.
In terms of liquidity, he states:  "_Bitcoin is the only store of value that actually trades 24/7 in the entire world._"  That's significant - and it's a point that has been misunderstood here previously.  With regard to portability, he states that "_nothing beats bitcoin_".
Fundamentals are discussed.  Bear in mind this letter is co-written by Lorenzo Giorgianni - former deputy chief of the IMFs Strategy, Policy & Review department.  He was there alongside Ajai Chopra in the Troika when the IMF had to bail out the nation due to government mismanagement.



Duke of Marmalade said:


> PTJ more or less admits that he would have found a rôle for tulips in his portfolio.


He does no such thing.  We've discussed fundamentals of bitcoin as a store of value.  PTJ identifies bitcoin's qualities as a store of value.  Tulips don't have any of the good characteristics of bitcoin as a store of value.  The analogy mismatch is very much tongue in cheek and inappropriate.



Duke of Marmalade said:


> As he says himself Bitcoin is a pure speculation.


To hedge is to speculate.  He is speculating on the realisation of 'the great inflation'. With that, he's speculating on the use of a digital asset (bitcoin) as a hedge against that possibility.
In considering such an eventuality, he quotes our good friend, Milton Friedman:
_"Milton Friedman famously stated that 'inflation is always and everywhere a monetary phenomenon that arises from a more rapid expansion in the quantity of money than in total output'."  _No mention of fax machine guy but then he didn't send his letter by fax either.



Duke of Marmalade said:


> I understand that the Great Halvening block contains some media references to the unprecedented monetary interventions, echoing similar references in the Genesis block. In fact, in terms of the rationale for bitcoin current conditions could hardly be more auspicious. The threat of a GMI will underpin the bitcoin price for a while yet. If the GMI fear dissipates in a year or two then the rug will have been pulled form under that rationale.


Ah, so are you going to call it then?  Are you confirming that bitcoin dies if there is no significant inflation within 36 months of this currently limitless money printing?
My contention is that it continues along with its development either way.  Where there's a place for gold, there's a place for digital gold.  Where there's an internet, there's a need for internet money.  In the event of runaway inflation though, for sure that makes a solid case for bitcoin - as PTJ outlines.


----------



## DublinHead54

The interference of Central Banks in the economy via monetary policies such as QE reminds me of a Father Ted episode. The one where Ted tries to tap a small dent in a car out with a hammer and results in him destroying the car. The Central Banks had no choice but to interfere because we can't be trusted to behave by ourselves, but once the interference starts it is hard to stop, and those actions are having less and less of an impact. 

When it comes to digital currencies, in particular, a Central Bank Digital Currency, one of those most exciting parts is that it is programmable. Therefore it could become a new tool for monetary policy. For example, the US government sent out cheques for $1500 to everyone, but the government has no control over how it is spent. In the future, the government could send out 1500 Digital Dollar and program it to be only spent in certain shops or have it expire after a certain time. 

Maybe Bitcoin has laid the groundwork for the government to have even more control over us!


----------



## tecate

Dublinbay12 said:


> The interference of Central Banks in the economy via monetary policies such as QE reminds me of a Father Ted episode. The one where Ted tries to tap a small dent in a car out with a hammer and results in him destroying the car. The Central Banks had no choice but to interfere because we can't be trusted to behave by ourselves, but once the interference starts it is hard to stop, and those actions are having less and less of an impact.


For sure.  Euro/USD/GBP, etc have not been weaned off the first wave of QE - and going into this crisis, there was little leeway in terms of reducing interest rates.  I understand that they have no other option but to print money right now - but that doesn't mean to say that anyone knows if there's a way out of all that afterwards - as we have not been here before (not at these numbers).
Central bankers are just made up of people - and people are not infallible.  Furthermore, CBs come under pressure from politicians - but who's interests are being served in those cases?



Dublinbay12 said:


> When it comes to digital currencies, in particular, a Central Bank Digital Currency, one of those most exciting parts is that it is programmable. Therefore it could become a new tool for monetary policy. For example, the US government sent out cheques for $1500 to everyone, but the government has no control over how it is spent. In the future, the government could send out 1500 Digital Dollar and program it to be only spent in certain shops or have it expire after a certain time.



That's guaranteed!  Not only what you spend it on but a time limit on when you have to spend it (as per this inflation based keynesian pro spend approach, have to keep people buying)>



Dublinbay12 said:


> Maybe Bitcoin has laid the groundwork for the government to have even more control over us!


Tech is neutral.  However, it can be used for good or bad - and it's no different in this instance.  I welcome the advent of CBDCs and Corporate money (Libra).  They'll serve their purpose in getting people accustomed to digital money - the differences between them and the advantage that decentralised crypto offers in that context.


----------



## DublinHead54

tecate said:


> Tech is neutral.  However, it can be used for good or bad - and it's no different in this instance.  I welcome the advent of CBDCs and Corporate money (Libra).  They'll serve their purpose in getting people accustomed to digital money - the differences between them and the advantage that decentralised crypto offers in that context.



The neutrality of tech is a great debate! Not one for this forum though.


----------



## Duke of Marmalade

tecate said:


> PTJs letter can be found.


Thanks. I can now give a more detailed critique of the horse race.  This took the form of polling a Research Group on how they would rank Gold, Fiat Cash, Financial Assets and Bitcoin on Purchasing Power, Trustworthiness, Portability and Liquidity.  This was in the context of a well argued case for the  potential for a Great Monetary Inflation resulting from the unprecedented monetary interventions.
As said before, Fiat Cash was hopelessly handicapped in this contest since *by definition *inflation is the loss of value of Fiat Cash  (meaning M2 - notes and coin and checking accounts, not deposits).  So it scored zero in the category of Purchasing Power.  Its overall score of 54 then came from the remaining 70 on offer which I presume put it ahead of the rest, especially on Trustworthiness.  A surprising result in the context of an article highlighting how precarious trust in Central Banks can be.

The sponsor of the contest made a big pitch for Bitcoin:


			
				Paul Tudor Jones said:
			
		

> I also made the case for owning Bitcoin, the quintessence of scarcity premium. It is literally the only large tradeable asset in the world that has a known fixed maximum supply. By its design, the total quantity of Bitcoins (including those not yet mined) cannot exceed 21 million. Approximately 18.5million Bitcoins have already been mined, leaving about 10% remaining. This brilliant feature of Bitcoin was designed by the anonymous creator of Bitcoin to protect its integrity by making it increasingly near and dear, a concept alien to the current thinking of central banks and governments.


 Notwithstanding this endorsement Bitcoin came plumb last, even behind the hobbled Fiat Cash.  PTJ's observation on this performance was as follows:





			
				PTJ said:
			
		

> What was surprising to me was not that Bitcoin came in last, but that it scored as high as it did.


  So despite his enthusiastic promotion of the brilliance of bitcoin he still expected to to come in last.  In the event it got a total thumbs down on Trustworthines which shows a considerable amount of ignorance on behalf of the Research Group - the White Paper makes a big play about how bitcoin avoids the need for trust in Central Banks.

The fact that it wasn't as bad a last as PTJ expected has persuaded him to have a punt on bitcoin with no more than 2% of his portfolio - a "great speculation" in his own words.
And there are those in the bitcoin  community who have heralded this as a ringing endorsement by a leading hedge fund manager 

He then makes a point that bitcoin, being a mere fraction of the market cap of gold can only make up that difference through a price increase.  I mean really!?  He tells us elsewhere that bitcoin has 10 times the market cap of rival cryptos.  Surely by the aforesaid "logic" that gives much greater scope for a price surge in bitcoin's over 2,000 crypto lookalikes.

He sums up the bullish case for bitcoin with the following:


			
				PTJ said:
			
		

> The most compelling argument for owning Bitcoin is the coming digitization of currency everywhere, accelerated by COVID-19.


 I don't think I have been to an ATM this year.  I do carry notes as a sort of emergency or to drop something in an SVP box. I don't know about where PTJ hangs out but here in Ireland digitization of the currency is not coming - it has well and truly arrived.

_Edited courtesy tecate_


----------



## Sunny

Dublinbay12 said:


> The interference of Central Banks in the economy via monetary policies such as QE reminds me of a Father Ted episode. The one where Ted tries to tap a small dent in a car out with a hammer and results in him destroying the car. The Central Banks had no choice but to interfere because we can't be trusted to behave by ourselves, but once the interference starts it is hard to stop, and those actions are having less and less of an impact.
> 
> When it comes to digital currencies, in particular, a Central Bank Digital Currency, one of those most exciting parts is that it is programmable. Therefore it could become a new tool for monetary policy. For example, the US government sent out cheques for $1500 to everyone, but the government has no control over how it is spent. In the future, the government could send out 1500 Digital Dollar and program it to be only spent in certain shops or have it expire after a certain time.
> 
> Maybe Bitcoin has laid the groundwork for the government to have even more control over us!



Or they could just send a one for all voucher.....Hardly a reason to embrace digital currency......


----------



## DublinHead54

Duke of Marmalade said:


> He sums up the bullish case for bitcoin with the following:
> I don't think I have been to an ATM this year.  I do carry notes as a sort of emergency or to drop something in an SVP box. I don't know about where PTJ hangs out but here in Ireland digitization of the currency is not coming - it has well and truly arrived.



That comment by PTJ is not a compelling argument for owning Bitcoin.

My two cents....

In my view the movement away from cash to card payment is the digitization of payments rather than the digitization of money. Even before card payments the amount of physical cash was less than cash deposit on bank ledgers. Though money can essentially be thought of as digital now, and for the retail user there is little benefit (in my mind) to owning a digital Euro issued as CBDC or a regular Euro. However, every major central bank is investigating CBDC's right now. 

I have read almost every Central Bank paper and peer-reviewed article on CBDCs published over the last 3 years and the conclusion is "CBDCs have potential but much more research is needed to understand the design, risks and costs". My opinion is the spike in crypto popularity in 2017 drew attention to the regulators, but it was the Libra announcement by Facebook that forced them into action on CBDC. This is because a 160bln market cap cryptocurrency is of little threat but a global company with 2.5bln users is a threat. I don't think Bitcoin is going to result in a disruptive innovation because the incumbents are showing adaptability. The biggest space for innovation in financial markets is payments, that's why Facebook got into Libra and why Stripe is valued at $36bln.

Bitcoin, in my opinion, is a speculative investment, I actually researched how one could acquire a bitcoin in Dublin and then spend it, my findings are the costs were prohibitive and there is nowhere to spend it. Thus it is really a closed economy, the value is set in the network and on exchanges which are less regulated, less sophisticated and easier to manipulate.


----------



## Duke of Marmalade

I forgot about this gem from Paul Tudor Jones.


			
				PTJ said:
			
		

> Gold has survived the test of time although a rational person could ask
> “Why gold over any of the other 118 elements?”


And I am not quibbling with the fact that there are only 117 other elements.  This particular person (I leave others to decide my rationality status) has asked:


			
				The Duke said:
			
		

> Why bitcoin over any of the 2,000 other crypto currencies?



_Edited for correction courtesy tecate_


----------



## Duke of Marmalade

Dublinbay12 said:


> That comment by PTJ is not a compelling argument for owning Bitcoin.
> 
> My two cents....
> 
> In my view the movement away from cash to card payment is the digitization of payments rather than the digitization of money. Even before card payments the amount of physical cash was less than cash deposit on bank ledgers. Though money can essentially be thought of as digital now, and for the retail user there is little benefit (in my mind) to owning a digital Euro issued as CBDC or a regular Euro. However, every major central bank is investigating CBDC's right now.
> 
> I have read almost every Central Bank paper and peer-reviewed article on CBDCs published over the last 3 years and the conclusion is "CBDCs have potential but much more research is needed to understand the design, risks and costs". My opinion is the spike in crypto popularity in 2017 drew attention to the regulators, but it was the Libra announcement by Facebook that forced them into action on CBDC. This is because a 160bln market cap cryptocurrency is of little threat but a global company with 2.5bln users is a threat. I don't think Bitcoin is going to result in a disruptive innovation because the incumbents are showing adaptability. The biggest space for innovation in financial markets is payments, that's why Facebook got into Libra and why Stripe is valued at $36bln.
> 
> Bitcoin, in my opinion, is a speculative investment, I actually researched how one could acquire a bitcoin in Dublin and then spend it, my findings are the costs were prohibitive and there is nowhere to spend it. Thus it is really a closed economy, the value is set in the network and on exchanges which are less regulated, less sophisticated and easier to manipulate.


Okay, I Googled CBDC.  We don't want to stray too far off topic but is my understanding correct that with a CBDC rather than a conventional Euro entry on a bank ledge, the former is backed directly by the Central Bank?
I feel fairly sure that it was the digitization of the payment that PTJ was referring to rather than the backing of the digital entry as I don't see Covid-19 having any particular implications for this latter.


----------



## DublinHead54

Duke of Marmalade said:


> Okay, I Googled CBDC.  We don't want to stray too far off topic but is my understanding correct that with a CBDC rather than a conventional Euro entry on a bank ledge, the former is backed directly by the Central Bank?
> I feel fairly sure that it was the digitization of the payment that PTJ was referring to rather than the backing of the digital entry as I don't see Covid-19 having any particular implications for this latter.



The question is not clear. The jury is out on CBDC for the optimal design and how it is represented on a central banks balance sheet, there is not a definitive answer. In Terms of Covid response, academics are beginning to research the potential of a digital asset as a form of monetary policy to respond to pandemics. The crypto media is suggesting that a digital dollar / euro would have helped fiscal response during Covid based on some comments by key people but nothing more than conjecture.


----------



## tecate

Duke of Marmalade said:


> As said before, Fiat Cash was hopelessly handicapped in this contest since *by definition *inflation is the loss of value of Fiat Cash  (meaning M2 - notes and coin and checking accounts, not deposits).  So it scored zero in the category of Purchasing Power.


So the characteristics of FIAT is that it's a bad store of value?  We all get that - understood.  You think this is not a fair comparison but why isn't it? You talk of deposits.  I don't think a hedge fund is putting money in the post office.  He covers bonds/the yield curve.  And as to the suggestion that he shouldn't have compared FIAT, the reason he should is because there's a wall of wealth sitting in USD right now on the sidelines.  It has been used in the past as a store of value in these circumstances and it is being used as such today (even though its a bad store of value).  For that reason, they were right to assess it.  Sorry that you don't like the outcome which was this:
_“If something is by design going to depreciate 2% per year through inflation, why own it?”_



Duke of Marmalade said:


> The sponsor of the contest made a big pitch for Bitcoin:


You mean that the results of the research and analysis of a hedge fund with no connection to the crypto sector led to findings that make a strong case for including bitcoin in an investment portfolio.



Duke of Marmalade said:


> Notwithstanding this endorsement Bitcoin came plumb last, even behind the hobbled Fiat Cash.  PTJ's observation on this performance was as follows:  So despite his enthusiastic promotion of the brilliance of bitcoin he still expected to to come in last.


What 'promotion'?  This guy doesn't have anything to do with the crypto sector.  He's a respected player within the hedge fund industry.



Duke of Marmalade said:


> In the event it got a total thumbs down on Trustworthiness which shows a considerable amount of ignorance on behalf of the Research Group - the White Paper makes a big play about how bitcoin avoids the need for trust in Central Banks.


No it doesn't.  It shows a convenient misinterpretation by yourself as to how they defined 'trustworthiness' for the purposes of this analysis:
_"Trustworthiness:  How it is perceived through time and universally as a store of value."_
It's not an assessment on the basis that its peer to peer money that, through its design from the outset, assumes a lack of trust.  Its a consideration of how it's _perceived_ over _time_.  Their conclusions:
_"No surprise here Bitcoin got the lowest score because it is also the youngest entrant at 11 years of age."_
The metric here is time - and it's the youngest asset in the contest in the race by the longest of distances.



Duke of Marmalade said:


> The fact that it wasn't as bad a last as PTJ expected has persuaded him to have a punt on bitcoin with no more than 2% of his portfolio - a "great speculation" in his own words.


So its a new asset that is showing great promise in terms of its characteristics as a store of value - but its an unknown as it hasn't been round the block by comparison with the alternatives.  Hedge funds tend to be conservative.  Bitcoin as a mature asset class would score much higher.  But therein lies the speculation.  He likens the potential for bitcoins performance to that of gold in the 1970s when it shot up in value in the face of rampant inflation.  Should conditions favour a similar scenario (a bout of inflation), there's a hell of a lot more upside potential in bitcoin (a formative store of value) than gold (a mature asset).



Duke of Marmalade said:


> And there are those in the bitcoin community who have heralded this as a ringing endorsement by a leading hedge fund manager


What's far more significant is that there are those not in the bitcoin community but in the hedge fund industry who have sat up and taken notice.  Furthermore, most within bitcoin circles suggest that every portfolio should have a couple of % of said portfolio in bitcoin.  The logic is similar.  Whilst bitcoin is formative as a new asset and store of value, the upside potential outweighs the risk and then some.  That was the case before consideration of 'the great inflation'.  It's got an even stronger case given the current environment.



Duke of Marmalade said:


> He then makes a point that bitcoin, being a mere fraction of the market cap of gold can only make up that difference through a price increase. I mean really!?


So everyone accepts that bitcoin is formative in its progression towards digital gold and/or an uncorrelated asset in its own right.  It has several advantages over gold such as the following:  Its digital, portable, divisible, difficult to counterfeit and easy to authenticate. It's market runs 24/7-365 - making it much more accessible.  It's started out from a stand still compared with assets that have been around for donkeys years.  If it brings good characteristics to the table in terms of a store of value - with several advantages over other assets - then why shouldn't it take a greater market share?  Its market capitalisation right now is less than 2% of that of gold.



Duke of Marmalade said:


> He tells us elsewhere that bitcoin has 10 times the market cap of rival cryptos. Surely by the aforesaid "logic" that gives much greater scope for a price surge in bitcoin's over 7,000 crypto lookalikes.


That wayward argument has been outed here a long time ago.  Firstly, on the 7,000 cryptos, do you want to exaggerate some more for even more sensational effect?  How many of the 2,000 cryptocurrencies pursue a store of value use case?  Very few.  Of those, what advantage do they have over bitcoin in terms of store of value use case?   When we talk of X number of cryptocurrencies, we're talking about X number of projects.  They don't go beyond project status if they don't provide unique advantages over bitcoin in a store of value use case (without dropping the ball on some other essential characteristic).  In terms of market capitalisation, bitcoin is 67% dominant in the overall marketplace - which includes digital assets that don't pursue a store of value use case.

When it comes to Gold vs. Bitcoin, bitcoin presents with several unique advantages over the monetary metal.



Duke of Marmalade said:


> I don't think I have been to an ATM this year. I do carry notes as a sort of emergency or to drop something in an SVP box. I don't know about where PTJ hangs out but here in Ireland digitization of the currency is not coming - it has well and truly arrived.


The process of digitisation is ongoing and evolving.  There's plenty of cash in use globally (and in Ireland).  In the States, they're still using cheques.  Secondly, it's a misunderstanding to think that digitisation stops at visa payments.  Sweden is the closest to a cashless society.  However, they have a E-Krona project opened to bring about a digital currency.  A state isn't going to leave the entire ability of citizens to exchange value in the hands of a couple of multi-nationals.
That's what he talks about in terms of digitisation in the context of money.  State mandated digital currencies are coming.  Corporate digital currencies are coming (Libra). And his point is this:

_"It will make the understanding, utility, and ease of ownership of Bitcoin a much more commonplace option than it is today"._

It makes complete sense to me.  Baby boomers and Gen X folk have a more difficult time getting to grips with virtual currencies.  That's not an issue for millennials and those that follow after them.  People are going to get much more comfortable in using them - together with such currencies themselves becoming much easier to use over time.



Duke of Marmalade said:


> Why bitcoin over any of the 8,000 other crypto currencies?


8,000 is it?  Ok, Pinocchio - if you think that adds credence to your viewpoint, fair play.




Duke of Marmalade said:


> Okay, I Googled CBDC. We don't want to stray too far off topic but is my understanding correct that with a CBDC rather than a conventional Euro entry on a bank ledge, the former is backed directly by the Central Bank?
> I feel fairly sure that it was the digitization of the payment that PTJ was referring to rather than the backing of the digital entry as I don't see Covid-19 having any particular implications for this latter.


It's not off topic at all - it's entirely relevant to the discussion at hand.  Secondly, it's patently clear he was very much including the development of CBDCs (Central Bank Digital Currencies) and Corporate Digital Currencies (Facebook's Libra) in this consideration of the drive towards greater digitisation.  He states:

_"The probable introduction of Facebook’s Libra (whose value will be pegged to the US dollar and will not be a store of value in that sense) as well as China’s DCEP, also tied to the yuan, will make virtual digital wallets a commonplace tool for the world."_


----------



## Duke of Marmalade

tecate said:


> _“If something is by design going to depreciate 2% per year through inflation, why own it?”_


We are talking about the filthy lucre here, possibly Covid ridden as you say.  Monetary assets like deposits are a different beast and are a valid asset class, which have performed reasonably well as an inflation hedge over time.  Better than bonds I think.  Given today's zero interest rate environment that might seem like a pedantic point.  But in normal times no law abiding citizen thinks in serious terms of keeping a substantial pile of used bank notes but many cautious folk are happy enough with bank deposits and/or state savings.  I don't mind Fiat Cash being in the race as a sort of pacemaker destined to finish last (unless there is a real donkey in the race) but Monetary Assets should not have been left in his stable.



> You mean that the results of their research and analysis led to findings that make a strong case for including bitcoin in an investment portfolio.


  I am pointing out that the steward of the course made a very strong case for one of the runners and yet it still finished last.




> What 'promotion'?


  The strong tip given for one of the runners in the race as mentioned above.




> No it doesn't.  It shows a convenient misinterpretation by yourself as to how they defined 'trustworthiness' for the purposes of this analysis:
> _"Trustworthiness:  How it is perceived through time and universally as a store of value."_
> It's not an assessment on the basis that its peer to peer money that, through its design from the outset, assumes a lack of trust.  Its a consideration of how it's _perceived_ over _time_.  Their conclusions:
> _"No surprise here Bitcoin got the lowest score because it is also the youngest entrant at 11 years of age."_
> The metric here is time - and it's the youngest asset in the contest in the race by the longest of distances.


Fair point, my White Paper reference is erroneous. 



> Its market capitalisation right now is less than 2% of that of gold.


  And that of Ripple a much smaller percentage still.  I really think that any argument that the market cap comparison with Gold points to the only way to close that gap is to increase the price and is therefore a bull indicator is a non sequitur.  But it does give me an inkling as to why that Raoul Pal fella thinks bitcoin has the potential to go to $1m before the next Great Halvening.




> That wayward argument has been outed here a long time ago.  Firstly, on the 7,000 cryptos, do you want to exaggerate some more for even more sensational effect?


Genuine Simon Harris moment on my part, don't know where I got that figure from.    I have corrected earlier posts.  All the same a figure of 2,000 hardly nullifies the thrust of my point.



> The process of digitisation is ongoing and evolving.  There's plenty of cash in use globally (and in Ireland).  In the States, they're still using cheques.  Secondly, it's a misunderstanding to think that digitisation stops at visa payments.  Sweden is the closest to a cashless society.  However, they have a E-Krona project opened to bring about a digital currency.  A state isn't going to leave the entire ability of citizens to exchange value in the hands of a couple of multi-nationals.
> That's what he talks about in terms of digitisation in the context of money.  State mandated digital currencies are coming.  Corporate digital currencies are coming (Libra). And his point is this:
> 
> _"It will make the understanding, utility, and ease of ownership of Bitcoin a much more commonplace option than it is today"._
> 
> It makes complete sense to me.  Baby boomers and Gen X folk have a more difficult time getting to grips with virtual currencies.  That's not an issue for millennials and those that follow after them.  People are going to get much more comfortable in using them - together with such currencies themselves becoming much easier to use over time.


It is an argument but for me even if bitcoin was tethered to something real as these CBDCs purport to be it doesn't bring anything new to the party that I don't currently have with my various cards.  PTJ thinks this will be the big game changer for bitcoin.  Don't see it myself but that is a matter of opinion.  In fact for those who are attuned to the nuance between digital payment and digital cash, Central Bank or Facebook sponsored digital cash could well remove one of their rationales for holding bitcoin.




> 8,000 is it?  Ok, Pinocchio - if you think that adds credence to your viewpoint, fair play.


Fax Machine moment.


----------



## tecate

Duke of Marmalade said:


> We are talking about the filthy lucre here, possibly Covid ridden as you say.  Monetary assets like deposits are a different beast and are a valid asset class, which have performed reasonably well as an inflation hedge over time.  Better than bonds I think.  Given today's zero interest rate environment that might seem like a pedantic point.  But in normal times no law abiding citizen thinks in serious terms of keeping a substantial pile of used bank notes but many cautious folk are happy enough with bank deposits and/or state savings.  I don't mind Fiat Cash being in the race as a sort of pacemaker destined to finish near last but Monetary Assets should not have been left in his stable.


Disagree entirely.  They run a $40 billion hedge fund.  The letter was to investors - not to Johnny & Mary.   There has been a global race into the USD over the last few weeks - whether you think that is a good idea or not.  That's FIAT cash that is sitting on the sidelines. In the digital assets arena, USD stablecoins have exceeded $10 billion for the first time - a 79% increase since February. 



Duke of Marmalade said:


> I am pointing out that the steward of the course made a very strong case for one of the runners and yet it still finished last.


And in that, you're glossing over the parameters set for that comparison which was this =>  _"Bitcoin got the lowest score because it is also the youngest entrant at 11 years of age."_



Duke of Marmalade said:


> The strong tip given for one of the runners in the race as mentioned above.


You used the word 'promotion' - again with the prejudicial lexicon.  The week before Chris Wood - Head of Equity Strategy with Jefferies - a leading global investment bank - produced a similar letter to clients and suggested they buy both gold and bitcoin.  On that occasion, you said he was a 'cultist'.  Neither Wood or Tudor-Jones are involved in the crypto sector.  There's no 'promotion' here - their findings on bitcoin in the context of their respective research and market knowledge is simply that.



Duke of Marmalade said:


> Fair point, my White Paper reference is erroneous.


Meaning?



Duke of Marmalade said:


> Genuine Simon Harris moment on my part, don't know where I got that figure from.  I have corrected earlier posts. All the same a figure of 2,000 hardly nullifies the thrust of my point.


And you're not quite there.  Can you now go through the list and tell us how many of those projects are pursuing a 'store of value' and means of exchange use case?  Once you've whittled that down, how many projects have anything but a handful of developers working on them? 
As I've said many times, I'm open to the notion that bitcoin could be usurped but it will only be usurped by a digital asset that brings more to the table than bitcoin currently does in terms of store of value use case....without dropping the ball on some other facet of what makes a good store of value.  Of the 2,000 digital assets, can you tell me which one is likely to take that mantle as it stands today?  Most cryptocurrencies/digital assets will die off - leaving a best in class for every category (and there are a myriad of sub-categories when it comes to the various use cases that are implicated).



Duke of Marmalade said:


> And that of Ripple a much smaller percentage still.


Betrays a lack of understanding.  Ripple is pursuing a different use case - that of a replacement of SWIFT (and a means for more efficient international remittances).


Duke of Marmalade said:


> I really think that any argument that the market cap comparison with Gold points to the only way to close that gap is to increase the price is a non sequitur.


As we ushered in a new millenium, gold was around $280/oz.  Today it's $1710/oz.  Price is a function of supply and demand.  Both gold and bitcoin are scarce assets.  If greater demand arises for a fixed supply asset, then its totally logical that price would increase.



Duke of Marmalade said:


> Genuine Simon Harris moment on my part, don't know where I got that figure from.


Here I would suspect - although not without purpose. 


Duke of Marmalade said:


> All the same a figure of 2,000 hardly nullifies the thrust of my point.


Given that few of those projects have anything to do with bitcoin and pursue a different use case, your point is nullified.



Duke of Marmalade said:


> It is an argument but for me even if bitcoin was tethered to something real as these CBDCs purport to be it doesn't bring anything new to the party that I don't currently have with my various cards.


It brings plenty to the party but you defiantly won't acknowledge those merits of the digital currency. 



Duke of Marmalade said:


> In fact for those who are attuned to the nuance between digital payment and digital cash, Central Bank or Facebook sponsored digital cash could well remove one of their rationales for holding bitcoin.


Bring it on!  There are regulatory battles to be fought but on the whole, bitcoin will continue to find its place in the world.  Usability is the one thing that I want to see improve with bitcoin.  Other than that, CBDCs, Libra, etc - will only help find it new users.


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## tecate

Sunny said:


> Or they could just send a one for all voucher.....Hardly a reason to embrace digital currency......


And yet that's exactly what the yanks were proposing.  Pelosi put forward a Covid relief bill in March - to include provision for a 'digital dollar' in order to make stimulus payments to citizens.  It was later pulled from the bill.  It's not the sort of thing that can be rushed and the US are behind China in their development of a CBDC.
If you distribute through banks - or with vouchers, you're implicating a third party.  The government want to be able to act fast and distribute quickly in these circumstances.  Furthermore, they are beginning to learn (following the last financial crisis) that they don't want banks to be systemic - and be in a position to cut them off if they need to when they get themselves mired in debt.
As per Dublinbay12's point in his post yesterday, they can also dictate how that money is spent and how long you have to spend it via their own digital currency.



Dublinbay12 said:


> That comment by PTJ is not a compelling argument for owning Bitcoin.


I disagree - I believe its relevant to its further use and development.  It's quite difficult for ordinary people to get their heads around the use of a digital or virtual currency.  Further digitisation - evident in every day life and where means of exchange is concerned - will break down that barrier.


Dublinbay12 said:


> In my view the movement away from cash to card payment is the digitization of payments rather than the digitization of money. Even before card payments the amount of physical cash was less than cash deposit on bank ledgers. Though money can essentially be thought of as digital now, and for the retail user there is little benefit (in my mind) to owning a digital Euro issued as CBDC or a regular Euro. However, every major central bank is investigating CBDC's right now.


Agree on the digitisation of payments rather than digitisation of money.  However, when a society is on the brink of being cashless, they're not going to leave the ability of citizens to pay in the hands of a couple of multinationals.  Secondly, there's all sorts of control that can be brought about from the government/CB side with their own digital currency as you alluded to yourself yesterday.  And you're quite right...all major CBs are investigating their own digital currencies with the Chinese being the furthest along.  I don't think you will see CBDCs in the hands of ordinary people for some time.  However, I do think you will see them used at higher levels much sooner.
Many countries are also trying to get out from under the USD as reserve currency - so it has a part to play here too - for Russia/China/Iran - and many others.  Iran was locked out of the international banking system - with digital currency, it will be much harder for that to happen....or rather for that to matter.



Dublinbay12 said:


> I don't think Bitcoin is going to result in a disruptive innovation because the incumbents are showing adaptability. The biggest space for innovation in financial markets is payments, that's why Facebook got into Libra and why Stripe is valued at $36bln.


It's not a binary deal.  Bitcoin can play its own unique part.  Libra and CBDCs can come along - but they're not decentralised crypto.



Dublinbay12 said:


> Bitcoin, in my opinion, is a speculative investment,


It is - in the same way as PTJ laid out.  i.e. it's 11 years old which is nothing in the development of a financial asset - and its formative in its development as a store of value.  That's where the speculation lies.  When it matures, it will be as boring as gold (but still with its merits all the while).  It may be able to make greater inroads as a means of exchange at a later stage - but store of value comes first.



Dublinbay12 said:


> I actually researched how one could acquire a bitcoin in Dublin and then spend it, my findings are the costs were prohibitive and there is nowhere to spend it,


You can acquire bitcoin via an exchange such as Binance for an exchange commission of 0.1%.  
I've been tracking the progress of bitcoin since 2013 - and have had cause to use it in various circumstances.  Costs and difficulty in acquiring it have changed considerably over that timeframe.  The eco-system continues to be built out - both for retail access and institutional (which for the most part has yet to come).
As regards spending it, you're talking about a means of exchange use case and mass market usage.  Considerable work is required on usability/UI and technical issues like transaction cost and transaction time before that comes into play.  Even then, volatility will need to have calmed down quite a bit.  As it develops and broadens in terms of market cap as a store of value/digital gold, that volatility will dissipate.  Layer 2 solutions like lightning network will continue to develop.  Email was available many years before the mass market came to use it (as it had to be made easier to use and palatable for mass market usage).



Dublinbay12 said:


> Thus it is really a closed economy, the value is set in the network and on exchanges which are less regulated, less sophisticated and easier to manipulate.


Same answer on regulation/market sophistication/manipulation.  Manipulation is facilitated by a small market.  It becomes ever more difficult as that market expands. Regulation continues to be developed - but regulation always trails innovation.



Dublinbay12 said:


> The crypto media is suggesting that a digital dollar / euro would have helped fiscal response during Covid based on some comments by key people but nothing more than conjecture.


Conjecture perhaps but the decentralised crypto sector is not going to be positively predisposed towards centralised digital currencies..so no motivation to recognise such advantages for them other than if they are actual advantages. Pelosi presenting an emergency bill to include a digital dollar would suggest that its not just the crypto media that recognises what advantages such a development could bring for a government.


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## Duke of Marmalade

tecate said:


> Disagree entirely.  They run a $40 billion hedge fund.  The letter was to investors - not to Johnny & Mary.   There has been a global race into the USD over the last few weeks - whether you think that is a good idea or not.  That's FIAT cash that is sitting on the sidelines. In the digital assets arena, USD stablecoins have exceeded $10 billion for the first time - a 79% increase since February.
> 
> And in that, you're glossing over the parameters set for that comparison which was this =>  _"Bitcoin got the lowest score because it is also the youngest entrant at 11 years of age."_
> 
> 
> You used the word 'promotion' - again with the prejudicial lexicon.  The week before Chris Wood - Head of Equity Strategy with Jefferies - a leading global investment bank - produced a similar letter to clients and suggested they buy both gold and bitcoin.  On that occasion, you said he was a 'cultist'.  Neither Wood or Tudor-Jones are involved in the crypto sector.  There's no 'promotion' here - their findings on bitcoin in the context of their respective research and market knowledge is simply that.
> 
> 
> Meaning?
> 
> 
> And you're not quite there.  Can you now go through the list and tell us how many of those projects are pursuing a 'store of value' and means of exchange use case?  Once you've whittled that down, how many projects have anything but a handful of developers working on them?
> As I've said many times, I'm open to the notion that bitcoin could be usurped but it will only be usurped by a digital asset that brings more to the table than bitcoin currently does in terms of store of value use case....without dropping the ball on some other facet of what makes a good store of value.  Of the 2,000 digital assets, can you tell me which one is likely to take that mantle as it stands today?  Most cryptocurrencies/digital assets will die off - leaving a best in class for every category (and there are a myriad of sub-categories when it comes to the various use cases that are implicated).
> 
> 
> Betrays a lack of understanding.  Ripple is pursuing a different use case - that of a replacement or SWIFT (and a means for more efficient international remittances).
> 
> As we ushered in a new millenium, gold was around $280/oz.  Today it's $1710/oz.  Price is a function of supply and demand.  Both gold and bitcoin are scarce assets.  If greater demand arises for a fixed supply asset, then its totally logical that price would increase.
> 
> 
> Here I would suspect - although not without purpose.
> 
> Given that few of those projects have anything to do with bitcoin and pursue a different use case, your point is nullified.
> 
> 
> It brings plenty to the party but you defiantly won't acknowledge those merits of the digital currency.
> 
> 
> Bring it on!  There are regulatory battles to be fought but on the whole, bitcoin will continue to find its place in the world.  Usability is the one thing that I want to see improve with bitcoin.  Other than that, CBDCs, Libra, etc - will only help find it new users.


_tecate _I have lots of ripostes for that, in particular that you seem to misinterpret my application of the horse race metaphor.  But I notice that this has become a bit of a dialogue, with neither of us even getting any likes/unlikes.  So I hope you will agree that until there is a more widespread participation we should let it go at that.


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## tecate

Duke of Marmalade said:


> _tecate _I have lots of ripostes for that, in particular that you seem to misinterpret my application of the horse race metaphor.  But I notice that this has become a bit of a dialogue, with neither of us even getting any likes/unlikes.  So I hope you will agree that until there is a more widespread participation we should let it go at that.


Dukey, if you're saying you'd like to park it up at that, I have no problem with that.  I don't get my rocks off on 'likes' so that's neither here nor there.  It's a discussion - and if anyone wants to weigh it up, or weigh in, they can do that. If it's not of interest, nobody has to read it.


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## Duke of Marmalade

tecate said:


> Dukey, if you're saying you'd like to park it up at that, I have no problem with that.  I don't get my rocks off on 'likes' so that's neither here nor there.  It's a discussion - and if anyone wants to weigh it up, or weigh in, they can do that. If it's not of interest, nobody has to read it.


Enjoyed the discussion but disappointed that it became a dialogue.


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## tecate

To my point earlier in this thread, there are now less bitcoin in circulation.  Since the Bitcoin Halving on May 11,  (GBTC) has purchased 18,910 bitcoin.  In that time, only 12,337 BTC newly minted bitcoin have been mined/released.  Supply/Demand dynamic at play.

Link


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## Leo

tecate said:


> To my point earlier in this thread, there are now less bitcoin in circulation.



With people continuing to lose access to their keys, some even by choice , I wonder how the rate of loss compares to that of generation.


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## tecate

Leo said:


> With people continuing to lose access to their keys, some even by choice , I wonder how the rate of loss compares to that of generation.


Don't have the opportunity to double check it right now but my understanding is that estimates are in the region of 4 million.  It makes sense that people were careless in the first couple of years with Bitcoin when it would have had a unit price of a few pennies.  Not so much today.  

There are some excellent means of multi-sig storage now - from Casa and Unchained Capital.  They're just not mass market yet.  People are better educated on storage but for those that are careless, mass market multi-sig solutions will be developed.  There's also a wallet offering that depends on bio-metrics rather than the user needing to store their private key.  

Therefore, in more recent years its reasonable to assume that there has been a reduction in loss of keys and such loss is likely to reduce further as we go forward. Where there has been loss, it just makes a scarce asset scarcer still.


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