Key Post Bitcoin is a clearly identifiable economic bubble

[tecate]

As usual you keep digging the rabbit hole.

"As usual", there are no limits to how far you will stretch and contort yourself to misrepresent.

I am not trying to undermine your Faith.

Well, that would be wayward, wouldn't it Duke?. You are on record in saying that you would have to have blind faith in the central bank alchemists. I believe you said that around the time that you claimed there would likely be little in the way of inflation. Paul 'fax machine' Krugman agreed with you.

I haven't expressed any 'faith'. I've stated repeatedly that Bitcoin could fail. It's yourself and @Brendan Burgess that have the divine faith behind you as neither of you will acknowledge a possibility (however slight either of you may think it to be) where your belief is misplaced and Bitcoin continues to develop.

But for me you work for US$. End of.

You're free to tell yourself whatever fairytales are most convenient to you. However, if you say them out loud, you give me no option but to challenge them. I receive payment directly in bitcoin from the company I contract to. There is nothing to suggest that they have to go out and buy that bitcoin. i.e. they're paying me out of bitcoin revenues.

let us assume for sake of argument that you are the Tea Lady.

Heavens forbid we should make such an assumption, Duke. I'd be more like the janitor.

 

[Duke of Marmalade]

@tecate Well you always insist on the last word. Let's see if this post breaks the tradition.

 

[tecate]

And your point is?
Even at 8% p.a. inflation we should note that the price of a latte in bitcoin will move by over 8% on most weeks.

Inflation is money that you're never getting back. Short/medium term BTC price volatility is bidirectional. Over the longer term, BTC buying power increases.

 

[tecate]

I'm curious, Is anyone here who is resident in Ireland keeping savings in USD and thus avoiding the substantial fall of the euro as late?

How easy it is to have digital USD in Ireland?

By 'digital' dollars, do you mean USD in a bank account or do you mean tokenised? If the former, I think its possible to open dollar-based accounts with the banks in Ireland - but I'm not sure if they're available to everyone or if the fees are reasonable. If the latter, I suppose anyone is free to open an account with Binance, https://www.kraken.com/ (Kraken), FTX and buy USDC / USDP / USDT .

Also, Gemini became the first exchange to be approved by the Irish central bank as a VASP (virtual asset service provider) earlier this month - and alongside the others above, they have their own USD stablecoin - GUSD .

 

[DazedInPontoon]

I meant the former. I've never had a USD denominated bank account in Ireland, I'm curious if anyone else has?

 

[Duke of Marmalade]

Inflation is money that you're never getting back. Short/medium term BTC price volatility is bidirectional. Over the longer term, BTC buying power increases.

If indeed bitcoin was not an utterly worthless make-believe your point would be very valid. However the huge balance of informed opinion is that "over the longer term" it is zero. And even cultists like your good self concede that this is a non negligible possibility.

 

[tecate]

If indeed bitcoin was not an utterly worthless make-believe your point would be very valid.

The point was as valid 5 years ago when you and I first started to discuss this topic as it is today - and as it has been for the entire 13 years of Bitcoin's existence.

However the huge balance of informed opinion is that "over the longer term" it is zero.

That's a lie Duke - you're talking about your carefully curated list of academics assembled to confirm your bias. You are excluding a whole host of people who have taken the opposing view. Most of those on your list who are prophesying the demise of the decentralised cryptocurrency that is Bitcoin are central bankers or those who concern themselves with centralised financial systems. It's a bit like polling taxi drivers as to what they think of Uber or checking in with hotels for their views on Airbnb.

And even cultists like your good self concede that this is a non negligible possibility.

You don't see the contradiction in that sentence? I'm open to the possibility of it failing - that in no way corresponds with cult-like behaviour.
Contrast that with your own views where you are not open to all the possibilities - that is very much in line with cult-like behaviour. Lets take that a step further. You have said previously that you will only change your mind when Nouriel Roubini changes his. That's next level cult.

 

[jasdpace@gmail.]

Hi Tecate,

Apologies in advance if you've addressed this previously and further apologies if this is question is not following the normal course of the thread.

Just wondering about the following. I had a conversation yesterday, the gist of which is that I was told that it would be easy for governments/central banks to effectively smother cryptos in general. Perhaps they can make life more difficult for cryptos but my own sense is that governmental/central banking policy measures of curtailment are problematic. And so to the question - is there anything that the "authorities" can do in the crypto space that would really hurt cryptos/that you really wouldn't like to happen?

 

[tecate]

Just wondering about the following. I had a conversation yesterday, the gist of which is that I was told that it would be easy for governments/central banks to effectively smother cryptos in general. Perhaps they can make life more difficult for cryptos but my own sense is that governmental/central banking policy measures of curtailment are problematic. And so to the question - is there anything that the "authorities" can do in the crypto space that would really hurt cryptos/that you really wouldn't like to happen?

He's talking about a ban on crypto. The weak spot is the on/off ramp with fiat money. If we acknowledge that we live in a world of sovereign money and the means to exchange crypto to/from sovereign money is shut down, then that would be a difficulty for sure. Centralised cryptocurrency exchanges like Binance, Coinbase, Kraken, FTX, Bitfinex, etc. are no different than banks. If they don't comply with regulation, they'll be shut down. For the most part, they actually want regulatory clarity and they will comply with regulation so long as its workable (a suggestion by European policymakers to put an onus on them to report the owners of self custodied digital wallets is an example of regulation that isn't workable). That aside, if governments simply wanted to ban it, they could ban the on/off ramps.

That said, they'd need to be consistent - it would take ALL governments getting together and agreeing to ban it. When have you ever seen that sort of consistency across all governments? They can't even agree on climate change policy. It won't really smother it if a few countries do it or even if most do it. That would set its development back a number of years for sure - but it wouldn't kill it.

In that scenario where there's a variance in policy, if a proportion of countries ban it, there's an incentive for others to accept it - as they'll get to tax it - and have a flow of funds coming into/under that jurisdiction that otherwise wouldn't have found itself there. The same game theory plays out from the standpoint of innovation. As the internet developed, the Americans went for light touch regulation to allow it to develop. The Europeans regulated it much more stringently. If you're a startup in that space, where are you likely to locate and take that innovation? Blockchain/crypto will be no different.

As we progress, it's going to become less and less politically popular to ban it. As the percentage of folks who hold/use crypto continues to go up, it will reach a level where it simply won't be acceptable to ban it to a significant chunk of the voter base. A straw poll on AAM wouldn't suggest that to be the case but there's a couple of things with that. Views within Ireland are not necessarily views reflected elsewhere. If we take the most important market - the US - there's a big chunk of the population that believes in minimal government interference and regulation, free markets, etc. - that is very much aligned with crypto. It's not going to be banned there. As an example, here's a recent proposal from the Republican Party in Texas to have the right to own/use/hold whatever means of exchange citizens want - inclusive of digital currency - enshrined in the state's Bill of Rights.

All of that to say, I think the genie can't be put back in the bottle. It won't be smothered at this point. At worst, they can put its development back a decade.

 

[DazedInPontoon]

Agree with what tecate has said. Coinbase alone claims to have 98m verified users now. Can't see it happening in the states at least.

 

[Duke of Marmalade]

In countries like the US bitcoin would need to be a serious threat to Fed monetary policy before anything like a ban would be considered. We are a trillion kilometres away from that.

 

[tecate]

In countries like the US bitcoin would need to be a serious threat to Fed monetary policy before anything like a ban would be considered. We are a trillion kilometres away from that.

Delighted to hear that Duke.

I'll add that Bitcoin is not and will not be a threat to the monetary policy of any sovereign currency - provided that said currency isn't mismanaged to the point of hyperinflation.

 

[jasdpace@gmail.]

Tecate - thanks for taking the time to answer my question so thoroughly - much appreciated.

 

[Duke of Marmalade]

Delighted to hear that Duke.

I'll add that Bitcoin is not and will not be a threat to the monetary policy of any sovereign currency - provided that said currency isn't mismanaged to the point of hyperinflation.

Good to see your realistic ambition for bitcoin. This is in contrast to the views of 95bn$ man Sharma who you introduced to us. He has bitcoin as strong favourite to be the next World reserve currency
I like the term on-off ramp. Unlike other currencies bitcoin will always need an on-off ramp to some fiat especially the US$. It will never actually be a medium of exchange in its own right - I think you call that "unit of account". Can it survive indefinitely in that form. Not impossible but unlikely to sustain anything like its current market cap.

 

[tecate]

Good to see your realistic ambition for bitcoin.

I don't need any type of world or nation state domination for bitcoin - nor does anyone else. All that's required is that it becomes a normal (but optional) mundane means of transfer that is acceptable everywhere - and a store of value.
Now if it also acts as a gentle reminder to sovereign states that it can act as a fallback system in a case where sovereign currency is mismanaged, I'd struggle to understand how anyone couldn't see that as a force for good.

This is in contrast to the views of 95bn$ man Sharma who you introduced to us. He has bitcoin as strong favourite to be the next World reserve currency

I don't think it is in contrast to the views of Rockefeller International's Ruchir Sharma. Bear in mind that while the US has benefited in many ways from the world reserve currency status of the USD, it's not all one way traffic. Take the current scenario with the strong dollar. That's great for them to an extent - but now sovereign states are scrambling for dollars, selling off USD treasury bonds, etc. - as dollars are scarce. It has also worked up a debt that nobody ever expects to be paid back - to a point where the system is broken.
As regards Sharma suggesting Bitcoin is a 'strong favourite' to become global reserve currency, you must have been listening to a different interview than the one I was listening to. That wasn't my take away. I think he was expressing the view that it has the potential to get itself into a position where that would be a realistic option (with lots of ground to cover up to that point) ...and nothing more than that.

I like the term on-off ramp. Unlike other currencies bitcoin will always need an on-off ramp to some fiat especially the US$.

What you mean is that it's unlikely that you or I will be forced by those with a monopoly on violence (i.e. nation states) to use Bitcoin - whereas you are with sovereign monopoly money.

Additionally, I don't agree that it will always have to on/off ramp. If market cap continues to grow and the asset matures, who's to say that there will be any off-ramping at all? If this continues to grow (and i don't just mean Bitcoin, I also mean stablecoins and other tokenized innovations), maybe it's most of conventional finance that gets tokenised. Have you considered that the US may not issue a CBDC at all? Instead, there's every likelihood that they will champion private sector tokenised dollars like USDC once they've been regulated (with regulation very close to being put in place at this point)?

Could it be that the US sees that it can give the USD a much longer reach through something like USDC? When it becomes second nature for ordinary people everywhere to use a digital wallet, it will be interesting to see what happens when one of these banana republic currencies blows up.

It will never actually be a medium of exchange in its own right - I think you call that "unit of account".

There's a distinction between the two - and what you're talking about (once again) is unit of account. Bitcoin is already a medium of exchange "in it's own right".

Can it survive indefinitely in that form.

If it progresses at the same rate as it has done since you and I first discussed Bitcoin back in early 2018, then the answer to that question is yes.

Not impossible but unlikely to sustain anything like its current market cap.

Time will tell, Duke.

 

[Duke of Marmalade]

Now if it also acts as a gentle reminder to sovereign states that it can act as a fallback system in a case where sovereign currency is mismanaged, I'd struggle to understand how anyone couldn't see that as a force for good.

If bitcoin was a thing of real value (and not UWMB*) then I think it would be a force for good. That is an If too big for me.

I don't think it is in contrast to the views of Rockefeller International's Ruchir Sharma.
As regards Sharma suggesting Bitcoin is a 'strong favourite' to become global reserve currency, you must have been listening to a different interview than the one I was listening to. That wasn't my take away. I think he was expressing the view that it has the potential to get itself into a position where that would be a realistic option (with lots of ground to cover up to that point) ...and nothing more than that.

Yes I somewhat exaggerated his confidence in his prediction for effect. But how off the wall can he be?

A reserve currency (or anchor currency) is a foreign currency that is held in significant quantities by central banks or other monetary authorities as part of their foreign exchange reserves.

You are for ever reminding us of how central banks are the sworn enemy of bitcoin. And yet 95bn$ man thinks the day will come when central banks and monetary authorities will hold bitcoin in significant quantities.

What you mean is that it's unlikely that you are I will be forced by those with a monopoly on violence (i.e. nation states) to use Bitcoin - whereas you are with sovereign monopoly money.

I know you reside in a strange part of the world.

Additionally, I don't agree that it will always have to on/off ramp. If market cap continues to grow and the asset matures, who's to say that there will be any off-ramping at all?

That is an interesting thought piece. Ultimately money even if held as a store of value is used to buy things. No off ramp implies a significant use of bitcoin as a primary medium of exchange. Looks a very long way off from this point.

If this continues to grow (and i don't just mean Bitcoin, I also mean stablecoins and other tokenized innovations), maybe it's most of conventional finance that gets tokenised. Have you considered that the US may not issue a CBDC at all? Instead, there's every likelihood that they will champion private sector tokenised dollars like USDC once they've been regulated (with regulation very close to being put in place at this point)?

I see a 100% distinction between CBDC/proper stablecoins and bitcoin. The former are in fact just manifestations of fiat, in fact are either fiat themselves are backed by fiat. Bitcoin is a UWMB.* But don't wind me up about that real con job - algorithmic stablecoins.

* UWMB Utterly Worthless per Chinese Government and Make-believe per Indian central bank.

 

[tecate]

Yes I somewhat exaggerated his confidence in his prediction for effect. But how off the wall can he be?

You still seem to be misinterpreting. He's clearly pointing to Bitcoin having to hit a plethora of milestones in its journey to that point. That's why there's little point in talking about it until it broadens.
Other than that, he's identified that there's an issue right now with the USD as global reserve currency. He is in no way unique in flagging this. Therefore, there is no way that he is 'off the wall' in suggesting that there may be a change in terms of global reserve currency - and in talking about that saying Bitcoin could develop to an extent that it could have the potential to fulfil the role isn't unreasonable (because he's not saying that's in any way a shoe in - just that fundamentally - all going well with its development - it could do the job as a neutral currency).

Here's Mark Yusko on the same theme (if you're caught for time, tune in from 25:30 onwards). He's talking about a handover to Chinese dominance - followed by btc taking that role 30 years beyond that. Is he off the wall too?...or you've simply dug yourself into a trench that won't allow you to be open minded about potential outcomes?

You are for ever reminding us of how central banks are the sworn enemy of bitcoin. And yet 95bn$ man thinks the day will come when central banks and monetary authorities will hold bitcoin in significant quantities.

Again, your choice of words misrepresent / exaggerate. However, how is it any different to commercial banks? They've come out with some nasty trash talk where bitcoin/crypto is concerned - but now we're seeing all manner of investment in the space from the likes of them, all manner of involvement. I can acknowledge that and I'm not exactly a big fan of retail/commercial banks either.
If it keeps defying you and them, then why not? In a scenario where the bitcoin thesis plays out, then the first movers at that level will be winners.

No off ramp implies a significant use of bitcoin as a primary medium of exchange. Looks a very long way off from this point.

No, it doesn't. You've missed the significance of the development of stablecoins in tandem with BTC - and that scenario where USDC could act as the CBDC. That's a whole world of tokenisation - it doesn't isolate Bitcoin.
As regards the development of stablecoins and CBDCs, I wouldn't say its that far off - the next couple of years will tell all.

I see a 100% distinction between CBDC/proper stablecoins and bitcoin. The former are in fact just manifestations of fiat, in fact are either fiat themselves are backed by fiat. Bitcoin is a UWMB.* But don't wind me up about that real con job - algorithmic stablecoins.

Of course there's a major distinction - but again, you've missed the point. Go and have a look at what purpose USDC/USDT,etc. have served in their earlier stages (because it had everything to do with decentralised crypto like BTC) - and now they've found other use case. This part of the discussion arose in consideration of on/off ramps. If stablecoins are accepted, then how is there an issue in terms of on/off ramps? There may be no need to off ramp. Maybe most conventional money on-ramps to tokenised form rather than us being concerned about how value flows to/from the legacy system.

On algorithmic stablecoins, you're taking the category and tar and feathering it on the basis of one specific ill-conceived and fundamentally flawed project (UST/Terra). If an algorithmic stablecoin can be developed such that it can't be unhinged, then that would be a powerful thing. By all accounts from a design perspective it's a big ask - but you can bet your last euro that there will be folks trying to solve that problem - because if they can do so, the upside is huge.

* UWMB Utterly Worthless per Chinese Government and Make-believe per Indian central bank.

Yeah, those are top class sources you've cited - totally unbiased in assessing Bitcoin.
By the way, that $6 billion that you said was chump change that depositors can't get back in Henan Province...could it possibly be symptomatic of greater ills in the Chinese banking system, comrade?

 

[Duke of Marmalade]

@tecate I will focus on just one of your comments.

By all accounts from a design perspective it's a big ask - but you can bet your last euro that there will be folks trying to solve that problem - because if they can do so, the upside is huge.

Absolutely, just as there were folks trying to turn base metal into gold. You do realise what you are discussing here? The ability to perfectly print digital US$, in other words to be able to be your own US Fed. As I think I said before, it would be akin to lifting a bald man by the head. But then the cult believe in so many things that are hardly believable it is but a short step to believe in something that is simply unbelievable.
I'll let you have the last word.

 

[tecate]

Absolutely, just as there were folks trying to turn base metal into gold. . . .As I think I said before, it would be akin to lifting a bald man by the head.

Your analogy is complete and utter bs. You have no background in the design of such things - ergo, you're not qualified to make an absolute determination that a robust algorithmic stablecoin can't be designed/developed.

You do realise what you are discussing here? The ability to perfectly print digital US$, in other words to be able to be your own US Fed.

Provided that the algorithmic stablecoin is robust and can be designed such that it can maintain the peg, then it will then be doing precisely what it is designed to do. If it achieves that, then such stablecoins will only be issued if there's demand there to meet that issuance. There would only be demand if there was a use case. If those that have designed such a product stand to benefit from that - alongside the holders of a governance token, what's the problem? Are you against private enterprise and capitalism?

Here are Vitalik Buterin's immediate thoughts on algorithmic stablecoins in the direct aftermath of the failure of Terra/UST. The lessons are painful for those who get caught up in it - but he and people like him do learn from design flaws. There's ample incentive for someone to get this right so you can be sure that others are going to keep trying. I have no notion of how likely it is that they will get there - from what I've been lead to understand, it's quite a difficult problem to solve. However, it's not a reasonable assumption to suggest difficult equals impossible.

In your case, given that you have no background in algorithmic stablecoin design, I also know that when you speak in absolutes and say in no way is this possible that you have no notion whether it is or it isn't.

But then the cult believe in so many things that are hardly believable it is but a short step to believe in something that is simply unbelievable.

And so long as you insist on tar and feathering folk with that disparaging label - including people who unlike you are open to being wrong - then expect to deal with ongoing disappointment, Duke.

 

[LosLobos]

New in this space, but when I see Paypal and the giant merchant banks investing strongly in crypto, I begin to wonder.