Why is Bitcoin "digital gold" crashing right now?

[tecate]

Well, more than 10 years after the printing presses were first turned on in earnest, no sign of the predicted hyperinflation.

Don't be so quick to judge it. It's an unfinished story. Interest rates were floored and the QE taps were never turned off. It was supposed to be temporary. Now the volume of monopoly money is going to be exponentially larger.

For my part, when I first became engaged in this bitcoin stuff here on AAM more than 2 years ago, I was a full blooded BOHA supporter of the Boss. Although bitcoin has fallen by more than 50% since then, I admit that I have not seen the expected BOHA moment.

I like the bias you show in cherry picking the 2017 peak to now :-D Just so that there's no confusion, bitcoin is confirmed as the best investment asset class of the past decade, of 2019, and it's currently the best performing asset class thus far in 2020.

I understand that you've both given up in terms of trying to confirm when either of you believe bitcoin will cease to exist..be that next week/month/year/decade, etc. The Lindy Effect may not work well with your prophecy.

They are certainly obsessed with the halving

I'm not seeing any such 'obsession' myself but I guess we all approach the subject with our own bias, right? At the end of the day, you can't tell me how many euro are in circulation right now, how many there will be in circulation next week/month/year, etc. The same with interest rates. Those that understand the bitcoin proposition see it for what it is - hard money - not 'Infinite QE' monopoly money.

Hopefully, for the sake of us all they are wrong and the conventional system makes a reasonable recovery. That will be the BOHA moment - the realisation that the conventional monetary machinery which has served society so well over the last century is flexible enough to withstand the bitcoin scholars' worst predictions for it.

You seem to be looking at this in a very binary way. Decentralised cryptocurrency provides people with an alternative. It's there if they want to use it or need to use it. Both FIAT and bitcoin can and will co-exist. As an aside, do you think the people of Lebanon would agree that 'conventional monetary machinery' has served them well?

Anybody that spouts any of that mantra is a cultist to me.

See my last post. Insofar as I'm aware, he has never before made any public utterance about bitcoin. Presumably this was his professional advice to clients. It would seem on that basis that anyone that disagrees with you is then a 'cultist'...

What is your view of a Nobel Laureate?

See my previous comment. Bitcoin is anathema to Keynesian economists. However, seeing as you mention Mr. Krugman, here's an insightful quote from the venerable economist from 1998:

"By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.”

Maybe his mistake was in putting a timestamp on it? If he had left it open ended, there's still a possibility of the fax machine making a comeback. Perhaps - in honour of the bould Paul - you can send your response by Fax?

 

[Duke of Marmalade]

Don't be so quick to judge it. It's an unfinished story. Interest rates were floored and the QE taps were never turned off. It was supposed to be temporary. Now the volume of monopoly money is going to be exponentially larger.

I take it from that that you do anticipate a Zimbabwe moment for the QE fiat currencies. Care to give us a date?

I like the bias you show in cherry picking the 2017 peak to now

That was when the Boss first admitted discussion on bitcoin, presumably because it had hit dizzying heights. That's when I decided to dig into this bitcoin thing a bit.

I understand that you've both given up in terms of trying to confirm when either of you believe bitcoin will cease to exist..be that next week/month/year/decade, etc.

No dates but I do think I can see the scenario when not so much that bitcoin will be shown to have no clothes but that its raison d'être will have been nullified. The clue is in that Wiki quote. The bitcoin scholars see bitcoin as the insurance policy invented in the face of QE. If anything that syndrome has intensified with some folk even questioning why fiat regimes levy tax at all. So I think it will need a big winding down of QE and a return to normal monetary conditions. I am expecting that the exercise will have been vindicated and that there will have been no Zimbabwe moment. The bitcoin scholars will then observe that the insurance policy was not needed after all. I also expect that the bitcoin's attraction for the criminal classes will have been addressed by the authorities. Then we will get that Krugman moment when it dawns on the speculators that bitcoin isn't tethered to anything at all. That will be the BOHA moment.

I'm not seeing any such 'obsession' myself but I guess we all approach the subject with our own bias, right?

Look at one of your own links. An article obsessing about the 50 days to go to the halvening (sic). And as I said countdown clocks abound in bitcoin blogsphere.

Those that understand the bitcoin proposition see it for what it is - hard money - not 'Infinite QE' monopoly money.

Yes, as explained above, that is what is keeping the fantasy afloat and when that justification is shown to be faux the party will be over.

You seem to be looking at this in a very binary way. Decentralised cryptocurrency provides people with an alternative. It's there if they want to use it or need to use it. Both FIAT and bitcoin can and will co-exist.

Once the fear of fiat meltdown dissipates I can't really see the rôle for crypto.

As an aside, do you think the people of Lebanon would agree that 'conventional monetary machinery' has served them well?

I am not a Lebanon watcher but I presume it is as relevant to this discussion as Zimbabwe or Venezuela.

See my last post. Insofar as I'm aware, he has never before made any public utterance about bitcoin. Presumably this was his professional advice to clients. It would seem on that basis that anyone that disagrees with you is then a 'cultist'...

Yep all that Satoshi White Paper, decentralised, blockchain, hash rate, halvings blah blah blah is a cult to me.

See my previous comment. Bitcoin is anathema to Keynesian economists. However, seeing as you mention Mr. Krugman, here's an insightful quote from the venerable economist from 1998:

"By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's.”

Maybe his mistake was in putting a timestamp on it? If he had left it open ended, there's still a possibility of the fax machine making a comeback. Perhaps - in honour of the bould Paul - you can send your response by Fax?

Nice one Do you have similar dirt on Joseph Stiglitz, Bill Gates, Warren Buffett etc.?

 

[sonandheir]

I have been wondering why for the last 10 years this massive QE has not caused inflation.

And now we have permanent QE by FED & ECB. This is more than just the corona or slow economies.

It is actually due to massive deflation caused by advances in technology. They are trying desperately to prevent this deflation.

I think Covid will speed up the tech drive combined with an economic crash which will spark hyper deflation. They will have to turn the printing presses into overdrive.

The man in the street will ask how can this be? This is when I think the money supply will questioned.

Is bitcoin the answer? I don't know. But I do think the wrong amount of Bitcoin in a portfolio is zero.

 

[Duke of Marmalade]

I have been wondering why for the last 10 years this massive QE has not caused inflation.

And now we have permanent QE by FED & ECB. This is more than just the corona or slow economies.

It is actually due to massive deflation caused by advances in technology. They are trying desperately to prevent this deflation.

I think Covid will speed up the tech drive combined with an economic crash which will spark hyper deflation. They will have to turn the printing presses into overdrive.

The man in the street will ask how can this be? This is when I think the money supply will questioned.

Is bitcoin the answer? I don't know. But I do think the wrong amount of Bitcoin in a portfolio is zero.

son the inflation rate in Ireland is around 1% so references to "massive deflation" are a bit OTT. The authorities target 2%, hence the QE. In any event the bitcoin community are weaned on a faith that hyper inflation of the fiat currencies is just around the corner. You seem to be diametrically in an opposite camp as you predict hyper deflation.

 

[tecate]

I take it from that that you do anticipate a Zimbabwe moment for the QE fiat currencies. Care to give us a date?

No, I'm not - but I recognise it as a possibility. I recognise that the situation could be mismanaged (as any government/CB can mismanage - and we have a long litany of examples - hit me up if you need a list). Furthermore, nobody knows the outcome as we have never been here before. Yes we had QE post financial crisis - but it will pale by comparison with this QE4. They had the option of reducing rates back then - they don't anymore as they've stayed on the floor. From what I'm led to believe, it could well be that QE doesn't work very well in its second coming so there's that also.

Bear in mind I'm also open to the notion that escaping deflation may be futile as per my previous post.

No dates but I do think I see the scenario when not so much that bitcoin will be shown to have no clothes but that its raison d'être will have been nullified. The clue is in that Wiki quote.

There's no mystery here or need for clues. A reference to this Times article was included in the genesis block on the bitcoin blockchain.

If anything that syndrome has intensified with some folk even questioning why fiat regimes levy tax at all.

You mean that people generally are looking to re-examine 'what is money' in the face of unprecedented money printing? They're right to do so. And by the way, it wasn't a suggestion that they shouldn't levy taxes. It was a query as to why it can't be paid for using printed off monopoly money. Or why we can't shake the magic money tree to provide Universal Basic Income (UBI) and we can all pay our taxes with that?

The bitcoin scholars will then observe that the insurance policy was not needed after all. I also expect that the bitcoin's attraction for the criminal classes will have been addressed by the authorities.

And why do you give bitcoin a hard time and not gold? What will happen to gold in this instance? Before you say it has real world value, it doesn't trade anywhere near the price it is mined at...ergo....its principal use in today's world is as a hedge.

Then we will get that Krugman moment when it dawns on the speculators that bitcoin isn't tethered to anything at all. That will be the BOHA moment.

Then I guess you should keep your fax machine switched to 'on' in case Paulie has news for you
As regards the 'tethered' nonsense, it fairs much better than that covid infested cotton in your wallet (which is backed by nada). I guess that has a use case as toilet roll in pandemic conditions. Other than that - bitcoin has built in scarcity - the opposite of your FIAT.

Look at one of your own links. An article obsessing about the 50 days to go to the halving. And as I said countdown clocks abound in bitcoin blogsphere. Yes, as explained above, that is what is keeping the fantasy afloat and when that justification is shown to be faux the party will be over.

Which link are we talking about? The clue is in your wording. The bitcoin halving is a significant event for anyone that is involved with bitcoin and anyone that understands the concept. Of course, it's the subject of discussion (and is being reported on in the conventional media - eg.Forbes/Bloomberg/CNBC, etc.). However, you're wading in with your own prejudice with the 'obsessing'. The event - where the supply of bitcoin is in effect reduced - is particularly poignant right now when we have FIAT printing machines going into overdrive. There's no 'obsessing' implicated - but there is genuine relevant discussion.

Once the fear of fiat meltdown dissipates I can't really see the rôle for crypto.

For crypto? Crypto projects are working on a multitude of use cases - I think you're mistaken. It's not a case of one project and one use case.
By the way, even if the Fed and the ECB (if there is still a euro and an ECB at the end of this) manage to steer the ship through the storm, so long as bitcoin performs as a largely uncorrelated asset, it will always have a place for those who choose to diversify their risk.

I am not a Lebanon watcher but I presume it is as relevant to this discussion as Zimbabwe or Venezuela.

This may help. And yes, they're all very much relevant to this discussion. They're proof that governments and central banks get it wrong all the time. We may expect higher standards from the Fed and the ECB but it doesn't mean that they are infallible.

Yep all that White Paper Satoshi decentralised, blockchain, hash rate blah blah blah is a cult to me.

That's pretty insightful for sure. Effectively, anyone that says one word that is positive about bitcoin is a 'cultist'. That's some open-minded and considered thinking right there.

Nice one Do you have similar dirt on Joseph Stiglitz, Bill Gates, Warren Buffett etc.?

Hmm...lets see... Stiglitz - we've talked about Keynesian economists already I believe.
Bill Gates: Has provided both positive and negative commentary about bitcoin and cryptocurrency generally in recent years. I wonder does that make him a cultist also?
Warren Buffett: The Oracle of Omaha is clearly to be respected. However, he's not infallible. He is on record as saying that he got it very wrong when it came to the tech stocks (google, etc.) in recent years.

 

[tecate]

In any event the bitcoin community are weaned on a faith that hyper inflation of the fiat currencies is just around the corner.

FIAT currencies die all the time. The average lifespan of a FIAT currency is 27 years. If the ECB/BoE/BoJ/Fed are top of the class and remain so, good for them. If they screw up, there is a plan b for those that want to maintain their wealth and not have it evaporate due to mismanagement.

 

[Duke of Marmalade]

FIAT currencies die all the time. The average lifespan of a FIAT currency is 27 years. If the ECB/BoE/BoJ/Fed are top of the class and remain so, good for them. If they screw up, there is a plan b for those that want to maintain their wealth and not have it evaporate due to mismanagement.

tecate I am considering whether to reply in our major tit for tat or to decide whether it has run its course. But let me address this point. I am worried about QE backfiring. I do realise that the whole house of cards depends on skillful management of our monetary infrastructure. If there was viable insurance against such a meltdown I would have a piece of that action. I am not trying to score a cheap point here but I cannot see how anybody thinks that bitcoin fits that role. It is tethered to nothing. With FIAT any train crash will be slow. With bitcoin every day is a potential train crash.

 

[tecate]

I am worried about QE backfiring.

Good for you - as you should be (not because it will - but because nobody knows).

If there was viable insurance against such a meltdown I would have a piece of that action.

It was for that reason that the Global Head of Equity Strategy with one of the world's leading investment banks suggested to clients last Thursday that they buy some gold and some bitcoin.

I am not trying to score a cheap point here but I cannot see how anybody thinks that bitcoin fits that role. It is tethered to nothing. With FIAT any train crash will be slow. With bitcoin every day is a potential train crash.

Neither are backed by anything - but as programmable money, it's known how many bitcoin there will ever be. You can't say that for FIAT. Now if they hadn't have dropped the gold standard, then we may never have occasion for this discussion.

With bitcoin every day is a potential train crash.

Bitcoin remains formative - and that's the reason it's subject to speculation right now. The volatility will remain - and will slowly dissipate over time as its market capitalisation continues to expand. In the meantime, it's hard money which has consistently outperformed all other asset classes over the past decade. As it stands today, it is the best performing asset in 2020 thus far.

As it's formative, of course there's risk. However, it's very much a case of asymmetric risk. Ergo the upside risk far outweighs the downside risk - and on that basis, there's justification for a small allocation of bitcoin (say somewhere in the region of 5%) in every portfolio.

 

[Duke of Marmalade]

Neither are backed by anything - but as programmable money, it's known how many bitcoin there will ever be. You can't say that for FIAT. Now if they hadn't have dropped the gold standard, then we may never have occasion for this discussion.

This shows a surprising misunderstanding of how FIAT works.

Bear with me as I try to explain the wonders of FIAT banking in Noddy language. If I was to ask my bank manager what did she do with my 100k she might say that she lent it on a 30 year mortgage to an up and coming young lawyer*. In principle I could have dealt directly with the lawyer. Maybe he would undertake to give me 20 hours legal services every year for the next 30 years. There are at least 3 problems with such an arrangement.
Credit risk - can I be sure of those 20 hours legal services for the next 30 years?
Maturity mismatch/liquidity risk - I might want my money back some time soon.
Exchange risk - I hope I won't personally need all those legal services, so I will have to exchange them in the market for goods and services that I do need.

I then realise that my bank is providing a very neat service here. It will pool the credit risk and indeed set up capital on top of that just in case. The real magic though is it can provide me with almost complete liquidity for what would otherwise be very illiquid assets.
It cannot unfortunately completely remove the exchange risk. It can mitigate it though - I am at risk to the general price level and not just the price of legal services.
Enter the Central Bank. Amongst its main roles is to manage the credit and liquidity risks but crucially for me it is to manage the exchange risk aka inflation. It has been rather upfront in letting me know that it is targeting a steady fall of 2% p.a. in the exchange rate, though I might possibly be able to offset that with interest once they achieve their target.

Quite a clever system you must admit and one that was not invented overnight and has served the vast bulk of humanity very well indeed. The main moral of the tale is that my deposit is indeed backed by a tangible claim on the economy. True the entry on the bank ledger or the note or coin in my pocket has no intrinsic value and nor did it have when there was a promise to pay the bearer on demand an amount of gold.
But here is the main difference with bitcoin. The entry on the blockchain has no intrinsic value just like the entry in my bank account. But in the words of the Nobel Laureate, unlike the entry in the bank account, the entry in the blockchain is tethered to nada, it is BOHA. Satoshi him or herself conceded this fatal flaw.

* In anticipation of your objections if she had told me she lends most of the bank's money to a Mr Mugabe or a Mr Maduro then alarm bells would ring.

However, it's very much a case of asymmetric risk. Ergo the upside risk far outweighs the downside risk.

That's disappointing. I was hoping I was communicating with a numerically literate adversary. I presume by asymmetric you mean that the most you can lose on btc is $9k whereas according to Raoul Pal you could make $1M in the next 4 years. The same can be said of any share. Its downside is limited to -100% there is no ceiling to its upside. Before you can talk about symmetry you need to weigh the nominaly possible outcomes by their probability of occurrence.

 

[joe sod]

There's no mystery here or need for clues. A reference to this Times article was included in the genesis block on the bitcoin blockchain.

One of the big shortcomings of bitcoin is that it has no history no heritage, it just leapfrogged onto the financial world from nothing. Therefore it tries to overcome this by using terminology and words from the bible like "genesis" block. Also it wants to be associated with gold one of the oldest forms of wealth and exchange. The fiat currencies all have long histories stretching back centuries and have evolved, they have a heritage sometimes not good ones.

The euro in fairness is an exception to this but it is accepted as a continuation of the big european currencies, although the debate on its legitimacy is still live. However if you were worried about the lack of heritage of the euro you would hardly be jumping from it into bitcoin.

I think the reason why bitcoin has not collapsed is because it is tied to the whole technology sector, believers in bitcoin are also believers in the technology stocks so as long as the bull market in tech stocks continues then also bitcoin.
Maybe regulation could be the nail in the coffin eventually and needing to register who owns what bitcoins and that being made available to authorities. This is also now going to happen in the art markets for decades shrouded in secrecy and money laundering.

 

[tecate]

One of the big shortcomings of bitcoin is that it has no history no heritage, it just leapfrogged onto the financial world from nothing.

You're quite right to say that gold has established itself as a proven store of value whereas bitcoin has no such history. No dispute or debate needed on that front. What I would say though is that it brings some different components to the party:

- It's digital - It can be sent from party A to party B - anywhere in the world in real-time. You can walk through borders with bitcoin by just remembering a 12-24 word mneumonic key. Try doing that with gold.

- Verifiable - It's much easier to determine the validity of bitcoin. You need expensive testing equipment to determine the purity (or otherwise) of gold. This is not necessary for bitcoin.

- Divisible - With 8 places of decimal, bitcoin is readily divisible - gold is not.

- It's the native currency of the internet. In 1999 renowned nobel winning (non Keynesian!) economist, Milton Friedman had the foresight to know that there was a need in society for digital money. At that early point, he had the foresight to know that there was a need for a native internet currency and that digital money was coming. (That very same year, Keynesian economist Paul Krugman was telling us that by 2005, we would all see that the fax machine was far more impactful than the entire internet!).

Therefore it tries to overcome this by using terminology and words from the bible like "genesis" block.

It's a technological innovation. Tech comes with its own lexicon. 'Genesis' means 'origin'. The 'genesis block' is the first block on a blockchain. IF this ever makes this to mass market use (and I accept that's an 'IF'), ordinary people don't need to know about 'genesis blocks' in the same way as they don't need to know what TCP/IP is when they use the internet.

Also it wants to be associated with gold one of the oldest forms of wealth and exchange. The fiat currencies all have long histories stretching back centuries and have evolved, they have a heritage sometimes not good ones.

They share certain similarities - most prominent amongst them - scarcity. Many proponents of bitcoin have made their way over from the gold sector. Having said that - and to Friedman's point - it is digital - and brings with it certain advantages for use in our digitised world.

The euro in fairness is an exception to this but it is accepted as a continuation of the big european currencies, although the debate on its legitimacy is still live. However if you were worried about the lack of heritage of the euro you would hardly be jumping from it into bitcoin.

The average lifespan of FIAT currencies is 27 years. As you know, the Euro almost kicked it - in the aftermath of the last financial crisis. I'm now hearing economic commentators suggest that its going to be similarly challenged as this economic depression unfolds.
As regards moving from euro into bitcoin, I think it would be foolhardy to have 100% of assets in bitcoin. I think it equally foolhardy to have zero gold/bitcoin right now.

I think the reason why bitcoin has not collapsed is because it is tied to the whole technology sector, believers in bitcoin are also believers in the technology stocks so as long as the bull market in tech stocks continues then also bitcoin.

Perhaps you're right. However, all I can say is that I don't hold any technology stocks. But it makes sense that the starting point for adoption and use is with geeks and tech heads given that it is a technology.

Maybe regulation could be the nail in the coffin eventually and needing to register who owns what bitcoins and that being made available to authorities. This is also now going to happen in the art markets for decades shrouded in secrecy and money laundering.

There's no doubt that there are many twists and turns to be taken yet in the bitcoin and crypto saga. Regulation is going to be a battle over the next few years for sure. If governments take a hardline view, then those who speculate on the asset will get a firm kick in the guts. However, I would foresee it playing out as per the war on drugs. It could be suppressed over many years but it will not be killed off. In last years Libra hearings in the US, many US senators acknowledged the innovation of bitcoin and cryptocurrencies generally with Rep. Senator Patrick McHenry stating "There's no capacity to kill bitcoin"..."you can kill something that is not a true open distributed ledger". China allow and disallow bitcoin as it suits them. In the long run, it won't suit them - but that doesn't mean it won't suit its citizens. To my mind, it doesn't matter what they do IF crypto develops such that your granny can use it. It's not governments that will stop it - but innovators ability or otherwise to make it far more easy to use than it currently is.

Bitcoin is the first native currency of the internet and the people's money.

 

[tecate]

This shows a surprising misunderstanding of how FIAT works.

It very much doesn't your dukeness - and the long 'explanation' you dive into does nothing to overturn that.

[FIAT]is indeed backed by a tangible claim on the economy.

This is truly priceless! Here's what your average Venezuelan has had to do with their 'tangible claim on the economy'!


Let's not stop there. Do you want to advise the people of Lebanon about their 'tangible claim on the economy' and what they think of it right now in May 2020? How about Argentina, Turkey, Iran, Zimbabwe. You think that advice would be welcomed by citizens of any of the 28 countries who experienced - not runaway inflation - but hyper-inflation over the past 25 years?

True the entry on the bank ledger or the note or coin in my pocket has no intrinsic value and nor did it have when there was a promise to pay the bearer on demand an amount of gold.

Seeing as you bring it up, do you want to explain to everybody why the actual gold standard was removed after WW1 and the dollar-centric gold standard in 1971? Let us all know why that was a good idea (from the perspective of ordinary people).

But here is the main difference with bitcoin. The entry on the blockchain has no intrinsic value just like the entry in my bank account.

Bull poop! Despite your lengthy scribblings above, you've done nothing to disprove the fact that the covid infested cotton notes in your wallet are nothing more than that. Bitcoin is programmable money - it assumes a lack of trust - and has designed in scarcity. Those are some of the important facets it brings to the table.

But in the words of the Nobel Laureate, unlike the entry in the bank account, the entry in the blockchain is tethered to nada, it is BOHA. Satoshi him or herself conceded this fatal flaw.

This would be the same nobel laureate (Krugman) that said in 1999 that the fax machine would be confirmed as being more impactful than the entire internet by 2005? Yeah, Krugman is very credible alright. In the very same year, Milton Friedman called it - having the vision to know that it was only a matter of time until there was a native currency for the internet and the digital age.
As regards Satoshi, he/she/they was able to look at something objectively - unlike yourself with your added 'fatal' misquote.

* In anticipation of your objections if she had told me she lends most of the bank's money to a Mr Mugabe or a Mr Maduro then alarm bells would ring.

Aaahhh...of course! Here's a list of the world's central banks. Can you please tell us which ones we can trust and which ones we can't? You're trying to tell us that nothing could possibly happen to the FIAT A-listers like the Euro and the Dollar when the Euro came so close to collapse following the last financial crisis (and we now have mounting speculation about its chances in this coming financial crisis). You want me to trust my life savings to the whims of unelected officials? Bitcoin was designed from the get go to assume a lack of trust. It sounds like a far better system to me from that perspective. Try and print more bitcoin. Try and change the interest rate associated with bitcoin. Try and steal my self custodied bitcoin from me.
Tell me - were the leaders of Greece and Cyprus on your Maduro/Mugabe list a few years back when citizens were forced to take a haircut on their savings?

That's disappointing. I was hoping I was communicating with a numerically literate adversary.

What's disappointing is that you have to reduce yourself to this type of comment. What's disappointing is that you can't approach this discussion with any form of objectivity. You continually talk of bitcoin 'cultists'. What's clear to me is that you yourself are the one that can't approach this without your own prejudice getting in the way (based on your previous comments about the origins of bitcoin).

I presume by asymmetric you mean that the most you can lose on btc is $9k whereas according to Raoul Pal you could make $1M in the next 4 years. The same can be said of any share. Its downside is limited to -100% there is no ceiling to its upside. Before you can talk about symmetry you need to weigh the nominaly possible outcomes by their probability of occurrence.

Let me help you with your comprehension difficulty. Raoul Pal's view (and that of many macro traders/investors) is that bitcoin is a risky asset as it's a brand new asset class at a formative stage. His view is that given that it's at this embryonic stage in its development, there is huge risk but the potential upside by comparison with many other asset classes is asymmetric in comparison to that risk. You refer to equities but they do not have the same upside potential as bitcoin does. You can disagree with that all day long - no problem. However, if you don't understand it, then you're lost in this discussion entirely and should hit the books or take up some other pursuit.

 

[Duke of Marmalade]

It very much doesn't your dukeness - and the long 'explanation' you dive into does nothing to overturn that.


This is truly priceless! Here's what your average Venezuelan has had to do with their 'tangible claim on the economy'!
View attachment 4523

Let's not stop there. Do you want to advise the people of Lebanon about their 'tangible claim on the economy' and what they think of it right now in May 2020? How about Argentina, Turkey, Iran, Zimbabwe. You think that advice would be welcomed by citizens of any of the 28 countries who experienced - not runaway inflation - but hyper-inflation over the past 25 years?


Seeing as you bring it up, do you want to explain to everybody why the actual gold standard was removed after WW1 and the dolar-centric gold standard in 1971? Let us all know why that was a good idea (from the perspective of ordinary people).

Bull poop! Despite your lengthy scribblings above, you've done nothing to disprove the fact that the covid infested cotton notes in your wallet are nothing more than that. Bitcoin is programmable money - it assumes a lack of trust - and has designed in scarcity. Those are some of the important facets it brings to the table.

This would be the same noble laureate (Krugman) that said in 1999 that the fax machine would be confirmed as being more impactful than the entire internet by 2005? Yeah, Krugman is very credible alright. In the very same year, Milton Friedman called it - having the vision to know that it was only a matter of time until there was a native currency for the internet and the digital age.
As regards Satoshi, he/she/they was able to look at something objectively - unlike yourself with your added 'fatal' misquote.


Aaahhh...of course! Here's a list of the world's central banks. Can you please tell us which ones we can trust and which ones we can't? You're trying to tell us that nothing could possibly happen to the FIAT A-listers like the Euro and the Dollar when the Euro came so close to collapse following the last financial crisis (and we now have mounting speculation about its chances in this coming financial crisis). You want me to trust my life savings to the whims of unelected officials? Bitcoin was designed from the get go to assume a lack of trust. It sounds like a far better system to me from that perspective. Try and print more bitcoin. Try and change the interest rate associated with bitcoin. Try and steal my self custodied bitcoin from me.
Tell me - were the leaders of Greece and Cyprus on your Maduro/Mugabe list a few years back when citizens were forced to take a haircut on their savings?

What's disappointing is that you have to reduce yourself to this type of comment. What's disappointing is that you can't approach this discussion with any form of objectivity. You continually talk of bitcoin 'cultists'. What's clear to me is that you yourself are the one that can't approach this without your own prejudice getting in the way (based on your previous comments about the origins of bitcoin).


Let me help you with your comprehension difficulty. Raoul Pal's view (and that of many macro traders/investors) is that bitcoin is a risky asset as it's a brand new asset class at a formative stage. His view is that given that it's at this embryonic stage in its development, there is huge risk but the potential upside by comparison with many other asset classes is asymmetric in comparison to that risk. You refer to equities but they do not have the same upside potential as bitcoin does. You can disagree with that all day long - no problem. However, if you don't understand it, then you're lost in this discussion entirely and should hit the books or take up some other pursuit.

Ooops! I have touched a raw nerve. Time to give this one a rest. See you for another bout in a few months' time, when you have chilled out and we can analyse the Great Halvening of the BOHA.
Raoul Pal, BOHA will be changing hands at a million quid before the next Great Halvening You're probably the sort of guy that believes that some folk can bend spoons by just looking at them.
Don't worry you can have the last word - I'm actually having a small wager with myself as to whether it will include repeats of your Venezuala, Lebanon, Fax Machine riffs.
Oh and by the way Milton Friedman was not talking about BOHA, he presumed that the digital currency would be tethered to something of intrinsic value.

 

[joe sod]

@tecate you definitely know your stuff, even though I don't believe in it you make a very good case. You go into alot of depth to back up your case not one line smart alec replies that some others are very fond of on other threads.

 

[tecate]

Ooops! I have touched a raw nerve. Time to give this one a rest. See you for another bout in a few months' time, when you have chilled out and we can analyse the Great Halvening of [Bitcoin].

I'm perfectly chilled your Dukeness and ready to consider any objective point of discussion you'd like to introduce.

Raoul Pal, [Bitcoin]will be changing hands at a million quid before the next Great Halvening You're probably the sort of guy that believes that some folk can bend spoons by just looking at them.

I keep an open mind your Dukeness and I'm always interested in hearing an objective contrarian view. My views are my own although I don't tend to put a high weighting on guys who believe that the fax machine has advanced society so much further than the entire internet...but each to their own. You want commentary on spoons?, this is all I've got for you.

Oh and by the way Milton Friedman was not talking about [bitcoin]

Well I'll grant you this - his comments were made 10 years before Satoshi published the bitcoin whitepaper on October 31, 2009. There's no doubt he can't match your Fax Machine guy!

However, lets have a look at those comments again and see what type of currency he was alluding to....

Peer to peer digital cash - check!​

​

The trustless movement of funds from party A to party B - without either of them needing to know each other - check!​

​

Anonymous transfer of value - check! (Bitcoin is already pseudo-anonymous. It can be used anonymously by those that are tech savvy enough and there are changes that can be made to the protocol to make it truly anonymous).​

​

he presumed that the digital currency would be tethered to something of intrinsic value.

Really? Do you have a citation to support that statement?

I feel sorry for Tecate.

Thanks but don't let that bother you. I'm big n' bould enough to scribble a defence.

 

[Duke of Marmalade]

I'm perfectly chilled your Dukeness and ready to consider any objective point of discussion you'd like to introduce.

Yes you seem to have chilled out a tad. My fundamental question is how can a digital entry which is tethered to nothing have any value? Satoshi itself recognised the difficulty and came up with the ingenious solution that if people think it has value then it has value. A sort of cogito ergo sum. Doesn't cut it for me I'm afraid.

Really? Do you have a citation to support that statement?

No citation but MF was a smart cookie. What more evidence would you need that he assumed the digital currency would be tethered to something of intrinsic value.

There's no doubt he can't match your Fax Machine guy!

You like that one, dont you? It's good I'll admit. But just coz someonne thinks that Covid-19 is preceded by 18 such incarnations doesn't mean we dismiss him entirely.

 

[tecate]

Yes you seem to have chilled out a tad.

There was no change in chill factor, Dukey. I'm always up for constructive debate and discussion.

No citation but MF was a smart cookie. What more evidence would you need that he assumed the digital currency would be tethered to something of intrinsic value.

Hahaha, - that's priceless. In the same way, I should 'assume' that my money would be safe in the Dutchy of Marmalade within the Marmalade Bank? No thanks!

Everything is right on track in describing bitcoin in that video clip from Milton. In fact at the very start of that clip - as he leads into the topic, he says that "I think that the internet is going to be one of the major forces for reducing the role of government." There's every reason to infer from that - that he wasn't thinking in terms of what you say - unless you think gold rather than government monopoly money and if you back with gold, then you have a centralised element to the currency (and he was referring to peer to peer money - not centralised money).

My fundamental question is how can a digital entry which is tethered to nothing have any value?

Because it's designed to be trustless and can't be tampered with. What if - in the weeks leading up to the US election - The Donald leans on the Fed to keep the 'money printer goes brrr' money rolling when Powell might have otherwise thought he could cut back on it, who's interests do you think that would be likely to serve? People can trust in bitcoin as it was designed to assume a lack of trust - and can't be tampered with. No, it's not backed by gold but it is programmed and locked in. You always know how many bitcoin have been issued, what the maximum is that will ever be issued. You can calculate the inflation rate - and know years in advance what that will be. Nobody can issue any additional satoshis - unlike EVERY single FIAT currency in existence since the gold reserve was dropped (and even then, who was auditing gold reserves??).

Satoshi itself recognised the difficulty and came up with the ingenious solution that if people think it has value then it has value. A sort of cogito ergo sum.

Two things. The first is as I've set out above - in the previous paragraph. The second is that if he/she did think that (that people affix value to money), where would he/she have seen that? I mean, in 1971 Nixon pulled the three card trick of going from the gold standard to 100% monopoly money. At least with bitcoin you can trust in the non-corruptible programmed coding behind it.

You like that one, dont you? It's good I'll admit.

I most certainly do like that one Dukey, because here we have a celebrated Keynesian economist demonstrating that although he may be some guru when it comes to the intricacies of the Keynesian school of Economics, he is lacking when it comes to his understanding of the power and implications of technology. It's particularly apt when we look right now at innovations such as bitcoin and crypto.

But just coz someonne thinks that Covid-19 is preceded by 18 such incarnations doesn't mean we dismiss him entirely.

Exactly to your point - don't assume because Krugman says 'bitcoin bad' that you don't have to actually consider the minutiae of the proposition yourself (and to which I'd add that I don't recall you ever once acknowledging any facet of bitcoin that was positive in these exchanges).

 

[Duke of Marmalade]

There was no change in chill factor, Dukey. I'm always up for constructive debate and discussion.
Hahaha, - that's priceless. In the same way, I should 'assume' that my money would be safe in the Dutchy of Marmalade within the Marmalade Bank? No thanks!

Everything is right on track in describing bitcoin in that video clip from Milton. In fact at the very start of that clip - as he leads into the topic, he says that "I think that the internet is going to be one of the major forces for reducing the role of government." There's every reason to infer from that - that he wasn't thinking in terms of what you say - unless you think gold rather than government monopoly money and if you back with gold, then you have a centralised element to the currency (and he was referring to peer to peer money - not centralised money).

Because it's designed to be trustless and can't be tampered with. What if - in the weeks leading up to the US election - The Donald leans on the Fed to keep the 'money printer goes brrr' money rolling when Powell might have otherwise thought he could cut back on it, who's interests do you think that would be likely to serve? People can trust in bitcoin as it was designed to assume a lack of trust - and can't be tampered with. No, it's not backed by gold but it is programmed and locked in. You always know how many bitcoin have been issued, what the maximum is that will ever be issued. You can calculate the inflation rate - and know years in advance what that will be. Nobody can issue any additional satoshis - unlike EVERY single FIAT currency in existence since the gold reserve was dropped (and even then, who was auditing gold reserves??).

Two things. The first is as I've set out above - in the previous paragraph. The second is that if he/she did think that (that people affix value to money), where would he/she have seen that? I mean, in 1971 Nixon pulled the three card trick of going from the gold standard to 100% monopoly money. At least with bitcoin you can trust in the non-corruptible programmed coding behind it.


I most certainly do like that one Dukey, because here we have a celebrated Keynesian economist demonstrating that although he may be some guru when it comes to the intricacies of the Keynesian school of Economics, he is lacking when it comes to his understanding of the power and implications of technology. It's particularly apt when we look right now at innovations such as bitcoin and crypto.

Exactly to your point - don't assume because Krugman says 'bitcoin bad' that you don't have to actually consider the minutiae of the proposition yourself (and to which I'd add that I don't recall you ever once acknowledging any facet of bitcoin that was positive in these exchanges).

Eppur si move it is tethered to BOHA

 

[tecate]

Eppur si move it is tethered to BOHA

That's your opinion and you're more than entitled to it. Mine is set out in my post above. Bitcoin - as programmable tamper-proof digital money - is tethered and backed by a hell of a lot more than FIAT money is today. Go back to the gold standard and we can have a different conversation.

 

[Duke of Marmalade]

I don't recall you ever once acknowledging any facet of bitcoin that was positive in these exchanges).

Every facet of btc is brilliant except for the key fault identified by Satoshi itself. It is tethered to BOHA.