Cryptocurrencies

[rkbabang]

I think someone in the US in 1840 who couldn't imagine slavery being abolished would simply be blind to the facts on the ground.

I can imagine massive change. I can imagine 10 year old bitcoin surpassing 5,000 year old gold as a store of value. I can imagine life extension technology changing our view of mortality and humanity.

And sure, I can imagine some revolution/depression in the US that destroys the country, the economy, and the USD, but that doesn't mean I think it's likely. And by looking at Japan's strong living standards despite very loose monetary policy for decades, I think it's clear that if anything takes down the US it won't likely be loose monetary policy.

I'd argue it's the anarchists, austrians, and zero hedgers that are stuck to their priors/dreams of collapse. They've been saying that the US would collapse any day now since ~2007 and have been wrong despite crazy events like the GFC and a global pandemic. I view them like the doomsday cultists who claim the world will end on 1/1/2019, then simply change the date to 1/1/2022 instead of admitting they're wrong.

I think the doomsday talk hurts incremental bitcoin adoption at this point.

I'm not likely to see eye to eye with anarchists, so I'll leave it there. Apologies for getting frustrated.

"Blind to the facts on the ground" is a very good way to describe it.  You are talking about a government which reigns over and taxes a multi-trillion dollar economy with the most powerful military empire the world has ever seen.  Anyone who thinks that is going down in a year or even in a decade is crazy, but anyone who thinks the empire it is immortal is equally crazy.  It will take some time, but the Federal Government of the United States will not last forever. And the United States Dollar will not last forever.  Loose monetary policy does have the power to eventually take the dollar down, it won't be overnight.  Just because it hasn't happened yet, isn't evidence that it isn't happening.  The dollar has lost over 85% of its value since Nixon untied it from gold, this current round of printing will send it even lower.   In the next 50 years it will go down from here even more than 85%.   The dollar is doomed eventually, the only question is when?

[rkbabang]

BTC now has a market cap over $1T

At $53, isn't the BTC market cap around $700B as I seem to remember that accounting for lost and unmined total count was closer to 14M?

Or is that way off?

No one knows for sure how many coins are lost (including millions of bitcoins presumably owned by Satoshi Nakamoto), so the market cap is calculated based on the only number which is known for sure: the number of mined bitcoins.  So yes the real market cap is somewhat less, but no one knows how much less.  I know there have been people who have looked at the number of coins which has not moved in X numbers of years, but that doesn't mean anything as a lot of people are holding.  Most of my coins haven't been moved since 2014, but they are not lost.  There is really no way to ever know for sure which coins are lost and which are being intentionally held.

100 BTC which haven't moved since 2010 were recently moved, further illustrating the point that no one knows which coins are owned and which are lost.

https://cointelegraph.com/news/bitcoin-whale-from-2010-moves-100-btc-for-first-time-in-11-years

[Parsad]

TwoCitiesCapital,   I think there are some people who just can't imagine change.  It's like telling someone in the 1840's that slavery would someday be illegal in the US.  The dollar has value now and it is unimaginable that it won't always have value.   Yes, you are correct every currency that has ever collapsed had the same government requirement that it be used for tax payments, therefore that will do zero to protect the dollar if and when it collapses, but you are going to bang your head against a wall convincing someone of this if they can't wrap their heads around it.  Nothing backs Bitcoin, nothing backs the dollar, and nothing really backs gold.  All value is subjective, so another way to look at it is the same thing backs all 3: demand.

I think this is completely incorrect.  Most currencies are backed by tax revenues and the country's assets.  Gold has a utilitarian purpose, as does silver and virtually all other precious metals and commodities.  Bitcoin has nothing at all supporting it other than demand as you say...as did tulips.  I would dare say that tulips at least served some purpose in gardens.  Bitcoin as it presently stands has no value whatsoever!

Will crypto replace cash...almost certainly over time.  But it will be supported by something...most likely large recurring cash flows from multi-national companies that are the size of small nations or digital currency issued by nations.  Bitcoin isn't that digital currency...not now anyways...and alot of speculators will lose alot of money!  Cheers!

[LC]

Outside of the blockchain transaction technology, how is cryptocurrency different from something like gold? Why not just remove the t+2 settlement timing and trade fractional positions in GLD futures?

[TwoCitiesCapital]

It's weird we'll pretend USD is supported by tax payers when that isn't supported by history, while also pretending BTC isn't supported by it's superiority for large payment processing and potentially as a store of value.

Could a tulip pay my bathroom contractor 20k in less than 10 minutes in a secure manner? No. It couldn't. And neither can the USD - even with large fees paid for the expedited request.

[JRM]

Outside of the blockchain transaction technology, how is cryptocurrency different from something like gold? Why not just remove the t+2 settlement timing and trade fractional positions in GLD futures?

Gold is anonymous, whereas Bitcoin no longer is.  When you transact in gold the transaction is over, with Bitcoin there must be a network maintained in order to maintain the function.  Bitcoin is useful for very large transactions or transactions across borders. 

I see Bitcoin as an entirely separate asset class.  It is not money, it is closer to art or collectibles than it is to gold.

[SharperDingaan]

To the anarchists central banks are criminals, on par with the obvious buyers of BTC. The anarchists just recognize that when two scorpions are confined within a small bottle (Yin/Yang), everyone is safer. Mutually Assured Destruction, is a well-proven nuclear arms deterrent. 

This thread demonstrates the Yin/Yang of crypto.
There is no convincing either side; and as the wheel turns, the influence of the dominant currency will wax/wane. However, the two extremes co-exist, they each need each other, and the intense competition ensures that they each perform at their best. As users of the currencies, we're all better off.

SD

[clutch]

I have expressed this argument at length before but will repeat again much more directly.

Money, stocks, bonds, loans, BTC..  basically all non-hard assets are massive fantasies.

It's not my argument but of a renowned philosopher John Searle. And no, he is not some French postmodernist, he is as realist and naturalist as you could get as a philosopher. But basically, all these assets are forms of institutional reality that is created via a series of speech acts (nowadays "document acts").

You may argue... but some of these assets are "backed" by something else. My stock certificates represent ownership of the factory, the money is backed by the government, etc. Well how do you establish such backing? Document acts... but there is nothing tangible and physical about this backing.

How do we know? Suppose a dictator comes along and instructs all financial records to be wiped out. All of the assets above will be worthless. So really, investing in such assets all require some level of faith.

Now, the chance of US currency or treasury bills facing such events will be very low... at least compared to BTC. So you can estimate your confidence. Maybe I have 99% confidence in traditional assets and 1% confidence in BTC (relatively). So I decide to invest 99% in traditional assets and 1% in  BTC. But then I realize the asymptomatic nature of that 1% in terms of the return. If BTC establishes itself as a stable store of value, my gain will be significant so I decided to invest a bit more.

(As an aside... I have a feeling that many economists and those with the traditional business school mindset have a harder time grasping this "massive fantasy" notion... I think it's largely because they'd like to think of their discpline as scientific and objective... they want to treat things like money, yields, institutions as the same ontological category as molecules, chemical elements, and gravity... I'm sorry they are not. In a way, I think they are resentful of the fact that they are not scientists, engineers, nor doctors dealing with objective reality... and perhaps their discipline is not as important... so they need some ground to stand on and argue that traditional assets are backed by institutions as if planet motions are governed by gravitational forces.)

[rkbabang]

Thank you Clutch, very well said.  I would add gold your list as nothing but a fantasy, a construct of the human mind rather than anything in reality.  It cracks me up when people say its value comes from its usefulness. Aluminum has every useful feature that gold has and is better at most of them, yet it isn't used as money and isn't "worth " thousands of dollars per oz.  Why? Because it doesn't have the mythical history that gold has going back thousands of years, it isn't a pretty yellow color that humans fancy, and it isn't as rare.  But again it is more useful and worth practically nothing. All value is subjective, seeing people trying to come up with post hoc reasoning for why we value one thing and not another is often hilarious. The easiest people to fool is often ourselves.  Bitcoin solves some problems and why will people value it over any other crypto which can also solve such problems? For the same reason people don't hoard aluminum coins. Its history, its story, its rarity, and because everyone else values it.