The economics of BitCoin

Relax

GreatApe wrote: »

I recall someone here who worked at a big Bank on anti money laundering saying that the big criminals don't mind paying as much as 50% to launder their money. If they are willing to take an instant 50% haircut they will be willing to accept 50% swings in bitcoin

If I am right about this then it won't be a problem anyway as for the next 10 years the price will just go up

Also imagine an African dictator they could well get their hands on $5 billion his do they steal that? Just buy $5 billion in bitcoin they won't care even if it loses 90% they still male off with $500m

And it won't just be criminals you could even have people going through divorcees who are bitter and just dump all their wealth into bitcoin and do a runner.

At this stage it's uncertain if bit coin will win this race but a crypo is going to become a asset for people to hide wealth. It looks likely it will be bitcoin due to the network effect there maybe be a couple but one will take majority market share

I think this makes sense
I don't think this was the aim I think it was to be a currency and it will become a currency due to it being a atoe of wealth.

I think you are confusing two things .
a commodity and a currency

I have used bitcoin and as a currency it is as useless as trying to buy a TV from currys with a couple of gold coins. The value might be there but it is almost impossible to make that trade because it has to be verified and valued and that adds to the cost of the transaction and the risk of holding something that has changed in value.

So now we really just have something that is a commodity that may be a store of wealth.

Lots of precious metals and rare items are tried and trusted but have the down side that they have to be physically carried and transferred ~ Is bitcoin worth £10,000 because it can be sent digitally ?

GreatApe

Relax wrote: »

So if the currency goes up then that is a result

if the currency flattens off ? You might get that result for some people

If the currency starts to fall ~ You get the opposite result

Overall your result positively feeds into itself until it doesn't, then it collapses ~ Sound like a bubble ?

Yes of course no one would want to invest into anything that falls in price

The problem is you and until today myself were thinking for legitimate reasons and for that this has no real benefits but for husibg wealth it has some great benefits

If you are a drug dealer what is more safe 1000 bitcoin or $15 million hidden in the walls of your house? Both arguably are unsafe and bad ideas but of the two which do you choose? Cash doesn't lose its value a lot maybe only 2-3% inflation a year but its risky to hold so are bitcoin but are they more risky than cash? You could put the bitcoibs in a hardware wallet and put that in a safe in Switzerland. No one would know if it had $1 in it or $1 billion and it would be safe both because its in a vault and because you are the only one with the password. You also don't need to put it in a bank safe you could have it on a micro SD cars and just hide it somewhere

It seems in many ways a good vehicle for hiding lots of wealth. Better than cash in many ways for hiding wealth

Rotor

Relax wrote: »

I think you are confusing two things .
a commodity and a currency

I have used bitcoin and as a currency it is as useless as trying to buy a TV from currys with a couple of gold coins. The value might be there but it is almost impossible to make that trade because it has to be verified and valued and that adds to the cost of the transaction and the risk of holding something that has changed in value.

So now we really just have something that is a commodity that may be a store of wealth.

Lots of precious metals and rare items are tried and trusted but have the down side that they have to be physically carried and transferred ~ Is bitcoin worth £10,000 because it can be sent digitally ?

You've partly answered a question i was going to pose but not fully.
If crypto becomes a systemic risk or criminality generator what is to stop governments just banning them?
I get that it wouldn't stop the ability to buy them but if you can't legally pay for anything with them, if your courts don't recognize them as a payment then a seller could say ' thanks for the bitcoin now pay us again in a proper currency or it's to court with you'?
They couldn't be used to settle any debt.

economic

GreatApe wrote: »

Yes of course no one would want to invest into anything that falls in price

The problem is you and until today myself were thinking for legitimate reasons and for that this has no real benefits but for husibg wealth it has some great benefits

If you are a drug dealer what is more safe 1000 bitcoin or $15 million hidden in the walls of your house? Both arguably are unsafe and bad ideas but of the two which do you choose? Cash doesn't lose its value a lot maybe only 2-3% inflation a year but its risky to hold so are bitcoin but are they more risky than cash? You could put the bitcoibs in a hardware wallet and put that in a safe in Switzerland. No one would know if it had $1 in it or $1 billion and it would be safe both because its in a vault and because you are the only one with the password. You also don't need to put it in a bank safe you could have it on a micro SD cars and just hide it somewhere

It seems in many ways a good vehicle for hiding lots of wealth. Better than cash in many ways for hiding wealth

why could i as say a druglord who has illegal millions to hide not just buy a piece of artwork from a dodgy art dealer? and then make a clean transaction by selling the art work (through a solicitor say) to cleanse the wealth of all the wrongdoing?

economic

Rotor wrote: »

You've partly answered a question i was going to pose but not fully.
If crypto becomes a systemic risk or criminality generator what is to stop governments just banning them?
I get that it wouldn't stop the ability to buy them but if you can't legally pay for anything with them, if your courts don't recognize them as a payment then a seller could say ' thanks for the bitcoin now pay us again in a proper currency or it's to court with you'?
They couldn't be used to settle any debt.

how can governments ban them exactly? if somehow btc was banned, wouldnt another crypto just replace it out of the hundreds that are now available?

GreatApe

Relax wrote: »

I think you are confusing two things .
a commodity and a currency

I have used bitcoin and as a currency it is as useless as trying to buy a TV from currys with a couple of gold coins. The value might be there but it is almost impossible to make that trade because it has to be verified and valued and that adds to the cost of the transaction and the risk of holding something that has changed in value.

So now we really just have something that is a commodity that may be a store of wealth.

Lots of precious metals and rare items are tried and trusted but have the down side that they have to be physically carried and transferred ~ Is bitcoin worth £10,000 because it can be sent digitally ?

I see it now as a commodity but a commodity that is highly divisible and easily transferred which will allow it to function as a currency. If you walk up to someone with a gold coin you can't split it into tiny pieces nor does the person know that what you say is gold is gold so there is a trust issue.

Of course cash will be king for small timers but those who need/want to hide larger amounts of wealth with use the predominant crypto. The drug lord with $20 million in cash in his walls might think 1000 bitcoins on a micro SD card hidden away is safer. Even if the value of the bit coins goes up and down 50% that to him is still better than $20 million cash hidden in the Walls waiting for the rival drug Lord to break in and Jill him to steal it. Could even put the SD card in a bank vault

Likewise the disgruntled divorc! hiding $5 million is going to be using bitcoin (or whichever crypto 'wins') they are not going to be taking out $5 million in $100 bills or buying 5,000 ounces of gold. Likewise they night not care about 50% swings

There is clearly going to be some value in an asset that hides wealth
People already hide wealth in the form of cash or offshore accounts. If this is easier safer than cash some people will use it. It will also become more and more used in higher level illegal stuff. Not the drug dealer on the corner he will want $100 bills but the king pin moving $100 million worth of coke will be quite happy to accept a transfer of crypto rather than a van full of notes he has to launder at a 50% haircut

Yes there is a trust issue. Nobody trusts it until one day everyone trusts it
And yes as I said a few posts back there are so many negatives for legitimate use its pointless
But for hiding wealth one of the crypto coins is going to become the online 'cash'

This is crazy but I think it likely
The higher the market cap the more people will use it.
At some point, perhaps we have already passed that point, it will have enough users that its user base will exponentially grow.

The main risk is legitimising it.
The users need to have some legitimate uses like amazon accepting it as payment and like wall street accepting and trading it.

Very very interesting

GreatApe

economic wrote: »

why could i as say a druglord who has illegal millions to hide not just buy a piece of artwork from a dodgy art dealer? and then make a clean transaction by selling the art work (through a solicitor say) to cleanse the wealth of all the wrongdoing?

It can't be that easy why do offshore secretive accounts exist if all people need to do is buy artwork and resell. Its also a bit of a stretch saying to the government you found/bought the artwork for pennies and now are sell Kong it for millions. Even if it were true you need to hand over 18% CGT

Also the doggy art dealer is hardly going to accept $5 million in cash for the artwork you just shift the problem.

economic

GreatApe wrote: »

It can't be that easy why do offshore secretive accounts exist if all people need to do is buy artwork and resell. Its also a bit of a stretch saying to the government you found/bought the artwork for pennies and now are sell Kong it for millions. Even if it were true you need to hand over 18% CGT

Also the doggy art dealer is hardly going to accept $5 million in cash for the artwork you just shift the problem.

yes agree.

i think it is quite well known that crypto can be used for dodgy money.

the question is is it possible for government to stop it?

economic

Would you buy btc based on this illegal demand?

GreatApe

Rotor wrote: »

You've partly answered a question i was going to pose but not fully.
If crypto becomes a systemic risk or criminality generator what is to stop governments just banning them?
I get that it wouldn't stop the ability to buy them but if you can't legally pay for anything with them, if your courts don't recognize them as a payment then a seller could say ' thanks for the bitcoin now pay us again in a proper currency or it's to court with you'?
They couldn't be used to settle any debt.

But it can be uses to pay for black market things.

A drug dealer brings in $10 million in coke and accepts 500 coins for payment.
Some time later the drug dealer want to buy an expensive mansion for $10 million and the seller accepts 500 bit coins for it.

How did you get the bitcoibs Mr drug dealer?
I mined them 7 years ago Mr judge on my phone
Hmmmmm....


As things stand AFAIK the drug dealer needs to pay a 50% haircut to clean the money.
With bit coin he doesn't need to do that
Sure the value will move up and down
But it is secure can be put on an SD card in a Swiss bank
No need to pay a 50% haircut or risk $10 million in cash in the walls.
Can also pretend its all legitimate and no one can prove it wasn't

Not just drug dealers
Lots of people hide wealth
When you mix the legitimate with the illegal they won't ban it

As crazy as $300 billion market cap sounded to me yesterday I can see it growing even more.
It us not yet trusted even I said it was a scam/ponzi just a few days ago. If hundreds of millions use it both legit and black market then it will become the reserve asset for hidden wealth. Maybe its already there now.