BITCOIN

Dalby84UK

fwor said: Let's say you buy £1000 worth of Bitcoin and keep it for a year, during which time inflation is, say, 10%. Is there some mechanism that means that when you sell a year later you get £1100 back? No - there is no such mechanism. 

Yes but by your logic you are only going to be happy if you find a place to leave your money where you get guaranteed 10% return with 0% risk and 0% price fluctuation? You are talking about the holy grail my friend, even gold wont give you that. But looking back historically it has gained over major fiat currencies USD/GBP on average 120-150% per year over the last 10 years, ill take that average over the ups and downs

fwor

Dalby84UK said:

Yes but by your logic you are only going to be happy if you find a place to leave your money where you get guaranteed 10% return with 0% risk and 0% price fluctuation?

Not at all - I don't expect to get a return at the moment that will match inflation.

What I'm pointing out is that your suggestion that Bitcoin somehow protects you from inflation is wrong - it doesn't. The gains that you refer to above have nothing at all to do with inflation. They are solely down to the speculative nature of Bitcoin, as are the recent losses.

Reaper

There is another problem with the claim Bitcoin is non-inflationary, which is that you are looking at it in isolation.

There are currently over 18,000 different crypto currencies, almost all of them creating "value" out of thin air without anything to back them up.

Investors (or "speculators") have a choice which one to buy, or even create their own. Having an almost infinite supply and limited demand will undoubtably turn out to be inflationary.

Frequentlyhere

@fwor is right, @Dalby84UK

The other thing you're missing is that even if it can't always keep up with inflation, cash does have a yield, whilst Bitcoin does not. That graph doesn't take into account that no-one (ok very few) keeps their cash under their mattress for decades - it goes to work, invested at banks and in investments.

In this respect (alone), BTC's prospects are more like gold. Zero-yielding and very much hostage to the whims of the crowd. It's demonstrably not an inflation hedge, and walks it's own path. Gold's long term real return is only just above inflation itself, and with huge volatility.

If that was the end of the story, we could perhaps just think of BTC as an interesting quirky asset to hold a small amount of as part of a diversified portfolio. However, unfortunately BTC carries greater risks. Gold has at least some intrinsic value, and has been an item deemed desirable for thousands of years, it isn't just lines of code just over 10 years old.
Meanwhile, Gold's fortunes aren't tied to rather questionable stablecoins which, when they implode, might have dramatic consequences.
Then there's the greater difficulty of storing BTC safely long term (as opposed to a regulated gold ETC), risk of theft, the environmental issues and on and on. All making it rather less than appealing for most people.

Oh, and you really need to stop trying to average out 10 years of highly speculative returns. By that logic, Gamestop (GME) with it's 2000% return in the last 2 years  is a better investment - and it's gone down 69% recently, so it must be an even better investment if it returns to it's average ;-)

Adyinvestment

Reaper said:

There is another problem with the claim Bitcoin is non-inflationary, which is that you are looking at it in isolation.

There are currently over 18,000 different crypto currencies, almost all of them creating "value" out of thin air without anything to back them up.

Investors (or "speculators") have a choice which one to buy, or even create their own. Having an almost infinite supply and limited demand will undoubtably turn out to be inflationary.

Agreed, although this is a Bitcoin thread and is supposed to be a discussion about Bitcoin, there is another general Crypto thread that was started to discuss other Crypto's but unfortunately alot of posters seem to think that Bitcoin is a general term for the whole Crypto space.

Adyinvestment

Frequentlyhere said:

The other thing you're missing is that even if it can't always keep up with inflation, cash does have a yield, whilst Bitcoin does not. That graph doesn't take into account that no-one (ok very few) keeps their cash under their mattress for decades - it goes to work, invested at banks and in investments.

In this respect (alone), BTC's prospects are more like gold. Zero-yielding

I get 6% "yield" on my Bitcoin

Frequentlyhere

Adyinvestment said:

Frequentlyhere said:

The other thing you're missing is that even if it can't always keep up with inflation, cash does have a yield, whilst Bitcoin does not. That graph doesn't take into account that no-one (ok very few) keeps their cash under their mattress for decades - it goes to work, invested at banks and in investments.

In this respect (alone), BTC's prospects are more like gold. Zero-yielding

I get 6% "yield" on my Bitcoin

Yes, indeed - "yield".  Terra/Luna investors were getting 20% "yield" too.

The thing is, if there was a risk-adjusted solid yield available on these things, then it would be instantly arbed away by huge global finance houses on the lookout for high yield in a (still, fairly) low yield world. 

I accept that it is nominaly possible to 'earn' with coins, but that money is either at best is coming from marketing departments looking to build popularity of a project, or at worst is the fun half of a ponzi scheme where there's not actually enough money coming out at the back end.

If it wasn't regulated to death, I'm sure we'd have all sorts of schemes on offer by unscrupulous firms to offer yield on my holdings of gold too through all sorts of impressive sounding schemes.

At the end of the day though, gold is just a rock and BTC is just a few lines of code. They're not buildings you can live in that earn rent, or stakes in businesses that make profit that can be paid as dividends.

User232002

Thrugelmir said:

Nothing temporary. This is is the start of the reset. With Central Banks losing control ofinflation. Pouring fuel on the fire by printing money is no longer an option. A return to normality for interest rates which will result in repricing of assets of all classes. Non income generating assets by default will be the ones to suffer the most. 

Can you please put a number on what you think 'a return to normality' for interest rates looks like. I think we need to start talking in unambiguous terms so that people can't argue later about what they meant by their original statements. My contention is that interest rates above 3% for any serious length of time is unsustainable. 

I note no anti-Bitcoiner has made any further attempt to make statements regarding what would change their mind on Bitcoin. If you aren't willing to do that and accept that if certain events were to happen you may be incorrect, then its tantamount to continually hand waving away new data points because you want to be right for the sake of your own ego. 

If Bitcoin starts to appear on the balance sheet of major companies, sovereign wealth funds and central banks, oil/gas or other natural resource trade begins to be priced in BTC and/or more companies continue to adopt BTC as legal tender that doesn't look good for your thesis regarding Bitcoin.

User232002

Frequentlyhere said:

@fwor is right, @Dalby84UK

The other thing you're missing is that even if it can't always keep up with inflation, cash does have a yield, whilst Bitcoin does not. That graph doesn't take into account that no-one (ok very few) keeps their cash under their mattress for decades - it goes to work, invested at banks and in investments.

If you put cash in to an investment that pays dividends or grows in value, the yield comes from the investment - not the cash. To say otherwise is to double count the yield.

Cash has essentially no yield right now - Money is basically free because it can be printed on a whim which is why banks are paying 0.1% interest. And of course given inflation, this actually becomes a negative real rate.

Frequentlyhere said:

Zero-yielding and very much hostage to the whims of the crowd. 

Even if we accept this to be true (I don't, but just for the sake of argument), Bitcoin is still a good bet. People under 40 invest in crypto in equal proportion to those who invest in the stock market. Boomers and older generations own less crypto and more traditional investments. As the wealth from boomers is inherited by millennials, its going to find its way in to crypto ;which is essentially a two decade re-balancing of where wealth is held by humanity.

Frequentlyhere said:

If that was the end of the story, we could perhaps just think of BTC as an interesting quirky asset to hold a small amount of as part of a diversified portfolio. However, unfortunately BTC carries greater risks. Gold has at least some intrinsic value, and has been an item deemed desirable for thousands of years, it isn't just lines of code just over 10 years old.

Intrinsic value is a bad meme. The most intrinsically valuable substance on this planet for humans is priced to be near free. Prices aren't determined by intrinsic value, if such a thing could even be defined, they are determined at the margins.

The price of gold is predominantly made up of its monetary premium and nothing to do with its industrial applications. Gold is simply an approximation to good money and was the Schelling point humanity settled on, but Bitcoin beats it on more or less every metric.

Frequentlyhere said:

Meanwhile, Gold's fortunes aren't tied to rather questionable stablecoins which, when they implode, might have dramatic consequences.

Tether nonsense is just that.

(1) Its not unusual for a private bank to want some privacy around how they structure their investments.
(2) Its also a complete non issue when you can just hold USDC or BUSD instead, which I would suggest anyone do anyway.
(3) Tether is a liquidity instrument. Its a means of exchange that facilitates trade but that doesn't necessarily change the price of a store of value like BTC.
(4) They recently published a breakdown of their holdings; 52% held in US Treasuries. There is a reasonable chance that stablecoins become a source of demand for US debt given that nobody else is interested in buying it nowadays.
(5) They've paid out $10B in redemptions over the last month. I think many high street banks would have a tough job doing that.

Frequentlyhere said:

Then there's the greater difficulty of storing BTC safely long term (as opposed to a regulated gold ETC), risk of theft, the environmental issues and on and on. All making it rather less than appealing for most people.

Its far easier to store BTC than Gold and that difference only becomes more apparent as we talk about greater sums involved. Taking custody of a few $BN in BTC requires a cold wallet and an internet connection, taking custody of a few $BN in Gold requires expensive transfer costs, a vault and a continual guarded presence.

Frequentlyhere said:

The thing is, if there was a risk-adjusted solid yield available on these things, then it would be instantly arbed away by huge global finance houses on the lookout for high yield in a (still, fairly) low yield world. 

This is basically what many firms have done for the last few years. Jump are making a fortune out of it.

Frequentlyhere said:

At the end of the day though, gold is just a rock and BTC is just a few lines of code. They're not buildings you can live in that earn rent, or stakes in businesses that make profit that can be paid as dividends.

But a fairly significant percentage of businesses don't pay out dividends. Which by the logic espoused in this thread must make them ponzi's.

Thrugelmir

darren232002 said:

Thrugelmir said:

Nothing temporary. This is is the start of the reset. With Central Banks losing control ofinflation. Pouring fuel on the fire by printing money is no longer an option. A return to normality for interest rates which will result in repricing of assets of all classes. Non income generating assets by default will be the ones to suffer the most. 

Can you please put a number on what you think 'a return to normality' for interest rates looks like.

The BOE some time ago said that a base rate of 3.5% ~ 4.5%  would be regarded as a more normal range. Would allow them flexibility and maneuverability when reacting to economic events. 

Bitcoin lacks stability that's the problem with companies having it on their balance sheets. Share prices would gyrate wildly.