BITCOIN

User232002

Frequentlyhere said:

The FED will have to continue to raise interest rates.  

Except, they can't.

This isn't the 1970's

The US national debt is $31.3T. The US government currently spends $480B dollars on interest payments on a tax revenue of $5T. We have been in a period of essentially 0% interest rates for the last decade, but this gives an average interest rate of 1.5% due to the existence of long term treasuries.

Lets assume the FED maintain their current 4% interest rate for the next two years. Just over 50% of the national debt is debt that will have to be renewed within those 2 years. So, 50% of the debt remains at an average 1.5% rate, and 50% renews at 4%, for a new average rate of 2.75%.

Well, at 2.75%, the interest payment on the debt ends up being nearly $900B. That's comfortably over 20% of federal tax revenue. On interest payments alone. For reference, medicare is $1.3T, all social security spending in the US totals $1.2T and defence spending totals $800B. So interest would be the third largest expenditure. You can't 'find' this amount of money in existing budgets - if you tried, there would be civil strife and undoubtedly you'd be unelected at the first opportunity. 

Every western government around the world finds themselves in this situation to one degree or another. So they keep interest rates low, print money and run deficits. It kicks the can down the road, but you can't avoid the reckoning. The IMF once said that a debt to GDP ratio of 90% was the inflection point of no return; well, we are way past that. Adjust the numbers if you want, but the end result is the same. When your interest payment is rising faster than your revenue, you're on borrowed time.

This is the zugzwang scenario for central banks; they can raise interest rates to fight inflation and eventually bankrupt the country because of debt to GDP levels, or keep interest rates low and watch inflation run rampant and slowly destroy peoples faith in the currency. They will choose the latter and continue printing the currency in to oblivion. 

Frequentlyhere said:

Stocks will crater again, bond yields will rise and Bitcoin & friends will fall further as well. 

Except, they can't be allowed to.

Pensions are underfunded as it is due to pension funds being forced to hold bonds which have underperformed everything for the last decade due to rampant QE. So, if asset values were to crater then suddenly a boat load of pensioners due for retirement would find out that their home values, equity portfolios and bond yields won't support them in retirement. What does a government do in this situation? Well, they will of course need to print money to fill these holes.

The only reason the current fiat system is still standing is because of the inflated values of the assets contained within it which maintain the faith of its participants - much like FTX a week ago ironically.

Frequentlyhere said:

Now maybe in that scenario Jerome Powell would get a slightly less favourable biography and some people will have a miserable few years as they did in 2008-2010 , but what I don't see is how this is of any use to the value of Bitcoin?

How does it "win" in this scenario? Or if my scenario is wrong, what does it look like?

Why do US Dollars have more value than Argentinian pesos? Because we can trust the issuing body more for it to maintain a stable value over time.

Most people don't understand money because they have no need to do so. Inflation at 2% is only noticeable over long time scales. When inflation gets to levels where you notice it within a year, people will very quickly start to realise that a currency that is losing value at such a pace is not a good money to store value in. And we will get there, because like I said in the first section - printing and debasing the currency to deal with rampant inflation is the only valid option central banks have now.

Money is an economic good that transports value in to the future. I can overproduce today, and send the difference between the value of my production and the cost of my desires in to the future in the form of money. That is why salt, gold and dollars existed as forms of money. But when it becomes apparent that something can no longer fulfill that function, people will stop storing value in it and move to something better. History is littered with examples of people and countries that lost fortunes because they didn't recognise this shift in time. People in Weimar Germany or 1950's Hungary knew not to hold their wealth in inflating currencies or became much poorer.

A globally recognised, scarce, easily transportable, fungible digital asset will accrue the monetary premium instead. Its just better at all the features of money than anything else that exists.

I'm not interested in USD or GBP that can be printed on the whim of a handful of people when they decide its right to do so. The same self-interested people who sold their portfolios at the top of the market to 'prevent conflict of interest.' I'd rather hold my wealth by trusting unchangeable code and solid design principles that incentivise participants to act in the best interests of all.

That is how Bitcoin accrues a monetary premium.

DoublePolaroid

I read the thread out of interest, whilst having little knowledge and absolutely no intention of investing in something I don’t fully understand.

I do though appreciate the appropriate use of the beautifully descriptive chess term in the post above. 

adamp87

Bit of a bloodbath at the moment.

I still think Bitcoin & maybe Eth have a future, certainly to me Bitcoin is the one that is a commodity and actually does something.

The Altcoins eventually will drop to £0 they have no real value or use & are basically pump and dumps.

The actions of exchanges over the weekend, FTX surely has knocked back confidence for a long time and further pushed back any form of adoption. 

Regulation is needed and will come eventually for a cryptocurrency to ever be accepted by a Western government and the general public.

For most people they are involved to make money. I really detest the argument and disagree that cryptocurrency is some sort of protection against Banks or that Banks somehow aren’t protective of your money.

If we are honest the past week has shown you are a million more times likely to get screwed over with cryptocurrency, and at least my fiat in a bank suddenly isn’t going to drop 10, 20 even 60% over the course of a year.

Someone out there will be making a ton of money on this weeks actions too.

As always with any investment it’s key to do your own research, and anything you invest is at risk and to act in your best interests.

Nebulous2

darren232002 said:

Frequentlyhere said:

The FED will have to continue to raise interest rates.  

Except, they can't.

This isn't the 1970's

The US national debt is $31.3T. The US government currently spends $480B dollars on interest payments on a tax revenue of $5T. We have been in a period of essentially 0% interest rates for the last decade, but this gives an average interest rate of 1.5% due to the existence of long term treasuries.

Lets assume the FED maintain their current 4% interest rate for the next two years. Just over 50% of the national debt is debt that will have to be renewed within those 2 years. So, 50% of the debt remains at an average 1.5% rate, and 50% renews at 4%, for a new average rate of 2.75%.

Well, at 2.75%, the interest payment on the debt ends up being nearly $900B. That's comfortably over 20% of federal tax revenue. On interest payments alone. For reference, medicare is $1.3T, all social security spending in the US totals $1.2T and defence spending totals $800B. So interest would be the third largest expenditure. You can't 'find' this amount of money in existing budgets - if you tried, there would be civil strife and undoubtedly you'd be unelected at the first opportunity.

I’ve very limited knowledge of, and even less interest in Bitcoin. My son managed to fund 8 months backpacking on the sale of less than 1 Bitcoin that he mined (using my electricity) so I appreciate it has worked for some people. 

However paying interest at 4% while inflation is at 8 is a win for the Fed. Their debt is literally being inflated away.... 

GDB2222

I agree that bank accounts paying negative real interest rates are not a good investment. What I do not understand is the logical leap from 'bank accounts are bad' to ‘therefore BTC is good'?

Frequentlyhere

Have you thought about writing a column for Zerohedge, Darren? 

You alternately paint a picture of a Fed either raising interest rates so hard that it destroys pension funds or being so lax that it brings about the next Weimar republic. There is such a thing as moderation, you know.

Where you are right though is that it is very important for inflation to be brought to target, but there is absolutely no evidence to suggest that this is beyond the power of the Fed to achieve. 

The far more likely course of events is that the Fed have already allowed high inflation to erode some of their liabilities (and it may be that moderately high inflation continues to do that for a while longer), they're now slowing that process down by raising interest rates, and at some point either brought about by demand destruction or potentially maybe some lynchpin of the financial system showing strain, or both, they'll stop rising rates and perhaps cut them (and perhaps yes, god forbid, print money too).

To make it your base case not only that the World's reserve currency will effectively fail, but also that as a result we'll all pile into an asset class that's shown itself to be hilariously awful in so many ways, is just...well....quite something.

I'm not sure where to begin with your comparison of the fiat currency system with FTX. Perhaps to state the obvious, they're a little bit different?

Fiat currencies are longstanding money instruments backed by history, Governments and their armies that we all use every day.

FTX was a wildly fraudulent platform that existed for a few years, was backed by nothing, and was run from the Bahamas by a 30 year old who mostly preferred playing League of Legends on his phone, all in order to service/front-run a waning demand for assorted speculative doggie tokens.

Anyway, the irony in all of this is that the only thing being destroyed by higher inflation and associated monetary policy that you're ostensibly so concerned about is...lo and behold.. not the $ or £ but Bitcoin and the rest of crypto.

What use is avoiding 10% inflation in pounds if you've swapped it for an asset which has dropped by 75%+ in the same time period?

Exodi

darren232002 said:

bugbyte_2 said:

Hi Darren, from your post above are you saying we now have to discount everything you said before 11/10/2022?

You do realise that the entity that gave the price prediction that the quote was referring to of $140k, is now predicting a price for the immediate future of $13k right? It seems both I, and JPMorgan, are capable of changing opinions.

This is interesting, as you'd previously said that you'd sell everything you had if bitcoin ever went below $20k, yet here we are. Your 'changing' opinion seems to be "Bitcoin is going to the Moon" to "Bitcoin is definitely going to the Moon".

GDB2222 said:

OTOH 10,000 other crypto currencies have been created, and there seems to be no end in sight. 

To be fair GBD222, 99% of them are just pump and dump schemes to steal money. Hence why the narrative is being subtlely changed from "Crypto is the future" to "Bitcoin is the future".

adamp87 said:

The actions of exchanges over the weekend, FTX surely has knocked back confidence for a long time and further pushed back any form of adoption.

You must be having a wind up. Every other week we see a multi-billion pound crypto firm collapse, at this point it's just business as usual. I'm not sure what confidence there is to knockback - the only people who remain steadfast in their loyalty are the crypto bros. Western governments wouldn't even humour the idea of considering adoption.

darren232002 said:

History is littered with examples of people and countries that lost fortunes because they didn't recognise this shift in time.

You say it best.

DannyCarey

Exodi said:

darren232002 said:

bugbyte_2 said:

Hi Darren, from your post above are you saying we now have to discount everything you said before 11/10/2022?

You do realise that the entity that gave the price prediction that the quote was referring to of $140k, is now predicting a price for the immediate future of $13k right? It seems both I, and JPMorgan, are capable of changing opinions.

This is interesting, as you'd previously said that you'd sell everything you had if bitcoin ever went below $20k, yet here we are. Your 'changing' opinion seems to be "Bitcoin is going to the Moon" to "Bitcoin is definitely going to the Moon".

GDB2222 said:

OTOH 10,000 other crypto currencies have been created, and there seems to be no end in sight. 

To be fair GBD222, 99% of them are just pump and dump schemes to steal money. Hence why the narrative is being subtlely changed from "Crypto is the future" to "Bitcoin is the future".

adamp87 said:

The actions of exchanges over the weekend, FTX surely has knocked back confidence for a long time and further pushed back any form of adoption.

You must be having a wind up. Every other week we see a multi-billion pound crypto firm collapse, at this point it's just business as usual. I'm not sure what confidence there is to knockback - the only people who remain steadfast in their loyalty are the crypto bros. Western governments wouldn't even humour the idea of considering adoption.

darren232002 said:

History is littered with examples of people and countries that lost fortunes because they didn't recognise this shift in time.

You say it best.

Bitcoin holders/believers have always said this, not just now, or any time someone chooses to do something fraudulent which has absolutely nothing to do with Bitcoin...

Bitcoin is the only organic and legitimate cryptocurrency going.

The rest are all quite literally pump and dumps / scams. 
That's also not to say that the Bitcoin "scene"  isn't full of scammers and snake oil salesmen, I am talking about the YouTube influencers etc... the whole thing is full of dodgy people. 

Exodi

DannyCarey said:

Exodi said:

darren232002 said:

bugbyte_2 said:

Hi Darren, from your post above are you saying we now have to discount everything you said before 11/10/2022?

You do realise that the entity that gave the price prediction that the quote was referring to of $140k, is now predicting a price for the immediate future of $13k right? It seems both I, and JPMorgan, are capable of changing opinions.

This is interesting, as you'd previously said that you'd sell everything you had if bitcoin ever went below $20k, yet here we are. Your 'changing' opinion seems to be "Bitcoin is going to the Moon" to "Bitcoin is definitely going to the Moon".

GDB2222 said:

OTOH 10,000 other crypto currencies have been created, and there seems to be no end in sight. 

To be fair GBD222, 99% of them are just pump and dump schemes to steal money. Hence why the narrative is being subtlely changed from "Crypto is the future" to "Bitcoin is the future".

adamp87 said:

The actions of exchanges over the weekend, FTX surely has knocked back confidence for a long time and further pushed back any form of adoption.

You must be having a wind up. Every other week we see a multi-billion pound crypto firm collapse, at this point it's just business as usual. I'm not sure what confidence there is to knockback - the only people who remain steadfast in their loyalty are the crypto bros. Western governments wouldn't even humour the idea of considering adoption.

darren232002 said:

History is littered with examples of people and countries that lost fortunes because they didn't recognise this shift in time.

You say it best.

Bitcoin holders/believers have always said this, not just now, or any time someone chooses to do something fraudulent which has absolutely nothing to do with Bitcoin...

Bitcoin is the only organic and legitimate cryptocurrency going.

The rest are all quite literally pump and dumps / scams. 
That's also not to say that the Bitcoin "scene"  isn't full of scammers and snake oil salesmen, I am talking about the YouTube influencers etc... the whole thing is full of dodgy people. 

You prove my point to an extent - obviously bitcoin holders believe in bitcoin. But there are more currencies than just bitcoin, and people invest in more than just bitcoin - they must have had faith in them in the past? I was just pointing out that the narrative has changed in the last year from 'crypto' being the future, to explicitly 'bitcoin' - obviously, as you reference, quickly moving the goalposts in response to the rampant pump and dumping that has occurred in virtually all the other cryptocurrencies.

But that's OK, because I'd still be suprised if bitcoin doesn't end up going the way of all the others over the next few years. Especially as we're close to (if not already at) the point it is no longer profitable to mine.

DannyCarey

My personal opinion is that it's the people who missed Bitcoin's multiple run ups who jump on stupid dog coins and other meme tokens hoping to catch "the next big thing", but there is no next big thing in crypto currency. It's Bitcoin or nothing succeeds. Its the only one without a central figure making decisions, VCs heavily influencing protocol decisions and changes etc. 

I don't see a mass moving of the goalposts. Bitcoiners have said everything else is a scam from day one, as they know how the protocol has grown organically from nothing, devoid of corruption. It has no central figure behind it making outlandish changes on a whim and corrupting it at will. 

The people who buy stupid dog coins and inevitably get burned either stay away from all things cryptocurrency, or maybe stick around, learn a thing or two and realise that Bitcoin is the one that has a legitimate chance.