BITCOIN

Malthusian

RichTips said:

Now fast forward to today. The creator remembers that Bitcoin thing he created years ago and suddenly develops nostalgia-fueld sellers remorse. He asks if he can have the 10 Bitcoin back. He offers to return the $100. Afterall, he never actually got around to spending it anyway. The buyer agrees, and accepts ten crisp ten-dollar bills. The buyer then takes this $100 to his bank, where he is pleasantly surprised to discover it is now worth £80. He is happy to have had this positive experience of avoiding the devaluation of his fiat currency relative to some other fiat currency. The creator is happy because he got his 10 Bitcoin back.

So the net result is the creator ends up with nothing (got $100, gave away $100) in exchange for his wasted effort and electricity spent selling and rebuying some spreadsheet cells. 

The buyer ends up with the same result as if he'd just bought $100 worth of crisp ten dollar bills in 2009. This gain in £ is not attributable to Bitcoin, it is attributable to the appreciation of the dollar vs the pound, and the poor negotiation skills of the creator (who could probably have offered less than $100 as the buyer would probably have been happy to get his £64 back).

Ignoring the fluctuations in £ vs $, which are completely irrelevant to the utility of Bitcoin (otherwise I could sell someone my eye bogeys for £100, put the £100 in VLS100 and claim that my eye bogeys return 8% a year), he gave away $100 and got $100 back, leaving him with nothing. Plus the buyer paid an opportunity cost of 14 years' worth of potential gain on his £64.

This proves that Bitcoin is a positive sum game. Have I got that right?

I love reductionist arguments, in case you hadn't guessed.

User232002

Aegis said:

Unless you can identify how it is positive sum, it's zero sum. 

A global, decentralised, trustless, permissionless financial system, outside the control of a single person, whose monetary policy is determined by code and game theoretic incentives creates value, just as companies do. Hard money is the foundational rock of a strong economic system. Without it, there is no incentive to overproduce and therefore no abundance.

Aegis said:

In terms of utility, the idea of saying "well, it might do something useful in future" just means that it isn't doing anything now, therefore it has no utility now. Even with the best will in the world, there's no way to imagine that a bitcoin will actually be useful for something in future because the functionality would need to be there now.

Completely incorrect. This isn't how you value networks.

Its also just an incorrect line of argument in general. The market is probabilistic and forward looking.

Aegis said:

As a comparison, I had an ISA with Kaupthing Edge back in 2008.  Kaupthing went bust and took my money with it.  I was protected by the Financial Services Compensation Scheme in full because it was a recognised bank and I had no reasonable way of predicting in advance that the bank itself would go bust.  

Banks are a duration business. They are all currently underwater due to this (and their horrible inefficiencies). How much is that FSCS protection worth if all customers realised this and asked for their deposits back?

Malthusian said:

No it won't. The Bank of England and the Fed could turn on the printing press and double the amount of dollars and pounds in existence overnight, which ceteris paribus would cause the price of Bitcoin in dirty fiat to jump to $80,000 / £80,000 or whatever. After you offramped your Bitcoin into dirty fiat, you would have twice as much fiat as before but it would buy half as much actual stuff, leaving you in the same position (not rich).

Actually, you'd have twice as much money but it would buy exactly the same amount of goods. Which is the point, because the old lady that had $40,000 in her account when the printer was turned on can now only buy half as much.

Money printing favours those near to the printer, those with assets and those that wish to take on debt, at the expense of economically responsible people, ie. savers and economically productive people, ie. Labour. 

Malthusian said:

Central bank money printing isn't enough to make hodlers rich. People have to be willing to hand over increasing amounts of actual goods and services in exchange for Bitcoin. Which means they have to want to buy Bitcoins specifically in larger numbers, in order to make early adopters rich. 

You mean, like this?




But, you're missing the point anyway. There's a great story in 'When Money Dies,' about an old lady in a bank in Austria in the early 1920's. The bank manager informs her that she can trade her Austrian Krone in for gold, pounds or dollars. She says she will think about it. She returns some time later and asks to proceed with the trade. The bank manager tells her that nobody will accept the Krone anymore.

Malthusian said:

And not, say, property, or company shares, or þe olde golde bullion, or literally anything else that can hold its value when cash is depreciated and that people have historically tended to buy when they wanted to preserve the value of their savings. 

Property being a 'store of value' and a place to park your excess savings has caused the housing crisis in this country over the last 3 decades. Gold bullion was confiscated from its citizens by the US government in 1933.

Neither are as fool proof as you would believe. Both showcase the degradation of fiat. A pure financial asset that holds its value is needed rather than subverting the purpose of other assets.

Malthusian said:

How long can Bitcoin bimble along, still miles off the price the largest cohort bought at, becoming increasingly associated with scams and ransomware, without losing its status as the safe haven to which people will one day flee?

The only people that are down are those that bought at about 50k and upwards and continued to buy as the price increased. As was pointed out, if you chose to start buying at the exact Bitcoin top of $69k and continued to do so, you would now be up very healthily on your investment.

The bitcoin price on 24th November 2020, the day this thread was started, was $18,000. It continues to outperform everything, and the window of days when you could conceivably have bought Bitcoin and be 'down' continue to dwindle. 

"I believe that crypto will play that role, as a flight to quality."
Larry Fink; 16th October 2023

Malthusian said:

(We'll leave aside the whole question of why it is bad for central banks to create pounds and dollars to maintain the money supply but OK for Tether to create stabledollars out of thin air to buy Bitcoins with.)

If you genuinely think Tether is an unbacked currency, then short it.

Tether is a stable coin; it doesn't go up in value, so shorting it has no blow out risk. You can cash out the tether from the crypto ecosystem in to real USD and hold it in your bank, so you have no counter party risk. You have no cost apart from your cost of carry, which is 4 - 7%. At that rate, you've got 10 years and probably more like 15 for your play to come off. You talk like Bitcoin won't even be around then, never mind a USD fugazi scheme which US regulators have already seen in to their books as part of a settlement.

Thus, your above quoted statement is either (1) poppycock, or (2) a genuinely held belief, but you lack any type of execution ability at all. Either way, it doesn't reflect well on your financial acumen.

Linton

darren232002 said:

Aegis said:

Unless you can identify how it is positive sum, it's zero sum. 

A global, decentralised, trustless, permissionless financial system, outside the control of a single person, whose monetary policy is determined by code and game theoretic incentives creates value, just as companies do. Hard money is the foundational rock of a strong economic system. Without it, there is no incentive to overproduce and therefore no abundance.

Aegis said:

In terms of utility, the idea of saying "well, it might do something useful in future" just means that it isn't doing anything now, therefore it has no utility now. Even with the best will in the world, there's no way to imagine that a bitcoin will actually be useful for something in future because the functionality would need to be there now."ut8ility" 

Completely incorrect. This isn't how you value networks.

I dont have the time or energy to answer all your misaconceptions but this one is easy.....

Yes a money transfer system generates value.  We have remarkably effective global ones in operation at the moment run by companies who offer their shares on the stock market.  I can invest in those companies now to receive some of those profits in the form of dividends in the short term or see my holdings increase in underlying value by their profits being reinvested.

But to do this one invests by owning part of the network company, not in the stuff being transferred.  Buying more $s because companies make profits by moving $s around the world makes no sense whatsoever.

RichTips

Malthusian said:

RichTips said:

Now fast forward to today. The creator remembers that Bitcoin thing he created years ago and suddenly develops nostalgia-fueld sellers remorse. He asks if he can have the 10 Bitcoin back. He offers to return the $100. Afterall, he never actually got around to spending it anyway. The buyer agrees, and accepts ten crisp ten-dollar bills. The buyer then takes this $100 to his bank, where he is pleasantly surprised to discover it is now worth £80. He is happy to have had this positive experience of avoiding the devaluation of his fiat currency relative to some other fiat currency. The creator is happy because he got his 10 Bitcoin back.

So the net result is the creator ends up with nothing (got $100, gave away $100) in exchange for his wasted effort and electricity spent selling and rebuying some spreadsheet cells. 

The buyer ends up with the same result as if he'd just bought $100 worth of crisp ten dollar bills in 2009. This gain in £ is not attributable to Bitcoin, it is attributable to the appreciation of the dollar vs the pound, and the poor negotiation skills of the creator (who could probably have offered less than $100 as the buyer would probably have been happy to get his £64 back).

Ignoring the fluctuations in £ vs $, which are completely irrelevant to the utility of Bitcoin (otherwise I could sell someone my eye bogeys for £100, put the £100 in VLS100 and claim that my eye bogeys return 8% a year), he gave away $100 and got $100 back, leaving him with nothing. Plus the buyer paid an opportunity cost of 14 years' worth of potential gain on his £64.

This proves that Bitcoin is a positive sum game. Have I got that right?

I love reductionist arguments, in case you hadn't guessed.

Rather than deliberate this with you in finer detail, Malthusian (despite your evident love of spreadsheet cell price-incorportating reductionist arguments), I'll just leave the post for others to consider.

In respect to you in particular, it's satisfying for me to simply remind you that when you disparaged me as a "bagholder" back in May of 2020 following my first ever post, the price of Bitcoin was £7,200. For all your derision, it's never dropped below that price in the three and a half years since then and currently sits at £33,000. In light of this, forgive me if I'm a little dismissive of your contributions to these Bitcoin/cryptocurrency threads.

zagfles

RichTips said:

Malthusian said:

RichTips said:

Now fast forward to today. The creator remembers that Bitcoin thing he created years ago and suddenly develops nostalgia-fueld sellers remorse. He asks if he can have the 10 Bitcoin back. He offers to return the $100. Afterall, he never actually got around to spending it anyway. The buyer agrees, and accepts ten crisp ten-dollar bills. The buyer then takes this $100 to his bank, where he is pleasantly surprised to discover it is now worth £80. He is happy to have had this positive experience of avoiding the devaluation of his fiat currency relative to some other fiat currency. The creator is happy because he got his 10 Bitcoin back.

So the net result is the creator ends up with nothing (got $100, gave away $100) in exchange for his wasted effort and electricity spent selling and rebuying some spreadsheet cells. 

The buyer ends up with the same result as if he'd just bought $100 worth of crisp ten dollar bills in 2009. This gain in £ is not attributable to Bitcoin, it is attributable to the appreciation of the dollar vs the pound, and the poor negotiation skills of the creator (who could probably have offered less than $100 as the buyer would probably have been happy to get his £64 back).

Ignoring the fluctuations in £ vs $, which are completely irrelevant to the utility of Bitcoin (otherwise I could sell someone my eye bogeys for £100, put the £100 in VLS100 and claim that my eye bogeys return 8% a year), he gave away $100 and got $100 back, leaving him with nothing. Plus the buyer paid an opportunity cost of 14 years' worth of potential gain on his £64.

This proves that Bitcoin is a positive sum game. Have I got that right?

I love reductionist arguments, in case you hadn't guessed.

Rather than deliberate this with you in finer detail, Malthusian (despite your evident love of spreadsheet cell price-incorportating reductionist arguments), I'll just leave the post for others to consider.

In respect to you in particular, it's satisfying for me to simply remind you that when you disparaged me as a "bagholder" back in May of 2020 following my first ever post, the price of Bitcoin was £7,200. For all your derision, it's never dropped below that price in the three and a half years since then and currently sits at £33,000. In light of this, forgive me if I'm a little dismissive of your contributions to these Bitcoin/cryptocurrency threads.

I had to google that

Seriously though, looking at Bitcoin prices going back whole years from now (to avoid selectively picking peaks or troughs):

3 years ago £14k

2 years ago £37k

1 year ago £13k

Now £33k

So what is it? A currency? No chance, not yet anyway. You can't possibly use a currency that's so unstable.

An investment? One that could almost treble its value in a year or lose nearly two thirds of its value! In just a year.

Nah, that's not an investment, that's a gamble. Individual shares could of course do the same but putting significant amounts into individual shares is also a gamble.

Good luck if you want a gamble. Personally I want a currency, or an investment. I'll go down the casino if I want a gamble!

RichTips

A currency? If you're asking me, not in its present form, no. The narrative that it's a store of value is currently the pre-eminent one, I believe. An arguably convenient hedge against currency debacement, etc.

Regarding volatility, I think Apple lost two thirds of its value in just a year during 1983, 2000 and 2008, despite presently being the most valuable company by market cap in the world. Succesful, concentrated investments arn't immune to volatility or even extreme volatility. I do see your point though, Bitcoin's certainly not something you'd want to bet the farm on and anyone recommending it be anything more than a modest portion of the average British person's net worth would be negligent for not acknowledging the benefits of diversification. I honestly do believe one can hold it while also being a relatively sedate, risk-adjusted person.

User232002

Linton said:

Yes a money transfer system generates value.  We have remarkably effective global ones in operation at the moment run by companies who offer their shares on the stock market.  

I have, just today, had cause to send a payment to an institution in Europe. I had to phone my bank, because you can't request SEPA payments via online banking, and provide 8 identifying pieces of information and 2 explanations as to my conduct. The call took 21 minutes and the payment takes 2-3 days and won't be received until Friday at the earliest because I "missed a 2:30pm cut off time to be sent the same day." That is, of course, assuming any one of the approximately 80 digits and characters we confirmed and reconfirmed weren't incorrect and it does actually reach its destination. 

Please tell me again about this 'remarkably effective global' financial system that was built in the 1970s...

With crypto, I can go from request to my payee receiving the funds within 5 minutes - all without asking permission and justifying what I'm doing to anyone.

Linton said:

But to do this one invests by owning part of the network company, not in the stuff being transferred.  Buying more $s because companies make profits by moving $s around the world makes no sense whatsoever.

Linton said:

I dont have the time or energy to answer all your misaconceptions but this one is easy.....

Oh, the irony....

Malthusian said:

Blimey, Bitcoin must be pamping hard, the King of the Blockquote Gish Gallop is back.

I've not been anywhere. I have enjoyed the quiet time and the ability to position accordingly. However, my participation here over the next two years will be mostly spent laughing at the naysayers as time serves to dismantle your arguments.

And then, I will remind you that some of us saw this coming. And that wasn't an accident or luck.

Malthusian said:

I.e. the largest cohort of bros. The most money was put in at 50k and upwards, that's why it was at 50k and upwards.

Evidence please. You continue to simply make stuff up to suit your own beliefs.

According to Glassnode, 89% of Bitcoin transactions are currently in profit. And just so that we are clear, here is a chart in USD terms. The price of Bitcoin has been above $50k for 5 months in its history. Pick any 5 volume bars from this chart and tell me that 'most' money purchased Bitcoin above $50k...

Malthusian said:

If you genuinely think Tether is an unbacked currency, then short it.

"I'm going to go into the casino and make a fortune betting on red."
"You're going to lose your money."
"Well why don't you come with me and bet on black if u so smart?"

If you genuinely believe that these two statements are equivalent, then you should not be posting on a finance forum.

Cus

RichTips said:

Rather than deliberate this with you in finer detail, Malthusian (despite your evident love of spreadsheet cell price-incorportating reductionist arguments), I'll just leave the post for others to consider.

In respect to you in particular, it's satisfying for me to simply remind you that when you disparaged me as a "bagholder" back in May of 2020 following my first ever post, the price of Bitcoin was £7,200. For all your derision, it's never dropped below that price in the three and a half years since then and currently sits at £33,000. In light of this, forgive me if I'm a little dismissive of your contributions to these Bitcoin/cryptocurrency threads.

I considered the post, and I can't see anything relating to it not being a zero sum game. It could easily have gone the other way with USD/GBP. What am I missing?

As for the current value, it will only truly be satisfying if you convert now to $ I would have thought.

Not directed to you in particular but I find it a shame that we can't discuss the driver's behind the angst / passion etc of bitcoin versus the establishment, the lack of hope or trust in the established markets, how it's perceived  to be weighted against younger generations etc. All we can seem to do is snap at each other, deride or brag.

Johnjdc

darren232002 said:

Malthusian said:

If you genuinely think Tether is an unbacked currency, then short it.

"I'm going to go into the casino and make a fortune betting on red."
"You're going to lose your money."
"Well why don't you come with me and bet on black if u so smart?"

If you genuinely believe that these two statements are equivalent, then you should not be posting on a finance forum.

They are certainly equivalent for as long as there isn't an exchange where you can short Tether, which is not in on the Tether scam. You short Tether on those, you're going to get mysteriously stopped out when someone decides it's worth $1.25 for a fraction of a second. Probably at around the same time the exchange managers, fresh from running a poker site where god-mode players can see everyone's hand, feel there is too much short interest.

Adyinvestment

Whatever else it is, it is currently ranked as the 10th largest asset by market cap in the world

https://companiesmarketcap.com/assets-by-market-cap/