[Finance] The cryptocurrency (Bitcoin etc) thread

chickens said:

I understand that those who speculated at the start have gained significantly.

However, a winning bet is still a bet.

There has been no real world service or goods provided, there is no utility attached to the coin.

I don’t know of anyone, even those who’ve profited, who would argue with that, regardless of how much they’ve made.

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CheeseRolls said:

Firstly apologies for not answering the question. I think it is missing the point.

Very little Bitcoin is traded. People are sitting on it;

• As insurance against the US government going bust. Strangely from a British persepctive many Americans would genuinely welcome this.
• or as protection against rampant inflation in country, some examples below.

When the bitcoin price is depressed, plenty of people will argue it is a poor store of value. If you have currency controls and rampant inflation the short term price variation is less of a problem. The same applies if you are hedging against a major economic disaster like your own government going bust. In the next two months the reward paid to Bitcoin miners will half. At a time when demand especially from Exchange Traded Funds is high.

You don't need to do anything about this, you can just sit on the sidelines and watch as the madness unfolds.

High Inflation Nations (Jan 2024)
Country	CPI inflation%
Venezuela	189.8
Zimbabwe	26.5
Argentina	211.4
Sudan	71.6
Turkey	64

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CheeseRolls said:

So are you buying drugs?

in the real world striking up a meaningful conversation around cryptocurrency is almost a complete non-starter, hence I really value the insight I get from exchanging views here. Apologies if that comes across as arrogant, but the real world utility thing has been done to death from my perspective and I have nothing more to add on that subject.

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CheeseRolls said:

Firstly apologies for not answering the question. I think it is missing the point.

Very little Bitcoin is traded. People are sitting on it;

• As insurance against the US government going bust. Strangely from a British persepctive many Americans would genuinely welcome this.
• or as protection against rampant inflation in country, some examples below.

When the bitcoin price is depressed, plenty of people will argue it is a poor store of value. If you have currency controls and rampant inflation the short term price variation is less of a problem. The same applies if you are hedging against a major economic disaster like your own government going bust. In the next two months the reward paid to Bitcoin miners will half. At a time when demand especially from Exchange Traded Funds is high.

You don't need to do anything about this, you can just sit on the sidelines and watch as the madness unfolds.

High Inflation Nations (Jan 2024)
Country	CPI inflation%
Venezuela	189.8
Zimbabwe	26.5
Argentina	211.4
Sudan	71.6
Turkey	64

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chickens said:

Thank you for your answer, I like this argument more, this is effectively saying “Bitcoin is a store of value” rather like the people suckered in by ZeroHedge back in the day were always talking about how much gold bullion they had in their underground bunkers.

So, the thinking is, America keeps running a deficit, it keeps getting larger. Soon a political party (let’s face it, probably some nutty Republican offshoot) will simply refuse outright to keep bailing out the government by allowing debt limit increases, and when the government shuts down, that’s when everyone will start insisting on gold/bitcoin as payment for services.

My first question is: will the day ever come? It feels like a form of political suicide, which the right frequently posture with, but I’m sure I’m not alone in doubting their genuine resolve to do this. Would their electorate ever forgive them?

For those in developing countries prone to high/hyper inflation, I can see reasons for seeking a store of value outside their own currency. Would they not buy dollars? Or gold? Does the technology available to them allow them to securely store, access and convert or use their stored wealth?

Do those nations not generally reset their currencies anyway if the hyperinflation seems to have taken hold irreversibly?

Would America (should the dollar “fail”) not have an alternative ready to implement, why would they move to a Bitcoin standard, it’s already been established that it doesn’t work as a currency.

I remain unconvinced, but hope I’m not annoying you with my responses.

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chickens said:

Thank you for your answer, I like this argument more, this is effectively saying “Bitcoin is a store of value” rather like the people suckered in by ZeroHedge back in the day were always talking about how much gold bullion they had in their underground bunkers.

So, the thinking is, America keeps running a deficit, it keeps getting larger. Soon a political party (let’s face it, probably some nutty Republican offshoot) will simply refuse outright to keep bailing out the government by allowing debt limit increases, and when the government shuts down, that’s when everyone will start insisting on gold/bitcoin as payment for services.

My first question is: will the day ever come? It feels like a form of political suicide, which the right frequently posture with, but I’m sure I’m not alone in doubting their genuine resolve to do this. Would their electorate ever forgive them?

For those in developing countries prone to high/hyper inflation, I can see reasons for seeking a store of value outside their own currency. Would they not buy dollars? Or gold? Does the technology available to them allow them to securely store, access and convert or use their stored wealth?

Do those nations not generally reset their currencies anyway if the hyperinflation seems to have taken hold irreversibly?

Would America (should the dollar “fail”) not have an alternative ready to implement, why would they move to a Bitcoin standard, it’s already been established that it doesn’t work as a currency.

I remain unconvinced, but hope I’m not annoying you with my responses.

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sydney said:

you could alternatively invest in a financial system that arranges for you to buy a property over 30 yrs and ends up charging you double the value of said property in interest..... this is why financial institutions are dead against it even though they are busy buying it which is why the value is increasing...wakey wakey.. there was a thread the other week about cash being discontinued , this is the start of it but the conventional institutions want to retain control ......with bitcoin this is not possible unless they buy it all.

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CheeseRolls said:

Maybe 20 years ago, I worked with a super intelligent young American on a huge salary and we had a lengthy discussion around gun control. He let on he had a bolt hole in the wilderness in case of civil war, with a hidden stash of valuables and ammunition. I can't imagine it happening, but I also can't imagine what this would look like in the UK. We would probably stand in our doorways banging pots and pans or something.

Imagine you have 20k in drongos salted away for your retirement. If the government devalues the drongo, your drongos are now worth 200 drongos in terms of what you can buy.

Holding gold or dollars can protect your from this, but governments put currency controls in place to make this illegal, otherwise the currency will be worth even less. You can buy on the balck market, but if you get caught the punishment is the same whether it is local gangsters, the army or police, you will hand it all over at gun point.

Holding bitcoin is more discrete and secure in these circumstances the dumbest thug can recognise gold or dollars.
If the choice is between losing fingers and handing over the keys though, you may still end up with nothing.

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chickens said:

This ties into another reason that I distrust Bitcoin, the largely false trope that the regular financial system is looking on in envy and simultaneously desiring Bitcoin (and secretly, always secretly) investing in it.

Bitcoin has a market price and a finite supply. It could easily be bought. In the same way it’s technically possible to own all gold, if you purchase all existing stock of it and all viable mines.

There’s a reason we dropped off the gold standard, it eventually becomes a constraint.

The requirement for holding dollars or gold is a hand. The requirement for holding Bitcoin is either a cold wallet (technically advanced, using technology which will become obsolete over years and decades) or an online exchange, assuming both internet access, the good intentions of those controlling the unregulated exchange, and that despite undergoing updates the online exchange remains perfectly unhackable. The kind of mind that doesn’t trust gold unless it can open the home safe and look at it isn’t going to trust an online exchange.

Will the computers of 2050 still have USB connections or be able to interoperate with versions of Bluetooth or WiFi from the mid 2020s.

If I had something important stored on a 5.25” floppy disk I’d be f***ed if I needed to access it now.

There’s just so much “extra” required in terms of ownership that I doubt it’s viability for the target market, but I accept my fallibility, clearly there is a market for it, to my mind it relies entirely on the “greater fool” theory.

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chickens said:

This ties into another reason that I distrust Bitcoin, the largely false trope that the regular financial system is looking on in envy and simultaneously desiring Bitcoin (and secretly, always secretly) investing in it.

Bitcoin has a market price and a finite supply. It could easily be bought. In the same way it’s technically possible to own all gold, if you purchase all existing stock of it and all viable mines.

There’s a reason we dropped off the gold standard, it eventually becomes a constraint.

The requirement for holding dollars or gold is a hand. The requirement for holding Bitcoin is either a cold wallet (technically advanced, using technology which will become obsolete over years and decades) or an online exchange, assuming both internet access, the good intentions of those controlling the unregulated exchange, and that despite undergoing updates the online exchange remains perfectly unhackable. The kind of mind that doesn’t trust gold unless it can open the home safe and look at it isn’t going to trust an online exchange.

Will the computers of 2050 still have USB connections or be able to interoperate with versions of Bluetooth or WiFi from the mid 2020s.

If I had something important stored on a 5.25” floppy disk I’d be f***ed if I needed to access it now.

There’s just so much “extra” required in terms of ownership that I doubt it’s viability for the target market, but I accept my fallibility, clearly there is a market for it, to my mind it relies entirely on the “greater fool” theory.

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sydney said:

at this point in time "the greater fool" is cleaning up.

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pb21 said:

There is a reason we dropped off the gold standard, and I'm not sure it was necessarily a sound reason, at least how it has transpired.

In the US (and other jurisdictions) you can now hold BTC via an ETF. Ostensibly, that's the reason for the recent price increase, both people buying expecting the price to go up and the actual ETFs buying substantial amounts of BTC, absolutely no secrecy about it, Blackrock no hold 132k BTC, or over $7,000,000,000. You could also buy MSTR stock to have exposure to BTC, who are also buying substantial amounts of BTC

A lot of exchanges are dodgy as feck, but not all, notably coinbase, which is financially regulated.

A cold wallet can be as technologically advanced as 48 letters written on a piece of paper, which can be held in your hand.

Hardware wallets wont be obsolete, they are just a method for storing private keys and signing transactions, which can readily change as tech changes; they are not akin to data on a floppy disk.

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chickens said:

As @CheeseRolls pointed out above, you haven’t cleaned up until you’ve converted back to FIAT and paid the tax man. I wish you well with it, but on the evidence so far it’s not for me.

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