What do you think of adding a low% of crypto allocation

[aceyou]

Bitcoin gained +429% in the past 12 months.

This is what I see getting in the way of Bitcoin as a currency.  I can't imagine a contract or salary denominated in a currency whose value can swing by 400% in a year.
Can you imagine last October your hourly rate was set at the bitcoin equivalent of $10 an hour (0.00084 bitcoin), now you're making the bitcoin equivalent of $52.90 per hour (still 0.00084 bitcoin)?

When it starts gaining only 2% to 3% per year for years on end, then we can talk about it being a currency substitute.  But at that point, less people will be excited about it because it's not gaining by leaps and bounds.

Interesting point, and one I hadn't considered.  Thanks.

its not a currency just b/c its called a currency doesnt make it one -

Currency - a system of money in general use in a particular country.

no country is using this generally as money still even though some have activated it as accepted as tender.

is it a store of value - well currently its a store of the value people believe it will have and the growth they expect.  Will that level of value be maintained over decades after it reaches the peak of growth - will it act similar to gold and younger generations see it as a safe place to keep value outside of under the mattress or in US dollars? Will it even continue to grow or will the massive amounts of coins bought with debt come crashing down like a house of cards and bring equities with it - i'd say this is the most likely outcome in the next 5-10 years.

I don't think Bitcoin has any chance for long-term survival as just a "store of value". That would just make it a virtual version of gold, but with a ridiculously high carbon footprint. No way is that sustainable at all. Bitcoin has to achieve its destiny as a global currency (or regional currency, possibly in Latin America) to have any long-term value, which I'd guess is less than 15% likely, or its long-term value will crash down.

But I do invest in it, because it seems to be in the middle stages of a very lengthy bull run that could last several more years before we learn its long-term fate.

In the long term the grid won't have a ridiculously high carbon footprint.  We are likely in the last 50 years of using fossil fuels in my opinion, and hopefully less than 50 years. 

[Rosy]

Bitcoin now has a futures ETF, which means more people can get exposure to cyrpto through their retirement accounts. 

https://www.cnbc.com/quotes/BITO

As of this post....
Over 100 million people own bitcoin...check
Nation States are beginning to accept it as currency....check
Large institutional buying is now occurring through ETF's....check

Look, I'm not trying to put Bitcoin on the same level as the Dollar, Yuan, or Euro at this point.  That would be nonsense.  But let's face it, there are MANY legitimate national currencies that can't check the three boxes above like Bitcoin does.  For those saying...sure, blockchain is here to stay, but it's to early to have ANY IDEA which will last...I think that's not giving Bitcoin enough credit.  To me I see real and tangible reasons why a PARTICULAR blockchain has staying power.

PRO SHARES FUTURES ETF APPROVAL
It is really interesting to hear the reactions to this new Pro Shares Futures ETF. I agree that it could be good for large institutional buying.
What I don't like is this push to keep retail buyers out and let the big boys play their "high-level arbitration games".
Not that I'm familiar with contango or backwardation or understand the multitude of fees that go along with this arbitraged digital casino.
None of this involves buying actual Bitcoin at a spot exchange.

Gary Gensler knows damn well that the crypto community wanted a real Bitcoin ETF. We already have options and leverage for crypto; enough for any fool to get "rekt". Regulating and reducing the % of leverage allowed was a move I had no issue with.
But I am suspicious about the SEC's motives for not approving an ETF with direct bitcoin or ethereum ownership; not even for Grayscale.
We'll see what havoc if any this creates for the bitcoin spot exchange price in the future.
Bitcoin never does what one expects it to do.

MEANWHILE
Europe just approved another real Bitcoin ETF and Canada has continued to approve more ETFs as have other countries.

NATION STATES
The Nation States who do and will benefit from a bitcoin currency now or in the future are under intense scrutiny. El Salvador isn't even past its first three months and yet every yahoo who hates bitcoin even though they don't know the difference between a sh$t coin and bitcoin is hoping for the demise of this currency experiment. The best part is that the IMF has to accept bitcoin as a currency.

No one in El Salvador is forced to accept only bitcoin that's a convenient twist of the truth. Truth is that the app requires them to agree to accept bitcoin as legal tender. It does not force the use of bitcoin only since you can instantly convert to US $ or any other currency.
They'll have hiccups - it would be a miracle if they did not.
It will take time, there will be bonuses and interest and whatever else is needed to nudge and reach the population and slowly improve access and tech.

It took Europe a long time time to go from local currencies to the EURO for all and they didn't have any of the third world problems El Salvador faces.

I think El Salvador is doing a splendid job so far but it is too soon to tell whether it will be a long-term success.
What I'd like to see happening is for El Salvador to start their own bitcoin mining using their clean energy, volcanic thermopower. There was talk about that but implementation will require time, a huge amount of money and probably significant foreign investment.
Again, these are not projects that happen overnight.

[boarder42]

Y'all are really blind if you think Bitcoin is useable as currency. It's been stated oh so many times here how it doesn't work for that even by investors in it. Could some block chain become acceptable as world currency yes but that's not what Bitcoin is it destroys the entire debt system the world runs on.

It's not even currency today by definition. Legal tender of a country is not currency. Currency has to be generally accepted and used.

We should have called it bitsnocones then everyone would think they own a bunch of snow cones.

[waltworks]

Rosy, can you elaborate on the IMF thing? Doesn't the IMF require repayment of loans in a specific currency when they make the loan (all loans I'm aware of work this way)? Are you saying, for example, Argentina could decide to pay the IMF in bitcoin and they'd be required to accept it for some reason?

For what it's worth, I've run a business for ~20 years that is really popular with techie white dudes who are the prime demographic for bitcoin. Never, once, in what has to be 10,000 transactions has anyone tried to pay me with it. It's something (for better or worse) that you own, not something you spend. And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

[Telecaster]

And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

This is  the sticky wicket of Bitcoin.  Bitcoin solved the trusted third party transaction problem.   But the creator(s) didn't think about what money actually is.  You do not want a currency that is inherently deflationary. 

[JohnnyZ]

The best part is that the IMF has to accept bitcoin as a currency.

 I think someone already told you that's not true, either higher in this thread or in another.

No one in El Salvador is forced to accept only bitcoin that's a convenient twist of the truth. Truth is that the app requires them to agree to accept bitcoin as legal tender.

If that's in reply to me, please re-read what I wrote. I didn't say people had to accept only bitcoins, but that they had to accept bitcoins, which is true because that's what legal tender means. No one claimed people couldn't pay in/accept dollars.

What I'd like to see happening is for El Salvador to start their own bitcoin mining using their clean energy, volcanic thermopower. There was talk about that but implementation will require time, a huge amount of money and probably significant foreign investment.
Again, these are not projects that happen overnight.

I really don't think more mining is the solution to anything. Wasted clean energy is still wasted energy.

[grmagne]

And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

This is  the sticky wicket of Bitcoin.  Bitcoin solved the trusted third party transaction problem.   But the creator(s) didn't think about what money actually is.  You do not want a currency that is inherently deflationary.

I don't see this as a problem in the long-term for Bitcoin:

1. The MMM philosophy of life discourages consumerism and encourages long-term savings & investment. A deflationary currency makes it easier for the world's poor to save for the future since they wouldn't even need access to capital markets. The currency itself becomes a savings vehicle.

2. The countries most likely to adopt a crypto-currency as legal tender in the next decade are in Latin America, Africa, Polynesia. In most countries of these regions the majority of people don't have access to traditional banking services and savings rates are near zero. I see little risk that El Salvadorans or Africans would suddenly stop spending money if their governments made Bitcoin the legal currency. That's a first world/middle class problem that wouldn't have any relevance for ~6 billion people alive today.

3. I think it's unlikely that Bitcoin would become a global currency in the 22nd century, but for the sake of argument let's suppose that it does. After the last Bitcoin is mined early next century it would become a truly deflationary currency. But economists in the future keep proclaiming that this currency doesn't work, undermining public confidence. So the Bitcoin community might decide to expand the supply above 21 million by restarting mining operations, solving the problem. And yes, they can do this despite its decentralized nature. For example, right now Bitcoin is being upgraded with the Taproot project which includes security and functionality upgrades agreed upon by the community near unanimously. An unpopular modification to the algorithm (such as expanding the supply above 21 million) could cause an uproar and lead to a hard fork into 2 currencies: the original version versus the modified version. In that case there would be 2 competing currencies and economists would get to observe in real-time whether the inflationary version is superior to the deflationary one.

[ChpBstrd]

And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

This is  the sticky wicket of Bitcoin.  Bitcoin solved the trusted third party transaction problem.   But the creator(s) didn't think about what money actually is.  You do not want a currency that is inherently deflationary.

I don't see this as a problem in the long-term for Bitcoin:

1. The MMM philosophy of life discourages consumerism and encourages long-term savings & investment. A deflationary currency makes it easier for the world's poor to save for the future since they wouldn't even need access to capital markets. The currency itself becomes a savings vehicle.

2. The countries most likely to adopt a crypto-currency as legal tender in the next decade are in Latin America, Africa, Polynesia. In most countries of these regions the majority of people don't have access to traditional banking services and savings rates are near zero. I see little risk that El Salvadorans or Africans would suddenly stop spending money if their governments made Bitcoin the legal currency. That's a first world/middle class problem that wouldn't have any relevance for ~6 billion people alive today.

3. I think it's unlikely that Bitcoin would become a global currency in the 22nd century, but for the sake of argument let's suppose that it does. After the last Bitcoin is mined early next century it would become a truly deflationary currency. But economists in the future keep proclaiming that this currency doesn't work, undermining public confidence. So the Bitcoin community might decide to expand the supply above 21 million by restarting mining operations, solving the problem. And yes, they can do this despite its decentralized nature. For example, right now Bitcoin is being upgraded with the Taproot project which includes security and functionality upgrades agreed upon by the community near unanimously. An unpopular modification to the algorithm (such as expanding the supply above 21 million) could cause an uproar and lead to a hard fork into 2 currencies: the original version versus the modified version. In that case there would be 2 competing currencies and economists would get to observe in real-time whether the inflationary version is superior to the deflationary one.

When I think to myself "I can live in a world where my savings are in a deflationary currency but I actually spend and borrow in a slightly inflationary currency" then I realize I've fallen into a mental trap. If everyone does this, then Bitcoin will never be a currency, and will thus be doomed forever to inhabit the dangerous realm of trendy collectibles like the Confederate notes traded for beer money by white supremacists at gun shows. No more of those are being minted either.

When I think to myself "I can buy the limited-edition currency today that impoverished people around the world will be using in 30 years when it costs a million dollars a coin" I have to ask myself why the global poor will choose to work all their lives producing goods and services for my chain of digits, when this digital slavery is actually a worse situation than their status quo. At least they can borrow money in their local currencies - or if not that, then in dollars - and finance their farms and businesses. Deflation shuts down lending. And at least their entire life savings doesn't disappear one day because their online exchange got hacked (btw, how exactly does this keep happening? You don't hear about Bank of America losing all their clients' funds with no recourse.). Why would people with no savings be more attracted to a deflationary cryptocurrency than they are to a currency that can be borrowed, loaned, invested, and securely exchanged worldwide - i.e. the dollar?

El Salvador? People are on the verge of starvation in that gang-run dictatorship, and they're walking the entire continent to escape it and enjoy the privileges of US immigration prisons. My guess is the E.S. government found a way to pilfer the entire treasury because their Bitcoin holdings can be obscured from audit. Move $ into Bitcoin within the treasury, take Bitcoin home and trade back for $, treasury reports it still has Bitcoin, repeat until rich enough to disappear to a Caribbean island. Maybe I'm a pessimist on E.S. but I've been reading the world news long enough to spot the patterns by now. it's always the same.

[talltexan]

And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

This is  the sticky wicket of Bitcoin.  Bitcoin solved the trusted third party transaction problem.   But the creator(s) didn't think about what money actually is.  You do not want a currency that is inherently deflationary.

I don't see this as a problem in the long-term for Bitcoin:

1. The MMM philosophy of life discourages consumerism and encourages long-term savings & investment. A deflationary currency makes it easier for the world's poor to save for the future since they wouldn't even need access to capital markets. The currency itself becomes a savings vehicle.

2. The countries most likely to adopt a crypto-currency as legal tender in the next decade are in Latin America, Africa, Polynesia. In most countries of these regions the majority of people don't have access to traditional banking services and savings rates are near zero. I see little risk that El Salvadorans or Africans would suddenly stop spending money if their governments made Bitcoin the legal currency. That's a first world/middle class problem that wouldn't have any relevance for ~6 billion people alive today.

3. I think it's unlikely that Bitcoin would become a global currency in the 22nd century, but for the sake of argument let's suppose that it does. After the last Bitcoin is mined early next century it would become a truly deflationary currency. But economists in the future keep proclaiming that this currency doesn't work, undermining public confidence. So the Bitcoin community might decide to expand the supply above 21 million by restarting mining operations, solving the problem. And yes, they can do this despite its decentralized nature. For example, right now Bitcoin is being upgraded with the Taproot project which includes security and functionality upgrades agreed upon by the community near unanimously. An unpopular modification to the algorithm (such as expanding the supply above 21 million) could cause an uproar and lead to a hard fork into 2 currencies: the original version versus the modified version. In that case there would be 2 competing currencies and economists would get to observe in real-time whether the inflationary version is superior to the deflationary one.

When I think to myself "I can live in a world where my savings are in a deflationary currency but I actually spend and borrow in a slightly inflationary currency" then I realize I've fallen into a mental trap. If everyone does this, then Bitcoin will never be a currency, and will thus be doomed forever to inhabit the dangerous realm of trendy collectibles like the Confederate notes traded for beer money by white supremacists at gun shows. No more of those are being minted either.

When I think to myself "I can buy the limited-edition currency today that impoverished people around the world will be using in 30 years when it costs a million dollars a coin" I have to ask myself why the global poor will choose to work all their lives producing goods and services for my chain of digits, when this digital slavery is actually a worse situation than their status quo. At least they can borrow money in their local currencies - or if not that, then in dollars - and finance their farms and businesses. Deflation shuts down lending. And at least their entire life savings doesn't disappear one day because their online exchange got hacked (btw, how exactly does this keep happening? You don't hear about Bank of America losing all their clients' funds with no recourse.). Why would people with no savings be more attracted to a deflationary cryptocurrency than they are to a currency that can be borrowed, loaned, invested, and securely exchanged worldwide - i.e. the dollar?

El Salvador? People are on the verge of starvation in that gang-run dictatorship, and they're walking the entire continent to escape it and enjoy the privileges of US immigration prisons. My guess is the E.S. government found a way to pilfer the entire treasury because their Bitcoin holdings can be obscured from audit. Move $ into Bitcoin within the treasury, take Bitcoin home and trade back for $, treasury reports it still has Bitcoin, repeat until rich enough to disappear to a Caribbean island. Maybe I'm a pessimist on E.S. but I've been reading the world news long enough to spot the patterns by now. it's always the same.

Isn't the nature of the Bitcoin ledger such that El Salvador's Bitcoin stake is publicly visible?

[waltworks]

And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

This is  the sticky wicket of Bitcoin.  Bitcoin solved the trusted third party transaction problem.   But the creator(s) didn't think about what money actually is.  You do not want a currency that is inherently deflationary.

It makes me furious. I really, really hate paying credit card transaction fees. Crypto has the promise to solve this and make humanity vastly better off, but because bitcoin is so terribly designed it is actually preventing that scenario from becoming a reality.

You can have a long argument about whether 0 or 1 or 2% inflation is ideal in a currency, but there's no coherent argument for one that is actually *deflationary*.

-W

[boarder42]

And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

This is  the sticky wicket of Bitcoin.  Bitcoin solved the trusted third party transaction problem.   But the creator(s) didn't think about what money actually is.  You do not want a currency that is inherently deflationary.

It makes me furious. I really, really hate paying credit card transaction fees. Crypto has the promise to solve this and make humanity vastly better off, but because bitcoin is so terribly designed it is actually preventing that scenario from becoming a reality.

You can have a long argument about whether 0 or 1 or 2% inflation is ideal in a currency, but there's no coherent argument for one that is actually *deflationary*.

-W

agreed this is fundamentally why some block chain is likely to become useable as a currency world wide or country wide. Just b/c bitcoin was first doesn't mean its best and we already know its likely the worst.  I do not understand how someone investing in bitcoin doesn't see this.  Many here have stated they have an allocation they are glad to lose b/c its highly speculative.  But no one has laid out a roadmap to what BTC is specifically going to be used for in the future.  The US accumulates 750B a year in debt to fund defense.  The largest military in the world is not going to allow something deflationary to become standard exchange - This does not just shut down the person to person/bank borrowing problem it kills entire countries propped up on debt and something tells me between china who is 2nd who already made this illegal and the us who is first in defense spending with a combined total of 1T dollars arent just going to let something like this take hold and replace fiat.

so then someone please explain the use case for this thing called bitcoin and dont go down the path of the value of blockchain which almost everyone here who doesnt speculate in crypto agrees has value.

[Rosy]

Rosy, can you elaborate on the IMF thing? Doesn't the IMF require repayment of loans in a specific currency when they make the loan (all loans I'm aware of work this way)? Are you saying, for example, Argentina could decide to pay the IMF in bitcoin and they'd be required to accept it for some reason?

For what it's worth, I've run a business for ~20 years that is really popular with techie white dudes who are the prime demographic for bitcoin. Never, once, in what has to be 10,000 transactions has anyone tried to pay me with it. It's something (for better or worse) that you own, not something you spend. And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

Walt and Johnny Z
No - the IMF agreement states that it must accept payment in the legal tender of their member countries. Since bitcoin is now legal tender in El Salvador and there is no exclusion of bitcoin that means El Salvador can pay the IMF in bitcoin.

Quote from the IMF

Jul 26, 2021 — If a cryptoasset were granted legal tender status, it would have to be accepted by creditors in payment of monetary obligations, including taxes ...

You raise an excellent point Walt in whether this might apply to an existing loan contract if that contract names only one currency. I don't know if the primary clause would override a specific contract.
It would not apply to your example of Argentina since they do not use bitcoin as legal tender.

Quote from Bloomberg - Oct 19, 2021

El Salvador’s first-of-its-kind adoption of Bitcoin won’t be an obstacle for the government to reach a $1.3 billion loan agreement with the International Monetary Fund, according to the country’s central bank president.

This Bloomberg article makes it crystal clear that the IMF is playing hard ball.

Since El Salvador is still using the US$ as legal tender alongside crypto (it takes time to convert to a new currency) who is to say they will not simply convert their crypto into dollars anyway?
If the day ever comes where they declare the US$ a foreign currency then it is a new ball game.

I like your comment Walt:)
"Any freshman macro econ student could have designed a better currency."
That may well be true for all I know but then maybe those deficiencies can be addressed? I'm neither an economist nor an expert on currencies and don't pretend to be. So I will leave discussions on the finer points of a currency to the experts.

[boarder42]

Rosy, can you elaborate on the IMF thing? Doesn't the IMF require repayment of loans in a specific currency when they make the loan (all loans I'm aware of work this way)? Are you saying, for example, Argentina could decide to pay the IMF in bitcoin and they'd be required to accept it for some reason?

For what it's worth, I've run a business for ~20 years that is really popular with techie white dudes who are the prime demographic for bitcoin. Never, once, in what has to be 10,000 transactions has anyone tried to pay me with it. It's something (for better or worse) that you own, not something you spend. And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

Walt and Johnny Z
No - the IMF agreement states that it must accept payment in the legal tender of their member countries. Since bitcoin is now legal tender in El Salvador and there is no exclusion of bitcoin that means El Salvador can pay the IMF in bitcoin.

Quote from the IMF

Jul 26, 2021 — If a cryptoasset were granted legal tender status, it would have to be accepted by creditors in payment of monetary obligations, including taxes ...

You raise an excellent point Walt in whether this might apply to an existing loan contract if that contract names only one currency. I don't know if the primary clause would override a specific contract.
It would not apply to your example of Argentina since they do not use bitcoin as legal tender.

Quote from Bloomberg - Oct 19, 2021

El Salvador’s first-of-its-kind adoption of Bitcoin won’t be an obstacle for the government to reach a $1.3 billion loan agreement with the International Monetary Fund, according to the country’s central bank president.

This Bloomberg article makes it crystal clear that the IMF is playing hard ball.

Since El Salvador is still using the US$ as legal tender alongside crypto (it takes time to convert to a new currency) who is to say they will not simply convert their crypto into dollars anyway?
If the day ever comes where they declare the US$ a foreign currency then it is a new ball game.

I like your comment Walt:)
"Any freshman macro econ student could have designed a better currency."
That may well be true for all I know but then maybe those deficiencies can be addressed? I'm neither an economist nor an expert on currencies and don't pretend to be. So I will leave discussions on the finer points of a currency to the experts.

this statement right here - you said it yourself its been stated multiple times here why BTC is not useable as a currency and never can be but you choose to claim ignorance on the issue - great way to invest your green soldiers.

BTC deficiencies cannot be addressed b/c there are a finite number of coins per how the code is written - that's an unsolvable deficiency for BTC

[waltworks]

You don't need to be an economics professor here. Just imagine you have some bitcoin, which is limited in supply, and hence is going to slowly gain value, forever, because it's the world currency.

I come to you asking for a loan. Do you give me a loan? If so, how much interest do you charge me? Worldwide, are people more or less likely to loan each other money and buy/sell things to each other if their money is constantly gaining value?

-W

[grmagne]

When I think to myself "I can live in a world where my savings are in a deflationary currency but I actually spend and borrow in a slightly inflationary currency" then I realize I've fallen into a mental trap. If everyone does this, then Bitcoin will never be a currency, and will thus be doomed forever to inhabit the dangerous realm of trendy collectibles like the Confederate notes traded for beer money by white supremacists at gun shows. No more of those are being minted either.

When I think to myself "I can buy the limited-edition currency today that impoverished people around the world will be using in 30 years when it costs a million dollars a coin" I have to ask myself why the global poor will choose to work all their lives producing goods and services for my chain of digits, when this digital slavery is actually a worse situation than their status quo. At least they can borrow money in their local currencies - or if not that, then in dollars - and finance their farms and businesses. Deflation shuts down lending. And at least their entire life savings doesn't disappear one day because their online exchange got hacked (btw, how exactly does this keep happening? You don't hear about Bank of America losing all their clients' funds with no recourse.). Why would people with no savings be more attracted to a deflationary cryptocurrency than they are to a currency that can be borrowed, loaned, invested, and securely exchanged worldwide - i.e. the dollar?

El Salvador? People are on the verge of starvation in that gang-run dictatorship, and they're walking the entire continent to escape it and enjoy the privileges of US immigration prisons. My guess is the E.S. government found a way to pilfer the entire treasury because their Bitcoin holdings can be obscured from audit. Move $ into Bitcoin within the treasury, take Bitcoin home and trade back for $, treasury reports it still has Bitcoin, repeat until rich enough to disappear to a Caribbean island. Maybe I'm a pessimist on E.S. but I've been reading the world news long enough to spot the patterns by now. it's always the same.

I don't expect Bitcoin to work miracles in El Salvador, but I can easily imagine that thousands of people are already seeing tangible benefits. Let's say my neighbor and I both receive $100/month remittance from a relative in the United States, which is a very common situation there. Every month we walk to the Western Union office where we collect $94 after fees. Only this month I've received $100 through the Chivo App with no fees and didn't have to leave my home. I'm already $6 ahead, which is the first real-world tangible benefit most El Salvadorans will notice. My neighbor still receives the $94 cash and spent it all. I spent $94 and decided to hold on to the other $6. Now, one month later I learn that my $6 is actually worth $8 because Bitcoin's been going up a lot. A lightbulb goes on in my brain that if I save that extra $6 every month, not only will I be saving significant money (by their standards) for the first time in my life, but it can actually grow very quickly. Of course, it can also go down very quickly, but if this becomes a common currency in Latin America it should tend to grow more than shrink for years to come.

At first it seems most people are just taking their remittance money, converting to $USD and then spending that, just as they always have. So maybe people will just save a tiny bit on their Chivo app, but shun using Bitcoin as cash. But eventually people will notice that they can save a step. Instead of converting Bitcoin to cash, and spending that, it's actually faster to just skip the ATM and just spend the Bitcoin. I could easily imagine 20-25% of El Salvador using Bitcoin as their primary savings & spending currency by 2025, given that public sentiment has turned a bit more favorable after just 7 weeks of usage.

I know there are potential pitfalls. I can imagine anything from EU/US regulation crushing cryptocurrency in the future and wiping out El Salvadorans savings, to a security glitch in the Chivo app leading to widespread thefts, or the dangers of having both your savings & short-term spending cash all lumped together on one phone app. But, given that Bitcoin can introduce poor people to an easy way to save for the future, I'm mostly optimistic.

I don't really buy into the argument that a deflationary currency can't work. And even if it doesn't, I described in an earlier post that it's possible to modify Bitcoin into an inflationary currency if that's ever needed. There have already been multiple upgrades to Bitcoin's protocol in the first 13 years. But if someone says we're only incentivized to invest for the future by holding fiat currency with a -2% annual value due to inflation, I'd ask why I can't also be incentivized to invest for the future while holding a digital currency that grows 2% in value annually? After all, I'm still better off investing at 7% per year than saving at 2%. And, if I lived in a country where corruption and hyperinflation were daily realities, I'd jump at the opportunity to have Bitcoin as a currency alternative.

[waltworks]

We already can see how a deflationary currency doesn't work, though. Nobody, and I mean nobody uses bitcoin to buy or sell things or to pay salaries. Because they hold onto it instead, expecting it to sporadically and randomly increase in value.

Contrast this to dollars - nobody thinks twice about making loans, purchasing things, etc. Because holding onto the currency itself is a losing proposition.

-W

[MustacheAndaHalf]

My guess is the E.S. government found a way to pilfer the entire treasury because their Bitcoin holdings can be obscured from audit. Move $ into Bitcoin within the treasury, take Bitcoin home and trade back for $, treasury reports it still has Bitcoin, repeat until rich enough to disappear to a Caribbean island.

The amount of Bitcoin in every wallet / account is public knowledge.  If they lie about how much Bitcoin is present in one of their accounts, they will be proved wrong within minutes of saying it.

A good example is the excitement over seeing a 9 year old Bitcoin wallet suddenly become active.  That old wallet has 616 BTC, and since Bitcoin recently shot up in value, that's worth over $40 million now ($29 million when the article was written).  Lying about the contents of a bitcoin wallet just won't work.
https://finance.yahoo.com/news/bitcoin-wallet-satoshi-nakamoto-era-075836330.html

BTC deficiencies cannot be addressed b/c there are a finite number of coins per how the code is written - that's an unsolvable deficiency for BTC

If Bitcoin miners agree, the code can be changed.  It's rare, but happened earlier this year.
https://www.cnbc.com/2021/06/12/bitcoin-taproot-upgrade-what-it-means.html

Bitcoin's security is that a majority of the computing power needs to confirm blocks.  Someone who has control of most of the computing power can, in theory, make changes until others relent and adopt the changes.  This "51% attack" is only theoretical, it's never been done.  Controlling an entire datacenter wouldn't be enough.
https://www.investopedia.com/terms/1/51-attack.asp

[boarder42]

My guess is the E.S. government found a way to pilfer the entire treasury because their Bitcoin holdings can be obscured from audit. Move $ into Bitcoin within the treasury, take Bitcoin home and trade back for $, treasury reports it still has Bitcoin, repeat until rich enough to disappear to a Caribbean island.

The amount of Bitcoin in every wallet / account is public knowledge.  If they lie about how much Bitcoin is present in one of their accounts, they will be proved wrong within minutes of saying it.

A good example is the excitement over seeing a 9 year old Bitcoin wallet suddenly become active.  That old wallet has 616 BTC, and since Bitcoin recently shot up in value, that's worth over $40 million now ($29 million when the article was written).  Lying about the contents of a bitcoin wallet just won't work.
https://finance.yahoo.com/news/bitcoin-wallet-satoshi-nakamoto-era-075836330.html

BTC deficiencies cannot be addressed b/c there are a finite number of coins per how the code is written - that's an unsolvable deficiency for BTC

If Bitcoin miners agree, the code can be changed.  It's rare, but happened earlier this year.
https://www.cnbc.com/2021/06/12/bitcoin-taproot-upgrade-what-it-means.html

Bitcoin's security is that a majority of the computing power needs to confirm blocks.  Someone who has control of most of the computing power can, in theory, make changes until others relent and adopt the changes.  This "51% attack" is only theoretical, it's never been done.  Controlling an entire datacenter wouldn't be enough.
https://www.investopedia.com/terms/1/51-attack.asp

so what you're saying is in order for this to be money the people holding the computing power have to decide to deflate the value of their assets -  that sounds like something people would willing choose to do who like above admittedly dont actually understand monetary policy.

[BicycleB]

I don't really buy into the argument that a deflationary currency can't work.

Your belief isn't the issue. You certainly have a right to your opinion, but consider why most people who study currencies conclude differently. It's simply this: if a deflationary currency is the dominant currency of a nation, its deflationary character has the tendency to slow down the real economy, causing worsened life conditions for the people. A currency with slight inflation works better.

The decision driving this isn't normally a person deciding to use one currency instead of another. It's the decision of a person who has temporarily saved some money, deciding what to do next. The savings are already in the dominant currency of the day, be it dollars or BTC or seashells. If the currency is deflationary, keeping the seashells or BTC is a safe choice that is likely to be profitable. #WinningBySaving, yay!

Unfortunately for everyone, this means that in an economy dominated by deflationary currency, the common choice is not to invest. By contrast, in an inflationary currency, the saver faces the unpleasant reality that if they do nothing, their savings will evaparate over time due to the currency's inflation. Sadly for them, the only way to preserve their capital is take the risky course of doing something with it - investing it in some business that does work, produces things, provides services, somehow provides value to customers. The inflating currency motivates investment and thus stimulates the real economy. In a nation with deflating currency, the motivation to invest declines and the real economy follows. Everyone becomes poorer in real life than they would have been, eagerly hoarding their seashells while houses rot and children start to get hungry.

I may yet invest in crypto and even BTC, but not because I believe in deflationary currency being something that "works" in the sense of being a good currency, a currency that has a positive effect.

[MustacheAndaHalf]

BTC deficiencies cannot be addressed b/c there are a finite number of coins per how the code is written - that's an unsolvable deficiency for BTC

If Bitcoin miners agree, the code can be changed.  It's rare, but happened earlier this year.
https://www.cnbc.com/2021/06/12/bitcoin-taproot-upgrade-what-it-means.html

Bitcoin's security is that a majority of the computing power needs to confirm blocks.  Someone who has control of most of the computing power can, in theory, make changes until others relent and adopt the changes.  This "51% attack" is only theoretical, it's never been done.  Controlling an entire datacenter wouldn't be enough.
https://www.investopedia.com/terms/1/51-attack.asp

so what you're saying is in order for this to be money the people holding the computing power have to decide to deflate the value of their assets -  that sounds like something people would willing choose to do who like above admittedly dont actually understand monetary policy.

I didn't say anything about money - maybe you're conflating my comments with another poster?  I actually don't consider Bitcoin to be money.

Bitcoin's volatility has been more significant than inflation.  Social security is giving a cost of living increase of 5.9%, which is more inflation than we've seen in some time.  If Bitcoin only went up 6% per year for a couple years, I think large numbers of people would abandon it.

Restaurants and move theaters have thin profit margins.  The volatility of BTC would make them either change their prices hourly, or potentially get underpaid by a percentage greater than their profit margin.  Five days ago (Oct 15), Bitcoin rose +7.4% in one day - but it could easily have dropped that much.  While Bitcoin remains volatile, it seems more appropriate for online transactions, where prices can be changed more smoothly than a printed menu.

[boarder42]

BTC deficiencies cannot be addressed b/c there are a finite number of coins per how the code is written - that's an unsolvable deficiency for BTC

If Bitcoin miners agree, the code can be changed.  It's rare, but happened earlier this year.
https://www.cnbc.com/2021/06/12/bitcoin-taproot-upgrade-what-it-means.html

Bitcoin's security is that a majority of the computing power needs to confirm blocks.  Someone who has control of most of the computing power can, in theory, make changes until others relent and adopt the changes.  This "51% attack" is only theoretical, it's never been done.  Controlling an entire datacenter wouldn't be enough.
https://www.investopedia.com/terms/1/51-attack.asp

so what you're saying is in order for this to be money the people holding the computing power have to decide to deflate the value of their assets -  that sounds like something people would willing choose to do who like above admittedly dont actually understand monetary policy.

I didn't say anything about money - maybe you're conflating my comments with another poster?  I actually don't consider Bitcoin to be money.

Bitcoin's volatility has been more significant than inflation.  Social security is giving a cost of living increase of 5.9%, which is more inflation than we've seen in some time.  If Bitcoin only went up 6% per year for a couple years, I think large numbers of people would abandon it.

Restaurants and move theaters have thin profit margins.  The volatility of BTC would make them either change their prices hourly, or potentially get underpaid by a percentage greater than their profit margin.  Five days ago (Oct 15), Bitcoin rose +7.4% in one day - but it could easily have dropped that much.  While Bitcoin remains volatile, it seems more appropriate for online transactions, where prices can be changed more smoothly than a printed menu.

bitcoin going up 6% is not the same as inflation its deflation bitcoin has to decrease by 6% in value to be the same as the COL adjustment given by the SSA to account for inflation which means 1 dollar is worth 6% less this year than last.

[maizefolk]

Deflation shuts down lending.

Out of curiosity, do we have strong evidence that the above is true? I know interest rates in many parts of the EU went negative and banks were making home loans at negative interest rates and investors were buying debt at negative interest rates.

So negative interest rates in of themselves don't appear to be a barrier to lending. But not sure if the EU experienced genuine deflation or not during that period.

[the_gastropod]

The amount of Bitcoin in every wallet / account is public knowledge.  If they lie about how much Bitcoin is present in one of their accounts, they will be proved wrong within minutes of saying it.

This is not true, though, right? All of these transactions go through Chivo, which is not transparent. It's allowing Bukele to make up wildly ridiculous stats about the success (https://twitter.com/nayibbukele/status/1442624279028408321), like there are more transactions in ES on Chivo than Visa handles worldwide. That seems rather unlikely.

To ChpBstrd's point, much of this is deeply suspicious. A lawyer prosecuted for falsifying a will helped create the company running Chivo Wallet. The notary who attested to the legality of Chivo SA de CV, created with public resources by the Government, was accused of documentary falsification in 2020 [1]. President Bukele’s Chief of Staff, Marta Carolina Recinos de Bernal, is on the US State Department’s Engel List of corrupt officials. She’s also a director of Chivo SA [2].

It really is depressing seeing a bunch of crypto enthusiasts—who claim to be wholly against corruption—cheer on this naked pillaging of some of the most impoverished people on Earth all because "number go up" on their pet Ponzi scheme.

[1] https://www.revistafactum.com/abogada-chivo/
[2] https://www.elsalvador.com/noticias/nacional/funcionaria-bukele-lista-engel-directora-empresa-detras-chivo/877437/2021/

[MustacheAndaHalf]

BTC deficiencies cannot be addressed b/c there are a finite number of coins per how the code is written - that's an unsolvable deficiency for BTC

If Bitcoin miners agree, the code can be changed.  It's rare, but happened earlier this year.
https://www.cnbc.com/2021/06/12/bitcoin-taproot-upgrade-what-it-means.html

Bitcoin's security is that a majority of the computing power needs to confirm blocks.  Someone who has control of most of the computing power can, in theory, make changes until others relent and adopt the changes.  This "51% attack" is only theoretical, it's never been done.  Controlling an entire datacenter wouldn't be enough.
https://www.investopedia.com/terms/1/51-attack.asp

so what you're saying is in order for this to be money the people holding the computing power have to decide to deflate the value of their assets -  that sounds like something people would willing choose to do who like above admittedly dont actually understand monetary policy.

I didn't say anything about money - maybe you're conflating my comments with another poster?  I actually don't consider Bitcoin to be money.

Bitcoin's volatility has been more significant than inflation.  Social security is giving a cost of living increase of 5.9%, which is more inflation than we've seen in some time.  If Bitcoin only went up 6% per year for a couple years, I think large numbers of people would abandon it.

Restaurants and move theaters have thin profit margins.  The volatility of BTC would make them either change their prices hourly, or potentially get underpaid by a percentage greater than their profit margin.  Five days ago (Oct 15), Bitcoin rose +7.4% in one day - but it could easily have dropped that much.  While Bitcoin remains volatile, it seems more appropriate for online transactions, where prices can be changed more smoothly than a printed menu.

bitcoin going up 6% is not the same as inflation its deflation bitcoin has to decrease by 6% in value to be the same as the COL adjustment given by the SSA to account for inflation which means 1 dollar is worth 6% less this year than last.

Oh, I see what you're saying.  The U.S. can print more dollars (or buy treasuries in the bond market, like it's doing now), which dilutes existing dollars.  Bitcoin is still generating block rewards, which create more Bitcoin.

Google says the current reward is 6.25 BTC (over $400k!), and a block is created 6 times an hour.  Dividing annual block rewards by Bitcoin in circulation gives me 1.7%.  Bitcoin went up +450% in the past 12 months (last I checked), so the extra 1.7% of Bitcoin rewards don't seem to matter much.

Viewing Bitcoin as a currency, wouldn't it be in extreme deflation?  If you look at the behavior of people with BTC, they just hold onto it.  Holding a currency and refusing to buy anything would be like a currency with extreme deflation... hyper-deflation?

[boarder42]

BTC deficiencies cannot be addressed b/c there are a finite number of coins per how the code is written - that's an unsolvable deficiency for BTC

If Bitcoin miners agree, the code can be changed.  It's rare, but happened earlier this year.
https://www.cnbc.com/2021/06/12/bitcoin-taproot-upgrade-what-it-means.html

Bitcoin's security is that a majority of the computing power needs to confirm blocks.  Someone who has control of most of the computing power can, in theory, make changes until others relent and adopt the changes.  This "51% attack" is only theoretical, it's never been done.  Controlling an entire datacenter wouldn't be enough.
https://www.investopedia.com/terms/1/51-attack.asp

so what you're saying is in order for this to be money the people holding the computing power have to decide to deflate the value of their assets -  that sounds like something people would willing choose to do who like above admittedly dont actually understand monetary policy.

I didn't say anything about money - maybe you're conflating my comments with another poster?  I actually don't consider Bitcoin to be money.

Bitcoin's volatility has been more significant than inflation.  Social security is giving a cost of living increase of 5.9%, which is more inflation than we've seen in some time.  If Bitcoin only went up 6% per year for a couple years, I think large numbers of people would abandon it.

Restaurants and move theaters have thin profit margins.  The volatility of BTC would make them either change their prices hourly, or potentially get underpaid by a percentage greater than their profit margin.  Five days ago (Oct 15), Bitcoin rose +7.4% in one day - but it could easily have dropped that much.  While Bitcoin remains volatile, it seems more appropriate for online transactions, where prices can be changed more smoothly than a printed menu.

bitcoin going up 6% is not the same as inflation its deflation bitcoin has to decrease by 6% in value to be the same as the COL adjustment given by the SSA to account for inflation which means 1 dollar is worth 6% less this year than last.

Oh, I see what you're saying.  The U.S. can print more dollars (or buy treasuries in the bond market, like it's doing now), which dilutes existing dollars.  Bitcoin is still generating block rewards, which create more Bitcoin.

Google says the current reward is 6.25 BTC (over $400k!), and a block is created 6 times an hour.  Dividing annual block rewards by Bitcoin in circulation gives me 1.7%.  Bitcoin went up +450% in the past 12 months (last I checked), so the extra 1.7% of Bitcoin rewards don't seem to matter much.

Viewing Bitcoin as a currency, wouldn't it be in extreme deflation?  If you look at the behavior of people with BTC, they just hold onto it.  Holding a currency and refusing to buy anything would be like a currency with extreme deflation... hyper-deflation?

correct that was the entire point i was making when you snipped off part of my post and started a different thread.  Basically btc isnt a currency unless something dramatically changes which most of the BTC holders here agree to but then you have quite a few still spouting its benefits as currency which with out heavy modification can never happen.

[Rosy]

Rosy, can you elaborate on the IMF thing? Doesn't the IMF require repayment of loans in a specific currency when they make the loan (all loans I'm aware of work this way)? Are you saying, for example, Argentina could decide to pay the IMF in bitcoin and they'd be required to accept it for some reason?

For what it's worth, I've run a business for ~20 years that is really popular with techie white dudes who are the prime demographic for bitcoin. Never, once, in what has to be 10,000 transactions has anyone tried to pay me with it. It's something (for better or worse) that you own, not something you spend. And it's pretty clear to me that was the intent. Any freshman macro econ student could have designed a better currency.

-W

Walt and Johnny Z
No - the IMF agreement states that it must accept payment in the legal tender of their member countries. Since bitcoin is now legal tender in El Salvador and there is no exclusion of bitcoin that means El Salvador can pay the IMF in bitcoin.

Quote from the IMF

Jul 26, 2021 — If a cryptoasset were granted legal tender status, it would have to be accepted by creditors in payment of monetary obligations, including taxes ...

You raise an excellent point Walt in whether this might apply to an existing loan contract if that contract names only one currency. I don't know if the primary clause would override a specific contract.
It would not apply to your example of Argentina since they do not use bitcoin as legal tender.

Quote from Bloomberg - Oct 19, 2021

El Salvador’s first-of-its-kind adoption of Bitcoin won’t be an obstacle for the government to reach a $1.3 billion loan agreement with the International Monetary Fund, according to the country’s central bank president.

This Bloomberg article makes it crystal clear that the IMF is playing hard ball.

Since El Salvador is still using the US$ as legal tender alongside crypto (it takes time to convert to a new currency) who is to say they will not simply convert their crypto into dollars anyway?
If the day ever comes where they declare the US$ a foreign currency then it is a new ball game.

I like your comment Walt:)
"Any freshman macro econ student could have designed a better currency."
That may well be true for all I know but then maybe those deficiencies can be addressed? I'm neither an economist nor an expert on currencies and don't pretend to be. So I will leave discussions on the finer points of a currency to the experts.

this statement right here - you said it yourself its been stated multiple times here why BTC is not useable as a currency and never can be but you choose to claim ignorance on the issue - great way to invest your green soldiers.

BTC deficiencies cannot be addressed b/c there are a finite number of coins per how the code is written - that's an unsolvable deficiency for BTC

I doubt that it is an unsolvable deficiency for BTC. The consensus to change the code and implement a change takes years. Like MustacheandaHalf said it is rare and for good reason. I do see where the 'deflationary' aspect might be a problem in the long run. Believe it or not there are smart people in crypto who are arguing the pros and cons and the functionality of bitcoin as a true currency in its current state. It is not that I claim ignorance on the issue(s) what I said is that I am not an expert on currencies or an economist.

There is the issue of scarcity and finite coins, but I do think that since bitcoin is divisible by eight digits down to satoshis this will perhaps dilute and slow down the scarcity by eight as the smaller denominations gain in value prolonging the process. Just a thought.

To clarify, I invested in bitcoin because I see it as a store of value.
Ideologically I like the idea of a global currency that succeeds in more financial equality and opportunities for all.

Ideology and reality generally do not mix.
It would be ironic if bitcoin was destroyed by the very idea that conceived it - a global currency.
I don't see that happening - bitcoin is here to stay, whether it ever becomes a global currency or not is not relevant to its survival.

[onecoolcat]

LOL at these criticism of Bitcoin for being "deflationary". 

Also, just because its not inflationary at the whim of the treasury does not equal it being deflationary.  I guess we have to start with the basics.

[js82]

I'm currently 80% vtsax, 11% Ethereum, 9% Bitcoin.  I'll likely shift another 20% into crypto by the end of the year. 

So yeah, I'd endorcse a 95/5 split as not being too crazy:)

Somewhere along the way I allocated to a ~93% equity/7% crypto split.  That balance is now something like 70% equity/30% crypto(Oops!).  I haven't rebalanced yet because I'm waiting until it rolls over into long term cap gains so I can rebalance without killing myself too badly with taxes.

My general thought process is this:

1) Most Crypto is not a great choice as a long-term asset(i.e. performance once we get past the next 5 years or so) for the same reasons that Gold is not a great choice as a long-term asset.  Gold is mostly a dumb asset because it's non-productive and its price is somewhat detached from its intrinsic worth, and similarly most cryptocurrencies will be pretty useless as investments once they've reached full-scale adoption.

2) *HOWEVER* (and this is where I missed the boat on crypto earlier on), Crypto is still coming up its S-curve in terms of adoption - meaning that there will be an increase in demand in crypto over the next few years, which should drive a general increase in the crypto market cap and prices of non-junk cryptocurrencies.  Crypto *IS* likely to be an extremely strong asset class in the mid-term.

3) There's a lot of junk (and outright scams) in the crypto space right now - I think the soundest strategy in the crypto space is to A) diversify, and B) look for crypto applications with clearly-defined use cases and consider total potential markets, as opposed to chasing memecoins.  The latter is basically gambling as opposed to investing.

In general I'm bullish on the technology(blockchain) itself, moreso than any individual cryptocurrency.  I also think that future gains will not be as large as past gains due to how far we've come up the adoption curve already.  That said, I drastically underestimated crypto's potential in its early phases, and I could very well be wrong(in either direction) again.

[BicycleB]

LOL at these criticism of Bitcoin for being "deflationary". 

Also, just because its not inflationary at the whim of the treasury does not equal it being deflationary.  I guess we have to start with the basics.

Basics are just what I need! Explain?

[onecoolcat]

LOL at these criticism of Bitcoin for being "deflationary". 

Also, just because its not inflationary at the whim of the treasury does not equal it being deflationary.  I guess we have to start with the basics.

Basics are just what I need! Explain?

Here you go.

[BicycleB]

LOL at these criticism of Bitcoin for being "deflationary". 

Also, just because its not inflationary at the whim of the treasury does not equal it being deflationary.  I guess we have to start with the basics.

Basics are just what I need! Explain?

Here you go.

I will assume you meant this Connor Brown article: https://medium.com/the-bitcoin-times/stop-calling-bitcoin-deflationary-84462cb90345

He makes some interesting points, but does not successfully address the key mechanism by which I am suggesting that BTC would have a deflationary effect. He mentions the concern, but mis-states the mechanism by which "critics" say BTC would have a deflationary effect; therefore, he doesn't address my actual concern, which as I understand it is most economists' main concern about any fixed money supply relative to a growing economy.

Sure, technically it's not a shrinking money supply. It's slowly increasing until 2140, he says, then flatlining. Fine. But Brown asserts the price will stablize. He asserts that slowing population growth will cause demand for currency to just perfectly match the amount of currency BTC will provide.

That's unlikely. Setting aside the improbability of a precise enough match between population numbers and number of Bitcoins, the money supply needs to meet the needs of economic growth. We'd prefer for buying power to rise even if population doesn't. BTC isn't prepared for an expanding economy if the population is stable. A better solution would be a currency that can be adjusted to the economy's needs. BTC will only maximize productive incentives if its coin production and maintenance curve happens to exactly match the future needs of the global economy. Brown asserts this will approximately happen, but his proposed mechanism is basically to get lucky in matching the two things.

In any case, he claims that "investors would certainly still be motivated to invest" without providing realistic reasoning to support his assertion. The actual mechanism where a slightly inflating currency motivates investment wouldn't happen, and Brown agrees it wouldn't! He views this motivation as people being "forced to harbor their money into speculative ventures just to protect themselves against inflation's decay." I'd like a riskless store of value as much as the next person, but there's a difference between investing rationally and speculating, so he's putting up a straw man there a little bit. But he's right, inflation does prompt savers to invest.

Sure, some investment would occur if BTC achieved a perfectly stable currency status. But more would occur under slight inflation, so compared to case of light inflation, BTC would have a deflationary effect - because it would prevent exactly the motivations that Brown himself points out do exist. The article mentions the reason that the article itself is incorrect, I think.

[the_gastropod]

Sure, technically it's not a shrinking money supply.

But it is a shrinking supply. People lose their keys, die, send bitcoins to invalid addresses, etc. Those coins are as good as gone. Satoshi’s own 1 Million+ BTC have remained untouched for a decade—and I think it’s likely they never will be moved again.

Deflation was a deliberate design choice in Bitcoin. It was fundamentally inspired by Austrian economics. It’s an odd argument to simultaneously be pro-Bitcoin and deny its deflationary design. Almost like someone doesn’t understand the basics, and repeatedly weasels out of any serious discussion by slinging mud and linking to other cultish crypto propaganda.

Also, for what it’s worth, the Google answer I get when I click occ’s link is this:

On the other hand, Bitcoin is deflationary, meaning buying power increases over time. If you put your private key under your mattress for 20 years (assuming Bitcoin is still around in 20 years), it will buy you more then than it will today.

Smartassery kinda backfired there eh?

[ChpBstrd]

The amount of Bitcoin in every wallet / account is public knowledge.  If they lie about how much Bitcoin is present in one of their accounts, they will be proved wrong within minutes of saying it.

This is not true, though, right? All of these transactions go through Chivo, which is not transparent. It's allowing Bukele to make up wildly ridiculous stats about the success (https://twitter.com/nayibbukele/status/1442624279028408321), like there are more transactions in ES on Chivo than Visa handles worldwide. That seems rather unlikely.

To ChpBstrd's point, much of this is deeply suspicious. A lawyer prosecuted for falsifying a will helped create the company running Chivo Wallet. The notary who attested to the legality of Chivo SA de CV, created with public resources by the Government, was accused of documentary falsification in 2020 [1]. President Bukele’s Chief of Staff, Marta Carolina Recinos de Bernal, is on the US State Department’s Engel List of corrupt officials. She’s also a director of Chivo SA [2].

It really is depressing seeing a bunch of crypto enthusiasts—who claim to be wholly against corruption—cheer on this naked pillaging of some of the most impoverished people on Earth all because "number go up" on their pet Ponzi scheme.

[1] https://www.revistafactum.com/abogada-chivo/
[2] https://www.elsalvador.com/noticias/nacional/funcionaria-bukele-lista-engel-directora-empresa-detras-chivo/877437/2021/

Wow @the_gastropod that's more than I knew, and my spidey senses were already tingling before I knew it.

To Summarize:
1) Bitcoin will someday be a superior currency because it allows for trustless transactions through blockchain technology, UNLESS you use Lightning or Chivo like everyone is doing because that's the only way to cheaply and quickly process large numbers of transactions.
2) Bitcoin will go up in value forever because it has a limited supply, UNLESS it is decided at some future fork in the road to increase the supply or split the currency, as already happens every few years. See https://en.wikipedia.org/wiki/List_of_bitcoin_forks.
3) Bitcoin will help regular people in undeveloped, corrupt countries with unstable currencies, UNLESS crypto is simply a new angle on corruption as it appears to be in E.S. I wonder if the regime's opponents are comfortable using Chivo?

Is it just me or do all the proposed benefits have a solution that undermines another of the proposed benefits in a circular fashion?

[lemonlyman]

I think holding a small crypto piece in the portfolio is a good idea. Picking any particular platform is a shot in the dark, but an etf of some wouldn't be bad. Crypto isn't just for currencies; blockchain technology will be used for many things in the future because it can be used to create protected, distributed general ledgers. Currencies, stable coins, medical records, wills, physical asset records, all kinds of things.

[GuitarStv]

Crypto isn't just for currencies; blockchain technology will be used for many things in the future because it can be used to create protected, distributed general ledgers. Currencies, stable coins, medical records, wills, physical asset records, all kinds of things.

Blockchain technology certainly has uses.  The only use I've seen anyone touting though, and the entire raison d'etre for cryptocurrency is it's use as a store of value.  What crypto ETF is investing in blockchain technology as opposed to it's use as a currency?  I haven't been able to find one.

[the_gastropod]

I think holding a small crypto piece in the portfolio is a good idea. Picking any particular platform is a shot in the dark, but an etf of some wouldn't be bad. Crypto isn't just for currencies; blockchain technology will be used for many things in the future because it can be used to create protected, distributed general ledgers. Currencies, stable coins, medical records, wills, physical asset records, all kinds of things.

I disagree. I think this "eh, what's the harm! I'll hold a little" attitude is, sadly, harmful. There are other people on the other end of these trades that will be hurt. This is a negative sum game. If you "win", it's necessarily at the expense of someone else. Additionally, there's that whole aspect of its outrageous energy requirements. Participating in this charade only keeps the insanity going.

As for the "blockchain will be everywhere!" thing. No. It won't. This is a pretty detailed and easy-to-understand essay explaining why: https://onlinelibrary.wiley.com/doi/epdf/10.1111/1468-2230.12603

I really urge you—and everyone else buying into the hype—to think critically about this mess. There's a lot of techno-babble going on that seems to distract people from the reality of it all. Blockchain is new(ish) and it is neat in some sense. But it absolutely cannot solve virtually any problem it's touted as being able to solve. And "investing" in an obvious Ponzi that's also somehow a currency—even though virtually any rational person would understand those are fundamentally at odds with one another—is a really silly and very bad idea. (ETA: in before the "LOL BUT NUMBER GO UP UR JUST JEALOUS". Number go up is how every Ponzi in the history of ponzis have worked, too. Investors in Enron, Madoff, and, yes, tulip bulbs thought they were geniuses for a while, too)

[lemonlyman]

I don't have access to that paper and won't pay for it so I can't respond to it. Could be right, but I don't know who that person is or why an essay written a year ago is an authority today. There are literally smart contracts already being used today. Businesses building blockchain platforms for hosting ledgers, sharing information, and doing cross border payments is not a ponzi scheme.

[lemonlyman]

Crypto isn't just for currencies; blockchain technology will be used for many things in the future because it can be used to create protected, distributed general ledgers. Currencies, stable coins, medical records, wills, physical asset records, all kinds of things.

Blockchain technology certainly has uses.  The only use I've seen anyone touting though, and the entire raison d'etre for cryptocurrency is it's use as a store of value.  What crypto ETF is investing in blockchain technology as opposed to it's use as a currency?  I haven't been able to find one.

You can search for blockchain etf. There are a good bit now. BLOK, Global X BLockchain, FTEC. I don't hold any because I haven't researched what they hold and why, but it's on my to do list because I do think applications are exploding.

[BicycleB]

Also, for what it’s worth, the Google answer I get when I click occ’s link is this:

On the other hand, Bitcoin is deflationary, meaning buying power increases over time. If you put your private key under your mattress for 20 years (assuming Bitcoin is still around in 20 years), it will buy you more then than it will today.

Smartassery kinda backfired there eh?

Sure looks like it.

PS. Hmm, that's a rather (ahem) deflating answer for the assertion that Bitcoin isn't deflationary.

[GuitarStv]

Also, for what it’s worth, the Google answer I get when I click occ’s link is this:

On the other hand, Bitcoin is deflationary, meaning buying power increases over time. If you put your private key under your mattress for 20 years (assuming Bitcoin is still around in 20 years), it will buy you more then than it will today.

Smartassery kinda backfired there eh?

Sure looks like it.

PS. Hmm, that's a rather (ahem) deflating answer for the assertion that Bitcoin isn't deflationary.

The first rule of bike club is you don't tempt the fates by talking about deflation.  That leads to flats and flats are the path to the dark side.

[the_gastropod]

I don't have access to that paper and won't pay for it so I can't respond to it. Could be right, but I don't know who that person is or why an essay written a year ago is an authority today.

Ahh, bummer. That's odd, I was able to view without paying. Maybe try this link? (https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3476678 and then click on "View PDF"). Not to appeal to authority, but the author is a Professor of Law at London School of Economics. Regardless, I'll not quite do it justice, but I'll attempt to summarize here:

The raison d'être for the blockchain is to solve the double-spending problem. While this is an impressive technological feat, it does not necessarily follow that this solves any real-world problems. It's important to remember two things:

1. that the double-spending problem only arises in distributed systems lacking a trusted record keeper or authority. If such a record keeper or authority existed, they could accomplish the same feat orders of magnitude more efficiently. Remember, the solution to the double spending problem is by design inefficient. It was designed to be wasteful to make it prohibitively costly for bad actors to act badly. and
2. that as far as crypto-assets are concerned, the legal system and courts themselves are mandatory central authorities that are the final arbiters of assigning owners to assets.

Therefore, any blockchain-based system of property ownership is a redundancy and must be kept in-sync somehow with the legal centralized legal system. The article then thoroughly goes into why this is not only impossible for myriad of reasons, but also explains why doing so would just be unnecessary and offer no benefits, while being significantly costly.

There are literally smart contracts already being used today. Businesses building blockchain platforms for hosting ledgers, sharing information, and doing cross border payments is not a ponzi scheme.

There are psychics with paying customers, plenty of people devoting lots of time and money to astrology, and countless MLM businesses making significant money. It doesn't make these things good ideas or worth pursuing.

I will grant you, one of the actual use-cases for blockchain technology today is regulatory arbitrage. Whether that's a good thing or not is up for debate. But blockchain tech does currently allow this. Once laws catch up, this loophole mostly closes, though.

One of the reasons talking about this is so difficult, is that enthusiasts tend to weasel out of criticism by shifting goal posts. This is another example. From an investment context, Bitcoin is absolutely a Ponzi scheme. That it can be used to skirt regulation is irrelevant from the investment context.

[Rosy]

Sure, technically it's not a shrinking money supply.

But it is a shrinking supply. People lose their keys, die, send bitcoins to invalid addresses, etc. Those coins are as good as gone. Satoshi’s own 1 Million+ BTC have remained untouched for a decade—and I think it’s likely they never will be moved again.

Deflation was a deliberate design choice in Bitcoin. It was fundamentally inspired by Austrian economics. It’s an odd argument to simultaneously be pro-Bitcoin and deny its deflationary design. Almost like someone doesn’t understand the basics, and repeatedly weasels out of any serious discussion by slinging mud and linking to other cultish crypto propaganda.

Also, for what it’s worth, the Google answer I get when I click occ’s link is this:

On the other hand, Bitcoin is deflationary, meaning buying power increases over time. If you put your private key under your mattress for 20 years (assuming Bitcoin is still around in 20 years), it will buy you more then than it will today.

Smartassery kinda backfired there eh?

Naw - it's more like google knows "our" bias -
here is my top result

Bitcoin is not deflationary in the formal sense of the term. Its supply will continue to increase on a curve that should account for lost coins and a growing population over the next century.
Stop Calling Bitcoin Deflationary. | by Conner Brown | The ...
medium.com/the-bitcoin-times/stop-calling-bitcoin-deflationary-84462cb90345
medium.com/the-bitcoin-times/stop-calling-bitcoin-deflationary-84462cb90345

If crypto enthusiasts really wanted to be jackassery they can easily point to the current news:
One Billion US $ Trades were made on the first day of the Bitcoin Futures ETF on Oct 19, 2021
The highest natural volume for an ETF ever in the history of Wallstreet.

One billion US dollars undeniably reflects a mind-blowing interest in the futures of a digital asset.
The SEC just approved two more Futures ETFs - one of them for Ethereum.
Or maybe Wallstreet just likes to bet and the wealthy have more cash than they know what to do with.

The Grayscale Trust has also filed for SEC approval - converting their trust into a real ETF, not Futures.
We know that the SEC, Gary Gensler, is not keen on promoting the sale of real bitcoin.
They know that the retail investors will see the first real ETF as a stamp of approval for bitcoin.

Crypto isn't just for currencies; blockchain technology will be used for many things in the future because it can be used to create protected, distributed general ledgers. Currencies, stable coins, medical records, wills, physical asset records, all kinds of things.

Blockchain technology certainly has uses.  The only use I've seen anyone touting though, and the entire raison d'etre for cryptocurrency is it's use as a store of value.  What crypto ETF is investing in blockchain technology as opposed to it's use as a currency?  I haven't been able to find one.

I'm invested in a couple, like the BLOK ETF which is all about blockchain technology. Glad to see the acknowledgment of tech like blockchain and I agree that the current narrative is that bitcoin - not crypto et al - is a store of value or digital gold.

[the_gastropod]

Smartassery kinda backfired there eh?

Naw - it's more like google knows "our" bias -

If crypto enthusiasts really wanted to be jackassery they can easily point to the current news:
One Billion US $ Trades were made on the first day of the Bitcoin Futures ETF on Oct 19, 2021
The highest natural volume for an ETF ever in the history of Wallstreet.

One billion US dollars undeniably reflects a mind-blowing interest in the futures of a digital asset.
The SEC just approved two more Futures ETFs - one of them for Ethereum.
Or maybe Wallstreet just likes to bet and the wealthy have more cash than they know what to do with.

Always comes back to NUMBER GO UPPPPPP!!!!

I just watched LuLaRich on Amazon Prime (highly recommended), and it's kinda funny. The execs of the LuLaRoe MLM cited the rapidly increasing number of LuLaRoe associates to demonstrate the success of the organization. Similarly, that uhh... enthusiasm... is certainly profitable for some Bitcoin participants. These numbers don't make me any more likely to participate, myself, though

Relatedly, 100,000+ people have had their eyes scanned to get this rad new Worldcoin cryptocurrency. You in? Everybody's doing it! https://www.ft.com/content/0f873676-26c8-4b57-b369-23a2b30f11a5

[Telecaster]

I will assume you meant this Connor Brown article: https://medium.com/the-bitcoin-times/stop-calling-bitcoin-deflationary-84462cb90345

He makes some interesting points, but does not successfully address the key mechanism by which I am suggesting that BTC would have a deflationary effect. He mentions the concern, but mis-states the mechanism by which "critics" say BTC would have a deflationary effect; therefore, he doesn't address my actual concern, which as I understand it is most economists' main concern about any fixed money supply relative to a growing economy.

I thought you made a good summation, but there are even more problems than that.  First, is that his definition of deflation isn't necessarily correct.  In fact, it isn't correct.
 Famously, one of the first pubic Bitcoin transactions was a guy who paid 10,000 Bitcoin for a pizza.  Now, that same 10,000 Bitcoin will buy you a chain of pizza restaurants.     From a consumer perspective that 100% meets the definition of deflation.  Saying that is not deflation is absurd. The reason why deflation is bad for the economy is that consumers believe that goods and services will become cheaper in the future and so delay spending money.   This puts downward pressure on prices and wages, and so people delay even more, rinse lather repeat.  To be clear, usually a depression causes deflation, not the other way around.  But once you are in the deflationary spiral it is hard to get out. 

His section on wages was even worse, if possible.  He missed some basic economic principles regarding wages and prices.

[talltexan]

I think having a system for withdrawing balance from crypto- over time can reduce the risk if it turns into a Ponzi scheme.

But I also see how problematic it would be for a person who sincerely believes this to be the future.

[GuitarStv]

Crypto isn't just for currencies; blockchain technology will be used for many things in the future because it can be used to create protected, distributed general ledgers. Currencies, stable coins, medical records, wills, physical asset records, all kinds of things.

Blockchain technology certainly has uses.  The only use I've seen anyone touting though, and the entire raison d'etre for cryptocurrency is it's use as a store of value.  What crypto ETF is investing in blockchain technology as opposed to it's use as a currency?  I haven't been able to find one.

I'm invested in a couple, like the BLOK ETF which is all about blockchain technology. Glad to see the acknowledgment of tech like blockchain and I agree that the current narrative is that bitcoin - not crypto et al - is a store of value or digital gold.

BLOCK ETF, top 10 holdings:
HUT 8 MNG CORP NEW COM    6.17% - Cryptocurrency miner (bitcoin and ethereum)
MARATHON DIGITAL HOLDINGS INC COM   6.02% - Bitcoin miner
MICROSTRATEGY INC   5.91% - Bitcoin speculator
COINBASE GLOBAL INC   4.68% - Cryptocurrency exchange platform
HIVE BLOCKCHAIN TECHNOLOGIES   4.33% - Cryptocurrency miner
SILVERGATE CAP CORP   4.11% - Cryptocurrency speculator
SQUARE INC   3.98% - Cryptocurrency speculator and point of sale provider for crypto currency
PAYPAL HLDGS INC   3.81% - Allows people to pay for things with bitcoin, ethereum, bitcoin cash, and litecoin
NVIDIA CORPORATION    3.51% - Builds graphics cards used by cryptocurrency miners
SBI HOLDINGS INC   3.23% - Bank that started a cryptocurrency fund


I'm seeing a lot to do with cryptocurrency, but little to nothing to do with 'blockchain technology'.  Which of the holdings in this fund are related to all the non-'currency' technology?

[lemonlyman]

One of the reasons talking about this is so difficult, is that enthusiasts tend to weasel out of criticism by shifting goal posts. This is another example. From an investment context, Bitcoin is absolutely a Ponzi scheme. That it can be used to skirt regulation is irrelevant from the investment context.

Even in an investment context, it's still not a ponzi scheme. A speculative asset doesn't meet the definition of a ponzi scheme. There's not a consistent level of cash going to people at the top of the pyramid. They either hold their coins or sell them. That's completely different than an asset going to zero value. Ponzi schemes also require someone actively running and operating the scheme. I don't believe Satoshi's activity is very equivalent to Ponzi or Madoff.

I think that link will work. I'll read that essay sometime. Thanks.

[the_gastropod]

Even in an investment context, it's still not a ponzi scheme. A speculative asset doesn't meet the definition of a ponzi scheme. There's not a consistent level of cash going to people at the top of the pyramid.

Miners. Miners get a consistent stream of cash that they remove from the system.

Ponzi schemes also require someone actively running and operating the scheme. I don't believe Satoshi's activity is very equivalent to Ponzi or Madoff.

It's certainly more sophisticated, I'll grant you that. But miners run and operate and profit from the scheme, do they not? Does the operator necessarily need to be one person? Is a distributed Ponzi any better than a centralized one?

[Telecaster]

Even in an investment context, it's still not a ponzi scheme. A speculative asset doesn't meet the definition of a ponzi scheme. There's not a consistent level of cash going to people at the top of the pyramid.

Miners. Miners get a consistent stream of cash that they remove from the system.

Ponzi schemes also require someone actively running and operating the scheme. I don't believe Satoshi's activity is very equivalent to Ponzi or Madoff.

It's certainly more sophisticated, I'll grant you that. But miners run and operate and profit from the scheme, do they not? Does the operator necessarily need to be one person? Is a distributed Ponzi any better than a centralized one?

I hate to be a pedantic, but that never stopped me before  ;)    A Ponzi scheme is a specific type of fraud, where early investors are paid off by later investors, until there aren't enough investors to continue and the whole thing collapses.   Bitcoin is not that.   When a miner sells a bitcoin, the buyer gets exactly what she is expecting:  one bitcoin.  There's no fraud in that transaction.

I think it most correct to think of bitcoin as a speculative asset. 

[boarder42]

Even in an investment context, it's still not a ponzi scheme. A speculative asset doesn't meet the definition of a ponzi scheme. There's not a consistent level of cash going to people at the top of the pyramid.

Miners. Miners get a consistent stream of cash that they remove from the system.

Ponzi schemes also require someone actively running and operating the scheme. I don't believe Satoshi's activity is very equivalent to Ponzi or Madoff.

It's certainly more sophisticated, I'll grant you that. But miners run and operate and profit from the scheme, do they not? Does the operator necessarily need to be one person? Is a distributed Ponzi any better than a centralized one?

I hate to be a pedantic, but that never stopped me before  ;)    A Ponzi scheme is a specific type of fraud, where early investors are paid off by later investors, until there aren't enough investors to continue and the whole thing collapses.   Bitcoin is not that.   When a miner sells a bitcoin, the buyer gets exactly what she is expecting:  one bitcoin.  There's no fraud in that transaction.

I think it most correct to think of bitcoin as a speculative asset.

I've got some copper engravings of Lincoln for sale for 10k a piece. Probably be more valuable an asset it 10 years than a Bitcoin.