My Crypto Thesis (no, not shilling shitcoins)

[DarkRange55]

I am familiar with it at a high level - right now it feels like a casino.

Worked in financial publishing for a sub of a public co covering crypto assets as an analyst. Also looked at with a wealth management team at a family office.

I don't believe crypto industry has legitimacy and don't see it viable longer term (regulators). IMO - Crypto is mostly a niche market for criminals and gamblers, not useful tech outside of some innovations. It's flawed tech not fit for mass adoption unless we want societal collapse rom avg joe's losing it all to hackers. If you haven't seen what an utter shit show it is in crypto/ DeFi browse https://web3isgoinggreat.com/ - billions hacked every month to funnel to foreign regimes.

Federal digital currency is 100% the next step in my opinion. It's all about efficiency and we effectively already have it from credit cards so consumer habits wouldn't change.
It would seem non-regulated crypto bull case is some distopian future where the government collapses…but if the government collapses there wouldn't be a regulated world wide web networks so the currency wouldn't work either.

Cryptocurrencies have become so tightly correlated with growth stocks particularly with tech stocks. People are thinking of crypto as a platform to run apps, execute smart contracts, different membership companies, ect - the umbrella is called Web3: (Web2 you can interact with the website), the platform is public and anybody can develop on it and anybody can interact with it. That's where a lot of the value lies in things other than Bitcoin. All these cryptos are like representations of a public computer that people can visit and carry their identities to each of these public computers.
Stable coins are interesting, these $1 coins, the idea of a safe haven. Some are completely backed by the amount of coins they have, some are algorithmically stable they can burn and mint and then the coins stay at $1 and then you can have hacks for exploits. But there are safe places to park money in crypto where it wont move against market forces.
I think 99% of coins will be worthless in 10 years
They are just cash grabs and copies and clones of each other. But CBDC's seem inevitable at some future point…

There may be 12,000 crytocurrencies but how many of them matter? I'd venture to say about 11,995 could disappear and no one except the poor souls who invested in them would know or care. Know how many car companies there were in the late 1800's? Almost 500. Everyone thought they could build cars. Everyone thinks they can invent a crypto that someone's going to care about or has some utility. By the early 1900's there were 250 car companies. By 1929 there were 44. Today there are 14 car conglomerates. The strong (as measured by sales and profitability) survive, the weak fail.

Charting the Number of Failed Crypto Coins, by Year (2013-2022)

The very definition of a commodity means that it does not have any knowledge component and technology is now at a stage that it quickly acts to increase supply. This may not have been true in the 1970's when we had increases in gold and oil prices because the technonomic medium of the world was not powerful and adaptable enough to respond to higher prices with increases in supply but now we are in that age. And it's no longer an age where anything that has anything that has a scarcity-based model can really rise a lot in price. That includes bitcoin because there are 12,000 other cryptocurrencies. Any inert commodity is a bet against technological progress. -- I think of a commodity is having to attributes:
1) widely produced and available
2) stuff produced by different suppliers is interchangeable.
I agree with the basic principles but not all of the details.
Holding a commodity is not strictly a bet against technological progress– it is a bet that growth in demand will outstrip technological progress in production (the current situation with lithium, for example).

This video is pretty good, but also doesn't talk about the benefit of having government levers to control against depressions etc



Bitcoin is separate from the government - How did crypto workout for the Canadian truckers? Governments are not going to allow a competing currency. You're going to go into a garage to get your car repaired and pay 1,000 BitCoins because of the price instability. It has to be converted to cash to buy other assets. It's not as liquid as currency, cash is the most liquid asset. You have to convert crypto into cash to use it.
The only reason crypto is still alive is because of the era of cheap money and dumb people.
There's money to be made there if you understand the greater fool theory and the BitCoin market. But as far as a long term asset, it doesn't produce cashflows. There's no way for me to use math and assess what I should pay for it. So intrinsically it's worth nothing to me. I think crypto will be around for a while like baseball cards.
We started out with the Spanish dollar and it was private currency. In the beginning of the country there were banks that issued their own reserve notes. So you actually had to pay attention to where you were putting your money.

There's no cashflow analysis for crypto. The only cashflow in crypto is you get more fake coins. So you buy a coin, you put it in FTX and you get fake interest with the coin. Thats not cashflow. The dollar is backed by the richest and most powerful nation in the world. What is crypto backed by? Some dweeb in his garage.

I don't know how many other crypto firms and leaders need to fall. CZ, Phone Home, SBF how many other clowns and companies need to fall apart before people realize that cryptocurrency is a scam. They just want to get rich quick.

⁃ more volatile
⁃ USD is backed by big guns
⁃ Crypto's value is derived from nothing, unlocked through meaningless computations that don't have any correlations with work
⁃ Greater fool theory

⁃ More susceptible to manipulation because no regulations exist
⁃ DeFi is inefficient and cumbersome when processing data, maintaining blockchain consumes a lot of power, clunky building apps because it involves stringing together small programs, "gas fees"
⁃ Loans
⁃ No insurance (like FDIC)
⁃ Addressing security vulnerabilities is slow

Bank accounts are insured and the
can also take money back and forth
between banks.

The whole thing is an awesome experiment, but at the end of the day mg impression is it's a bet that someone else will pay more rather than an on something that provides intrinsic value. Nothing wrong with a bet, but it's a totally different game than I want to play.

An area that's highly speculative, no foundation for valuation. Take a company like Waste Management – you can dissect the balance sheet, understand what the business is, who's running it, opportunities for growth, competitors, cash flow and have an idea if they're making money or losing money. Attach a growth multiple on the earnings and come up with a somewhat fair valuation of the company. Different analysts will come up with different valuations but the general idea is consistent – given all that I know is this a company I want to invest in or not. The same can't be said for cryptos – there's no method of valuation.
Many broker/dealer still have place restrictions on the ability to offer cryptocurrencies to our clients.

Did the government stop dread pirate roberts from accessing crypto? How's he doing? He's the guy who started the Silk Road and he got busted because it turns out this stuff actually when the government want to get at people who are using it for doomsday scenario purposes that people suggest its useful for, it doesn't work that way.
These kind of scenarios are laid out to convince people purchase a speculative asset that has been bought in bulk for the most part by people who already had a ton of capital, a ton of money and they need the price to go up.
The dollar is fiat currency and everyone is participating in it and this is our financial system. So that's completely different than a finite number of BitCoins that are already in existence and are being held by a majority of people of capitalists who are trying to take your money.

A lot of alt coins were designed to be pump and dumps. Even BitCoin has whales that can move the market.

What Is a Crypto Whale and How Do They Affect Crypto Markets?

Cryptocurrency wallets that hold a large amount of cryptocurrency are called crypto whales. These whales can influence cryptocurrency valuations.

www.investopedia.com

An asset that has no intrinsic value except for whats ascribed to it because its a speculative asset
It's an attempt to get around taxes and money laundering laws.
We're all going to trade with BitCoin and it's never going to get converted back to something that the government can take for taxes?
Its finite, its like a gold standard argument for currency. And thats what makes it ridiculous in the modern era. The original Satoshi white paper mentions that. The reason that we did away with the gold standard was because we needed the ability to print more money, thats just what society needs. There's zero percent chance that crypto is valuable for that fundamental reason.

Do quantum computers, make the Blockchain ungambable because the encryption can be cracked?
Not yet, but might happen to current blockchains.

On of my mentors who is a career serial generalist-inventor said:
"I proposed a crypto currency myself back in 1987 or 88 – I called the "coims" "useful units". But although I had the basic crypto idea, I didn't have the management infrastructure such as the block chain / mining, so it was not fully worked… Bitcoin is brilliant but an energy hog; I'm less familiar with the others. From what I know, my brother (hedge fund manager) has treated crypto like any other commodity – he's in for short periods when he sees an opportunity...
I called them "useful units", or "UU"s. I recently found a few of my notes from those days describing the properties that they needed to have, but I don't know if I kept the notes.
I was only just a bit over 30 at the time, so I didn't write a white paper anything."

I consider a government-backed crypto currency to be the main threat to bitcoin.

The FCC approved a BitCoin ETF, though?
The FCC approves a lot of terrible, scammy stuff.

Who is Satoshi?
There was a Satoshi Nakamoto who worked for the NSA, and the hashing algorithm that bitcoin capitalizes on was created by the NSA, so yes, I think that is very plausible. The NSA *might* even have a fast way to solve that hashing in the inverse, and hence a way to control bitcoin as well as monitor it. Paul Le Roux?



Read my cousin's (economist and finance professor) colleague's blog on crypto -- steve checetti is a central banker, don't get sucked in

Some niche benefits:

- Cryptocurrency transactions can often be completed within minutes, eliminating the need for lengthy settlement processes of traditional banks or financial institutions. This is useful for cross-border transactions and instant payments.

- Cryptocurrency transactions typically have lower fees compared to traditional financial systems. This makes micropayments and cross-border transactions more cost-effective."

What do you think about blockchain technology just as an underlying technology? Not cryptos or NFT's.

I do not give much thought to NFTs or blockchain – they currently have too high a hype-to-reality ratio for my taste.
Bill Gates said, "there's some really good technology in terms of sharing data bases and verifying transactions that is talked about a blockchain." Otherwise he thinks that crypto is the greater fool theory.
The way bitcoin implements it, blockchain is a powerful but efficient way for a large number of people with computing resources to agree on something. I can see it being useful for tracking high-value items such as real estate, and probably patents.



Crypto is more centralized than fiat. Look at the wallets. Its like ten dudes control a massive amount of the wealth in crypto.

One of the issues with crypto is there is low barrier to entry to create a coin

I think if you're truly interested in the technology and believe in it, then look at investing in companies that are building the underlying blockchain technology and infrastructure.

 

[SexyIncél]

We're all going to trade with BitCoin and it's never going to get converted back to something that the government can take for taxes?

Yeah, as I understand Modern Monetary Theory, taxes give currency value

So a nation-state (basically your territory's successful mafia) makes currency & threatens you with violence if you don't give some of it back. That's also how it creates markets

 

[DarkRange55]

Yeah, as I understand Modern Monetary Theory, taxes give currency value

So a nation-state (basically your territory's successful mafia) makes currency & threatens you with violence if you don't give some of it back. That's also how it creates markets

Modern Monetary Theory (MMT) doesn't suggest that taxes directly give currency its value. Instead, MMT argues that taxes create a demand for a currency, which supports its value. According to MMT, governments can create value for their currency by imposing taxes that must be paid in that currency, thus ensuring that people and businesses need to obtain the currency to meet their tax obligations. This creates a built-in demand for the currency, which helps maintain its value. However, the value of a currency is influenced by various factors beyond taxation, including economic stability, inflation rates, and global confidence in the currency.

Supply and demand, the interest rates of each country, the trade balance of each country, and the perceived stability of the currency, the governments, economic factors like higher oil prices, which helps the Canadian dollar for example, ect.

FX = f(economic and political health of country and BOP)

The US for example has big guns (the world's most powerful military), the world's largest economy, perceived stability, dollar denominated debt, ect.

We still grow a lot of stuff a lot of agriculture, we still have a lot of timber, we still have a big finance industry, big oil industry, ect. Manufacturing (alone) is not necessarily a relevant indicator of where the world economy is heading today. The comparative expansion of information-technology sector is much more relevant.

Trillions of dollars have been spent building up this military infrastructure with good reason because it supports your free trade. Its the thing that allows free and fair trade for our country at least. We would not be the power as rich as we are now if it were not for that military might.

Own the seas you own the world - The British and Spanish knew that.
Before the 19th century it was Britian and France and before those two there was Spain. Spain was the first superpower, they were shortly joined by the Dutch, who used trade to influence everyone for a time. No superpowers before Spain becuase there was no global trade or transit. Portugal while a great power, was quickly supplanted by Spain when they fell into a personal union, uniting the crowns of Iberia. Beginning their long decline. Portugal wasn't really a superpower.
It has been recognized for close to 400 years that the ability to sail from point to point safely underpins the global economy.
The ability to "beggar thy neighbor" by obstructing free travel on the seas would be an enormous and often-used tactic when nations struggled for dominance. The value of doing so would in most cases vastly outweigh the short-term consequences.
Recognizing this the major world powers have acted since the 1700s to police the sea lanes and keep them free not only of pirates and other criminals but also to form such a massive deterrent that no smaller states would take the risk of trying to create problems either.
The US Navy became the dominant force in this effort after WWII, following a 50 year transition from the combined forces of the British and the French. A substantial amount of the money the US pours into its military can be attributed to the US Navy being the undisputed guarantor of the freedom of the sea lanes.

 

[SexyIncél]

Thanks for the interesting explanation

Modern Monetary Theory (MMT) doesn't suggest that taxes directly give currency its value. Instead, MMT argues that taxes create a demand for a currency, which supports its value.

I'm not sure we're disagreeing. To be precise, taxes are the precondition to many currencies having value. Thus, it causes the currency to have value:

First, taxes enable a government to provision itself and create demand for a government's currency. As Warren Mosler jokes, "taxes turn litter into currency." This is because the U.S. dollar does not have any intrinsic value. After all, it is just a piece of paper with some symbols on it and is worthless to someone who does not need it to pay taxes. Since the government does require people to pay taxes, however, a demand for the dollar is created and people want to work for those dollars to pay their tax. It creates a workforce of people who work and produce things in exchange for dollars, so they can give them to the government who demands them. Taxes are then necessary for creating demand for currency and a working economy.

— Nicholas Diaz

So MMT proponent Stephanie Kelton explains:

At the end of the day, a currency-issuing government wants something real, not something monetary. It's not our tax money the government wants. It's our time. To get us to produce things for the state, the government invents taxes or other kinds of payment obligations. This isn't the explanation you'll find in most economics textbooks, where a superficial story about money being invented to overcome the inefficiencies associated with bartering—trading goods without the use of money—is preferred. In that story, money is just a convenient device that sprang up organically as a way to make trade more efficient. Although students are taught that barter was once omnipresent, a sort of natural state of being, scholars of the ancient world have found little evidence that societies were ever organized around barter exchange."

— Stephanie Kelton, "The Deficit Myth"

 

[DarkRange55]

Thanks for the interesting explanation



I'm not sure we're disagreeing. To be precise, taxes are the precondition to a currency having value. Thus, it causes the currency to have value:


So MMT proponent Stephanie Kelton explains:

You can also have countries that have very little or almost no taxes like the UAE. A lot of the golf states currency value comes from oil.

Thanks for the interesting explanation



I'm not sure we're disagreeing. To be precise, taxes are the precondition to many currencies having value. Thus, it causes the currency to have value:


So MMT proponent Stephanie Kelton explains:

Economics is a form of applied mathematics where a lot of theory is tossed around without much experimentation to back it up.

Thanks for the interesting explanation



I'm not sure we're disagreeing. To be precise, taxes are the precondition to many currencies having value. Thus, it causes the currency to have value:


So MMT proponent Stephanie Kelton explains:

I think it contributes to the value within a nation. Unless you are referring to the concept as a whole.

currency is just a convenient way of counting. remember that value is a reflection of the real economy: land, food, goods and services. go bsck to barter economies where we traded goats, wheat, salted food/meat .. and evolved into gold and currency (before central banks)

stay with basics if real economies ... today value of currencies are just people/banks/ traders evaluation of long term prospects of economic growth of US, China, Japan, UK, EU...

the driver is real economy -- goods and services, trade -- of currency which is just a way of counting

where did new money come from when king's taxed the peasants if they had no money? And if they did, where did this supply of new money come from?
The king wants new a castle in a newly conquered land. He brings people with him who don't have money. Does he pay them to build the castle and then slowly tax them after its built? Where are these people in the new land getting more money from? they taxed citizens not only in coins and bullion but also in agricultural crops and livestock as commodities. The king needed to eat, too. And they stored grain. They also had traveling trade and commerce caravans for thousands of years. food, goats, gold and the barter economy snd eventually currency with pictures of kings. Remember NO central banks

 

[SexyIncél]

You can also have countries that have very little or almost no taxes like the UAE. A lot of the golf states currency value comes from oil.

Yeah, if you look at my post now, you'll see I tightened up my language, to be even more precise: "taxes are the precondition to many currencies having value.". I made the edit right before you posted

Stephanie Kelton was similarly precise: "To get us to produce things for the state, the government invents taxes or other kinds of payment obligations." — I'm sure this is of interest to @sserafim!

Economics is a form of applied mathematics where a lot of theory is tossed around without much experimentation to back it up.

Yeah. Many have noticed this exact same thing. So the question is: why?

I have my own answers, but others can feel free to explain why

 

[DarkRange55]

Yeah, if you look at my post now, you'll see I tightened up my language, to be even more precise: "taxes are the precondition to many currencies having value.". I made the edit right before you posted

Stephanie Kelton was similarly precise: "To get us to produce things for the state, the government invents taxes or other kinds of payment obligations." — I'm sure this is of interest to @sserafim!


Yeah. Many have noticed this exact same thing. So the question is: why?

I have my own answers, but others can feel free to explain why

Ah! Oops, my bad, I missed that! Lol, thanks for clarifying

Yeah, if you look at my post now, you'll see I tightened up my language, to be even more precise: "taxes are the precondition to many currencies having value.". I made the edit right before you posted

Stephanie Kelton was similarly precise: "To get us to produce things for the state, the government invents taxes or other kinds of payment obligations." — I'm sure this is of interest to @sserafim!


Yeah. Many have noticed this exact same thing. So the question is: why?

I have my own answers, but others can feel free to explain why

As I've said before, I'm not really an economist, but I know and associate with some.

I can give you my rough idea off the top of my head, but I'd like to hear your thoughts as well?


Economics, like many social sciences, faces challenges in conducting large-scale experiments due to ethical, practical, and logistical constraints. Here are some reasons why economics relies heavily on theory rather than experimentation:

1. **Ethical concerns:** Many economic experiments would involve manipulating people's behavior or economic conditions, which raises ethical concerns about potentially harmful effects on participants.

2. **Complexity:** Economic systems are complex and interconnected, making it difficult to isolate specific variables and control for all factors in an experimental setting.

3. **Cost:** Conducting large-scale economic experiments can be expensive and time-consuming, especially if they involve real-world interventions or policy changes.

4. **External validity:** Even if experiments are conducted in controlled settings, there is uncertainty about whether the findings can be generalized to real-world scenarios, limiting the external validity of the results.

5. **Data availability:** Economic data is often limited, making it challenging to design experiments that accurately reflect real-world conditions and dynamics.

6. **Behavioral factors:** Human behavior in economic contexts is influenced by psychological, cultural, and social factors, which may not be easily captured in controlled experiments.

While experimentation in economics is less common compared to some natural sciences, researchers do employ experimental methods when feasible, such as laboratory experiments, field experiments, and natural experiments. Additionally, economists rely on a combination of theoretical models, empirical analysis, and observational data to develop and test hypotheses about economic behavior and outcomes.

 

[DarkRange55]

Yeah, if you look at my post now, you'll see I tightened up my language, to be even more precise: "taxes are the precondition to many currencies having value.". I made the edit right before you posted

Stephanie Kelton was similarly precise: "To get us to produce things for the state, the government invents taxes or other kinds of payment obligations." — I'm sure this is of interest to @sserafim!


Yeah. Many have noticed this exact same thing. So the question is: why?

I have my own answers, but others can feel free to explain why

I'll try to run all of this past one of my career research economists over email. I'll let you know if I hear anything back.

 

[DarkRange55]

I am familiar with it at a high level - right now it feels like a casino.

Worked in financial publishing for a sub of a public co covering crypto assets as an analyst. Also looked at with a wealth management team at a family office.

I don't believe crypto industry has legitimacy and don't see it viable longer term (regulators). IMO - Crypto is mostly a niche market for criminals and gamblers, not useful tech outside of some innovations. It's flawed tech not fit for mass adoption unless we want societal collapse rom avg joe's losing it all to hackers. If you haven't seen what an utter shit show it is in crypto/ DeFi browse https://web3isgoinggreat.com/ - billions hacked every month to funnel to foreign regimes.

Federal digital currency is 100% the next step in my opinion. It's all about efficiency and we effectively already have it from credit cards so consumer habits wouldn't change.
It would seem non-regulated crypto bull case is some distopian future where the government collapses…but if the government collapses there wouldn't be a regulated world wide web networks so the currency wouldn't work either.

Cryptocurrencies have become so tightly correlated with growth stocks particularly with tech stocks. People are thinking of crypto as a platform to run apps, execute smart contracts, different membership companies, ect - the umbrella is called Web3: (Web2 you can interact with the website), the platform is public and anybody can develop on it and anybody can interact with it. That's where a lot of the value lies in things other than Bitcoin. All these cryptos are like representations of a public computer that people can visit and carry their identities to each of these public computers.
Stable coins are interesting, these $1 coins, the idea of a safe haven. Some are completely backed by the amount of coins they have, some are algorithmically stable they can burn and mint and then the coins stay at $1 and then you can have hacks for exploits. But there are safe places to park money in crypto where it wont move against market forces.
I think 99% of coins will be worthless in 10 years
They are just cash grabs and copies and clones of each other. But CBDC's seem inevitable at some future point…

There may be 12,000 crytocurrencies but how many of them matter? I'd venture to say about 11,995 could disappear and no one except the poor souls who invested in them would know or care. Know how many car companies there were in the late 1800's? Almost 500. Everyone thought they could build cars. Everyone thinks they can invent a crypto that someone's going to care about or has some utility. By the early 1900's there were 250 car companies. By 1929 there were 44. Today there are 14 car conglomerates. The strong (as measured by sales and profitability) survive, the weak fail.

Charting the Number of Failed Crypto Coins, by Year (2013-2022)

The very definition of a commodity means that it does not have any knowledge component and technology is now at a stage that it quickly acts to increase supply. This may not have been true in the 1970's when we had increases in gold and oil prices because the technonomic medium of the world was not powerful and adaptable enough to respond to higher prices with increases in supply but now we are in that age. And it's no longer an age where anything that has anything that has a scarcity-based model can really rise a lot in price. That includes bitcoin because there are 12,000 other cryptocurrencies. Any inert commodity is a bet against technological progress. -- I think of a commodity is having to attributes:
1) widely produced and available
2) stuff produced by different suppliers is interchangeable.
I agree with the basic principles but not all of the details.
Holding a commodity is not strictly a bet against technological progress– it is a bet that growth in demand will outstrip technological progress in production (the current situation with lithium, for example).

This video is pretty good, but also doesn't talk about the benefit of having government levers to control against depressions etc



Bitcoin is separate from the government - How did crypto workout for the Canadian truckers? Governments are not going to allow a competing currency. You're going to go into a garage to get your car repaired and pay 1,000 BitCoins because of the price instability. It has to be converted to cash to buy other assets. It's not as liquid as currency, cash is the most liquid asset. You have to convert crypto into cash to use it.
The only reason crypto is still alive is because of the era of cheap money and dumb people.
There's money to be made there if you understand the greater fool theory and the BitCoin market. But as far as a long term asset, it doesn't produce cashflows. There's no way for me to use math and assess what I should pay for it. So intrinsically it's worth nothing to me. I think crypto will be around for a while like baseball cards.
We started out with the Spanish dollar and it was private currency. In the beginning of the country there were banks that issued their own reserve notes. So you actually had to pay attention to where you were putting your money.

There's no cashflow analysis for crypto. The only cashflow in crypto is you get more fake coins. So you buy a coin, you put it in FTX and you get fake interest with the coin. Thats not cashflow. The dollar is backed by the richest and most powerful nation in the world. What is crypto backed by? Some dweeb in his garage.

I don't know how many other crypto firms and leaders need to fall. CZ, Phone Home, SBF how many other clowns and companies need to fall apart before people realize that cryptocurrency is a scam. They just want to get rich quick.

⁃ more volatile
⁃ USD is backed by big guns
⁃ Crypto's value is derived from nothing, unlocked through meaningless computations that don't have any correlations with work
⁃ Greater fool theory

⁃ More susceptible to manipulation because no regulations exist
⁃ DeFi is inefficient and cumbersome when processing data, maintaining blockchain consumes a lot of power, clunky building apps because it involves stringing together small programs, "gas fees"
⁃ Loans
⁃ No insurance (like FDIC)
⁃ Addressing security vulnerabilities is slow

Bank accounts are insured and the
can also take money back and forth
between banks.

The whole thing is an awesome experiment, but at the end of the day mg impression is it's a bet that someone else will pay more rather than an on something that provides intrinsic value. Nothing wrong with a bet, but it's a totally different game than I want to play.

An area that's highly speculative, no foundation for valuation. Take a company like Waste Management – you can dissect the balance sheet, understand what the business is, who's running it, opportunities for growth, competitors, cash flow and have an idea if they're making money or losing money. Attach a growth multiple on the earnings and come up with a somewhat fair valuation of the company. Different analysts will come up with different valuations but the general idea is consistent – given all that I know is this a company I want to invest in or not. The same can't be said for cryptos – there's no method of valuation.
Many broker/dealer still have place restrictions on the ability to offer cryptocurrencies to our clients.

Did the government stop dread pirate roberts from accessing crypto? How's he doing? He's the guy who started the Silk Road and he got busted because it turns out this stuff actually when the government want to get at people who are using it for doomsday scenario purposes that people suggest its useful for, it doesn't work that way.
These kind of scenarios are laid out to convince people purchase a speculative asset that has been bought in bulk for the most part by people who already had a ton of capital, a ton of money and they need the price to go up.
The dollar is fiat currency and everyone is participating in it and this is our financial system. So that's completely different than a finite number of BitCoins that are already in existence and are being held by a majority of people of capitalists who are trying to take your money.

A lot of alt coins were designed to be pump and dumps. Even BitCoin has whales that can move the market.

What Is a Crypto Whale and How Do They Affect Crypto Markets?

Cryptocurrency wallets that hold a large amount of cryptocurrency are called crypto whales. These whales can influence cryptocurrency valuations.

www.investopedia.com

An asset that has no intrinsic value except for whats ascribed to it because its a speculative asset
It's an attempt to get around taxes and money laundering laws.
We're all going to trade with BitCoin and it's never going to get converted back to something that the government can take for taxes?
Its finite, its like a gold standard argument for currency. And thats what makes it ridiculous in the modern era. The original Satoshi white paper mentions that. The reason that we did away with the gold standard was because we needed the ability to print more money, thats just what society needs. There's zero percent chance that crypto is valuable for that fundamental reason.

Do quantum computers, make the Blockchain ungambable because the encryption can be cracked?
Not yet, but might happen to current blockchains.

On of my mentors who is a career serial generalist-inventor said:
"I proposed a crypto currency myself back in 1987 or 88 – I called the "coims" "useful units". But although I had the basic crypto idea, I didn't have the management infrastructure such as the block chain / mining, so it was not fully worked… Bitcoin is brilliant but an energy hog; I'm less familiar with the others. From what I know, my brother (hedge fund manager) has treated crypto like any other commodity – he's in for short periods when he sees an opportunity...
I called them "useful units", or "UU"s. I recently found a few of my notes from those days describing the properties that they needed to have, but I don't know if I kept the notes.
I was only just a bit over 30 at the time, so I didn't write a white paper anything."

I consider a government-backed crypto currency to be the main threat to bitcoin.

The FCC approved a BitCoin ETF, though?
The FCC approves a lot of terrible, scammy stuff.

Who is Satoshi?
There was a Satoshi Nakamoto who worked for the NSA, and the hashing algorithm that bitcoin capitalizes on was created by the NSA, so yes, I think that is very plausible. The NSA *might* even have a fast way to solve that hashing in the inverse, and hence a way to control bitcoin as well as monitor it. Paul Le Roux?



Read my cousin's (economist and finance professor) colleague's blog on crypto -- steve checetti is a central banker, don't get sucked in

Some niche benefits:

- Cryptocurrency transactions can often be completed within minutes, eliminating the need for lengthy settlement processes of traditional banks or financial institutions. This is useful for cross-border transactions and instant payments.

- Cryptocurrency transactions typically have lower fees compared to traditional financial systems. This makes micropayments and cross-border transactions more cost-effective."

What do you think about blockchain technology just as an underlying technology? Not cryptos or NFT's.

I do not give much thought to NFTs or blockchain – they currently have too high a hype-to-reality ratio for my taste.
Bill Gates said, "there's some really good technology in terms of sharing data bases and verifying transactions that is talked about a blockchain." Otherwise he thinks that crypto is the greater fool theory.
The way bitcoin implements it, blockchain is a powerful but efficient way for a large number of people with computing resources to agree on something. I can see it being useful for tracking high-value items such as real estate, and probably patents.



Crypto is more centralized than fiat. Look at the wallets. Its like ten dudes control a massive amount of the wealth in crypto.

One of the issues with crypto is there is low barrier to entry to create a coin

I think if you're truly interested in the technology and believe in it, then look at investing in companies that are building the underlying blockchain technology and infrastructure.

**Just adding on:

You're having to trust shady, off-shore entities. They show proof of reserves but not liabilities.

People loose their crypto keys all the time.

I think one of the most fair cases you could is, sometimes you want an alternative to your national currencies like the Argentine peso.

Popular, yes. But worthless.
Speculating on bc is still a viable strategy to make money, but its not investing, its speculating/gambling.
A different ball game. Some people know how to do it, probably, vast majority ends up burned.

Not all companies are scams. They're audited, they're publicly traded. With Bitcoin and these brokerages they don't even publish their financials, you have these scammy rates and 9 times out of 10 they just totally implode.

Crypto is the most infinite resource in the world, in a sense. Because you can replicate with some computer code - there is a lot of blockchain proof of work algorithms and proof of stake and these things contribute to it. But you can use that technology to make anything because you can print to infinity.
Inflation hasn't been insanely bad. Over the history of the 30 years it's been 2%. Its predicable, its steady, its not massive dilution. Crypto goes up and down and left and right. With a dollar it will probably loose about 1 or 2% a year. You don't want deflation because thats bad. You can copy crypto. If you wanted to copy say Nike, you'd have to get your own factories and have real people (finite) make the shoes and use real finite resources. So there isn't infinite Nike. You can make a gazillion of a crypto currency.
There's inflation, you invest your money and grow your money with inflation and you get real growth.
Plenty of companies continue to grow and produce real goods and services. The price of Bitcoin is going up but one Bitcoin is still one Bitcoin (yes, I know the halving).

What government and army back Bitcoin?

The problem with a fix supply of a currency is someone ends up with all of it. The Romans ended up with vitus no gold or silver because of importing from outside the empire.

Wall Street's scam is that they get to launch the products (Bitcoin ETF's) that retail buys and they get to charge fees on those products. So they'll say whatever. They get to charge a management fee and don't care about the underlying asset. Thats the scam that they're doing. They would endorse Poopy Fart Coin ETF's if it was popular enough and they could make money on it.

The different algorithms and the code that underly crypto are real but technology and the asset are two different things. The coin that is derived from the underlying has no intrinsic value. The technology is legitimate.

None of these crypto speculators care about the fundamentals of investing which is spending money, investing in a company that produces future cashflows that you as a shareholder (a partial owner) are entitled to. Bitcoin doesn't create more Bitcoin. If I buy a share of Apple, they can take those profits and they can do a dividend or do share buybacks or they can reinvest the profits and build more factories (or share price appreciation). That one share can eventually get more and more future cashflows. There's real legitimate underlying growth in holding that share. Say Apple had 10 factories and now they have 20 factories. Now you have partial ownership of 20 factories instead of 10 factories. One Bitcoin is still one Bitcoin. Just because more people are buying Bitcoin is more clown growth. It's the underlying holdings and future cashflows that come into you.

People just read the white paper and half understand and read some Reddit posts.

Buying an index fund is grounded in efficient markets.

You can buy a bunch of calls Tesla and happen to hit it right when it goes up and make a ton of money. Thats doesn't mean you're smart, it means you're a gambler. Making money in the short term doesn't mean you're smart it's about making money in the long-term over decades.

Bitcoin extras energy. There are warehouses full of machines that are used to process the blockchain, basically update it. We have to take stuff out of the ground like oil and coal to process block chain transactions. We consume energy and these finite resources. It's a net negative, it doesn't produce a real cashflow or goods and services. You take real dollars and buy goods and services.

What is the intrinsic value of Bitcoin and do you know that the price is even a close approximation of what it's worth?
It's like a gold bar (but gold actually has some uses), it just sits there, it doesn't do anything except get traded. It is a transactional system that is underpinned by a lot of technology that uses energy. But it's use for people to trade and all the middlemen are making a killing because they charge a fee on the frontend and the backend. There no loads on VT, there's a very-low management fee.

A "currency" that goes up and down massively in half a second, you want to use that to go buy bread? A dollar that consistently goes down is more predictable because if you go buy a pack of gum, it's still gonna be a dollar when you get there.
Currency has to be inflatory in order for economy to grow or even function. Basic macroeconomics

Bitcoin in the original white paper of Bitcoin it's totally different now than it was originally intended for - the original white paper for Bitcoin, authored by Satoshi Nakamoto, outlined a peer-to-peer electronic cash system. However, over time, Bitcoin has evolved beyond its original intention and has become more of a store of value or digital gold, with high volatility and limited transactional scalability.



Bitcoin goes up because more people buy it than sell it, its supply and demand. The sellers can bit up prices.
Its fundamentally worthless trash. What is the fundamental value? Nobody can say and if they do they just make a number up. It does not produce cashflows. It does nothing. Its just this string of ones and zeros. It has no intrinsic value. Compare it to buying a company that produces real goods and services. Lets say I invest in Apple stock, they make Apple watches, phones, they have software, iPads, computers. Its a real company that produces real things that people actually use. Bitcoin goes up because people buy it. If you have one Bitcoin, thats it. Its gonna be one Bitcoin forever. If you buy a share of Apple, its still only one share of Apple but your ownership of the company's assets will go up over time as the company grows it earnings and reinvests its profits. The company's book value will increase over time theoretically if the company does well. You can get real returns. In the long run a fundamentally worthless asset will probably eventually go to zero. Look at all the clown stocks. You're not just gonna buy a coin and some other idiot is gonna buy it from you and thats gonna make you wealthy. If you believe that, you're a looser that doesn't want to work.
Nobody can predict where anything will go in the short-term. And if they draw their stupid triangle inverse teacup handle formation - its all bullshit.

 

[DarkRange55]

Bitcoin can't handle enough transactions to be useful as a primary currency

 

[SexyIncél]

I can give you my rough idea off the top of my head, but I'd like to hear your thoughts as well?

Economics, like many social sciences, faces challenges in conducting large-scale experiments due to ethical, practical, and logistical constraints. Here are some reasons why economics relies heavily on theory rather than experimentation:

Haha, I once imagined universities made labs out of the local college-town businesses. Like you'd run a few stores & restaurants as fascist; then as anarcho-syndicalist... Oops

Yeah, the problem is orthodox economists pretend they're not social scientists. They often claim to go beyond physicists & approach mathematical truth!

Even Marxist economists don't go that far. As I recall, Marxist economists pretend they're more like natural scientists. But even this goes too far, as electrons don't change their behavior upon reading your theories about them. When something's too complex for physicists, they pass it up to the chemists — and human relations are a couple complexity levels above that!

Soviet decisionmakers like Lenin & Trotsky were aware of ideological problems with their economists: "Whenever any Marxist attempted to transmute the theory of Marx into a universal master key and ignore all other spheres of learning, Vladimir Ilyich would rebuke him with the expressive phrase 'Komchvanstvo' ('communist swagger')." — Trotsky, "Problems of Everyday Life"

As you point out, an "experiment" is extremely expensive. They're highly artificial environments, where you try to nullify as much of the natural world as possible — except for the mechanism you're trying to uncover. Isolating it. A closed system. Active interventions by people producing unnatural sequences of events

Fortunately, even without that awesome tool, we can still make useful theories about social/psychological structures. At least better than winging it. Using qualitative & quantitative methods; whatever works. And there's some good economists out there. Amartya Sen, Michael Hudson, Steve Keen...

And even on the math-y end: Hahnel, Sczcepanczyk & Weisdorf are doing cool computer simulations of an advanced future economy

---

Ok, so WHY are they like this? I think understanding the economy is (at best) only their #3 priority:

The neoclassical economists say they are trying to understand the economy … but that's really an exaggeration. They are trying to talk about the economy in a way that will seem appropriate and compelling-which means it has to provide some understanding, for sure--but that will in the first place rationalize and justify it as the only possible good economy. So they don't want to look at anything that might disrupt that sought after outcome.

But what if you're a capitalist and you're keeping track of what is going on in the economy? You don't want to rationalize while you're doing business--you want to get useful and truthful answers to questions that you care about. So you have bookkeeping. And it pays attention to things in a different fashion than neoclassical economics does. The capitalist does care about watching many things having to do with the condition of workers and their consciousness, for example, that the neoclassical economic theories abstract out.

The capitalist goes to business school, not to economics graduate school, and with good reason. The capitalist wants to understand what is going on in the economy to intervene and make a profit, which entails, as we will see later, playing pretty close attention to lots of things about, say, the work force. The neoclassical economist, on the other hand, is discussing the same economy, but with a different purpose - I would say to advance their own careers and to rationalize it as most desirable among all possible options, and then, within that first order limitation, to understand its operations.

— Michael Albert

I agree. Back in the Soviet Union, we could easily imagine a marxist economist's top priority isn't to understand the economy. More important: advancing their career & rationalizing/justifying the economic order. Similar with the neoclassical economist. Which is why the CEO or Soviet leader instead looks to places like the business school

---

And it's ahistorical. Even down to its founding myth of barter, as anthropologists point out:

It really has become ubiquitous. Wherever we find money, we also find the story. At one point, in the town of Arivonimamo, in Madagascar, I had the privilege of interviewing a Kalanoro, a tiny ghostly creature that a local spirit medium claimed to keep hidden away in a chest in his home. The spirit belonged to the brother of a notorious local loan shark, a horrible woman named Nordine, and to be honest I was a bit reluctant to have anything to do with the family, but some of my friends insisted—since, after all, this was a creature from ancient times. The creature spoke from behind a screen in an eerie, otherworldly quaver. But all it was really interested in talking about was money. Finally, slightly exasperated by the whole charade, I asked, "So, what did you use for money back in ancient times, when you were still alive?"

The mysterious voice immediately replied, "No. We didn't use money. In ancient times we used to barter commodities directly, one for the other ..."

The story, then, has become the founding myth of our system of economic relations. It is so deeply established in common sense, even in places like Madagascar, that most people on earth couldn't imagine any other way that money possibly could have come about.

The problem is there's no evidence that it ever happened, and an enormous amount of evidence suggesting that it did not.

— David Graeber, "Debt: The first 5,000 Years"

 

[DarkRange55]

Haha, I once imagined universities made labs out of the local college-town businesses. Like you'd run a few stores & restaurants as fascist; then as anarcho-syndicalist... Oops

Yeah, the problem is orthodox economists pretend they're not social scientists. They often claim to go beyond physicists & approach mathematical truth!

Even Marxist economists don't go that far. As I recall, Marxist economists pretend they're more like natural scientists. But even this goes too far, as electrons don't change their behavior upon reading your theories about them. When something's too complex for physicists, they pass it up to the chemists — and human relations are a couple complexity levels above that!

Soviet decisionmakers like Lenin & Trotsky were aware of ideological problems with their economists: "Whenever any Marxist attempted to transmute the theory of Marx into a universal master key and ignore all other spheres of learning, Vladimir Ilyich would rebuke him with the expressive phrase 'Komchvanstvo' ('communist swagger')." — Trotsky, "Problems of Everyday Life"

As you point out, an "experiment" is extremely expensive. They're highly artificial environments, where you try to nullify as much of the natural world as possible — except for the mechanism you're trying to uncover. Isolating it. A closed system. Active interventions by people producing unnatural sequences of events

Fortunately, even without that awesome tool, we can still make useful theories about social/psychological structures. At least better than winging it. Using qualitative & quantitative methods; whatever works. And there's some good economists out there. Amartya Sen, Michael Hudson, Steve Keen...

And even on the math-y end: Hahnel, Sczcepanczyk & Weisdorf are doing cool computer simulations of an advanced future economy

---

Ok, so WHY are they like this? I think understanding the economy is (at best) only their #3 priority:


I agree. Back in the Soviet Union, we could easily imagine a marxist economist's top priority isn't to understand the economy. More important: advancing their career & rationalizing/justifying the economic order. Similar with the neoclassical economist. Which is why the CEO or Soviet leader instead looks to places like the business school

---

And it's ahistorical. Even down to its founding myth of barter, as anthropologists point out:

I think that was very very well thought out and articulated and I applaud that

Yes - Economics is a social science using math / statistics to estimate and calculate and show what is happening in economy and markets. I think the computational approach that you've mentioned will be very interesting and very useful.

And lol a lot of economists do have big heads

Biology stands on the science of chemistry which in turn stands on atomic physics which stands on nuclear physics which stands on particle physics which stands on quantum mechanics.

 

[sserafim]

Yeah, if you look at my post now, you'll see I tightened up my language, to be even more precise: "taxes are the precondition to many currencies having value.". I made the edit right before you posted

Stephanie Kelton was similarly precise: "To get us to produce things for the state, the government invents taxes or other kinds of payment obligations." — I'm sure this is of interest to @sserafim!


Yeah. Many have noticed this exact same thing. So the question is: why?

I have my own answers, but others can feel free to explain why

Wdym

 

[DarkRange55]

Adan Smith was the professor of moral philosophy -- economics is a social science where math and empirical observations help us understand our changing worlds

 

[sserafim]

Adan Smith was the professor of moral philosophy -- economics is a social science where math and empirical observations help us understand our changing worlds

Adam Smith. I saw his grave in Edinburgh

 

[DarkRange55]

Adam Smith. I saw his grave in Edinburgh

Oh, yeah? have you read his book?

 

[sserafim]

Oh, yeah? have you read his book?

No lol but I've heard of him

 

[DarkRange55]

**Just adding on:

You're having to trust shady, off-shore entities. They show proof of reserves but not liabilities.

People loose their crypto keys all the time.

I think one of the most fair cases you could is, sometimes you want an alternative to your national currencies like the Argentine peso.

Popular, yes. But worthless.
Speculating on bc is still a viable strategy to make money, but its not investing, its speculating/gambling.
A different ball game. Some people know how to do it, probably, vast majority ends up burned.

Not all companies are scams. They're audited, they're publicly traded. With Bitcoin and these brokerages they don't even publish their financials, you have these scammy rates and 9 times out of 10 they just totally implode.

Crypto is the most infinite resource in the world, in a sense. Because you can replicate with some computer code - there is a lot of blockchain proof of work algorithms and proof of stake and these things contribute to it. But you can use that technology to make anything because you can print to infinity.
Inflation hasn't been insanely bad. Over the history of the 30 years it's been 2%. Its predicable, its steady, its not massive dilution. Crypto goes up and down and left and right. With a dollar it will probably loose about 1 or 2% a year. You don't want deflation because thats bad. You can copy crypto. If you wanted to copy say Nike, you'd have to get your own factories and have real people (finite) make the shoes and use real finite resources. So there isn't infinite Nike. You can make a gazillion of a crypto currency.
There's inflation, you invest your money and grow your money with inflation and you get real growth.
Plenty of companies continue to grow and produce real goods and services. The price of Bitcoin is going up but one Bitcoin is still one Bitcoin (yes, I know the halving).

What government and army back Bitcoin?

The problem with a fix supply of a currency is someone ends up with all of it. The Romans ended up with vitus no gold or silver because of importing from outside the empire.

Wall Street's scam is that they get to launch the products (Bitcoin ETF's) that retail buys and they get to charge fees on those products. So they'll say whatever. They get to charge a management fee and don't care about the underlying asset. Thats the scam that they're doing. They would endorse Poopy Fart Coin ETF's if it was popular enough and they could make money on it.

The different algorithms and the code that underly crypto are real but technology and the asset are two different things. The coin that is derived from the underlying has no intrinsic value. The technology is legitimate.

None of these crypto speculators care about the fundamentals of investing which is spending money, investing in a company that produces future cashflows that you as a shareholder (a partial owner) are entitled to. Bitcoin doesn't create more Bitcoin. If I buy a share of Apple, they can take those profits and they can do a dividend or do share buybacks or they can reinvest the profits and build more factories (or share price appreciation). That one share can eventually get more and more future cashflows. There's real legitimate underlying growth in holding that share. Say Apple had 10 factories and now they have 20 factories. Now you have partial ownership of 20 factories instead of 10 factories. One Bitcoin is still one Bitcoin. Just because more people are buying Bitcoin is more clown growth. It's the underlying holdings and future cashflows that come into you.

People just read the white paper and half understand and read some Reddit posts.

Buying an index fund is grounded in efficient markets.

You can buy a bunch of calls Tesla and happen to hit it right when it goes up and make a ton of money. Thats doesn't mean you're smart, it means you're a gambler. Making money in the short term doesn't mean you're smart it's about making money in the long-term over decades.

Bitcoin extras energy. There are warehouses full of machines that are used to process the blockchain, basically update it. We have to take stuff out of the ground like oil and coal to process block chain transactions. We consume energy and these finite resources. It's a net negative, it doesn't produce a real cashflow or goods and services. You take real dollars and buy goods and services.

What is the intrinsic value of Bitcoin and do you know that the price is even a close approximation of what it's worth?
It's like a gold bar (but gold actually has some uses), it just sits there, it doesn't do anything except get traded. It is a transactional system that is underpinned by a lot of technology that uses energy. But it's use for people to trade and all the middlemen are making a killing because they charge a fee on the frontend and the backend. There no loads on VT, there's a very-low management fee.

A "currency" that goes up and down massively in half a second, you want to use that to go buy bread? A dollar that consistently goes down is more predictable because if you go buy a pack of gum, it's still gonna be a dollar when you get there.
Currency has to be inflatory in order for economy to grow or even function. Basic macroeconomics

Bitcoin in the original white paper of Bitcoin it's totally different now than it was originally intended for - the original white paper for Bitcoin, authored by Satoshi Nakamoto, outlined a peer-to-peer electronic cash system. However, over time, Bitcoin has evolved beyond its original intention and has become more of a store of value or digital gold, with high volatility and limited transactional scalability.



Bitcoin goes up because more people buy it than sell it, its supply and demand. The sellers can bit up prices.
Its fundamentally worthless trash. What is the fundamental value? Nobody can say and if they do they just make a number up. It does not produce cashflows. It does nothing. Its just this string of ones and zeros. It has no intrinsic value. Compare it to buying a company that produces real goods and services. Lets say I invest in Apple stock, they make Apple watches, phones, they have software, iPads, computers. Its a real company that produces real things that people actually use. Bitcoin goes up because people buy it. If you have one Bitcoin, thats it. Its gonna be one Bitcoin forever. If you buy a share of Apple, its still only one share of Apple but your ownership of the company's assets will go up over time as the company grows it earnings and reinvests its profits. The company's book value will increase over time theoretically if the company does well. You can get real returns. In the long run a fundamentally worthless asset will probably eventually go to zero. Look at all the clown stocks. You're not just gonna buy a coin and some other idiot is gonna buy it from you and thats gonna make you wealthy. If you believe that, you're a looser that doesn't want to work.
Nobody can predict where anything will go in the short-term. And if they draw their stupid triangle inverse teacup handle formation - its all bullshit.

If you understand the crypto market, and you understand how to sell it off, then there's nothing wrong with putting a small percentage of your portfolio. When it goes up to 70 start taking profits. But understand you're gambling.

My friend's brother is a hedge fund manager that does short term plays and trades with gold, crypto, other commodities that he sees opportunities in.