It would appear to me that the biggest source of friction in the present legacy financial system is foreign exchange. In the Bitcoin Standard, a reference was made to an annual valuation of that market as being about 1850 trillion dollars a year. I couldn't ascertain whether that referred to the total value of each transaction - i.e. one million USD changed to one million equivalent value in yuan plus the robber's portion equals two million plus the robber's portion, or, the sum total of all the transaction fees. The total GDP of the planet was estimated to be 75 trillion/annum, resulting in a tax on the world's financial workings of 25X its total output. This passage appears on page 130, and is accorded no greater emphasis that many of the other valid points made by the author. In my view, the reduction towards total elimination of that friction would go a long way to stretching out the viability of the present legacy system, but the vested interests that profit from it will cling to it like the barnacles on an overturned and listing ship. Bitcoin eliminates it, all that will be left is bubbles.....
Wow I had come to very similar conclusions re:crypto. I was into BTC in 2011 for the theory of creating a competitor to USD and fiat, but I never committed, feeling like an idiot as others into it early flaunted their lambos. It is now clear how easily it was co-opted as 99% of crypto investors value their holdings in terms of fiat. Creating digital currencies out of thin air is one of the not so often talked about drivers of this inflationary mess we're in now. Should have realized it when people that did literally nothing of value started flaunting lambos.
Can someone please explain this main principle in this Article: "We drew two pipes between the circles – one flowing into the crypto universe and the other flowing back to the real economy – and labeled both pipes with “fiat currencies.” "
I dont see how there is a "Crypto Universe", and that is should be balanced (fiat In/Out).
In a simple example I deposit USD to the Exchange's Bank account and they transfer me their BTC. The Exchange's Bank account is not in the "Crypto Universe" so there should be no Zero-Sum Balance to be maintained. Technically, if that Exchanges ceases to exist for any reason then that's irrelevant. The New BTC buyer needs to find new demand for their BTC via USD if they want to sell.
Another way of putting my question is assuming there is not USDT, and the Exchanges spends the USD used for purchasing the BTC for any other reason, and their USD Balance is now 0. Would this be the same issue with the Argument of this Article? Because if yes, then I don't see the issue.
What matters is not the value in the pipe, but the value in the circle. In the long run it is the growth of the Bitcoin denominated economy upon which the valuation of Bitcoin depends, not speculative flows, which gradually become de minimis over time...that, and it's monetary velocity.
I like how you talk about flows. I read yesterday, an article by Frank Shostak, where he defined a bubbles' root cause as an expansion of the money supply. The creation of money out of thin air. The people that get this money can bid up assets (something for nothing). Non productive activities come from the money printing and can only be sustained by the further expansion of the money supply. The bitcoin or crypto industry can only continue with expansion of the money supply or on the back of inflation because they are not wealth generating. Tether as another central bank inside crypto. The mal-investment can be seen when a company that used to produce oil / gas, pivots and instead of adding to the supply of energy which we all agree is wealth, they consume energy and capital to mine bitcoin. Can bitcoin survive without the fractional reserve lending, or from creating money out of thin air? If bubbles activities are defined or caused by printing money out of thin air, then they cannot.
A ponzi scheme doesn't need the money supply to grow, they just need to convince more people to invest in their product and I think a bubble is a closer or more accurate representation that describes crypto. They are both non productive activities however that eventually collapse because they aren't wealth generating. It may not be a ponzi, but there are people committing fraudulent inducement into crypto.
A question regarding CUSIP: do CUSIP bitcoin holdings differ from the rest of the crypto universe with respect to fiat liquidity?
I say this because the CUSIP operator effectively acts, to some degree, as a market maker. The HNW dominant CUSIP bitcoin area could thus potentially be very different than the rest of the crypto universe.
I also would recommend talking to Harris Kupperman.
He as a small cap hedge fund manager had put likely a position limit into Bitcoin in early 2020 and exited mid 2021 - likely to the tune of 8 or 9 digits. If crypto is truly so poorly capitalized and liquid, it seems likely that his exit into fiat would have had an impact. AFAIK, he exited several weeks before the 1st $60K bitcoin new all time high.
I have read this and listened to DB on the Grant Williams podcast which I pay for. EVERY monetary system is a belief system. Period. To claim gold is somehow divorced from energy consumption even after mining could only only occur when someone is as blinded by their bias as Doomberg accuses BTC maxis of being. Doomberg gives an example of going to Grants house to exchange his gold coin or to the coin store as if this is the primary real world use of gold rather than it’s almost universal storage by central banks. Most gold is there not jingling in DBs pocket! That is the real world of gold along with endless price suppression and manipulation of precious metals which JP Morgan has been fined hundreds of millions of dollars for not to mention the forcible routing of other countries to obtain gold over the 5000 years of history it has been money. no energy costs to be found in maintaining a huge military to keep gold safe guarded right DB?
He also claims that the energy cost of maintaining the BTC network versus gold or fiat are a strike against it. This would be like saying the wax candle is a preferable source of light versus the lightbulb because of the enormous costs of maintaining the electrical grid. All advancements in technology require energy expenditure DB. If there are any that have been significant I challenge you to present these. And you don’t get to divorce gold above ground from gold in the ground that needs to be dugout. You either deal with the entire gold system or not at all not just a piece of it that fits in your pocket and narrative.
What bitcoin is it is an advancement in money technology. As many who have done little actually spending time studying bitcoin do you the mistake that all value is paid up in $50 bills I understand the confusion on this. The value is in the network. In the end bitcoin is valued in bitcoin and as with everything else it’s transition to fiat is subjective and variable the same as gold. Pleasegive me hard data on how much of the $10 trillion gold market is fully capitalized in US dollars? no one in the gold market licks its own lollipop so to speak? And if so, therefore gold house no value? Please
Unlike the gold network, the bitcoin network is expanding exponentially. There is no guarantee that it will continue only fervent hope as it is clearly a better approach to money then whipped out of thin air digital dollars and shiny metal rocks that are pressed into round coins or bricks then converted to paper.
To expect the bitcoin network on a day-to-day basis is valued 1 to 1 or even .5 to 1 in real US dollars misses the point. Saying it is an important point is fair it’s just not the most important point or even close
Bitcoin is in a transitional stage and it is unknown if it will make the move to a true long-term store of value. Actually tracking bitcoin addresses and how long those coins stay in those addresses demonstrate anything other than the fact that those who purchase are simply gambling in the bitcoin casino. everyone wants to make money for god sake don’t try casting aspersions on bitcoin owners is somehow divorced from these material desires. The vast majority of coins have not moved in six months and many not for years. What this all demonstrates is a true belief that long-term, bitcoin is our best chance at a controlled sovereign money system.Sorry gold has been demonstrated repeatedly throughout history that it fails here because men ultimately cannot deal with the portability issue creating paper notes and obfuscating the value of gold.
I’m sorry DB but you don’t get to have a discussion of BTC it’s problems and the monetary systems and claim “we’re not talking about gold because I failed to mention gold in my article”. That is as intellectually dishonest and lame as saying “we’re going to have a discussion about air but not talk about oxygen.”.
if you want to talk about bitcoin then you have to be as intellectually honest as you demand your debaters be. It without question is imperfect and again in a transitional state and it is not a sure thing but it also solves so many of the problems that gold and Fiat provide us so if you want to talk about the problems with bitcoin and what it helps to replace you have to talk about the things bitcoin Maxis want it to replace or don’t bother stepping onto the debate stage. You standing in the corner claiming “ I’ll make the rules as I see fit discussion of bitcoin”… it’s just a pussy move. You are bright DB and I respect your opinion but have a real discussion or don’t have one at all.
Ask the hard questions but go ahead and answer the hard ones too or don’t bother with a debate/discussion!!
Gold, fiat, and BTC are all competitors, so you can't have a cop-out and say "I never mention gold." The world doesn't care if you mention it or not, its a fact that they all compete, so it needs to be in the conversation. Avoiding that is showing your weak argument. The competition is for hard money and attributes. None carries a market cap in cash, so that argument is useless. The biggest offender is fiat and fractional reserve banking and always having inflation problems. THAT'S why BTC goes up. More fiat goes into BTC, as more is printed and devalued. BTC and Gold is a bet on devaluing fiat. BTC traded long before tether or stablecoins existed too. Every single point of your essay, is wrong, misleading, or a cop out. It is also obvious by your twitter likes, that you are a BTC bear. That's fine, but don't claim to be agnostic.
You did not mention that when the US prints money and mails stimmy checks, El Salvador doesn't get those checks but they pay for them. So they are sitting on melting ice being on the USD standard. Instead of criticizing, what's your solution? A hard money alternative that can be sent to every citizen, is a bearer instrument, and very secure, makes BTC the only option. And regarding the Mike Green Nic Carter podcast you mention in your podcast with Grant, it might have been even at the time, but in the test of time, Nic won every argument. Mike Greens' main point was the China threat. That is now gone.
Every single point you have in non BTC arguments has been exceptional. And every single point in BTC arguments is the opposite. Saylor owns his board as majority voting rights holder, so that point is wrong. And owning the company, I'd say he does own that bitcoin, its a derivative but its functionally the same so yeah, his conviction is all that matters. I can go all day. Awful piece. If fiat wasn't a problem, there would be no need for a BTC standard. Love your energy peices. Thanks
Also Bitcoin is a bank in cyberspace, a central bank ruled by math not politics, a payment network with the lightning network. So a bitcoin in itself has no intrasic value (as Fiat currencies), indeed. It has a value given by its network. The market is speculating about the adoption of the Bitcoin network as the internet of money and the money of the internet. There is also this incredebly dangerous task of separating money and state. That is the reason why Ray Dalio thinks it might fail. We will see. Vires in numeris.
By focusing on the lambos and the speculators, the socialist magazine Jacobin is missing what the Salvador is trying to do with the bonds. I guess they are stuck in the past of the French revolution and a bloody Jacobine terror organized by a centralized state.
How amazing is this story of the Volcano bond? It could fail for sure, but what if it doesn't?
Tonga and another latin america country are following (might be Guatemala or Ecuador). Can't you see the writing on the wall?
And the turks, lebaneses, venezuelians, cubans who are trying to salve their money from hyperinflation created by their states, using Tether or Bitcoin? Did you miss it?
How on earth did you manage to not becoming richer by entering the crypto market in 2016? Did you buy ICOs and hodl until 0? I entered at the top of the 2017 bull run but with a bit of patience, learning and perseverance, I have made it.
Mmm.... You've spent too much time looking at the terminal. The premise that crypto value is measured only the USD is typically skewed. Give some credit to the technology, social, and power structure innovation wave that's being unleashed.
The "value" isn't in the price of Bitcoin (whatever the currency of account).
Sure, a lot of this is messy and there will be epic failures. Great I say because if a few eggs don't get broken, we won't have omelette.
hi ... I'm not sure I get why "the total amount of hard fiat" in the system is relevant. No one thinks BTC is collateralized by USD. The USD price is just a way to measure what people are currently willing to pay for it, no?
Could you not say the same about Gold or any other commodity? I do take your point though, which is why I've always considered a small (like 1% of investments) stake in crypto (BTC, ETH) to be the digital equivalent of gold coins. If the worst happens, there is a chance I can transact with it sans fiat.
Where do you get the figure for amount of hard fiat in the system?
It would appear to me that the biggest source of friction in the present legacy financial system is foreign exchange. In the Bitcoin Standard, a reference was made to an annual valuation of that market as being about 1850 trillion dollars a year. I couldn't ascertain whether that referred to the total value of each transaction - i.e. one million USD changed to one million equivalent value in yuan plus the robber's portion equals two million plus the robber's portion, or, the sum total of all the transaction fees. The total GDP of the planet was estimated to be 75 trillion/annum, resulting in a tax on the world's financial workings of 25X its total output. This passage appears on page 130, and is accorded no greater emphasis that many of the other valid points made by the author. In my view, the reduction towards total elimination of that friction would go a long way to stretching out the viability of the present legacy system, but the vested interests that profit from it will cling to it like the barnacles on an overturned and listing ship. Bitcoin eliminates it, all that will be left is bubbles.....
Great article. I have a better picture now.
Wow I had come to very similar conclusions re:crypto. I was into BTC in 2011 for the theory of creating a competitor to USD and fiat, but I never committed, feeling like an idiot as others into it early flaunted their lambos. It is now clear how easily it was co-opted as 99% of crypto investors value their holdings in terms of fiat. Creating digital currencies out of thin air is one of the not so often talked about drivers of this inflationary mess we're in now. Should have realized it when people that did literally nothing of value started flaunting lambos.
Can someone please explain this main principle in this Article: "We drew two pipes between the circles – one flowing into the crypto universe and the other flowing back to the real economy – and labeled both pipes with “fiat currencies.” "
I dont see how there is a "Crypto Universe", and that is should be balanced (fiat In/Out).
In a simple example I deposit USD to the Exchange's Bank account and they transfer me their BTC. The Exchange's Bank account is not in the "Crypto Universe" so there should be no Zero-Sum Balance to be maintained. Technically, if that Exchanges ceases to exist for any reason then that's irrelevant. The New BTC buyer needs to find new demand for their BTC via USD if they want to sell.
Another way of putting my question is assuming there is not USDT, and the Exchanges spends the USD used for purchasing the BTC for any other reason, and their USD Balance is now 0. Would this be the same issue with the Argument of this Article? Because if yes, then I don't see the issue.
What matters is not the value in the pipe, but the value in the circle. In the long run it is the growth of the Bitcoin denominated economy upon which the valuation of Bitcoin depends, not speculative flows, which gradually become de minimis over time...that, and it's monetary velocity.
I like how you talk about flows. I read yesterday, an article by Frank Shostak, where he defined a bubbles' root cause as an expansion of the money supply. The creation of money out of thin air. The people that get this money can bid up assets (something for nothing). Non productive activities come from the money printing and can only be sustained by the further expansion of the money supply. The bitcoin or crypto industry can only continue with expansion of the money supply or on the back of inflation because they are not wealth generating. Tether as another central bank inside crypto. The mal-investment can be seen when a company that used to produce oil / gas, pivots and instead of adding to the supply of energy which we all agree is wealth, they consume energy and capital to mine bitcoin. Can bitcoin survive without the fractional reserve lending, or from creating money out of thin air? If bubbles activities are defined or caused by printing money out of thin air, then they cannot.
A ponzi scheme doesn't need the money supply to grow, they just need to convince more people to invest in their product and I think a bubble is a closer or more accurate representation that describes crypto. They are both non productive activities however that eventually collapse because they aren't wealth generating. It may not be a ponzi, but there are people committing fraudulent inducement into crypto.
A question regarding CUSIP: do CUSIP bitcoin holdings differ from the rest of the crypto universe with respect to fiat liquidity?
I say this because the CUSIP operator effectively acts, to some degree, as a market maker. The HNW dominant CUSIP bitcoin area could thus potentially be very different than the rest of the crypto universe.
I also would recommend talking to Harris Kupperman.
He as a small cap hedge fund manager had put likely a position limit into Bitcoin in early 2020 and exited mid 2021 - likely to the tune of 8 or 9 digits. If crypto is truly so poorly capitalized and liquid, it seems likely that his exit into fiat would have had an impact. AFAIK, he exited several weeks before the 1st $60K bitcoin new all time high.
I have read this and listened to DB on the Grant Williams podcast which I pay for. EVERY monetary system is a belief system. Period. To claim gold is somehow divorced from energy consumption even after mining could only only occur when someone is as blinded by their bias as Doomberg accuses BTC maxis of being. Doomberg gives an example of going to Grants house to exchange his gold coin or to the coin store as if this is the primary real world use of gold rather than it’s almost universal storage by central banks. Most gold is there not jingling in DBs pocket! That is the real world of gold along with endless price suppression and manipulation of precious metals which JP Morgan has been fined hundreds of millions of dollars for not to mention the forcible routing of other countries to obtain gold over the 5000 years of history it has been money. no energy costs to be found in maintaining a huge military to keep gold safe guarded right DB?
He also claims that the energy cost of maintaining the BTC network versus gold or fiat are a strike against it. This would be like saying the wax candle is a preferable source of light versus the lightbulb because of the enormous costs of maintaining the electrical grid. All advancements in technology require energy expenditure DB. If there are any that have been significant I challenge you to present these. And you don’t get to divorce gold above ground from gold in the ground that needs to be dugout. You either deal with the entire gold system or not at all not just a piece of it that fits in your pocket and narrative.
What bitcoin is it is an advancement in money technology. As many who have done little actually spending time studying bitcoin do you the mistake that all value is paid up in $50 bills I understand the confusion on this. The value is in the network. In the end bitcoin is valued in bitcoin and as with everything else it’s transition to fiat is subjective and variable the same as gold. Pleasegive me hard data on how much of the $10 trillion gold market is fully capitalized in US dollars? no one in the gold market licks its own lollipop so to speak? And if so, therefore gold house no value? Please
Unlike the gold network, the bitcoin network is expanding exponentially. There is no guarantee that it will continue only fervent hope as it is clearly a better approach to money then whipped out of thin air digital dollars and shiny metal rocks that are pressed into round coins or bricks then converted to paper.
To expect the bitcoin network on a day-to-day basis is valued 1 to 1 or even .5 to 1 in real US dollars misses the point. Saying it is an important point is fair it’s just not the most important point or even close
Bitcoin is in a transitional stage and it is unknown if it will make the move to a true long-term store of value. Actually tracking bitcoin addresses and how long those coins stay in those addresses demonstrate anything other than the fact that those who purchase are simply gambling in the bitcoin casino. everyone wants to make money for god sake don’t try casting aspersions on bitcoin owners is somehow divorced from these material desires. The vast majority of coins have not moved in six months and many not for years. What this all demonstrates is a true belief that long-term, bitcoin is our best chance at a controlled sovereign money system.Sorry gold has been demonstrated repeatedly throughout history that it fails here because men ultimately cannot deal with the portability issue creating paper notes and obfuscating the value of gold.
I’m sorry DB but you don’t get to have a discussion of BTC it’s problems and the monetary systems and claim “we’re not talking about gold because I failed to mention gold in my article”. That is as intellectually dishonest and lame as saying “we’re going to have a discussion about air but not talk about oxygen.”.
if you want to talk about bitcoin then you have to be as intellectually honest as you demand your debaters be. It without question is imperfect and again in a transitional state and it is not a sure thing but it also solves so many of the problems that gold and Fiat provide us so if you want to talk about the problems with bitcoin and what it helps to replace you have to talk about the things bitcoin Maxis want it to replace or don’t bother stepping onto the debate stage. You standing in the corner claiming “ I’ll make the rules as I see fit discussion of bitcoin”… it’s just a pussy move. You are bright DB and I respect your opinion but have a real discussion or don’t have one at all.
Ask the hard questions but go ahead and answer the hard ones too or don’t bother with a debate/discussion!!
Gold, fiat, and BTC are all competitors, so you can't have a cop-out and say "I never mention gold." The world doesn't care if you mention it or not, its a fact that they all compete, so it needs to be in the conversation. Avoiding that is showing your weak argument. The competition is for hard money and attributes. None carries a market cap in cash, so that argument is useless. The biggest offender is fiat and fractional reserve banking and always having inflation problems. THAT'S why BTC goes up. More fiat goes into BTC, as more is printed and devalued. BTC and Gold is a bet on devaluing fiat. BTC traded long before tether or stablecoins existed too. Every single point of your essay, is wrong, misleading, or a cop out. It is also obvious by your twitter likes, that you are a BTC bear. That's fine, but don't claim to be agnostic.
You did not mention that when the US prints money and mails stimmy checks, El Salvador doesn't get those checks but they pay for them. So they are sitting on melting ice being on the USD standard. Instead of criticizing, what's your solution? A hard money alternative that can be sent to every citizen, is a bearer instrument, and very secure, makes BTC the only option. And regarding the Mike Green Nic Carter podcast you mention in your podcast with Grant, it might have been even at the time, but in the test of time, Nic won every argument. Mike Greens' main point was the China threat. That is now gone.
Every single point you have in non BTC arguments has been exceptional. And every single point in BTC arguments is the opposite. Saylor owns his board as majority voting rights holder, so that point is wrong. And owning the company, I'd say he does own that bitcoin, its a derivative but its functionally the same so yeah, his conviction is all that matters. I can go all day. Awful piece. If fiat wasn't a problem, there would be no need for a BTC standard. Love your energy peices. Thanks
Also Bitcoin is a bank in cyberspace, a central bank ruled by math not politics, a payment network with the lightning network. So a bitcoin in itself has no intrasic value (as Fiat currencies), indeed. It has a value given by its network. The market is speculating about the adoption of the Bitcoin network as the internet of money and the money of the internet. There is also this incredebly dangerous task of separating money and state. That is the reason why Ray Dalio thinks it might fail. We will see. Vires in numeris.
By focusing on the lambos and the speculators, the socialist magazine Jacobin is missing what the Salvador is trying to do with the bonds. I guess they are stuck in the past of the French revolution and a bloody Jacobine terror organized by a centralized state.
How amazing is this story of the Volcano bond? It could fail for sure, but what if it doesn't?
Tonga and another latin america country are following (might be Guatemala or Ecuador). Can't you see the writing on the wall?
And the turks, lebaneses, venezuelians, cubans who are trying to salve their money from hyperinflation created by their states, using Tether or Bitcoin? Did you miss it?
How on earth did you manage to not becoming richer by entering the crypto market in 2016? Did you buy ICOs and hodl until 0? I entered at the top of the 2017 bull run but with a bit of patience, learning and perseverance, I have made it.
Mmm.... You've spent too much time looking at the terminal. The premise that crypto value is measured only the USD is typically skewed. Give some credit to the technology, social, and power structure innovation wave that's being unleashed.
The "value" isn't in the price of Bitcoin (whatever the currency of account).
Sure, a lot of this is messy and there will be epic failures. Great I say because if a few eggs don't get broken, we won't have omelette.
hi ... I'm not sure I get why "the total amount of hard fiat" in the system is relevant. No one thinks BTC is collateralized by USD. The USD price is just a way to measure what people are currently willing to pay for it, no?
Could you not say the same about Gold or any other commodity? I do take your point though, which is why I've always considered a small (like 1% of investments) stake in crypto (BTC, ETH) to be the digital equivalent of gold coins. If the worst happens, there is a chance I can transact with it sans fiat.