Bitcoin's Future as Real Currency Like Dollar Relies on ...

What are some good sites to view charts / graphs of bitcoin deflation. I wanna know how much it's been going for per hour today 4/2.

Like some cool graphs that are easy to read? Mt.gox's little graph is a little too advanced...
submitted by gl00pp to Bitcoin [link] [comments]

Putting $400M of Bitcoin on your company balance sheet

Also posted on my blog as usual. Read it there if you can, there are footnotes and inlined plots.
A couple of months ago, MicroStrategy (MSTR) had a spare $400M of cash which it decided to shift to Bitcoin (BTC).
Today we'll discuss in excrutiating detail why this is not a good idea.
When a company has a pile of spare money it doesn't know what to do with, it'll normally do buybacks or start paying dividends. That gives the money back to the shareholders, and from an economic perspective the money can get better invested in other more promising companies. If you have a huge pile of of cash, you probably should be doing other things than leave it in a bank account to gather dust.
However, this statement from MicroStrategy CEO Michael Saylor exists to make it clear he's buying into BTC for all the wrong reasons:
“This is not a speculation, nor is it a hedge. This was a deliberate corporate strategy to adopt a bitcoin standard.”
Let's unpack it and jump into the economics Bitcoin:

Is Bitcoin money?

No.
Or rather BTC doesn't act as money and there's no serious future path for BTC to become a form of money. Let's go back to basics. There are 3 main economic problems money solves:
1. Medium of Exchange. Before money we had to barter, which led to the double coincidence of wants problem. When everyone accepts the same money you can buy something from someone even if they don't like the stuff you own.
As a medium of exchange, BTC is not good. There are significant transaction fees and transaction waiting times built-in to BTC and these worsen the more popular BTC get.
You can test BTC's usefulness as a medium of exchange for yourself right now: try to order a pizza or to buy a random item with BTC. How many additional hurdles do you have to go through? How many fewer options do you have than if you used a regular currency? How much overhead (time, fees) is there?
2. Unit of Account. A unit of account is what you compare the value of objects against. We denominate BTC in terms of how many USD they're worth, so BTC is a unit of account presently. We can say it's because of lack of adoption, but really it's also because the market value of BTC is so volatile.
If I buy a $1000 table today or in 2017, it's roughly a $1000 table. We can't say that a 0.4BTC table was a 0.4BTC table in 2017. We'll expand on this in the next point:
3. Store of Value. When you create economic value, you don't want to be forced to use up the value you created right away.
For instance, if I fix your washing machine and you pay me in avocados, I'd be annoyed. I'd have to consume my payment before it becomes brown, squishy and disgusting. Avocado fruit is not good money because avocadoes loses value very fast.
On the other hand, well-run currencies like the USD, GBP, CAD, EUR, etc. all lose their value at a low and most importantly fairly predictible rate. Let's look at the chart of the USD against BTC
While the dollar loses value at a predictible rate, BTC is all over the place, which is bad.
One important use money is to write loan contracts. Loans are great. They let people spend now against their future potential earnings, so they can buy houses or start businesses without first saving up for a decade. Loans are good for the economy.
If you want to sign something that says "I owe you this much for that much time" then you need to be able to roughly predict the value of the debt in at the point in time where it's due.
Otherwise you'll have a hard time pricing the risk of the loan effectively. This means that you need to charge higher interests. The risk of making a loan in BTC needs to be priced into the interest of a BTC-denominated loan, which means much higher interest rates. High interests on loans are bad, because buying houses and starting businesses are good things.

BTC has a fixed supply, so these problems are built in

Some people think that going back to a standard where our money was denominated by a stock of gold (the Gold Standard) would solve economic problems. This is nonsense.
Having control over supply of your currency is a good thing, as long as it's well run.
See here
Remember that what is desirable is low variance in the value, not the value itself. When there are wild fluctuations in value, it's hard for money to do its job well.
Since the 1970s, the USD has been a fiat money with no intrinsic value. This means we control the supply of money.
Let's look at a classic poorly drawn econ101 graph
The market price for USD is where supply meets demand. The problem with a currency based on an item whose supply is fixed is that the price will necessarily fluctuate in response to changes in demand.
Imagine, if you will, that a pandemic strikes and that the demand for currency takes a sharp drop. The US imports less, people don't buy anything anymore, etc. If you can't print money, you get deflation, which is worsens everything. On the other hand, if you can make the money printers go brrrr you can stabilize the price
Having your currency be based on a fixed supply isn't just bad because in/deflation is hard to control.
It's also a national security risk...
The story of the guy who crashed gold prices in North Africa
In the 1200s, Mansa Munsa, the emperor of the Mali, was rich and a devout Muslim and wanted everyone to know it. So he embarked on a pilgrimage to make it rain all the way to Mecca.
He in fact made it rain so hard he increased the overall supply of gold and unintentionally crashed gold prices in Cairo by 20%, wreaking an economic havoc in North Africa that lasted a decade.
This story is fun, the larger point that having your inflation be at the mercy of foreign nations is an undesirable attribute in any currency. The US likes to call some countries currency manipulators, but this problem would be serious under a gold standard.

Currencies are based on trust

Since the USD is based on nothing except the US government's word, how can we trust USD not to be mismanaged?
The answer is that you can probably trust the fed until political stooges get put in place. Currently, the US's central bank managing the USD, the Federal Reserve (the Fed for friends & family), has administrative authority. The fed can say "no" to dumb requests from the president.
People who have no idea what the fed does like to chant "audit the fed", but the fed is already one of the best audited US federal entities. The transcripts of all their meetings are out in the open. As is their balance sheet, what they plan to do and why. If the US should audit anything it's the Department of Defense which operates without any accounting at all.
It's easy to see when a central bank will go rogue: it's when political yes-men are elected to the board.
For example, before printing themselves into hyperinflation, the Venezuelan president appointed a sociologist who publicly stated “Inflation does not exist in real life” and instead is a made up capitalist lie. Note what happened mere months after his gaining control over the Venezuelan currency
This is a key policy. One paper I really like, Sargent (1984) "The end of 4 big inflations" states:
The essential measures that ended hyperinflation in each of Germany,Austria, Hungary, and Poland were, first, the creation of an independentcentral bank that was legally committed to refuse the government'sdemand or additional unsecured credit and, second, a simultaneousalteration in the fiscal policy regime.
In english: *hyperinflation stops when the central bank can say "no" to the government."
The US Fed, like other well good central banks, is run by a bunch of nerds. When it prints money, even as aggressively as it has it does so for good reasons. You can see why they started printing on March 15th as the COVID lockdowns started:
The Federal Reserve is prepared to use its full range of tools to support the flow of credit to households and businesses and thereby promote its maximum employment and price stability goals.
In english: We're going to keep printing and lowering rates until jobs are back and inflation is under control. If we print until the sun is blotted out, we'll print in the shade.

BTC is not gold

Gold is a good asset for doomsday-preppers. If society crashes, gold will still have value.
How do we know that?
Gold has held value throughout multiple historic catastrophes over thousands of years. It had value before and after the Bronze Age Collapse, the Fall of the Western Roman Empire and Gengis Khan being Gengis Khan.
Even if you erased humanity and started over, the new humans would still find gold to be economically valuable. When Europeans d̶i̶s̶c̶o̶v̶e̶r̶e̶d̶ c̶o̶n̶q̶u̶e̶r̶e̶d̶ g̶e̶n̶o̶c̶i̶d̶e̶d̶ went to America, they found gold to be an important item over there too. This is about equivalent to finding humans on Alpha-Centauri and learning that they think gold is a good store of value as well.
Some people are puzzled at this: we don't even use gold for much! But it has great properties:
First, gold is hard to fake and impossible to manufacture. This makes it good to ascertain payment.
Second, gold doesnt react to oxygen, so it doesn't rust or tarnish. So it keeps value over time unlike most other materials.
Last, gold is pretty. This might sound frivolous, and you may not like it, but jewelry has actual value to humans.
It's no coincidence if you look at a list of the wealthiest families, a large number of them trade in luxury goods.
To paraphrase Veblen humans have a profound desire to signal social status, for the same reason peacocks have unwieldy tails. Gold is a great way to achieve that.
On the other hand, BTC lacks all these attributes. Its value is largely based on common perception of value. There are a few fundamental drivers of demand:
Apart from these, it's hard to argue that BTC will retain value throughout some sort of economic catastrophe.

BTC is really risky

One last statement from Michael Saylor I take offense to is this:
“We feel pretty confident that Bitcoin is less risky than holding cash, less risky than holding gold,” MicroStrategy CEO said in an interview
"BTC is less risky than holding cash or gold long term" is nonsense. We saw before that BTC is more volatile on face value, and that as long as the Fed isn't run by spider monkeys stacked in a trench coat, the inflation is likely to be within reasonable bounds.
But on top of this, BTC has Abrupt downside risks that normal currencies don't. Let's imagine a few:

Blockchain solutions are fundamentally inefficient

Blockchain was a genius idea. I still marvel at the initial white paper which is a great mix of economics and computer science.
That said, blockchain solutions make large tradeoffs in design because they assume almost no trust between parties. This leads to intentionally wasteful designs on a massive scale.
The main problem is that all transactions have to be validated by expensive computational operations and double checked by multiple parties. This means waste:
Many design problems can be mitigated by various improvements over BTC, but it remains that a simple database always works better than a blockchain if you can trust the parties to the transaction.
submitted by VodkaHaze to badeconomics [link] [comments]

LeanFIRE and Goal Oriented Investing: 10 Mistakes you should avoid

Dear All -
After my earlier post regarding COVID-19 and 10 rules to deploy savings that generated lots of questions and interest I would like to share my thoughts about Goal Oriented Investing. While it's a 101 it may nevertheless be helpful to highlight especially in this market environment. I wasn't able to put graphs and videos here so you may find the full version here. Looking forward to hearing your feedback.

1. Not clearly defining your goals. Define your objectives and think in terms of sub-portfolios

Define your short and long term goals. Allocate to asset classes based on your time horizon (e.g. short term goals need to be carefully managed with a defensive portfolio since the short term volatility of high risk assets like stocks can hurt you). Be sure to have a reserve fund of liquid short-term investments and cash so you can cover emergencies and upcoming large expenses without having to sell your investments during down markets.

2. Not being patient and overreacting. Good things come to those who wait

Returns tend to smooth out over the long term. There is a myth about a Fidelity study that analysed all its performing accounts and realised that best performance came out of portfolios of people who either forgot about their accounts or were dead. You can understand why people believe these findings although the study never took place (look at the chart here - 1 to 20 year rolling performance again!). Logging into your brokepension plan account every day may not be helpful. You may tend to react – do not rush investment decisions.

3. Oveunderestimating your risk tolerance

Take a risk tolerance assessment if necessary to understand your risk profile. Your risk tolerance is important to tweak the asset allocation of your goal sub-portfolio. It is determined by: the degree of flexibility you have with regard to your financial goal, and your personal comfort level with volatility in your portfolio.

4. Aiming at influencing things outside of your control. Focus of what’s in your control

This is the Stoic part of the 10 recommendations (if you also happen to adhere to this philosophy get the Stoic newsletter I never stopped reading for the past 5 years). One of the eye-openers that you learn while studying for the gruelling (Chartered Financial Analyst ‘CFA’) Charter is that research estimates that asset allocation (not stock selection!) drives up to c. 90% of overall portfolio performance. You control asset allocation and rebalancing. You do control your spending and savings that will grow over time – don’t waste most of your time on researching individual stocks (read: Are you more qualified than a professional analyst).

5. Not acquiring enough education and taking excessive idiosyncratic risks

Some of the most trending Google searches during this COVID-19 pandemic include ‘best stocks to buy now’, ‘how to invest in oil stocks’, ‘best stock for 2020’ or ‘best investments for 2020’ etc. In fact the phrase ‘how to buy a stock’ surged to record highs. This also relates to FOMO which I have described here and chasing upward trends in a bear market. Acquiring Investment Knowledge is key as it is ultimately your decisions that will determine whether your hard-earned savings generate long term returns. Do your homework. Understand investment risks. Research fundamentals. Take a bit more time if needed – the market is efficient and is pricing in information relatively quickly – you have no edge in acting quickly.

6. Being overly conservative over the long run

Think of your goals as liabilities that you need to match with your investments. The power of compounding means that you need a much lower amount today to meet a higher amount expenditure in the future. Einstein said compound interest is the 8th wonder of the world. He who understands it, earns it; he who doesn’t, pays it. If you have high needs with long time horizon you need to take calculated risks. Invest too defensively (e.g. low allocation to Equities) and it may not match your long term objective. Buffett’s exceptional investment returns are also due to his time horizon.

7. Holding excessive cash. Not taking risks involves high opportunity costs

Believe it or not but a lot of bankers working for the top names tend to hold cash and under-invest. By holding cash you are not only missing out on compounding interest but also paying more taxes! Inflation is an indirect tax that works by destroying savings in exchange for gov’t financing. It gets worse – as central banks print an unprecedented amount of money – most standard measurements of inflation, such as the consumer price index (CPI), do not account for the disproportional effects of quantitative easing which is rising asset prices (monetary inflation). Even when you hear about deflation it’s often very misleading. This bear market may be a good opportunity to gradually deploy cash for long term returns if you haven’t already.
As an example – the ‘headline’ inflation in the UK (2.9%) that over 10 years increased prices by 29.29% vs. London Property Prices that increased over twice as much. The same applies to other real assets, like company valuations (stocks) or gold.

8. Not considering diversification

Yes, bonds are not as sexy as stocks since your returns may not be as spectacular in the short term but these are excellent diversifiers that may be sometimes better suited depending on your investment objective and time horizon. Other currencies or hard metals/BTC may be good as well. As an example YTD performance (as of March 9th when I did the analysis) was -14.2% for stocks, +6.1% for bonds and +10.7% for Gold.

9. Letting your emotions rule

This is difficult to implement since we tend to have emotional biases. If you do decide to have a small part of your goal-oriented strategic asset allocation dedicated to tactical asset allocation, sector or stock selection emotions could drive investment decisions based on loss aversion or overconfidence (e.g. confusing brains with a bull market). If it’s e.g. the latter try to stay humble/rational and ask yourself if you really have an edge before making a decision.

10. Forgetting to rebalance

Some advisors recommend that investors rebalance their portfolios on a regular time interval while others recommend rebalancing only when the relative weight of an asset class deviates from the target allocation (glide path investments). Either way, this is something that needs to be observed on a regular basis. I aim to discuss glide path investments in future posts.
With all charts: https://bankeronwheels.com/how-do-i-start-investing-start-learning-how-to-invest-in-stocks-and-bonds-by-avoiding-these-10-common-investing-mistakes/
Stay well!
submitted by bankeronwheels to leanfire [link] [comments]

BitcoinSoV: Theoretical Mathematical Analysis

BitcoinSoV: Theoretical Mathematical Analysis
The following graph and spreadsheet were created and calculated by the community's own @Rouse (Solid work man). The information provided is not meant to act as a literal interpretation of what the future of BSoV looks like, but rather what it would look like with a certain level of success.

This graph shows what 100 years of BSoV transactions and deflation would look like Vs. Bitcoin's disinflation.
This graph shows what 100 years of BSoV transactions and deflation would look like Vs. Bitcoin's disinflation.
This graph is a predictive visual which paints a picture of how the supply may look like as BitcoinSoV is mined, and then burned after distribution through on-chain trading and sent transactions. 1% of every BSoV transaction is burned. With 39 halving eras and a 21,000,000 supply at launch, BSoV may become a scarce token with its rarity increasing with every trade. This may in turn increase the tokens demand.

Spread sheet showing a successful example of what BSoV distribution, halving eras, and burn count calculated over a 100 year period may look like.
Spread sheet showing a successful example of what BSoV distribution, halving eras, and burn count calculated over a 100 year period may look like.
It's important to note that the data presented in this graph is only one iteration of what BSoV's success or lack thereof may present. In order to show the community and those interested in the coin what the future could look like, we wanted to simply show how the math could work.
What is interesting with this prediction is how the percentage burned decreases nearly linearly as time moves on. With each halving era, less and less tokens are being distributed which in turn may increase its demand.
In addition, demand may increase due to the 1% burn as shown in column 4. The cumulative amount burned will continue to climb, but at a much slower rate than the starting time period. This could provide an incentive to hold the token, which in turn may allow the token to live up to its claim as a store of value. For, what is really a store of value? Simply put, in our opinion it is "when people have a peace of mind when investing". When prices rise steadily over decades like real-estate, gold and Bitcoin, it happens because people trust an asset's success in the future.
This is the future outlook of BSoV, a valuable asset which automatically loses 1% of the transaction when you send it. Will these tokenomics provide the right environment for a store-of-value? Only time will tell.By the end of the halving eras, the predicted low supply further reveals how the coin will sustain itself due to its 8 decimals, along with people willing to hold due to its burn. If there are only 350,000 BSoV left after year 100, then with 8 decimals it means there are still 35,000,000,000,000 units of Mundos left. 1 BSoV is 100,000,000 Mundos, just like Bitcoin has Satoshis.
With mining power at a high level, and not a whole lot of BSoV being created or distributed, buying it is one of the easiest ways to benefit from its long term appeal. This is not an attempt to coerce anyone to purchase our token, since we do not provide financial advice. Also, you do not need to buy this token, as nearly anyone is able to mine it to gain the token reward.
Please keep in mind the above graph and spreadsheet are projections which display a future if the project is able to stay on track and grow as it has. Over 18 weeks have gone by since the contracts launch, and we have witnessed our token holders, community members, and social media following grow at a steady, organic, and sustainable rate.
BitcoinSoV has firmly placed itself as a serious player in the game and shows no signs of slowing down. While a new tokens price volatility, lower liquidity, and price discovery are to be expected, historical analysis of securities and even cryptocurrencies alike show that these are signs of a healthy market, and with over 640 holders as of this writing, it is safe to say the market is heading in the right direction. We are going to be publishing more information and other statistical analysis as time progresses. Thanks to Rouse for taking the time to do this again!
Happy Mining/Trading!
(If any readers would like to add input or correct any information we may have missed, please post in the comments below and we will make sure it is corrected)
submitted by Chrisc9234 to BitcoinSoV [link] [comments]

Australians, you need to start buying as much crypto as you can.

I’m Australian, this isn’t meant to be an alarmist or sensationalist post, but the economic situation in our country is a lot more serious than most of us think.
First off, the current economic situation.
Simply put, our economy is fucked. Our housing market is dangerously overleveraged and because of policies by our government at the time, we never experienced the correction the US and most of the rest of the world did during the 2008 Global Financial Crisis. And now the chickens are coming home to roost. Australians are up to their eyeballs in debt, almost half of the housing loans are interest only, it’s the reason the Reserve Bank of Australia hasn’t raised the interest rates since 2016. Because as soon as they do, even by 0.01%, tens of thousands of Australians are going to default on their mortgages. It’s no secret that our housing market is one of the most expensive in the world, and anyone living in our country already knows this. The market value of Australian homes is 4 times the GDP of the country. Our housing market is beyond the point of saving and the bubble is about to pop. And while our mainstream media is trying to convince us that it will deflate slowly, history paints a different picture.
And that’s just the start of our problems. It’s no secret that China is our biggest trading partner. We rely on China more than any other developed country in the world. And what is currently happening on the greater global stage? Our most important military ally has engaged in a trade war with China, and the effects of that trade war are starting to be felt. Chinese stocks are in freefall, and that’s only going to be the beginning of the negative effects from Trump’s hardline approach to dealing with China. It doesn’t take a genius to see that this is going to have a devastating effect on our economy.
Our biggest trading partner is having a financial gunfight with the USA, which is going to result in them buying less of our stuff. And still that isn’t the end of it. Mining is down. Commodities prices are down. Our manufacturing sector is almost dead. The only thing we have going for us at the moment is agriculture and that can’t prop up the entire economy. You wanna turn white? Read this article from last year. Our economy is teetering on the precipice.
You think I’m being dramatic? Well even the Australian MSM can no longer ignore it. With articles like this appearing almost on the daily. Our dollar is in serious trouble, anyone who knows the slightest bit about TA go look at the graphs in that article. Our country is in serious economic trouble. And we don’t know shit about it because our media is a duopoly that makes most of its money from their real estate arms. All signs are pointing to our dollar about to be worth a hell of a lot less than it currently is.
What can we do?
Since this is the crypto subreddit the solution to this impending economic shitstorm should be painfully obvious. Buy fucking Bitcoin. Not the solution for the country, for you. The country isn’t going to do shit for anyone of us except saddle us with debt and a cooked economy that is going to take generations to get out of, if ever. So we should be diversifying. Sure buying gold probably isn’t a stupid idea either, but if you think that is proof against state intervention, read a history book. Even then, gold still needs to be converted into cash to be useful, and anyone paying attention can see that Australia is gearing up for a war on cash that borders on tyrannical. The only way for us as individuals to protect our wealth at the moment is to convert it into cryptocurrency.
But Bitcoin is low at the moment!
No shit. But if you think it’s going to stay that way you are 1. In the wrong subreddit, and 2. No paying attention to the macro factors of crypto. Wall St is gearing up to enter. The bank that runs the world is getting involved. And not just American banks. Bitcoin may be low now but if you know anything about market cycles, you know that it’ll be back. Here is a good comparison of BTC a few years ago as opposed to now. It’s almost at the point where it’s irresponsible not to be buying bitcoin, and I’m not the only one that holds this opinion. Worst case scenario, bitcoin falls to USD 3k. What do you think is going to happen after that? Bitcoin and crypto aren’t going anywhere and you’re kidding yourself if you think that the value of bitcoin isn’t going to be much higher in the years to come.
Of course the RBA is telling people that Bitcoin is dead, probably because they don’t want Australians to dump their soon to be worthless fiat currency. In fact one any given day you’ll see a bunch of anti-crypto propaganda on our MSM. The same MSM that has been telling us all to buy as many houses as we can for the last 20 years. The same MSM that up until now hasn’t said shit about the direction our economy is heading in.
The writing’s on the wall people. If we keep our wealth in AUD it’s going to be worth considerably less sooner rather than later. Our property sector is going to crash, our dollar is going to crash, our personal wealth is going to be stripped away from us. If you want to avoid this, if you want to protect your wealth, ensure a future that isn’t financial hardship, then we really only have one choice. Buy bitcoin. Personally I am converting half my pay each week into BTC and just holding it. Not putting it into alts. Just btc. I’d advise you do the same as well. I understand that this sounds super risky. But if you read the articles I’ve linked to in this post I’m sure you’ll see that the only risky move is doing nothing. This isn’t a joke or a false alarm. The notion that our economy has always been fine up until now isn’t valid anymore. If you want to protect your personal wealth and purchasing power in the next few years, you really should be buying as much btc as you can while it is this low. This is what crypto is for, avoiding the negative financial downturns of specific countries. It’s a globally traded commodity that is accessible by anyone with a computer. Our economy tanking isn’t going to affect the price one bit.
I hope some of this has been useful. Listen to me, don’t listen to me, it’s your choice. But this is the digital age, there’s no excuse for ignorance anymore.
submitted by Sendmyabar to CryptoCurrency [link] [comments]

Oil’s freefall: Russia in crisis, Canada braces for fallout

Oil’s freefall: Russia in crisis, Canada braces for fallout submitted by nimobo to canada [link] [comments]

The fundamentals of bitcoin as an asset exist and they are stupider than you can imagine

tldr; tldr; Hodling is deflationary and all those wild price swings from bitcoin are changes in the fundamental value of bitcoin. Really.
tldr; Imagine there is a market where $100 worth of goods are sold every day using 100 bitcoins which cycle around. Then each bitcoin would be worth $1. Now suppose that 50 of the bitcoins were being held in anticipation of growing in value so only 50 bitcoins were cycling each day. For all the goods in the market to be sold every day each bitcoin will now be worth $2.
Introduction There has been a lot of discussion about what the fundamental value of bitcoin is. The consensus view in this subreddit is that the fundamental value is zero. I argue in this post that the fundamental value of bitcoin is whatever the price is right now, or a something close to it. This is because the fundamentals of bitcoin are stupid. Unimaginably stupid.
Bitcoin as Currency Bitcoin is a terrible currency compared to normal statist filthy fiat. Bitcoins are often permanently lost due to hacking or easily made mistakes. Transactions take considerable time to be confirmed. The price is highly volatile. But this post isn’t going into those issues in depth.
There is little evidence for mainstream Bitcoin use. A report by Morgan Stanley on the acceptance of Bitcoin from online retailers found that only 3 out of the 500 online retailers tracked accepted Bitcoin payments, a decrease from 5 in the previous year. The report concluded: “Bitcoin acceptance is virtually zero and shrinking”.
The number of transaction on darknet markets is large. On darknet markets users buy illegal products using cryptocurrencies (not just Bitcoin). Due to their illegal nature, it is impossible to know the exact value of transactions that take place on them. Between February 2011 and July 2013 the darknet market Silk Road had 1,229,465 transactions comprising 9,519,644 bitcoins in revenue. Darknet markets, along with ransomware payments are the only uses where there is evidence of a substantial number of bitcoin transactions taking place.
To work at scale darknet markets require cryptocurrency to pay for goods on sale. The anonymous nature of cryptocurrency allows transactions to take place without the buyer or the seller knowing anything about each other (although if a buyer has drugs mailed to them the seller will know who they are). If darknet markets used another form of payment then law enforcement could buy something and then track both the money going to the seller and the commission paid to the darknet market. It isn’t true as many people have claimed that nothing backs bitcoin. Bitcoin is backed by darknet markets.
There are a few kinds of people who buy bitcoin and want to spend it. They include drug buyers, those who need to pay off ransomware, money launders, fraudsters, and a few others but for simplicity’s sake I will just call them drug buyers. Likewise, there are a few types of people who sell products for bitcoin but again for simplicity’s sake I will call them drug sellers.
Non-circularity Bitcoin is a currency with a property that I call non-circularity. With Actual Money, when I buy something in a shop, the money I paid with goes towards the wages of the staff, rent and the products themselves among other expenses. This money then flows on to others. When a drug seller receives bitcoin in exchange for their drugs they can’t use the bitcoin to pay for their groceries or to pay their rent. They must exchange the bitcoin for filthy fiat to buy food. The inability to use bitcoin for further purchases means it is a non-circular currency. Bitcoin is a medium of a medium of exchange.
A full bitcoin transaction thus consists of three parts:
  1. A drug buyer goes to a bitcoin exchange to get bitcoin in exchange for filthy fiat
  2. The drug buyer goes to the DNM to exchange bitcoin for drugs from the drug seller
  3. The drug seller goes to the bitcoin exchange to get filthy fiat in exchange for bitcoin
An exchange is any place which matches buyers and sellers of bitcoin. This includes online exchanges like Coinbase as well as LocalBitcoins which matches people for face to face transactions. As nobody receives bitcoin for payment except drug dealers, the only place for drug buyers to get bitcoin is an exchange. The extreme volatility of bitcoin means that drug buyers and sellers try to complete the process as quickly as possible and avoid holding onto bitcoin.
Perfect Price Unstickiness For normal currencies prices are sticky. That means that nominal prices do not respond quickly to changing economic conditions. In contrast bitcoin has what I call perfect price unstickiness so the price of goods in bitcoin changes almost perfectly to changes in the value of bitcoin.
This is because prices for items which can be bought with bitcoin are never actually set in bitcoin, probably due to the high volatility. Instead they are set in fiat. The amount in fiat can either be listed directly, so $US50 for these drugs, or the price can be listed in the converted amount of bitcoin, 0.005BTC if 1 BTC = $US10,000. Changes in the price of bitcoin on exchanges are instantly reflected in the prices of drugs in bitcoins on darknet markets.
Hodling Another feature of bitcoin that should be considered is that people hodl bitcoin. The word comes from a typo of ‘hold’. Bitcoin is often bought on exchanges not for use as a currency to buy drugs, but as an asset in expectation of a price rise. Hodlers are the third type of user of bitcoin along with drug buyers and drug sellers. Although they don’t use it.
What’s the difference between an asset that is held and one that is hodled? This is admittedly vague, but an asset is hodled if it is being held, it can be held for long periods at low costs, it can but isn’t generating any income and there are no plans to generate income from it soon.
Cash under the mattress is being hodled, cash in my wallet that I am going to buy stuff with soon is not. Money in my bank account is generating income and so is not hodled. Bitcoin held in anticipation of price rises is being hodled. Bitcoin bought to buy drugs but which has not been used yet is not. Gold stored in a vault is being hodled, gold used for electronics purposes is not (jewellery is a harder case). A vacant block of land with no plans to develop it or use it for anything is being hodled but one that is soon going to have an apartment block built on it is not.
Commodities can be held and do not generate income until sold but it is expensive to hold most commodities for long periods of time. This prevents most commodities from being hodled.
Velocity The velocity of money is the average number of times a unit of fiat changes hands in a period. You can skip the next three paragraphs as they are a little annoying and you can get by without them. Just know that I am defining the velocity of bitcoin as what the velocity of bitcoin would be if no bitcoin was being hodled.
Due to hodling, the velocity of bitcoin under the conventional definition can vary wildly. Consider two cases. Both have 100 bitcoins, 100 transactions a day and all non-hodled bitcoins are spent each day. The first has no hodled bitcoins, the second 50 hodled bitcoins. The first has a velocity of bitcoin of 1 transaction per day, the second is 0.5 per day.
I want a definition of velocity of bitcoin that is not impacted by changes in hodling. I did consider doing this analysis through changes in velocity but the final formula is easier to understand if we find a definition of velocity of bitcoin that is independent of the level of hodling.
The definition that achieves this is (Length of Time)/(Average length of time to complete transaction). When there is no hodling the two definitions agree but the new definition is unchanged by any rise or fall in the level of hodling, which is what we need. From this point on when I refer to the velocity of bitcoin I am referring to the second definition.
The actual time to complete a bitcoin transaction seems to be over a week. In an interview one vendor claimed that it took one week for the bitcoin to be released from escrow and longer to convert it to actual money.
Intuitive argument Assume that the amount of drugs sold on darknet markets changes little from week to week. If the price of bitcoin doubles over the week then the number of bitcoins flowing through the darknet markets will halve. So where have the bitcoins gone? Drug buyers and sellers don’t have them. The only option is hodlers. In fact, it was the hodlers buying the bitcoins that caused the price to change.
Formula The conventional formula for the relationship between velocity of money (V), nominal amount of money (M), price level (P) and real economic activity (Q) is
V*M = P*Q
I am going to change that equation slightly so it now concerns the velocity of bitcoin (V), the total number of bitcoins (M), the price level of bitcoin (P), the total value in fiat of all economic transactions (Q) and the proportion of bitcoins that are hodled (h). If h*M bitcoins are being hodled then there are (1-h)*M bitcoins being used in economic transactions. The new equation is
V*(1-h)*M = P*Q
Next we isolate P:
P = V*(1-h)*M/Q
If the price level changes from 1 to 1.1 that means that there has been 10% inflation over the period and that the value of bitcoin has fallen. To find the value of a single bitcoin we have to take the reciprocal of P and that gives a formula for the true value of bitcoin:
1/P = Q/[V*(1-h)*M]
In the rest of the post when I write the price of bitcoin I mean the price bitcoin sells for on exchanges. I establish in the next section that this price must be close to the true value of bitcoin.
Equilibrium This section uses the flow of bitcoin model established earlier. We assume no activity from hodlers and that economic users do not hodl bitcoin (not true but it simplifies and does not hurt the model). Furthermore, we assume that all activity on the bitcoin exchanges happens, then all activity on the darknet markets happens. Drug sellers sell their bitcoin to drug buyers, then drug buyers use the bitcoin to buy drugs on the darknet markets. Neither the exchanges or the darknet markets charge commissions. I use specific numbers but my reasoning is easily generalizable.
To establish why the equation is true we must consider what happens if the actual price is higher or lower than the price given by the formula. First let us suppose that the price is lower than the price predicted by the formula. Over the time period of a day suppose that Q = 100 (so $100 worth of transactions a day), V = 1 (transactions take a day), M = 100 (100 bitcoins) and h = 0.5 (50 bitcoins are hodled). This gives a predicted price of $2. Suppose the price is instead $1.
Every day there are $100 worth of drugs available to be sold and buyers willing to buy $100 worth of drugs. At a price of $1 and with only 50 bitcoins available for economic use each day that means that only $50 worth of drugs can be sold. This would drop Q to 50 and immediately correct the equation.
However, there are buyers and sellers who want more drug dealing than that. Some buyers are not going to be able to get their drugs given the current price. Some of them will be willing to pay higher prices for bitcoin to guarantee they can have their drugs. Suppose that the drug sellers have 50 bitcoins (hodlers also have 50). They want to sell their 50 bitcoins to drug buyers on an exchange. Some drug buyers then bid the price of bitcoin up to $1.10 (for example). This benefits other drug buyers as now $55 worth of drug transactions can take place each day. In this way, the price will be bid up to $2, the equilibrium price.
If the price is $1 and the drug buyers have the 50 bitcoins then they will spend the bitcoins to buy $50 worth of drugs and then we are in the situation above.
Now suppose the reverse happens and the actual price is higher than the predicted price. Let the actual price be $4, with all the same example values from the previous example, so the predicted price is $2. On the exchange drug sellers have 50 bitcoins worth $200 to sell. Drug buyers want to buy $100 worth of bitcoin. At this price only 25 bitcoins are sold. To ensure they sell more of their bitcoin, drug buyers bid down the price. If the price does not immediately reach $2 then the left-over bitcoins will be held by the drug sellers until the next day when the price will be bid down again.
The drug sellers holding bitcoin for a few extra days is not the same as hodling because they are actively trying to sell them on an exchange but they haven’t because the price isn’t in equilibrium. They could instead decide to sell only 25 bitcoins and hodl the other 25. This would raise h to 0.75 and the price would be in equilibrium again.
Now suppose that the drug buyers have 50 bitcoins and the price is $4. Then $100 worth of drugs are bought with 25 bitcoins. The drug sellers will not be able to sell their bitcoin as drug buyers already have enough bitcoin to buy the next round of drugs they want. The drug buyers spend their last 25 bitcoin and drug sellers now have 50 bitcoins and the situation is as above.
In conclusion, the price of Bitcoin is fundamentally determined by speculators and brought into equilibrium by criminals.
Inflows and Outflows of Hodling The previous section treated the level of hodling as constant, except when drug buyers or sellers decide to hodl extra bitcoins that are in their possession. Now we will treat the amount of hodled bitcoins as changing. The next topic to consider is the relationship between filthy fiat spent to hodl bitcoins and the bitcoin price.
To calculate how much it costs to raise the hodl ratio from 0 to h we assume that the bitcoins are bought continuously. We integrate the function Q/[M*V*(1-t/M)] between 0 and h*M. The result is (Q/V)ln[1/(1-h)].
To double the price of bitcoin by taking h from 0 to 0.5 will cost (Q/V)ln(2). In fact, it will always cost this amount to double the price of bitcoin as we can see by finding the difference between the total value of hodled bitcoin when we consider hodling levels of h and (h+1)/2.
This means that the price of bitcoin rises exponentially when a constant amount of new money buys bitcoin to hodl. I would illustrate this with a log-scale graph but I don’t know where to find one. It also means that the market capitalisation of a cryptocurrency gives very little idea about how much the cryptocurrency is worth. It is an impossibility for all hodlers to receive the Actual Money that they think their bitcoin is worth.
Volatility People hoping to get rich and their buying and selling bitcoin is what causes bitcoin’s extreme volatility. Theoretically this could be stopped if there was a bank where hodlers could deposit their bitcoins and earn interest. However, for this to work would require the existence of a bitcoin bank which is not a Ponzi which seems like an unlikely outcome.
Hodling Gold A quick digression into gold, but I suspect someone has already thought of what follows. We can consider gold like a conventional commodity with conventional supply and demand curves (the real world for all commodities is more complicated but this is going to be quick). But people also hodl gold. If hodlers decide to buy $100 million worth of gold produced in the year, then that will change the equilibrium price. The new price is such that the difference between the quantity demanded by non-hodlers and the quantity supplied at that price multiplied by the price is 100 million.
If the overall level of hodling declines then the reverse happens. The hodlers sell an amount of gold, that amount is the difference between the amount supplied and demanded. The hodlers earn that amount multiplied by the new lower price. (I assumed people bought a fiat amount of gold and sold a volume of gold to make things easier).
Without another hodler to take on the gold or an improvement in market conditions, the hodlers are guaranteed a loss. To make a profit hodling gold you need there to be hodlers to sell it on to (or an improvement in the underlying factors). It follows that all the gold hodled in the world today cannot be sold without causing the fundamentals of gold to collapse. With 40% of the gold produced in 2017 being hodled this will eventually become a significant issue.
Full Reserve Banking Another place where we can consider the impact of hodling is full reserve banking. It is a form of banking where banks are required to have cash on hand equal to the full amount in all demand deposit accounts. The bank does not lend this money. This contrasts with the present system where banks are only required to have a certain fraction of this amount on hand, called fractional reserve banking. Money in a fractional reserve bank account is not being hodled (or is, but to a more limited degree) as it is being lent on to other people and it is generating income for the depositor.
Deposits under full reserve banking are hodling. They are like cash stuffed under a mattress but have better security. In a recession people increase their saving rates. Much of this additional saving will be in liquid assets because of fears of economic trouble. This rise in deposits under full reserve is an increase in hodled cash which then causes deflation. This is a big problem in a recession. (Somebody else has probably already made this observation).
Velocity and Value Consider the equation of bitcoin’s value again. Notice that the value increases when V decreases. Which means that the length of time to complete a transaction has increased. Bitcoin is an asset and a currency and its value as an asset increases as the length of time it takes to complete a transaction increases. This is a minor bit of stupidity which surprised me but seems obvious in retrospect as if bitcoins take longer to be processed then they must be worth more so that all transactions can happen. (This is assuming that a decrease in V does not also cause a decrease in Q which might be caused by drug buyers and sellers switching to a different cryptocurrency).
Hodler Behavior With one exception which I might make in another post I make no assumptions about hodler behaviour. I think they are buying and selling with no rational basis. But there are two rational reasons why someone would expect the price of bitcoin to rise: increased economic activity using the cryptocurrency in the darknet markets or an increased level of hodling in the future. The DNM is an actual economic activity but due to its illegality knowing anything about the amounts involved is impossible for almost everyone as is predicting their trends. Future hodling levels are also impossible to predict, unless you run a pump and dump. We can’t expect any sort of rational behavior from hodlers.
Nakamoto Scheme Preston Byrne developed the concept of a Nakamoto Scheme to describe cryptocurrencies because of how they differed from Ponzis and pyramid schemes. While bitcoin has been frequently called a Ponzi or pyramid scheme it is clearly something different. There are no “dividends” paid or any sort of organised structure. There are similarities, notably early adopters make their money at the expense of later adopters. Like in pyramid schemes hodlers try to convince new people to join in.
It is best to consider bitcoin as a type of asset which is uniquely suited for a pump and dump. When hodlers buy bitcoin, and encourage others to do the same (the pump) the fundamental price of bitcoin really is raised by these actions which helps the pump.
To add to Byrne’s work, we should put the properties of cryptocurrency assets at the centre of the scheme. A Nakamoto scheme works like this: first create a cryptocurrency and keep most of it for yourself. Then release it and try to get as many other people hodling as possible and try to get the darknet markets to adopt it (I’m looking at you Monero). This increases the fundamental value of the asset. Then dump your hodlings. Pocket the actual money. This is probably legal right now. But I’m not a law-knowing person.
For the hodler the Nakamoto scheme is like going to a party. You arrive and leave later on. If there are more people at the party when you leave compared to when you arrived then you’ve made a profit. There is also drug dealing going on at the party. The change in the level of drug dealing also impacts your profits. You have to try and get more people to come to the party and be careful of everyone else at the party who have the exact same incentives as you. It is a weird new form of scam.
Lower bound on price While the price of bitcoin can theoretically be infinitely high there is a lower bound on the price when the hodling ratio is zero. For given levels of Q, V and M the value of bitcoin can never go below Q/[V*M] (the highest possible price for bitcoin is when 1 satoshi is equal to the value of a transaction).
Some bitcoins have been permanently lost due to people losing their wallet keys or bitcoins being sent to the wrong address. If we suppose that H is the proportion of coins that have been permanently lost then the actual lower bound is Q/[V*(1-H)*M]. Note that a hodler losing their coins does not change the present fundamental value of bitcoin.
What could cause bitcoin’s price to go lower? Besides a mass hodler sell-off the obvious reason is a permanent decline in Q. What could cause this? Law enforcement have successfully shut down many darknet markets but others have replaced them quickly. What could really hurt darknet markets is increased government scrutiny of exchanges. When governments realise that bitcoin has no use beyond criminal transactions and speculation they might decide to treat every bitcoin transaction as inherently suspicious and regulate exchanges heavily. This will make bitcoin much harder to use for criminal transactions and thus greatly decrease Q and the value of bitcoin.
Previous work This post is not entirely original. Satoshi himself said that if a bitcoin user wanted to give a donation to everyone else then they should delete the keys to their wallet and increase the value of everybody else’s bitcoins. I realised that someone who hodled a bitcoin would temporarily have the same effect.
More significantly Joseph C Wang came up with a formula very similar to mine. A significant difference is that he thought increased economic activity with bitcoin would not cause an increase in bitcoin’s value but an increase in its velocity. My model has nominal prices of drugs in bitcoin falling when Q increases. Wang has prices remaining the same and the velocity of bitcoin increasing to handle the extra transactions. I developed my formula before I became aware of Wang’s work.
Further Topics This post is over 4000 words so I have not gone into depth on a few subjects like the costs of block rewards (higher than you think), shocks like darknet market shutdowns, why bitcoin can’t fall to a liquidity trap, how to value a cryptocurrency that isn’t being used for economic transactions and why it makes sense that bitcoin and bcash had a higher combined value at the time of the fork compared to bitcoin alone. If there is demand I’ll put together a second post which will cover these issues.
submitted by GBerkeley1734 to Buttcoin [link] [comments]

New rule! Also are cryptocurrencies an investment, will there be a crash? Everything answered here!

This is going to be the only crypto post for now and an announcement:
Rule 6: Bitcoins & cryptocurrenies should be discussed in CryptoCurrency. Posts regarding this topic will be automatically removed.
If there's a stock correlated with cryptocurrencies, like coinbase going IPO, then that's fine, you might have to message the mods after posting to have it approved, no big deal.
Also if you're questioning whether something is an investment or not, just search for it on personalfinance. For general currency trading strategies, see forex .
If you're wondering if bitcoins are an investment or if there will be a crash, read on.

Are cryptocurrencies an investment?

This post is going to deal with bitcoins & cryptocurrencies as an investment... they're more speculative. All currencies are speculative mostly due to how the forex market works, but more because of exchange rates between countries keep currencies balanced (including inflation, country debt, interest rates, political & economic stability, etc), so you can only profit in price fluctuations.
Sure you could buy the currency of a depressed country, like Mexico decades ago, and then hold in the hopes it'll go up (which it did for Mexico), but that's also speculation (no one knew Mexico would pay off so much debt).
Bitcoins are also affected by other countries' currency values, but more so by the future expectation of legitimacy, world wide adoption, limited gains from mining, and eventual limit in supply. But at any given moment the United States could pay off more debt, raise interest rates to reduce inflation (or cause deflation), grow GDP, or even reduce the supply of USD all of which would increase the value of USD (keep in mind bitcoins can't do any of these things).
Far too many people are treating cryptocoins as an investment because currently (June 5th 2017) a lot of crypto investors are worth a lot of money, god bless you people, so this post will also help you determine if we're headed for a crypto crash and maybe you can keep those profits.

Should I invest in cryptocurrencies?

Understand that an investment is something you hope will go up in the future or provide income, both of which for the long term vs speculation which profits on short term inefficiencies.
Speculative securities are typically commodities, options, bonds, and currencies, but also stocks that are volatile enough to give you extreme returns or extreme loses.

Examples of investments:

Examples of speculation:

Reducing the risk of speculation

Typically for speculation you reduce risk by reducing your trade size and timeframe, but since you're trying to invest into something that is speculative, you can try:
Asset allocation, a strategy that reduces risk.. If you're 80% stocks, 15% bonds, 4% gold, and 1% bitcoins, if something were to happen to bitcoins, you still have 99% of your money.
But even very aggressive long term portfolios leave speculation out completely and just go 100% stocks because stocks benefit from growth while speculative securities like gold benefit from global turmoil in the short term. Only mid risk & mid term portfolios can take advantage of gold's speculative returns.
I also mention asset allocation because many crypto investors have been using this strategy on a portfolio of 100% crypto coins, but that doesn't help you reduce the overall risk of crypto coins, you're just reducing the risk of 1 speculative asset with another speculative asset. 100% crypto portfolio would face the same risks such as being made illegal, IRS aggressively hunting down crypto profits, a drop in correlated coin markets, or just a loss of popularity would all cause a sell off. Even the USD or Chinese currencies becoming more valuable would reduce the value of crypto coins.

Should I buy coins right now?

Cryptocoins are a better investment after a period of consolidation when volatility has stabilized:

Bitcoin 2013/2014 speculation, chart

Bitcoin 2015 consolidation, chart

Source Bitstamp exchange, while the volume is #2 to GDAX, Bitstamp is better to look at for historical price/data, more charts here.

RSI & MACD key for above charts and primer

Analyzing overbought signals

So the first chart above have RSI & MACD screaming that bitcoin is overbought and you shouldn't invest in 2013/2014.
The black squares in the 2nd chart show consolidation and reduced volatility, a "better" time to invest. If you were trading short term, it would be a whole different story, and there would be opportunities to buy & short, but since this is written for investing, the small overbought signals are ignored, so if you were to buy Bitcoin at $300 inside the first blacksquare (2nd chart) and then it suddenly drops to 25%, it's okay because the volatility is much lower compared to previous price movements (nothing compared to 80% loss in the 1st chart). Any investor would tell you a 25% drop is terrible, but bitcoins are speculative and that kind of drop is pretty damn good for this level of volatility.

Nothing goes straight up forever

and anything that comes near this vertical incline will eventually lose 80% to near 100%, always happens, it's usually preceded by emotions (price euphoria), attention, and increased volume, all classic signs that something is becoming riskier.
Other speculative securities gaining multiples and then losing 80% to near 100% of value:

Notable comments on reddit:

*This is just to get you guys looking at different subs on this topic, and yeah it's mostly anti-crypto, but don't let that discourage you.

Is Bitcoin going to crash?

Maybe, the signals are getting louder, you tell me: The only chart you wanted to see this entire time.
So based on the above chart, is bitcoin overbought? MACD levels are the same as 2013's crash, but the increased in value is around 4.3x or 2.4x (depending on which you look at), so maybe we'll see another spike before a crash, I don't know, it's up to interpretation right now. There's the emotional price levels of 3000 and 4000 that we might have no problem getting to in an overbought environment before a correction. And how big will the correction be? I think 80%, but it very well could be around 50% down to $1200, the previous level of resistance which would become support.
I put everything above in its own wiki here.
Well I hope that helps everyone. Sorry to anyone that may feel butthurt on classifying cryptocoins as speculation, I hope you understand the facts. Feel free to argue or agree with this. If I made any mistakes and you point them out, I'll correct them and give you credit for it in an update to this post and the wiki.
Also the automod will is just going to blanket remove posts (not comments) with the following keywords {crypto, bitcoin, btc, etherium, altcoin} (see update 4 below) (this will eventually get relaxed if Coinbase ever IPOs) and then it'll send the user this message:
"Sorry your post[link] was removed in stocks because of rule 6: Bitcoins & cryptocurrenies should be discussed in CryptoCurrency. You can find more information in our are-cryptocurrencies-investments wiki. If you're trying to discuss a non-OTC stock related to cryptocoins like Coinbase IPO, or this was just a mistake, message the mods and they'll approve your post, thanks."
Update: Created wiki, added relevant websites and sub reddits. Also turned on automod reply.
Update2: those relavant websites and subreddits I put into the wiki, thanks u/dross99 for recommending ethereum

Relevant websites/wikis

Relevant subreddits

  • CryptoCurrency - main sub to learn about all bit & altcoins
  • ethtrader - trading eth
  • ethereum - for more eth information
  • btc - the place to have bitcoin discussions or r/CryptoCurrency; while Bitcoin does have a lot of information on Bitcoins in general, you'll find many reddit subs completely opposed to Bitcoin for heavy censorship of discussions, especially those critical of bitcoins, so you're better off reading the sub's wikis and discussing bitcoins in btc & r/CryptoCurrency
  • personalfinance
Update3: Shoutout to the mods on CryptoCurrency
Update4: Updated auto mod keywords, it's not a blanket catch all, a little completed to understand if you don't know regex but it looks like this
"crypto ?(trading|investing)","(should(| I)|could(| I)|can(| I)|how to|is it worth) (buy|sell|mine|min)(|ing) (btc|btcs|bitcoin|ether|etherium|eth|litecoin|ripple|altcoin)" 
submitted by provoko to stocks [link] [comments]

When the title is "The Federal Reserve is such a scam," and the link goes to YouTube, you know it's going to be good

The whole thread is a pile of rage-vomit inducing nonsense, but that's to be expected when it hits the badecon trifecta:
  1. Involves Bitcoin - Check!
  2. Talks about the Fed - Check!
  3. Links to YouTube - Check!
  4. Bonus: OP made the YouTube video in question
That said, I'm going to focus on just one post by the OP:
The problem is that printing more money steals from the savers and favors the lenders. It's immoral and it's straight up fraud, and makes it damn hard to save for retirement. The fresh money is not fairly distributed and tend to inflate the housing market. My understanding is that when interests go back up, the housing market(bubble) contracts, and the money is "released" and inflation runs wild.
Let's go through this line by line:
The problem is that printing more money steals from the savers and favors the lenders.
Inflation, which can be caused by printing money does reduce the real value of cash-under-the-mattress savings. In that sense, it does act as a penalty for those who would remove their savings from the economy. That is not the same as "stealing from savers." There are simple, no risk, inflation-beating ways to save such as investing in intermediate term treasuries or (in a tax-free account, e.g. a Roth IRA) TIPS. There are many ETFs that do this for a very small (e.g. <10bps) management fee to save you the trouble of re-investing the coupons. Furthermore, moderate inflation acts as a buffer against deflation with all the problems that carries. One could make a quite reasonable argument that, even viewed as a tax, controlled inflation is basically an insurance premium (i.e. pay 2% to avoid potential catastrophic issues down the line) that will be refunded (I am a big Fisher fan) if you just keep your money in the economy instead of hoarding it in a dragon pile under your mattress.
Now, let's address the part about favoring lenders. This is just plain silly. First, the expected rate of inflation is (or at least should be) built into the interest rate on a loan. Continuously compounded, the market rate on a loan should be approximately (expected rate of inflation) + (risk premium) + (minimum acceptable real return). Known steady inflation doesn't benefit anybody in the borrower-lender relationship; it's just a factor in determining the fair interest rate. Accelerating inflation on the other hand helps the borrower in fixed rate (and even adjustable rate) loans as it reduces the real burden of his debt.
Now, on to the next!
It's immoral and it's straight up fraud, and makes it damn hard to save for retirement.
If he was right about it's being theft, I'd agree that theft is immoral. However, that is not the case. I don't even know where fraud would come in here. Nobody guaranteed you that a dollar will always have constant purchasing power; you were not defrauded. Furthermore, there's nothing stopping you from being paid in an asset of your choice if should so desire. That is a matter between you and your employer. If you want inflation protection, ask to be paid in TIPS or barrels of oil or BTC or .
Please don't ask me to explain his assertion that steady inflation "makes it damn hard to save for retirement." Just invest your savings in a diversified portfolio of income (e.g. dividend or interest) generating assets and you'll do fine because, and I'm going to repeat myself because I can't emphasize this enough, expected inflation is factored in to the market price of assets. Other investors are semi-rational too. They worry about inflation too. And they too are going to consider their inflation expectations when they buy assets. This is why TIPS have a lower nominal yield than vanilla treasuries.
The only partial truth in his statements would be that inflation shocks hurt savers because that devaluation is not included in asset prices (tautologically). However, spiking (or plummeting) inflation mean the Fed is failing in its mandate. Should that happen, it wouldn't be a scam, it would be a failure, but fortunately we've had pretty steady inflation for a while now.
The fresh money is not fairly distributed and tend to inflate the housing market.
Sources? Inflation was not particularly high during the most recent housing bubble, nor was money being "printed" at a particularly rapid rate. In fact, money supply growth was, broadly speaking, decelerating from 2000-2005. But why let evidence get in the way of a good rant?
My understanding is that when interests go back up, the housing market(bubble) contracts, and the money is "released" and inflation runs wild.
There is so much going wrong here, I don't even know where to begin, so let's just go in order.
when interests go back up
Does he mean, "when the Fed allows interest rates to rise?" Because, if not, he's more or less positing a complete failure of the Federal Reserve's main tool. And if that is what he meant, then it's probably safe to say that the Federal Reserve would do this step-by-step to allow the market to adjust without causing a huge shock.
when interests go back up, the housing market(bubble) contracts
This is probably true. By increasing the total cost of a mortgage, higher interest rates should depress real estate prices. But wait!
and the money is "released" and inflation runs wild.
How does depressing values release money? It's like he thinks of asset bubbles like pimples: when you pop them stuff comes out (money in this case). That is not what happens; the value is just gone, you don't get your money back, and there is no flood of cash in the economy driving up prices. I mean think about this for a second (before we get to the actual data). He's asserting that a precipitous fall in prices should cause inflation. If that's not a contradiction, I don't know what is. Just to be thorough though, let's look at the CPI during that most recent housing bubble collapse. See the big drop? That's deflation (albeit rapidly corrected deflation), not inflation. What I really love here though is the suggestion that increasing interest rates causes inflation. Because, you know that's totally how Volcker pushed down inflation in the 80s: by dropping interest rates to zero, right? It amazes me how silly this is: higher interest rates provide a higher incentive for investment, thus reducing current consumption, which should in turn reduce prices (because there is less demand).
I feel like I should close with a good, stinging insult here, but after going though that thread again, I'm actually a little ashamed that I am, genetically speaking, 99.9% identical to these people, and I just don't want to think about it anymore; it's just too depressing.
submitted by ajmarks to badeconomics [link] [comments]

[Serious about future]Deflation & How tipping is discouraging people to invest into doge. This will get burried away anyway, but lets try.

English is not my mother language, please keep that in mind for possible mistakes!
We got a great community over here, I've been making quite some posts about being serious altough the 1d=1d mentality. This post will get burried again but welp, lets try this again. I've never came to doge for a 'Quick buck'. I've joined the community after watching some encouraging videos as: https://www.youtube.com/watch?v=T9I-UA4IBOc and https://www.youtube.com/watch?v=000al7ru3ms. And after watching the community I fellt like we are family as shibes.
At the moment our supply of doge is getting out of control. For the new shibes: http://doge.yottabyte.nu/ if you watch beneath the graph you'll see a green and red line. The green line indicates our demand and the red line our supply. Like you can see the red line is way higher in comparisation with the green line.
You could speculate that the rise of the bitcoin gives lots of negative influence on the increasing supply, but there are lots of other reasons why we keep getting increasing supply.
We spend way to much dogecoin without buying it back. For example the t-shirts for another race at NASCAR. Altough Josh is a great guy, we just dropped lots of doge by spending on t-shirts. Multipoolers like wafflepool who has 70% of our hash are dropping doges like flies on the market. I'm also concerned why we take the risk of giving 1 pool a majority of our hash.
Every day I see another charity on the doge reddit, I'm cool with all of that but the problem is that we keep dropping doge for fiat on the market without buying it back. I'm well aware that some shibes don't have the money for buying dogecoins but if we don't invest we'll keep dropping and dropping to the point where waves of people will panic sell. I want this community to keep excisting, we can keep raising our morale with 1d=1d. But how will we fund a charity if our coin deflates to 0.000001 for example (extreme example btw).
I love this community for many reasons like our kindness and generousity. People love to tip in this reddit, and I like this idea but it also has some downsides. Some people who can invest (maybe 1-5€/$) will be discouraged because they get free money from tipping. I don't want tipping to end for sure, but I'm trying to be realistic here and think about all things which can hurt doge.
We are 86600 shibes strong as we speak and I think its time to secure our own coin instead of making charity after charity and funding race after race if we can't control our own supply and demand. In my opinion, this is what we should focus for:
I know that most of you guys don't want to have negative posts but we can't just hold onto the motto 1 doge = 1 doge, with a stronger economy we could achieve so much more (charity's, sponsoring, etc).
At the moment I only possess 1m doge, and I will not panic sell it away but we'll have to decide our future in the next months.
submitted by iLajoss to dogecoin [link] [comments]

Adam Back & Greg Maxwell are experts in mathematics and engineering, but not in markets and economics. They should not be in charge of "central planning" for things like "max blocksize". They're desperately attempting to prevent the market from deciding on this. But it *will*, despite their efforts.

Adam Back apparently missed the boat on being an early adopter, even after he was personally informed about Bitcoin in an email from Satoshi.
So Adam didn't mine or buy when bitcoins were cheap.
And he didn't join Bitcoin's Github repo until the price was at an all-time high.
He did invent HashCash, and on his Twitter page he proudly claims that "Bitcoin is just HashCash plus inflation control."
But even with all his knowledge of math and cryptography, he obviously did not understand enough about markets and economics - so he missed the boat on Bitcoin - and now he's working overtime to try to make up for his big mistake, with $21+55 million in venture-capital fiat backing him and his new company, Blockstream (founded in November 2014).
Meanwhile, a lot of the rest of us, without a PhD in math and crypto, were actually smarter than Adam about markets and economics.
And this is really the heart of the matter in these ongoing debates we're still forced to keep having with him.
So now it actually might make a certain amount of economic sense for us to spend some of our time trying to get adam3us Adam Back (and nullc Gregory Maxwell) to stop hijacking our Bitcoin codebase.
Satoshi didn't give the Bitcoin repo to a couple of economically clueless C/C++ devs so that they could cripple it by imposing artificial scarcity on blockchain capacity.
Satoshi was against central economic planners, and he gave Bitcoin to the world so that it could grow naturally as a decentralized, market-based emergent phenomenon.
Adam Back didn't understand the economics of Bitcoin back then - and he still doesn't understand it now.
And now we're also discovering that he apparently has a very weak understanding of legal concepts as well.
And that he also has a very weak understanding of negotiating techniques as well.
Who is he to tell us we should not do simple "max blocksize"-based scaling now - simply because he might have some pie-in-the-sky Rube-Goldberg-contraption solution months or years down the road?
He hasn't even figured out how to do decentralized path-finding in his precious Lightning Network.
So really what he's saying is:
I have half a napkin sketch here for a complicated expensive Rube-Goldberg-contraption solution with a cool name "Lightning Network"...
which might work several months or years down the road...
except I'm still stuck on the decentralized path-finding part...
but that's only a detail!
just like that little detail of "inflation control" which I was also too dumb to add to HashCash for years and years...
and which I was also too dumb to even recognize when someone shoved a working implementation of it in my face and told me I might be able to get rich off of it...
So trust me...
My solution will be much safer than that "other" ultra-simple KISS solution (Classic)...
which only involved changing a 1 MB to a 2 MB in some code, based on empirical tests which showed that the miners and their infrastructure would actually already probably support as much as 3 MB or 4 MB...
and which is already smoothly running on over 1,000 nodes on the network!
That's his roadmap: pie-in-the-sky, a day late and a dollar short.
That's what he has been trying to force on the community for over a year now - relying on censorship of online forums and international congresses, relying on spreading lies and FUD - and now even making vague ridiculous legal threats...
...but we still won't be intimidated by him, even after a year of his FUD and lies, with his PhD and his $21+55 million in VC backing.
Because he appears to be just plain wrong again.
Just like he was wrong about Bitcoin when he first heard about it.
Adam Back needs to face the simple fact that he does not understand how markets and economics work in the real world.
And he also evidently does not understand how negotiating and law and open-source projects work in the real world.
If he didn't have Theymos theymos supporting him via censorship, and austindhill Austin Hill and the other venture capitalists backing him with millions of dollars, then Adam Back would probably be just another unknown Bitcoin researcher right now, toiling away over yet another possible scaling solution candidate which nobody was paying much attention to yet, and which might make a splash a few months or years down the road (provided he eventually figures out that one nagging little detail about how to add the "decentralized path-finding"!).
In the meantime, Adam Back has hijacked our code to use as his own little pet C/C++ crypto programming project, for his maybe-someday scaling solution - and he is doing everything he can to suppress Satoshi's original, much simpler scaling plan.
Adam is all impeding Bitcoin's natural growth in adoption and price, through:
Transactions vs. Price graph showed amazingly tight correlation from 2011 to 2014. Then Blockstream was founded in November 2014 - and the correlation decoupled and the price stagnated.
Seriously, look closely at the graph in that imgur link:
https://imgur.com/jLnrOuK
What's going on in that graph?
So it seems logical to formulate the following hypothesis:
This, in a nutshell, is the hypothesis which the market is eager to test.
Via a hard-fork.
Which was not controversial to anyone in the Bitcoin community previously.
Including Satoshi Nakamoto:
Satoshi Nakamoto, October 04, 2010, 07:48:40 PM "It can be phased in, like: if (blocknumber > 115000) maxblocksize = largerlimit / It can start being in versions way ahead, so by the time it reaches that block number and goes into effect, the older versions that don't have it are already obsolete."
https://np.reddit.com/btc/comments/3wo9pb/satoshi_nakamoto_october_04_2010_074840_pm_it_can/
Including adam3us Adam Back:
Adam Back: 2MB now, 4MB in 2 years, 8MB in 4 years, then re-assess
https://np.reddit.com/Bitcoin/comments/3ihf2b/adam_back_2mb_now_4mb_in_2_years_8mb_in_4_years/
Including nullc Greg Maxwell:
"Even a year ago I said I though we could probably survive 2MB" - nullc
https://np.reddit.com/btc/comments/43mond/even_a_year_ago_i_said_i_though_we_could_probably/):
Including theymos Theymos:
Theymos: "Chain-forks [='hardforks'] are not inherently bad. If the network disagrees about a policy, a split is good. The better policy will win" ... "I disagree with the idea that changing the max block size is a violation of the 'Bitcoin currency guarantees'. Satoshi said it could be increased."
https://np.reddit.com/btc/comments/45zh9d/theymos_chainforks_hardforks_are_not_inherently/).
And the market probably will test this. As soon as it needs to.
Because Bitstream's $21+55 million in VC funding is just a drop in the bucket next to Bitcoin's $5-6 million dollars in market capitalization - which smart Bitcoin investors will do everything they can to preserve and increase.
The hubris and blindness of certain C/C++ programmers
In Adam's mind, he's probably a "good guy" - just some innocent programmer into crypto who thinks he understands Bitcoin and "knows best" how to scale it.
But he's wrong about the economics and scaling of Bitcoin now - just like he was wrong about the economics and scaling of Bitcoin back when he missed the boat on being an early adopter.
His vision back then (when he missed the boat) was too pessimistic - and his scaling plan right now (when he assents to the roadmap published by Gregory Maxwell) is too baroque (ie, needlessly complex) - and "too little, too late".
A self-fulfilling prophecy?
In some very real sense, there is a risk here that Adam's own pessimism about Bitcoin could turn into a self-fulfilling prophecy.
In other words, he never thought Bitcoin would succeed - and now maybe it really won't succeed, now that he has unfairly hijacked its main repo and is attempting to steer it in a direction which Satoshi clearly never intended.
It's even quite possible that there could be a subtle psychological phenomenon at play here: at some (unconscious) level, maybe Adam wants to prove that he was "right" when he missed the boat on Bitcoin because he thought it would never work.
After all, if Bitcoin fails (even due to him unfairly hijacking the code and the debate), then in some sense, it would be a kind of vindication for him.
Adam Back has simply never believed in Bitcoin and supported it the way most of the rest of us do. So he may (subconsciously) actually want to see it fail.
Subconscious "ego" issues may be at play.
There may be some complex, probably subconscious "ego" issues at play here.
I know this is a serious accusation - but after years of this foot-dragging and stonewalling from Adam, trying to strangle Bitcoin's natural growth, he shouldn't be surprised if people start accusing him (his ego, his blindness, his lack of understanding of markets and economics) of being one of the main risk factors which could seriously hurt Bitcoin.
This is probably a much more serious problem than he himself can probably ever comprehend. For it goes to one of his "blind spots" - which (by definition), he can never see - but the rest of the community can.
He thinks he's just some smart guy who is trying to help Bitcoin - and he is smart about certain things and he can help Bitcoin in certain ways.
For example, I was a big fan of Adam's back when I read his posts on bitcointalk.org about "homomorphic encryption" (which I guess now has been renamed as "Confidential Transactions" - "CT").
But, regarding his work on the so-called "Lightning Network", many people are still unconvinced on a few major points - eg:
  • LN would be quite complex and is still unproven, so we actually have no indication of whether it might not contain some minor but fatal flaw which will prevent it from working altogether;
  • In particular, there isn't even a "napkin sketch" or working concept for the most important component of LN - "decentralized path-finding":
https://np.reddit.com/bitcoin_uncensored/comments/3gjnmd/lightning_may_not_be_a_scaling_solution/
https://np.reddit.com/btc/comments/43sgqd/unullc_vs_buttcoiner_on_decentralized_routing_of/
https://np.reddit.com/btc/comments/43oi26/lightning_network_is_selling_as_a_decentralized/
  • It is simply unconscionable for Adam to oppose simpler "max blocksize"-based, on-chain scaling solutions now, apparently due to his unproven belief that a more complex off-chain and still-unimplemented scaling solution such as LN later would somehow be preferable (especially when LN still lacks a any plan for providing the key component of "decentralized path-finding").
Venture capitalists and censors have made Adam much more important than he should be.
If this were a "normal" or "traditional" flame war on a dev mailing list (ie, if there were no censorship from Theymos helping Adam, and no $21-55 million in VC helping Adam) - then the community would be ignoring Adam.
He'd be just another lonely math PhD toiling away on some half-baked pet project, ignored by the community instead of "leading" it.
So Adam (and Greg) are not smart about everything.
In particular, they do not appear to have a deep understanding how markets and economics work.
And we have proof of this - eg, in the form of:
Satoshi was an exception. He knew enough about markets and math, and enough about engineering and economics, to release the Bitcoin code which has worked almost flawlessly for 7 years now.
But guys like Adam and Greg are only good at engineering - they're terrible at economics.
As programmers, they have an engineer's mindset, where something is a "solution" only if it satisfies certain strict mathematical criteria.
But look around. A lot of technologies have become massively successful, despite being imperfect from the point of view of programming / mathematics, strictly speaking.
Just look at HTML / JavaScript / CSS - certainly not the greatest of languages in the opinions of many serious programmers - and yet here we are today, where they have become the de facto low-level languages which most of the world uses to interact on the Internet.
The "perfect" is the enemy of the "good".
The above saying captures much of the essence of the arguments continually being made against guys like Adam and Greg.
They don't understand how a solution which is merely "good enough" can actually take over the world.
They tend to "over-engineer" stuff, and they tend to ignore important issues about how markets and programs can interact in the real world.
In other words, they fail to understand that sometimes it's more important to get something "imperfect" out the door now, instead of taking too long to release something "perfect"...
... because time and tide waits for no man, and Bitcoin / Blockstream / Core are not the only cryptocurrency game in town.
If Adam and Greg can't provide the scaling which the market needs, when it needs it, then the market can and will look elsewhere.
This is why so many of us are arguing that (as paradoxical and deflating as it may feel for certain coders with massive egos) they don't actually always know best - and maybe, just maybe, Bitcoin would thrive even better if they would simply get out of the way and let the market decide certain things.
Coders often think they're the smartest guys in the room.
Many people involved in Bitcoin know that coders like Adam and Greg are used to thinking that they're the smartest guys in the room.
In particular, we know this because many of us have gone through this same experience in our own fields of expertise (but evidently most of us have acquired enough social skills and self awareness to be able to "compensate" for this much better than they have).
So we know how this can lead to a kind of hubris - where they simply automatically brush off and disregard the objections of "the unwashed masses" who happen to disagree with them.
Many of us also have had the experience of talking to "that C/C++ programmer guy" - in a class, at a seminar, at a party - and realizing that "he just doesn't get" many of the things that everyone else does get.
Why is why some of us continue to lecture Adam and Greg like this.
Because we know guys like them - and we know that they aren't as smart about everything as they think they are.
They should really sit down and seriously analyze a comment such as the following:
https://np.reddit.com/btc/comments/44qr31/gregory_maxwell_unullc_has_evidently_never_heard/czs7uis
He [Greg Maxwell] is not alone. Most of his team shares his ignorance.
Here's everything you need to know: The team considers the limit simply a question of engineering, and will silence discussion on its economic impact since "this is an engineering decision."
It's a joke. They are literally re-creating the technocracy of the Fed through a combination of computer science and a complete ignorance of the way the world works.
If ten smart guys in a room could outsmart the market, we wouldn't need Bitcoin.
~ tsontar
Adam and Greg probably read comments like that and just brush them off.
They probably think guys like tsontar are irrelevant.
They probably say to themselves: "That guy doesn't have a PhD in mathematics, and he doesn't know how to do C pointer arithmetic - so what can he possibly know about Bitcoin?"
But history has already shown that a lot of times, a non-mathematician, non-C-coder does know more about Bitcoin than a cryptography expert with a PhD in math.
Clearly, tsontar understands markets way better than adam3us or nullc.
Do they really grasp the seriousness of the criticism being leveled at them?
They are literally re-creating the technocracy of the Fed through a combination of computer science and a complete ignorance of the way the world works.
If ten smart guys in a room could outsmart the market, we wouldn't need Bitcoin.
https://np.reddit.com/btc/comments/44qr31/gregory_maxwell_unullc_has_evidently_never_heard/czs7uis
Do Adam and Greg really understand what this means?
Do they really understand what a serious indictment of their intellectual faculties this apparently off-handed remark really is?
These are the real issues now - issues about markets and economics.
And as we keep saying: if they don't understand the real issues, then they should please just get out of the way.
After months and months of them failing to mount any kind of intelligent response to such utterly scathing criticisms - and their insistence on closing their eyes and pretending that Bitcoin doesn't need a simple scaling solution as of "yesterday" - the Bitcoin-using public is finally figuring out that Adam and Greg cannot deliver what we need, when we need it.
One of the main things that the Bitcoin-using public doesn't want is the artificial "max blocksize" which Adam and Greg are stubbornly and blindly trying to force on us via the code repo which they hijacked from us.
One of the main things the Bitcoin-using public does want is for Bitcoin to be freed from the shackles of any artificial scarcity on the blockchain capacity, which guys like Adam and Greg insist on imposing upon it - in their utter cluelessness about how markets and economics and emergent phenomena actually work.
People's money is on the line. Taking our code back from them may actually be the most important job many of us have right now.
This isn't some kind of academic exercise, nor is it some kind of joke.
For many of us, this is dead serious.
There is currently $ 5-6 billion dollars of wealth on the line (and possibly much, much more someday).
And many people think that Adam and Greg are the main parties responsible for jeopardizing this massive wealth - with their arrogance and their obtuseness and their refusal to understand that they aren't smarter than the market.
So, most people's only hope now is that the market itself stop Adam and Greg from interfering in issues of markets and economics and simple scaling which are clearly beyond their comprehension - ie (to reiterate):
And after a year of their increasingly desperate FUD and lies and stone-walling and foot-dragging, it looks like the market is eventually going to simply route around them.
submitted by ydtm to btc [link] [comments]

Creating a new cryptocurrency --- based on Monero and IOTA

I would like to create a new crypto I'll call "Phoenix" based on ideas both from Monero and IOTA as well as some original(?) ideas.
Part of the idea is to mitigate price deflation of the cryptocurrency by having a tail emission which becomes harder as time passes --- but this part of the mining operation is not necessary for security. This is somewhat more like physical gold than most cryptocurrencies, that is, when the price of gold rises with respect to other goods (price deflation of goods in gold), mining gold becomes more profitable than some other investments, mining ramps up, this increases the supply of gold and pushes prices of goods (in gold) down.
Clearly the coin is not premined, since I want the above property, so why is it like IOTA? It uses a "tangle"/DAG (directed acyclic graph) for the most recent transactions. That is, the "tail" of the "chain" (we'll see later that I don't want a blockchain) is basically like an IOTA tangle --- with users verifying each others transactions at (generally) zero fee.
Why do I say just the "tail"? Because the job of the miners is to take all the transactions which have been fully validated (in the IOTA sense), i.e. those transactions which have a path to every tip of the tail, and create a block to update the ledger from those. (Miners serve much the same purpose as the "coordinator" of the IOTA network.)
However, I don't think it is necessary to store the entire blockchain --- this is quickly becoming a big task for Bitcoin. This "block" is simply used to update the shared ledger. The history of transactions need not be stored. Can you see why there wouldn't be a fork?
This is why I call the idea "Phoenix" --- the previous ledgers simply die and the record of transactions has a "tangled tail."
A few minor things I would like to see:
the symbol would be Φ (phi)
there would be no decimal amounts, typical denominations would be GΦ --- "gold Φ" (1,000,000,000 Φ), MΦ --- "silver Φ" (1,000,000 Φ), and KΦ --- "copper Φ" (1,000 Φ), obviously we expect a large number of coins
I would hope for privacy features like Monero, but I'm not certain they could be implemented with a "tangle". Still, there would be, in general, no blockchain, increasing privacy and fungibility some (though, there would be no way to prevent storage of all transactions). Scaling is helped by using the DAG/tangle as well as not storing the entire transaction history.
Comments? Are there some resources for creating coins (other than source code for current coins)? Would anyone be interested in development?
submitted by BM-2cTmRPoNMYhbUHkE5 to CryptoCurrency [link] [comments]

Deflation means no more debt

While it's becoming abundantly clear that I need to find a new subreddit to stalk, /Bitcoin has yet again provided me with material. In this episode, we have SearchForTruthNow2's assertion that
Bitcoin cannot prevent loaning [sic.] but discourages it due to deflation unlike fiat
For the sake of good-sportsmanship, I should note that my singling him out is a bit unfair since this is a sentiment that I have seen several times. And, to be fair, it should be admitted that deflationary shocks make debt harder to repay. However, the bitcoin-style expected deflation is something that can be easily factored into the terms of a loan. In fact, in a simple Fisher effect model, one would expect the (continuously compounded) interest rate on a loan to be (expected inflation) + (risk premium) + (minimum acceptable real profit). In other words, the difference between lending under 2% deflation and 2% inflation is that you just charge the guy 4% less. That is not a disincentive to lend. It is a disincentive to borrow at the same rate as one would borrow under different macro-economic circumstances. Further, at the risk of stereotyping, one might suspect that the typical payday loan customer (what's being discussed there, and whom I am assuming are not, typically speaking, the most financially savvy) would be more inclined to borrow at 14% under 2% deflation than at 18% under 2% inflation, because 14 < 18.
Now for the fiat part (because the Dunning-Krugernauts' constant use of that term to dismiss actual currency really grinds my gears): The currency's being asset-backed or fiat has nothing to do with debt. Behold, I present you with total US household mortgage debt as a fraction of GDP. Before the Nixon Shock in 1971, the USD was pegged to gold. Shockingly, real mortgage debt existed before then. Not only that, but one might reasonable look at the graph and suspect that debt creation has nothing to do with the currency's backing. Shocking!
Of course, what really confuses me here is why on earth would you want to eliminate borrowing? Imagine for a minute a world in which houses must be bought for cash, in which cities can't float bonds to build bridges, and companies can't take out loans to build factories.
This is not to suggest that there is nothing wrong with predatory lending (because there definitely, definitely is), but that Bitcoin and deflation are not magical economy wands that will suddenly make people engage in prudent financial planning.
Edit: Typos
submitted by ajmarks to badeconomics [link] [comments]

A false sense of deflation happening

I don't know how many others pay attention to the graphs some exchanges provide but I'm observing very odd trends
There are large posted orders for Bitcoins being put up for dollars above the going rate for a few seconds then being taking down. You don't see massive purchasing going through on the history tracker.
This massive demand near the going rate is causing a massive supply entering the market. When the orders get pulled the supply that recently entered the market does not and causing huge spikes downward. This is causing a false sense of deflation on Bitcoin.
Is anyone else noticing these events? I'm talking like 100-200+ coin orders instantly entering the market and seconds later disappearing and seconds after that huge quantities are sold which is causing bid dips in the value. I saw this happen during the $11k dip and seeing it again this weekend.
submitted by Rustyfaw to CoinBase [link] [comments]

My thought of Bitcoin's value. Should it appreciate faster than Gold?

I think we tend to overvalue its use as an apocalyptic hedge. How often do these events happen to what percent is in our investment portfolio?
Like Gold, both have a limited supply and will deflate. And with how little of it there is in the world, 6.1 billion ounces roughly, there is still plenty to buy.
I can only find a 100 year graph of gold and % increase per year on average isn't great. My assumption for this is because people would rather put most of their money into the stock market for higher risk and better returns.
For Bitcoin, barring the price being influenced subjectively because of hype, FUD, manipulation, etc. I can't see why it would be any different. My point is, using Bitcoin ONLY as a vehicle to hedge against another currencies value doesn't seem like a good investment.
Bitcoins use for easy P2P transactions is where most of its value comes from in my opinion. However, I don't know if I can see it become main stream enough for the majority of people to put more than 10% of their money in it.
What are your thoughts?
Disclaimer: I'm a Bitcoin hodler and own half my wife's gold jewelry
submitted by allofher to Bitcoin [link] [comments]

BITFINEX???? OPEN YOUR EYES!

Have you ever wondered why you can not find order books and graphs of Bitfinex on BTCUSDT pair on the web?
At present, 2,507,140,814 Theter from Bitfinex have been issued in circulation (or better, by a company created by Bitfinex)
Let's take a few steps back ..
2012 - iFinex, the company that becomes the parent company of Bitfinex and Tether, is founded in Hong Kong.
2013 - Bitfinex incorporates in Hong Kong. Phil Potter runs the company together with CEO Jan Ludovicus van der Velde and CFO Giancarlo Devasini.
July 2014 - Director of the Bitcoin Foundation and former child actor Brock Pierce announces Realcoin a cryptocurrency supported by the value in US dollars. Realcoin is built on Mastercoin (now called Omni), a protocol that works on Bitcoin. Pierce founded the company together with software engineer Craig Sellars and entrepreneur Reeve Collins.
September 2014 - Bitfinex operators Potter and Devasini establish Tether Limited in the British Virgin Islands but tell the public that Bitfinex and Tether are completely separate.
November 20, 2014 - Realcoin rebrands in "Tether", stating that he wants to avoid the association with "altcoins". At the same time, the company announces several partners, including Bitfinex. A few questions if Bitfinex actually bought Realcoin and simply wanted to hide the fact that an exchange was issuing dollarized tokens.
February 25, 2015 - Tether starts trading but the amount of USDT in circulation remains relatively flat throughout 2015 and 2016.
May 22, 2015 [19659002] - Bitfinex loses 1,500 bitcoins, worth $ 400,000 at the time, when its hot wallets, connected directly to the Internet, are hacked. The amount represents 0.06 percent of the company's total holdings. Bitfinex indica will absorb losses.
June 2, 2016 - The United States Futures Trade Commission (CFTC) fines Bitfinex $ 75,000 for the offer of off-exchange financed off-exchange retail products in bitcoins and other cryptocurrencies and for the non-registration as a merchant of a Futures Commission as required by the Commodity Exchange Act. In response, Bitfinex transfers its money from an omnibus account into multi-protected portfolios protected by BitGo.
August 2, 2016 - In the second - the biggest digital currency robber in history at the time, Bitfinex is hacked when a thief manages to escape with nearly 120,000 bitcoins, worth approximately $ 75 million at the moment. Bitfinex never reveals all the details of the hack but BitGo, the security company that had to sign the transactions, states that its servers have not been hacked.
6 August 2016 - Bitfinex "socializes" its losses from theft by announcing a 36 percent cut for almost all of its customers. In return, customers receive BFX tokens, initially valued at $ 1 each. Tokens can be exchanged or used to buy shares in iFinex, Bitfinex's parent company. Since no third-party verification is conducted, it is unclear whether Bitfinex is solvent at this time or simply trying to stay afloat.
September 2016 - Bitfinex announces Ledger Labs, a forensic blockchain company, to investigate the theft and perform a complete financial audit of its cryptocurrency and fiat assets; only public nevers see the results of the survey, and months later, Bitfinex admits that he has never actually hired Ledger Labs to perform an audit to begin with.
October 13, 2016 - Bitfinex allows customers to convert BFX token at a value of $ 1, into equities in iFinex. For many, who had seen the value of their BFX tokens fall well below $ 1 (a Redditor reported the price dropped to $ 0.30), the deal seems too good to be abandoned. Approximately one-third of all BFX tokens are converted from 1: 1 to RRT token.
March 31, 2017 - Wells Fargo, the last bank willing to process Bitfinex transactions, discontinues all services to Bitfinex and Tether, according to court documents in a lawsuit against Bitfinex against Wells Fargo later. Bitfinex is not a direct customer of Wells Fargo but a customer of four Taiwan-based banks that use Wells Fargo as its correspondent bank.
3 April 2017 - Bitfinex announces that it has paid off all the debt incurred in the August hack, redeeming all the dollarized BFX tokens issued during the haircut. BFX trading is stopped and all remaining BFX tokens are destroyed.
April 5, 2017 - Two days after announcing that the debt has been paid, Bitfinex files a lawsuit against Wells Fargo for interrupting his wire transfer. Tether is listed as a plaintiff. In addition to an injunction order, Bitfinex claims more than $ 75,000 in damages.
6 April 2017 - A pseudonym character known as "Bitfinex" debuts online. Start twisting accusing Bitfinex of creating bonds from nothing to pay debts. (In January 2017 only 10 million tether were in circulation, now there are 55 million.
11 April 2017 - Bitfinex and Tether voluntarily reject the case against Wells Fargo. Potter, the director of Bitfinex, admits later that they only hoped to gain time.
17 April 2017 - Following an announcement on cable delays, Bitfinex announces that it has been closed by its main banks in Taiwan. At this point, Bitfinex has lost all links with formal banking services and is being moved between a number of banks in other countries.
May 5, 2017 - After stating that he never actually hired Ledger Labs for an audit, commissioning Bitfinex Friedman LLP to complete a full audit of the financial statements. "A third-party audit is important for all Bitfinex stakeholders, and we are thrilled that Friedman will help us achieve this goal" - - - - - Bitfinex started blogging. His first blog post introduces a character calling "Spoofy." A video shows a trader (Spoofy) who makes a large bitcoin order on Bitfinex just to cancel the order as soon as the price of the bitcoin starts to go up. Mt. Gox, an exchange that managed 70% of all Bitcoin transactions worldwide before going bankrupt in 2014, was also accused of manipulating markets.
November 7, 2017 - leaked documents dubbed "Paradise Papers" reveal Bitfinex and Tether are managed by the same individuals. Until now, Tether and Bitfinex have insisted that the two operations were separate.
November 19, 2017 - Tether is hacked and $ 31 million (equivalent in US dollars) is moved from Tether's treasury portfolio and sent to an unauthorized Bitcoin address. Tether starts a difficult fork to prevent those funds from being spent.
December 1, 2017 - Bitfinex takes over the 5W in New York as a new public relations company.
December 2, 2017 - In a quarterly report, Bitfinex announces that it will no longer serve US customers because it is too expensive to serve them. However, the move, which began in August, follows a US crackdown on the Securities and Exchange Commission (SEC) on tokens generated by initial coin offerings (ICOs) that could be securities.
December 4, 2017 - Bitfinex takes over the Steptoe & Johnson law firm and threatens legal actions against critics. Bitfinex does not specify who exactly could sue, but the individual in question seems to be Bitfinex'ed the blogger who continues to accuse Bitfinex of manipulating markets and printing more cables than it can redeem.
6 December 2017 - The CFTC sends subpoenas to Bitfinex and Tether, Bloomberg Reports. The actual documents are not made public.
December 21, 2017 - Without making any formal announcement, Bitfinex suddenly seems to have closed all new account registrations. Those seeking to register for a new account are required for a mysterious code of reference, but there does not seem to be any reference code.
January 12, 2018 - After a month of closure to new registrations, Bitfinex announces it is reopening its doors, but now requires new customers to deposit $ 10,000 in fiat or cryptocurrency before they can start trading.
January 27, 2018 - Five months after the confirmation of the imminent verification, Tether starts with the Friedman LLP auditor. "Given the extremely detailed procedures that Friedman was undertaking for Tether's relatively straightforward balance sheet, it became clear that an audit would be unattainable within a reasonable time," says Tether from CoinDesk.
January 31, 2018 - In the first month of the year, Tether issues 850 million new tether, more than every month before.
Now 2,507,140,814 Theter....
Thanks to some calculation algorithms we managed to analyze the movements and transactions carried out on Bitfinex in greater detail and we discovered the following:
1) The pumps of the last weeks are initialized through the purchase of BTC made with the USDT exchange
2) BTC pump (due to the numerous existing BOTs, altcoins exchange pairs with BTC and the "enzyme mechanism") stimulates the purchase of altcoins!
3) attained certain price levels (and volume) the altcoins and bitcoins are deflated starting from Bitfinex on the market (the first sales take place on this platform causing a domino effect on other exchanges).
4) emptying takes place in fiat currency !!!!!!!!!
5) Bitfinex is liquidating its BTC: has sold 40,000 BTC in just 14 days (The ghost of Mt.Gox is a cover)! You do not have to believe me, you have to open this link
https://bitinfocharts.com/bitcoin/address/3D2oetdNuZUqQHPJmcMDDHYoqkyNVsFk9r
In practice with this mechanism it is possible to produce a non-existent digital currency (theter = 1 $?????), inflate prices with it and then empty investor's funds (fiat currencies).
Recent investigations (by SEC) on some ICOs could reveal that one or more altcoins were put into circulation by Bitfinex with indirect correlations.
PAY ATTENTION: The authorities are working on it and soon they could block these activities and you could find yourself with a handful of flies in your hand ..
Welcome to the biggest scam scheme in history!
submitted by VintexPlus to Bitcoin [link] [comments]

Bitcoin Trading Intelligence [09.01.15]

Hope all is well guys. Our third Intelligence report is out. Again, thank you all very much for the feedback on our last Bitcoin Trading Intelligence newsletter. We hope we were able to address some of the issues from last time. Feedback and any other comments are welcome.
If you like this and want more, you can now reserve your spot in our Bitcoin Trading Intelligence platform. We haven't figured out pricing for the course yet. I would appreciate if you guys took a look at the Bitcoin Trading Intelligence platform and let me know what you think is a fair price for this. BTCVIX is our trader and with his real time alerts subscribers have a chance of making some serious money
Bitcoin in August
August has witnessed the rapid devaluation of Bitcoin, accelerated by fundamental data and augmented by technical glitches. The possible forking on the minds of the Bitcoin community, the repeated blows following the Mt Gox disaster and the effects of the BitLicense have cast a bearish shadow over the market which resulted in a month that managed to breach significant lows.
“After the stunning price action of the last couple weeks we have seen BTCUSD grind up the traders seeing patterns that aren’t there, complete chopfest. Rather than whittling away hard earned profits remember NO position IS a position — just need to know when them time is. Just like me, many other traders in the Whaleclub believe that sometimes not trading is a right decision and people should appreciate that.” BTCVIX, Professional Bitcoin Trader
Post the flash crash last week, the market has tested 200 and has been on a correction curve ever since. With many countries calling for increased regulation, let’s see how market emotions fared last week.
Nigeria’s central bank has called for Bitcoin regulation in order to stop money laundering and avoid international penalties. Dr. Okwu Nnanna the governor of the financial system at Nigeria’s Central Bank has cited that cryptocurrencies have no borders and hence are an easy channel for money laundering and thus there is a need to monitor them. AB 1236, a proposed California law to regulate virtual currencies has faced lot of opposition from industry lawyers.
It has now been amended saying companies that take ‘full custody’ of the currency are to be licensed and the bill is being backed by other major companies who are mostly made up of software developers. Another important country to look out for whose ecommerce demographic can play a pivotal role in the development of bitcoin system would be India.
With major companies like Microsoft and IBM backing bitcoin based startups, the Governor of RBI has made it clear that cryptocurrencies are being observed for now and would be regulated in the future.
The collapse of Mt Gox has racked up many controversies and the latest one, the arrest of Mark Karpeles, is over the issue of a fresh warrant for allegations that he has pocketed over $2.6 million from the company funds of Mt Gox. While Japan’s cryptocurrency scenario is restructuring for the best after the impact of Mt Gox, the Japanese Government has decided to regulate cryptocurrencies so as to avoid the risk of money laundering and terrorist funding.
How these coordinated regulations among different countries would affect/aid the growth and development of bitcoin is to be seen. While the ‘one-off’ depreciation of the Chinese Yuan has beaten the stock markets down in the USA and China, BTC China’s Greg Wolfson has remarked that the corresponding dip in prices in bitcoin is not devastating and in the times of uncertainty just like Gold, people are turning towards bitcoin as their safe haven.
The immediate correction after the dip is being seen as people hedge their positions in bitcoin.
Meanwhile on the Korean front, things are looking bright with a new exchange traded fund (ETF) tracking the value of bitcoin planned for launch on Korea Exchange next year.
This news coupled with Korean Bitcoin Exchange ‘Korbit’ announcing the launch of Bitwire, which allows people to send money using Bitcoin to any Korean bank account in less than two hours, the bitcoin ecosystem in Korea is trending towards a positive position.
On the European continent, the sentiment is consolidating with the launch of Mycelium Gear with Cashila’s API being integrated, this enables merchants to accept bitcoins that are automatically converted to Euros.
The financial crisis in Greece is here to stay for some time and bitcoin services providers like Cubit are trying to do what they can to help. Cubit in coordination with BTC-Greece is helping Greek citizens move their money out of the country to business partners and suppliers.
The aim is to try and work around the various capital controls that have been enforced in Greece in the hope that some private businesses can get back up and running once more. They have plans to install 1000 ATMS in order to make the this work. Even in the Black Sea Basin there are more than 13,600 locations where you can access bitcoin related stores, ATM and service providers.
On a corporate front, things have been picking up pace with Intel expressing its intention to unify the Internet of Things with bitcoin transactions. World Wide Web creator Tim-Berners-Lee leads the W3C to establish online payment standards, including Bitcoin, another sign of positive acceptance.
UBS’s Alex Batlin’s statements about Blockchain, saying that the technology will be an opportunity or threat to companies like UBS basing on how quick they act on it, has once again clarified that the technology is here to stay and is slowly gaining traction.
Patrick Byrne, the founder of Overstock.com, has acquired a broker-dealer firm built deep into the DNA of Wall Street. When the technology at the center of the acquisition is switched on, Byrne said, it will mark the first time the decentralized ledger behind bitcoin is plugged directly into Wall Street. This way it will be possible to bridge the gap between bitcoin technology and the blockchain.
With Coinbase reaching a valuation of $1 billion, it is listed as one of the top 50 tech startups in the USA. Fortifying their market share, they have launched services to purchase bitcoins through debit cards and credit cards and most recently launched in Canada.
While the service providing companies are doing well, the exchanges have taken a back step last week. The Bitfinex trade engine was blamed for the flash crash and many people experienced problems with exiting their positions during the crash, Australian Exchange, iGot, halted their trading activity and this has led to angst among its traders and customers.
So in conclusion, it is fair to say this past week of has seen lots turmoil in bitcoin trading with loads of negative factors contributing to the market sentiment bearish.
Long Term Technical Analysis
On a weekly scale, the market has tested its long term support level at 200 and retraced quickly to 227. The bearish arc of this swing was a strong move ranging over a month, driven by fundamental factors. The Bollinger bands in the weekly chart still remain parallel showing that the market is in bounds and judging by the regression lines, is setting up for a bull trend after consolidation.
On a long term scale, RSI is approaching oversold region while MACD just took a bearish turn crossing the signal line. Since the market is yet to consolidate, taking a long term position right as of now wouldn’t be feasible. Short term trades around 224 region with stop loss around the lows of previous week’s candle, targeting 5 SMA would be feasible. Long term trades can be planned on basis of consolidation. As soon as both Bollinger and 5 SMA become trending in the upward direction after significant consolidation, entering into trades with a long term plan would be profitable. Proper entry points for such trades would be around 220 region with stops below 217. With Market trending, possible exit points could be 266, 300 and 317.
If the market breaks out on the downside, breaking the support zone at 200, possible targets can be 157 and further drop in prices would seem likely.
Midterm Technical Analysis
In the daily chart, the support encountered around 217 region was breached and market has now found long term support at 200. With the Bollinger bands and SMA’s pointing downwards, the setup is going to remain bearish for some time until a base of consolidation is formed. The descending triangle as shown in the daily chart between the downward trend line and support line at 200 might possibly see good number of volumes being traded in the coming days. In which direction the break out would be or the setup would change will depend on how the market approaches the vertex of the triangle.
If the Bollinger bands and short term SMA’s don’t straighten out or change direction, the break out might as well be in the downward direction, continuing the set trend. The MACD is about to cross the signal line and turn bullish, RSI has crossed 30 from the downside indicating impending bullishness in the market but when the bull run takes off is to be seen.
In the medium term, it appears that it is going to be bearish/sideways for some time. Shorting opportunities at the trend line and retracement trades with 5 SMA as support hold good potential.
Short term Technical Analysis
On a short term scale, the market has retraced over 220 levels and is expected to trade in this range for some time before either consolidating and going for a reversal or crashing down further more.
We can observe that 100 SMA is offering good support and market has not been able to go beyond 34 SMA. Picking longs over 100 SMA with 34 SMA as target would be a good short term trade. With the Bollinger bands and SMA’s still pointing downwards and higher time frame charts supporting, shorting around 34 SMA would be a good option.
The possible targets for such trades would be 100 SMA and if the market gets further trendy, a crash down back to 200 levels can also be expected, although these trades have to be done with tight stop loss. The MACD and RSI don’t give much indication as the market is sideways in the short term and retracing.
Sentiment Analysis
This week saw a lot of action with countries announcing regulation moves and unveiling of technologies which ease bitcoin and blockchain adoption. While the sentiment was bearish majorly, let’s take a look at what happened in the market:
The Bank of England has announced that Bitcoin is ‘harder money’ than Gold because of Deflation. During a presentation on digital currencies, Andy Haldane, Chief Economist and the Executive Director of Monetary Analysis and Statistics of the Bank of England stated the above statement explaining that sustained adoption would see ongoing deflation.
An article from ibtimes has given a thorough analysis of how adopting blockchain technology to the existing banking system would be difficult and how Deutsche bank’s economist sees blockchain as a threat because of the lack of the IT infrastructure to support the technology involved. On educational front, Stanford has joined NYU and Duke University in offering bitcoin course, Princeton has launched its own bitcoin course on Coursera, strengthening the sentiment that cryptocurrencies are here to stay and further studies and research in these fields embedded into the course work is a strong possibility.
On the technological front, with e-coin launching Bitcoin Debit card affiliate program, which aims at bridging the gap between traditional financial services and bitcoin, it’s now possible to load bitcoins into debit cards and make payments for the transactions. With Coinbase also enabling purchase of bitcoin through debit-card/credit-card, we are now in a transformative phase where the traditional financial services are being used to develop and adopt systems that would be framework for the future bitcoin usage.
How the technology will evolve to accommodate or change the traditional banking system is to be seen.
Developments in Blockchain
On August 20th, Nasdaq revealed its plans with the underlying technology of Bitcoin and Blockchain. In an interview with efinancialnews Fredrik Voss, Vice President and head of Blockchain strategy at Nasdaq answered questions about how the program is progressing and what other applications Nasdaq is thinking of.
Nasdaq is planning to launch the private market initiative later this year and is clearly looking at commercial uses for the Blockchain now. The application of distributed ledgers in financial markets for things like settlement and custody, to create efficiency in back-office processes is the primary aim.
Another application of Blockchain this week would be the launch of John McAfee SwiftMail which is a new free peer-to-peer, proof-of-work, encrypted mail system that uses the technology underlying Bitcoin to replace email. The system is said to have very high encryption as privacy is one of the key aspects of SwiftMail.
Technocorner
On the techspace, what has been hogging all the limelight is the new chip for Antminer S7 by Bitmain that is believed to be more powerful than its predecessor. Bitmain, the bitcoin mining ASIC provider, announced on August 20th it is launching its fourth-generation ASIC, the BM1385. This chip is claimed to generate a 45 percent increase in hashrate while needing 50 percent less electricity than its former chip, the BM1384.
Another interesting development would be Netcoins which can supposedly turn any device (iPad, Android devices) into a bitcoin ATM. It is ideally designed for retailers to enable transactions in bitcoin and attract tech savvy customers.
News that’s also been doing rounds is about the Mike Tyson ATM. While initially the prospect was heralded to be a scam, the ATM was launched in Las Vegas with Bitcoin Direct backing the launch.
While security threats in Windows 10 has put the wallet developers in a tight situation, the iOS space is now crowded with launch of new wallets everyday making it hard for the users to choose from the many apps. Most people believe that the advanced bitcoin demographic belongs to iOS users and this is the primary reason for the competition while some say that the lack of a secure wallet in Android and security issues with Windows has led to this development.
For the same report with the Technical Graphs please see the original post: Bitcoin Trading Intelligence: September 1st, 2015
submitted by blockstreet_ceo to BitcoinMarkets [link] [comments]

[finance] [theory] Supply inflation vs Price inflation

This is a critical basic concept for understanding the discussion of "inflation" around cryptocurrency. When inflation is discussed for fiat currencies, price inflation is generally referred to. When inflation is discussed for cryptocurrencies, supply inflation is generally referred to. This is part of the crux of why mainstream, traditional economics considers cryptocurrency completely backwards, and it's the source of a lot of confusion among cryptocurrency enthusiasts.
They are somewhat inverse concepts, and when determining monetary policy, only one can be controlled, and the other will be affected. The names are somewhat self-explanatory: supply inflation is a growth in the amount of the currency. Price inflation is a decrease in the purchasing power of a unit of the currency.
The Federal Reserve targets a particular level of price inflation. Because there continues to be growth in the demand for USD, this means that they increase the supply of USD in order to maintain the desired level of price inflation. There are a few different ways of measuring the supply of USD, referred to a M0, M1, M2 and so on, with each step counting more "cashlike" assets, like checking accounts. Here's a site with a graph of M0; the 10 year view is worth looking at. Now, an increase in the monetary supply doesn't mean that anyone other than banks necessarily have any more money. Here's an article arguing that M0 increase doesn't matter because banks don't lend the money anyhow. So while more money is being created, the amount of money actually circulating isn't necessarily increasing as a result. However, looking at M2 over the ten year view, we also see a steady increase.
The mainstream economists debunk the hyperinflationists claiming that a massive increase in monetary supply will necessarily lead to a massive increase in price inflation. The question is whether this can last indefinitely. For now, however, despite the routine claims to the contrary, there is obvious, massive "printing" of money. The fact that this doesn't cause larger price inflation is because of the growth of productivity and other economic growth. So the USD economy (broader than simply the US economy) continues to grow larger, while the individual unit continues to slowly lose value, per design.
Cryptocurrency targets a particular supply inflation instead of controlling price inflation. This is in large part a pragmatic choice, as it's far easier to write an algorithm with a fixed emission rate than it is to vary the supply of a currency to maintain a price level, in particular with an underlying economy (here referring to whatever economic activity is done with a given currency) that can be rapidly growing or shrinking. Because of this choice, far greater price volatility is naturally expected and seen.
If there is no supply inflation, then if the economy grows, the individual unit will grow in value. As an extremely simplified example, if there were 10 apples in the economy, and 10 units of currency, then we might expect 1 apple = 1 unit of currency (this is quite over simplified, but we'll pretend that "all currency can buy all of the economy" for this example). Then if the economy grew such that we now have 20 apples and still only 10 units of currency, 2 apples = 1 unit of currency, and we see that the additional value is gained by the holders of the currency. This is called "deflation", when prices fall. This is a Very Bad Thing (tm) according to conventional economics, which is ostensibly why fiat currencies are targeted to a particular inflation rate.
The central argument for why this would be bad involves investing and lending. If money is getting more valuable on its own, no one will ever invest, is the argument. And it will be impossible for anyone to repay a loan if money is getting more valuable over time.
In my opinion, this is willfully ignorant groupthink. The rate at which the currency is becoming more valuable is the growth rate of the economy. If an investment cannot exceed the growth rate of the economy overall, then it seems reasonable to consider it uneconomical. Same argument for lending. So while some lending and investment might not happen, I consider it the inflationary side which is making the economic mistake: when currency is becoming less valuable, an investment can yield a small return, and yet have less value at the end than at the beginning. More investment and lending is encouraged, certainly, as otherwise the money "rots" from inflation, but it seems more prone to creating bubbles than wise investment.
The counter argument for why it is good to limit supply inflation is that there is value in encouraging saving and that this is best done by a currency which is not guaranteed to lose value. While the USD loses value slowly enough that short-term savings in it make sense, it is economically irrational to simply maintain large cash reserves long-term. Instead, it must be put into a bond or other security which can try to maintain value, or at least lose value more slowly. With a strong store of value, buying and holding should be a reasonable long-term strategy.
The central question is where gains from growth in the underlying economy should go. Should the currency be diluted by the central bank to ensure that savers will not gain value, and the new currency given to banks so they can charge the public for borrowing it? Or should any growth in an economy be retained by those who hold the currency? Obviously I believe in the latter, or I wouldn't be here. I agree with the characterization of inflation as "the silent tax", but further, I believe the lack of deflation which would otherwise have occurred to be part of the same theft.
Of course cryptocurrencies have a lot of challenges to deal with before they are the strong stores of value which can actually demonstrate the advantage of this approach well, although Bitcoin has given an early example. And the idea of what builds the value / economy of a given currency is non-trivial in my opinion; a topic for another post. Any mainstream economic thinker will ridicule this as completely backwards, discredited monetary theory. I'm not the sort to bow to consensus, however. "Anti-scientific", "psychotic", "contrarian for the sake of being contrarian", and similar labels have been applied to me in other disagreements with mainstream, consensus expert opinion. I think there is no more anti-intellectual attitude than believing that the majority of paid professionals in a field should always be believed. History is full of examples of expert opinion being wrong. I see no reason to believe that this is the first era in human history where experts were infallible. I find it critical that people dare to think for themselves and to delve into the fields that interest them, learn as much as they can, and form their own opinions. I think there is no more heretical idea in modern society than the notion that you are capable of thinking for yourself, and coming to valid conclusions, even when opposed by vociferous critics who mock you for not submitting your mind to the pre-digested conclusions of others.
This is my no means the most controversial position I will take. Many of them will not seem relevant to cryptocurrency. But Nyancoin is about philosophy in the most basic sense of the term: a love of wisdom. This makes epistemology (the theory of knowledge) a central topic for us, and it makes any controversial issue a potential example for us. We will not blindly follow experts, nor shall we indulge in mere speculation or unreasonable beliefs. At the least, we can expect to be mocked. But we shall value truth and pursue it.
submitted by coinaday to nyancoins [link] [comments]

Bitcoins price in USD or any fiat currency for that matter is 'literally' irrelevant.. and here's why.. Post directed at Mike Maloney if he is listening

After learning way more than I should have about monetary history and the global economic trajectory (time consuming but just so addictive). It is important to note that it is not bitcoins dollar price that matters, it will be its purchasing power relative to other assets that counts.
Bare with my following explantion as it is hard to articulate this concept in depth.
We are in my opinion about to experience real deflation on a global basis, to which central banks will overreact and provide even more extreme stimulating monetary policies. At which point confidence even in tier one national currencies starts to come into question, not only by nation states holding debt denominated in those currencies but also by average citizens who will start to see the cost of living rising faster than they are already accustomed to.
It is at this point that safe haven assets like Gold, Silver and bitcoin start to look not only attractive as an investment, but a must have asset to hedge against this uncertainty.
As global currencies start to loose value (not from bitcoin but from central bank interventionism) the price of other asset classes will start to appear more expensive in dollar terms but will be loosing real purchasing power. However the price of safe haven assets like bitcoin will be rising by orders of magnitude more rapidly in dollar terms. The result being if you hold national currencies during this period you will loose everything. If you hold stocks etc you will look like your gaining but the value of other safe haven assets will be gaining so much more that in relative terms you will actually be loosing wealth.
Property values will collapse again relative to other assets, along with every asset class that has been bid up into a bubble due to global monetary stimulus policies.
Bottom line is if this does play out, almost every investment will loose you purchasing power. While only precious metals and bitcoin will grow your purchasing power.
Even if you dont think this scenario will play out, but you do think bitcoin will go mainstream at some point in the future, its adoption as money will undoubtedly cause this scenario to unfold anyway.
So its meaningless to look at bitcoin in dollar terms, however it is extremely relevant to look at bitcoin priced in realestate, or oil, or the dow jones industrial average etc. As this shows the true growth of the purchasing power of this new monetary protocol, while simultaneously removing the distortion of its value that comes from pricing it in dollars.
If anyone out there has the time to chart some graphs pricing bitcoin in realestate, oil, DJIA etc we would all be very grateful. (Im looking at you Mike Moloney)
submitted by slvbtc to Bitcoin [link] [comments]

Programmer explains Bitcoin Inflation Bug Bitcoin Q&A: Inflation and debt systems - YouTube Steven Van Metre - Real Estate Risk  Deflation  Bitcoin ... Is Bitcoin deflationary? Motion Graphics - Gold Bitcoin Backgrounds

There are many things that could destroy bitcoin, but deflation is not one of them. While deflation is problematic for a currency backed by debt (as most, if not all, national currencies are), it is not an issue for commodity currencies (and bitcoin is most similar to commodity currencies). The deflation argument goes something like this: everyone, believing that the value of the currency is ... Auch wenn die bekannteste Währung Bitcoin bereits seit mehreren Jahren auf dem Markt ist, ist ein Totalverlust immer möglich. Über diese Risiken sollte man sich, bevor man in Kryptowährungen investieren möchte, im Klaren sein. Fachwissen; Abonniere uns. Gib deine E-Mail-Adresse an, um diesen Blog zu abonnieren und Benachrichtigungen über neue Beiträge via E-Mail zu erhalten. E-Mail ... It’s fairly obvious why. Because of Bitcoin’s price volatility, people don’t want to hang onto it for very long. No one wants to get their paycheck only to find that it has halved in value ... Bitcoin Is a Hole In a Burning Building. I had the thought that Bitcoin is like a hole in the wall of a burning building. The burning building is the petrodollar. The Bitcoin hole in the wall doesn’t meet any standard definition of a door. It wouldn’t pass a building inspection and it may not last long. It will most certainly be replaced by ... I've been watching and reading about Bitcoin and crypto in general from about 2 weeks and I really want to get into it. Will be buying some BTC soon before getting into other altcoins. So the question, do I need to learn to read these crypto graphs before getting into crypto and hodling for the most part. I do have some basic understanding of the crypto jargon. But is it enough to read article ...

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Programmer explains Bitcoin Inflation Bug

Bitcoin Q&A: Inflation and debt systems - Duration: 12:04. aantonop 26,782 views. 12:04. I WILL TEACH YOU TO BE RICH (BY RAMIT SETHI) - Duration: 14:29. The Swedish Investor Recommended for you ... Inflation versus Deflation - And why Bitcoin is changing economics forever - Duration: 5:17. AnarcoTech 3,012 views. 5:17. Language: English Location: United States Restricted Mode: Off ... 1:04 Deflation As a Base Case - Housing Crash Included! 4:08 GFC 2.0 PLUS! 5:35 Low Interest Rates.....Great! - But Can You Borrow? 8:16 Negative Rates - Int... How do you see the roles of debt and inflation changing in society with the advent of cryptocurrencies? Does Bitcoin have the best monetary policy? Bitcoin a... Since Bitcoin is a technology that enables a new type of currency never seen before (a digital currency that behaves like a commodity currency) traditional e...

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