Duke of Marmalade
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This is a renowned economist talking. Are there any respected economists making the case for bitcoin? Ironically the amazing bitcoin performance of 2020, from 10k to 4k to 30k(?) spells its early demise. A nice steady performance would have been more indicative that bitcoin had come of age and was here to stay. 2017 was a similarly ridiculous year and it was followed by the collapse from 20k to 3k in 2018.Yahoo Finance said:Famed economist Nouriel Roubini says that Bitcoin and other cryptocurrencies, which he’s dubbed as “sh-tcoins,” have no place in retail or institutional investor portfolios.
Roubini, a professor of economics at NYU’s Stern School of Business, slammed Bitcoin (BTC-USD) as it has hit recent highs and was last trading above $23,300.
“First of all, calling it a currency — it’s not a currency. It’s not a unit of account, it’s not a means of payment.…it’s not a stable store of value. Secondly, it’s not even an asset,” Roubini said.
According to Roubini, Bitcoin has no intrinsic value. He pointed out that assets — bonds, stocks, real estate, or precious metals — either provide income, capital gains or some form of utility.
“While in the case of Bitcoin, there is no income,” he said. “There is no use. There is no utility. The only thing is a speculative, self-fulfilling kind of rise, and that rise is driven totally by manipulation.”
Roubini noted that there’s academic research to suggest that “this pseudo stable coin Tether has been created by fiat” and is “used literally to manipulate the price of Bitcoin.”
“The price of Bitcoin is totally manipulated by a bunch of people, by a bunch of whales. It doesn’t have any fundamental value,” he said. “We’re close to the point where the hyperbolic bubble is going to go bust.”
Are there any respected economists making the case for bitcoin?
I decided to read François. I see he is an employee of a Federal Reserve bank and therefore less likely to have a commercial motive, so I must take him seriously. His paper and his admiration for bitcoin is mainly based on his appreciation of the technology. Very little is said about the economic substance which Roubini rubbishes so forcibly. The following is his full conclusion.As far back as 2013 economist François Velde wrote about possible adoption of financial institutions using bitcoin. His paper on bitcoin is as an objective a piece I have read about Bitcoin from anyone.
As you say, hardly a ringing endorsement. If that is the intellectual case for the defence (of btc) then I am afraid this jury member is voting guilty as charged (by Roubini).François Velde in 2013 said:Conclusion So far, the uses of bitcoin as a medium of exchange appear limited, particularly if one excludes illegal activities. It has been used as a means to transfer funds outside of traditional and regulated channels and, presumably, as a speculative investment opportunity. People bet on bitcoin because it may develop into a full-fledged currency. Some of bitcoin’s features make it less convenient than existing currencies and payment systems, particularly for those who have no strong desire to avoid them in the first place. Nor does it truly embody what Hayek and others in the “Austrian School of Economics” proposed. Should bitcoin become widely accepted, it is unlikely that it will remain free of government intervention, if only because the governance of the bitcoin code and network is opaque and vulnerable. That said, it represents a remarkable conceptual and technical achievement, which may well be used by existing financial institutions (which could issue their own bitcoins) or even by governments themselves.
Colm, yes I was fascinated by his charges of manipulation. Don't know what front-running is but most intriguing is this Tether thing. Tether is unusual as a crypto in that it is linked to the dollar. I don't know exactly what Roubini is suggesting but its along the lines that in crypto land Tether is the US dollar. I think he is saying that Tethers are being created without any actual dollar backing and then used to support the bitcoin price. If he is right and there is currently a criminal investigation into that possibility we might get a denouement very soon.I've not contributed much to this discussion, but I found that interview with Roubini compelling. Could anyone enlighten me on his allegation that there is criminal activity, in the form of front-running, etc.? That would help to change the focus slightly, and hopefully satisfy Brendan's aspiration to move on from the previous mud-slinging.
His paper and his admiration for bitcoin is mainly based on his appreciation of the technology.
If that is the intellectual case for the defence (of btc)
Yes it would have value if bitcoin was "money". As Roubini so passionately explains bitcoin is not money.That is not to disparage their views, but from my understanding of bitcoin, what we are talking about is a new technology for transmitting money securely without third party interference. This has value.
Adoption? Adoption as what? Certainly not as a medium of exchange i.e. money as intended and as described by Veldes. That speculators in a frenzy of FOMO induced by whales' manipulation is not adoption. And yet this argument is frequently used to talk up the potential of cryptos. It is completely bogus IMHO.The extent of adoption is anybodys guess, but currently the demand for such a system places BTC at around $28,000, or $500bn market for its 18m or so coins in circulation.
In the global scheme of the financial sector, it is tiny and its scope for greater adoption is massive, in my opinion.
Adoption? Adoption as what? Certainly not as a medium of exchange i.e. money as intended and as described by Veldes.
That speculators in a frenzy of FOMO induced by whales' manipulation is not adoption.
Let's explore that thought.The only conclusion I can come to is, like Veldes, is that "bitcoin remains a remarkable conceptual and technical achievement" - this is not the general economist description of something with no intrinsic value?
It is clear, to me, that is the descriptive of something of intrinsic value.
What the price attributable to that is what appears to be contentious.
Take Laslo Hanyecz
Lots to digest there theo. It is becoming a bit of a dialogue,
Annual sales run at about €7bn. If someone came looking to spend €16bn, prices would go through the roof (see what I dun there?)
What has changed? A vaccine?
I was asking why btc has increased 50% in the last two months. Only two news stories worth a mention. A good guy will be next POTUS and the discovery of a vaccine. Really can't see why that adds $200bn to btc mkt cap. On the doubling my understanding was that that was not the @tecate argument. That argument was that as the supply of new bitcoins halved its price would go up on supply and demand arguments. Completely bogus of course, as the supply of new coins is a very minor part of the supply/demand dynamic. On the other hand if you think the supply of new coins is a significant price driver then that would underpin that an extra $16bn of demand would have a highly leveraged effect on the price.Also, there was the halving of the block reward in March this year. This is part of the technical side that I trust more than understand.
As much as I do understand it, it is that as the block reward has halved that the nodes/miners require more processing power to validate the blocks and earn the rewards. Or in short, it hardens the network against hacking, fraud, centralised control, etc.
I agree with this and it is completely contrary to orthodox bitcoin theology. The cultists do from time to time cite shells as an example of money with no intrinsic value. You have just explained that the reason it served as money in primitive times was precisely because it had intrinsic value, at least when made into an ornament.The example given was primitive societies and the use of shells to trade. It wasn't the actual shells per se that was money, it was the shells in decorative and ornamental form that was money. Even still, shells made into bracelets, necklaces, ornaments etc were not made with the intention of being used as money, but rather for aesthetic purposes. Only when in say, times of hardship, did the ornamental items become of value to trade with other communities (perhaps experiencing a time of affluence) did the shells become money.
As a consequence, the ornament makers had, unintentionally, built up a store of value to be used eventually as a medium of exchange at the appropriate time.
Only two news stories worth a mention.
as the supply of new coins is a very minor part of the supply/demand dynamic.
precisely because it had intrinsic value, at least when made into an ornament.
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