Bitcoin in a hyperbolic bubble

[presidenttttt]

I do think the internet age is exaggerating this too. Joe Bloggs having a portable low commission trading platform in his pocket is a massive change to markets. I expect we're going to see bigger bubbles than ever.

This is true. Another point about the social media platforms though is the algorithms work hard to give you the content you want, and if you are in the network that follows #tothemoon and one or two of the more active influencers in the trading/crypto space, you could feel that crypto is far more mainstream, accepted and trusted than it actually is.

If I look at my professional and educated 25-35 year old peer group, a few of us might have a few 100 euros "invested" (due to lock down boredom more than anything, at least in my case) but it is rarely spoken about, whereas there is a bit of an echo chamber effect on social media where you might think everyone had 1000s in it. The viral and hype nature to some of these things of course has also been witnessed in non crypto channels (Gamestop).

 

[tecate]

I just would not bank on the category winner having entered the competition yet and i think there is some way to go.

That's fair enough. However, bear in mind that I was referring to categories - plural. That said, from what I can decipher - you're focusing on crypto's which can or will be used as currency. People have different notions as to what success looks like in this regard. Right now, bitcoin is formative as a decentralised store of value rather than a day to day currency. It also is making some in-roads in terms of use as a settlement layer - for settlement of large amounts internationally. As a day to day currency it doesn't scale - although it may still make in-roads via layer 2 solutions.

I think you referred to the coming of central bank digital currencies and to private digital currencies. There's no doubt but that these are coming - it's just a matter of how long it takes. Facebook failed miserably with their offering and on the back of that, I think a lot of people have forgotten about them - they're still working away on their digital currency. So there should be some level of choice (albeit that CDBC's - being just an extension of sovereign money - are not something anyone chooses - rather something that we are forced to use). Anyone in their right mind (regardless of what they think of the development of crypto) should welcome choice in an area there never has been choice before. However, bear in mind that these are very different things. Whilst they offer individuals choice, they belong in their own categories. I guess what I'm saying is that if CBDCs or private digital money are issued, I don't see these as a threat to bitcoin. Quite the opposite as they will serve a purpose in conditioning people in becoming more comfortable with digital currency.

Bitcoin belonging in its own category of decentralised cryptocurrency as opposed to private digital or fiat digital is going to be hard to overcome at this point. Many roll out the myspace analogy yet myspace had attained a fraction of the market cap that bitcoin has - as a trillion dollar asset. It was also overtaken as facebook hit the ground running in catering to mobile whereas myspace didn't do so. Many also think that bitcoin was/is the first crypto - but that's also not the case. I'm quite open to it being surpassed but whatever comes next will have to be 10x better. Having the upperhand on one single characteristic isn't going to cut it.

 

[tecate]

If I look at my professional and educated 25-35 year old peer group, a few of us might have a few 100 euros "invested" (due to lock down boredom more than anything, at least in my case) but it is rarely spoken about, whereas there is a bit of an echo chamber effect on social media where you might think everyone had 1000s in it. The viral and hype nature to some of these things of course has also been witnessed in non crypto channels (Gamestop).

I am of the view that we are still at an incredibly early stage in all of this. This particular bull market started off fairly sober but has given way to a feverishness surrounding nft's, the defi casino and meme coins. NFTs are not my bag but I would say that this development is reeling in a raft of new people who otherwise had no interest in crypto. DeFi is incredibly high risk - and I suspect a lot of fingers are going to get very badly burnt with it. That said, the innovation that ultimately arises from it will likely be much bigger than what bitcoin brings. Meme coins I find completely moronic - but if grown adults choose to involve themselves with that, that's there own doing. I don't think anyone should suggest that anyone has been ripped off in this respect later on...rather people need to take responsibility for their own decisions.
A lot of that stuff I'm not all that enthusiastic about - but between those items and each hype cycle, more people are reeled in to crypto. You may be quite right in your thinking that people are getting ahead of themselves but by dabbling in crypto - they're introducing themselves to it. They may come due to boredom or curiosity but oftentimes, people start to understand what's tangible and what's bs.

This bull market isn't done yet - and it will be followed by a bear market and another such cycle. What's most important - is that as per previous cycles - bitcoin's network effect will continue to grow.

 

[Duke of Marmalade]

My money is on Bitcoin winning the Ransomware category, if it isn’t closed down. More likely it will be the only category.

 

[jim]

My money is on Bitcoin winning the Ransomware category, if it isn’t closed down

My money is on you loosing your money

 

[WolfeTone]

My view on the Musk (partial) turnaround on bitcoin.

Tesla spent $1.5bn(?) on bitcoin. It occurs to me that if you are going to spend that much on anything you are going to some bit of research on what you are buying.
The bitcoin energy red-flag has been raised for a long enough so it is beyond my comprehension how a company like Tesla could not have been aware of the energy usage issue surrounding bitcoin.
If they were aware of it before, and did some research about it before they bought bitcoin then it obviously wasn't that big an issue to deter purchase of bitcoin. So it would be hard to understand why it is an issue a few months later.

Another possibility is that Musk has jumped on the bitcoin bandwagon and Telsa is a company that is run by "Yes-Elon" men and women, which would be a bigger concern for me if I had shares in Tesla.

The third possibility, and I think most probable, is that Tesla probably has a significant number of green-energy investors who, not being overly endeared to bitcoin or understanding of it, are putting a bit of a squeeze on Tesla and the direction it has taken with bitcoin, resulting in Musks announcement to stop accrpting bitcoin as a means of payment.

 

[tecate]

My money is on Bitcoin winning the Ransomware category, if it isn’t closed down. More likely it will be the only category.

Research has shown that of the 300,000 transactions / $10 billion that the bitcoin network settles each day, illicit use only accounts for 1%. I know you'd like to tar and feather it in that way but it's not going to wash.

 

[Duke of Marmalade]

Research has shown that of the 300,000 transactions / $10 billion that the bitcoin network settles each day, illicit use only accounts for 1%. I know you'd like to tar and feather it in that way but it's not going to wash.

Huge skill that, how researchers can get criminals to openly disclose their money laundering activities.

 

[WolfeTone]

Huge skill that, how researchers can get criminals to openly disclose their money laundering activities

Roubini being a leading researcher

"Cryptocurrencies are routinely launched and traded outside the domain of official financial oversight, where avoidance of compliance costs is advertised as a source of efficiency. The result is that crypto land has become an unregulated casino, where unchecked criminality runs riot."

 

[Duke of Marmalade]

Roubini being a leading researcher

"Cryptocurrencies are routinely launched and traded outside the domain of official financial oversight, where avoidance of compliance costs is advertised as a source of efficiency. The result is that crypto land has become an unregulated casino, where unchecked criminality runs riot."

Another one of your nice tries Wolfie. All off that quote is observable fact except the conclusion which does involve an element of speculation. Much as I respect Prof Roubini's skills this speculation cannot compare with the researchers cited by @tecate who were able to identify that c. 3,000 of daily bitcoin transactions are illigit. My understanding of how crypto works is that this could only be gleaned by getting criminals to openly admit their crimes.

 

[WolfeTone]

except the conclusion which does involve an element of speculation

Which is the only pertinent part of the quote when referencing criminality that is related to cryptocurrency.

Much as I respect Prof Roubini's skills this speculation cannot compare with the researchers cited

On the contrary, the researchers cited by @tecate are positively claiming that criminality is not running riot to any great extent.

It is Roubini who makes the counter claim. Unless he is getting criminals to openly admit their crimes then there is more than a whiff of speculation in his 'research'.

 

[tecate]

Huge skill that, how researchers can get criminals to openly disclose their money laundering activities.

Pretty lazy stuff from you Duke. The research comes from Chainalysis who are disliked by plenty in the crypto space and if anything I would have thought it would be better for their business model if their findings were more in line with what you very much want them to be.

And that figure again just in case you missed it...$10 billon settled on the Bitcoin network every day.

 

[tecate]

Much as I respect Prof Roubini's skills this speculation cannot compare with the researchers cited by @tecate who were able to identify that c. 3,000 of daily bitcoin transactions are illigit. My understanding of how crypto works is that this could only be gleaned by getting criminals to openly admit their crimes.

You mean Roubini's complete loss of objectivity on the subject such that he will latch on to anything that's negative about bitcoin regardless of it having even a trace of credibility.

3,000 tx out of 300,000 daily bitcoin transactions, yes.

I guess your understanding doesn't extend to on-chain analysis - which is precisely what Chainalysis does.

 

[joe sod]

The bitcoin energy red-flag has been raised for a long enough so it is beyond my comprehension how a company like Tesla could not have been aware of the energy usage issue surrounding bitcoin.
If they were aware of it before, and did some research about it before they bought bitcoin then it obviously wasn't that big an issue to deter purchase of bitcoin. So it would be hard to understand why it is an issue a few months later.

All he had to do was read my posts earlier addressing this issue. Maybe Musk is afraid that attention will be drawn to the fact that alot of the electricity used to power Tesla cars also come from coal and fossil fuels. On a cold calm day virtually all the electricity produced comes from fossil fuels. Battery technology to store enormous quantities of electricity does not exist and is never likely to either. The head of Eirgrid admitted this recently saying their battery storage can only produce at maximum output for less than an hour so never a replacement for a conventional power station. Now if only we could retrieve all that energy stored in bitcoin for cold calm days

 

[tecate]

Maybe Musk is afraid that attention will be drawn to the fact that alot of the electricity used to power Tesla cars also come from coal and fossil fuels. On a cold calm day virtually all the electricity produced comes from fossil fuels.

Ok, I see where you're going with this. So essentially you're encouraging Elon to acknowledge that there are a whole host of other things using a bucket load of energy; that his EVs only really become transformative when we greenify the energy supply as a whole. That's precisely where this 'bitcoin boils the oceans' narrative lacks honesty. It's the entire energy grid that needs to go green - not people coming out and dictating who can/can not use energy based on their own bias, ignorance or both.

As for Elon's reasons, not having the info at hand beforehand can't possibly be one of them. Having to backtrack due to people buying into this cherry picked narrative is one. There has been mention of carbon offset business being significant for Tesla so it could be that. Lastly it could be a case of 4D chess and they're going to enter the bitcoin mining market - which they can do with the kit that they have installed in consumers homes all over North America.

Battery technology to store enormous quantities of electricity does not exist and is never likely to either.

Now this is very interesting. So demand can only be as predictable as the weather and renewables can only be as predictable as the weather and there's no way to deal with the peaks and troughs (the duck curve).
.

Now if only we could retrieve all that energy stored in bitcoin for cold calm days

Time for you to ask a better quality of question, Joe. What could be established to utilise the excess energy at source when it comes to irratic renewable energy production? We could have central government continue to subsidise renewable energy projects OR could something else benefit from that excess energy whilst making such a project financially viable?

 

[Duke of Marmalade]

And that figure again just in case you missed it...$10 billon settled on the Bitcoin network every day.

Of which only 1% is for criminal purposes, which is at least a genuine utility. How much can be spent on lattes? It leaves an awful lot of money in daily speculation on this price discovery journey. In fact does Chainanalytics tell us how much is spent on utility transactions? Criminal activity would probably amount to about 50% of that.

 

[Cavanbhoy]

Huge skill that, how researchers can get criminals to openly disclose their money laundering activities.

I don't get the dislike of Bitcoin, do people commit fraud with it yes but is that not the same with Fiat.
Is Bitcoin in a bubble or overpriced maybe but that is more down to people than bitcoin itself.
Is it fear off change thats driving the debate over bitcoin there seems to be two camps one thinking its brilliant and going to change the world and the other its a scam with nothing in between.
Personally I dont know which but then I thought selling bottled water and takeaway coffees would never take off.

 

[joe sod]

As for Elon's reasons, not having the info at hand beforehand can't possibly be one of them. Having to backtrack due to people buying into this cherry picked narrative is one. There has been mention of carbon offset business being significant for Tesla so it could be that.

Yes exactly that could be it, we know that the whole green lobby and ESG investing has become a huge thing and alot of Tesla profits come from selling carbon credits, another arbitrary accounting token . There is alot of cherry picking of narratives going on in the green area now especially as it has becoming a huge political and now financial issue. Oil and Gas companies have to pay Tesla for carbon credits even though those cars cannot run without that energy in many cases.
Another narrative is that going green is easy if only the big bad oil companies would get out of the way and let it happen and that the oil companies need to be punished, the good guys bad guys narrative so beloved of hollywood.
I know I jokingly referenced retrieving all the energy used to produce a bitcoin, so alot of energy is used to solve complex maths equations which at the end produces a bitcoin. What if we reverse the process unsolve the equations reabsorb the bitcoin and release the energy, however that is impossible because of the laws of physics and thermodynamics. There is a hierarchy of energy that you can only move in one direction, once you burn oil to produce heat you cannot retrieve that heat to create oil again.

 

[Duke of Marmalade]

...to solve complex maths equations which at the end produces a bitcoin.

I am quoting you out of context here and what follows is not a criticism of your post.
But it really sticks in the craw this metaphor of "mining" and "solving complex math", the former creating a gold illusion and the latter sounding very sophisticated and even productive. All part of the cult mythology.
This is the correct metaphor. I have locked a €50 note in a box and closed it with a combination key. The box is left out in the open for the first person who can guess the combination. And they can have as many tries as they can fit in until someone opens the box. Note there is no intellectual content in these tries, they are pure random quickpicks.
Two takeaways from the metaphor. 1. The locking of the box was totally unnecessary. 2. There is absolutely no sophistication whatsoever in the race to open it.
@Cavanbhoy Of course I do not actually hate the inanimate object that is crypto. But, like the illustrious Professor Roubini and various Nobels and numerous academics, I do find the cult that engulfs it intellectually distasteful in the same way as I feel about theories that the World was built in 7 days 6,000 years ago. I am less offended by the unbridled speculation or the eco bit - after all I enjoy a bet and I drive a diesel car.

 

[tecate]

Of which only 1% is for criminal purposes, which is at least a genuine utility. How much can be spent on lattes? It leaves an awful lot of money in daily speculation on this price discovery journey. In fact does Chainanalytics tell us how much is spent on utility transactions? Criminal activity would probably amount to about 50% of that.

You can try and label use of bitcoin as right or wrong all day long Dukey - the fact remains that when this debate opened on AAM, there wasn't anywhere near $10 billion in daily settlement on the Bitcoin network. Its network effect is growing and whilst I don't take anything for granted I suspect that it will continue to grow. Otherwise, the sands are shifting beneath your perennial reliance on the notion that it's all just speculation. Billionaire investor and entrepreneur Mark Cuban pointed to that change earlier this week:

https://twitter.com/x/status/1393584361375735810

I don't get the dislike of Bitcoin

It varies - there can be pragmatic objections. However, in these parts I suspect its political. The constant reference to 'cultists' is the giveaway. Bitcoin is the first financial instrument that wasn't conceived by Wall Street or their ilk. It sticks in the craw of many that cypherpunks drove this and even though it's being embraced by all manner of stakeholders now, there are many that won't accept it.
The resistance to change aspect that you hit on is the other reason. Millennials downwards are going to be far more comfortable with the use of virtual currencies than their elders (not to mention their ability to understand it better). Others are quite happy with the current order of things and are simply uncomfortable with any moves to change it up. Dukey's suggestion during the course of these discussions that we simply have to have blind faith in central bank high priests even though the financial system is broken underscores that point.

I know I jokingly referenced retrieving all the energy used to produce a bitcoin, so alot of energy is used to solve complex maths equations which at the end produces a bitcoin. What if we reverse the process unsolve the equations reabsorb the bitcoin and release the energy, however that is impossible because of the laws of physics and thermodynamics. There is a hierarchy of energy that you can only move in one direction, once you burn oil to produce heat you cannot retrieve that heat to create oil again.

I think maybe the point I was trying to make above was lost on you. So rather than fight against the laws of physics/thermodynamics, why not embrace bitcoin mining and harness it for the betterment of all? Here's an example. Lets say you are the proposer of a renewable energy project. You run the numbers and its not feasible (due to the irregular nature of the energy capture/production). You lobby central government to subsidise the project but they don't have the $ to do so. You decide to partner with a bitcoin mining co. to utilise at source the excess energy that is being produced at times. This is your subsidy - and now when you run the numbers, the project is viable.

It really sticks in the craw this metaphor of "mining" and "solving complex math", the former creating a gold illusion and the latter sounding very sophisticated and even productive. All part of the cult mythology.This is the correct metaphor. I have locked a €50 note in a box and closed it with a combination key. The box is left out in the open for the first person who can guess the combination. And they can have as many tries as they can fit in until someone opens the box. Note there is no intellectual content in these tries, they are pure random quickpicks.

I see. So what's important to you Duke is not that the bitcoin mining algorithm should provide the most robust network security on the planet but that it should only dare to do so in a manner you deem to be 'intellectual'. Sit with that notion for a while - hopefully you will see how obnoxious a view it is. If you can't, then I'm lost for words.

The locking of the box was totally unnecessary.

Your metaphor is wayward. You're suggesting that there's no need for network security. That's the whole point of the algorithm.

2. There is absolutely no sophistication whatsoever in the race to open it.

Again, see above. It seems its not important to you that it provides the best in class network security because it doesn't reach your levels of 'sophistication'. Is that really what we're talking about here?