Key Post Bitcoin is a clearly identifiable economic bubble

[tecate]

I presume you read Marcus' comment on btc/Libra; paraphrasing "btc/Libra have complimentary roles, Libra as a trransactonal currency, btc as a uncorrelated asset". Okay, no praise for btc there I suppose, faint or otherwise

Your dukeness, you're colouring this to suit your narrative. I remember him being interviewed on June 18 when he said that they serve different purposes - referring to Bitcoin as a store of value/digital gold. The guy served on the board of coinbase.

Agree with the diagnosis not with the prognosis. If FBIcoin catches on people will actually get to understand what they are and they will see clearly that compared to FBIcoin, btc is pure BOTHA.

Really? If it catches on, FBIcoin will on-ramp a shed tonne of new people to (almost) crypto - for the most part in developing countries. They will become accustomed to the idea of digital currency and then the flaws will also emerge in FBIcoin. It will be a much easier segue to move from one to the other and it should be seamless to move from one to the other.

How will movement from one to the other be prevented? If it's truly successful, then it will become a means of payment for all sorts of things. What of the implications then for your precious central banking and governments?

Poor Caitlin, she is obviously unaware of the near 8,000 btc lookalikes.

Been covered at length. Launch marmalade coin tomorrow and it will be worth jack - and it will remain as such. It's a non argument.

I have no problem with FBIcoin.

Isn't it remarkable? It betrays that as much as proponents of decentralised crypto may come at it from a certain ideological bent, so too those who oppose. Isn't there plenty to be concerned about?
A truly successful FBIcoin could seriously unhinge your centralised monetary system - the one that you love. it could be responsible for systemic risk. You think your privacy is going to be in good hands with FBIcoin? Not one bad thing to say about it - well I never. lol

I have no problem with FBIcoin. It could be useful to attack Venezuala syndrome,

Yes, and 'venezuela syndrome' does the rounds from one FIAT currency to the next to varying extents. Don't think for a second that this doesn't have implications for every central bank on the planet. If they screw up (which over the fullness of time, they will) then people will shift assets.

Interesting reflections by Caitlin on where the interest on the reserves will go, especially considering that on € assets that interest will be negative.

That betrays that you have no notion of what you're talking about. Time to hit the books again, your dukeness.

 

[Duke of Marmalade]

That betrays that you (should be corrected to "I"?) have no notion of what you're talking about.

I presume this was a typo and the you intended the suggested correction.
Caitlin, with her natural $ perspective speculates on what FBIcoin will do with the interest it earns on its reserve fund. 2 year dollar yields are 1.9%, so indeed that could be a nice earner. But to the extent it is tied to the € the reserve fund will earn -0.7% on 2 year safe assets, that's right it will lose 0.7% p.a. and the Yen is even worse. It was just a passing comment, but your reaction suggests you could do yourself with reading a few books, can I recommend "Yield Curves for Dummies".

 

[tecate]

I presume this was a typo and the you intended the suggested correction.
Caitlin, with her natural $ perspective speculates on what FBIcoin will do with the interest it earns on its reserve fund. 2 year dollar yields are 1.9%, so indeed that could be a nice earner. But to the extent it is tied to the € the reserve fund will earn -0.7% on 2 year safe assets, that's right it will lose 0.7% p.a. and the Yen is even worse. It was just a passing comment, but your reaction suggests you could do yourself with reading a few books, can I recommend "Yield Curves for Dummies".

You're working on the assumption that in those circumstances, they will choose to denominate the 'basket' in Euro and Yen. Remember, they never said specifically how this broke down. The basket will include bonds and 'low level securities' too. They're not going to take a bath on it. They'll optimize for earnings.

 

[Duke of Marmalade]

You're working on the assumption that in those circumstances, they will choose to denominate the 'basket' in Euro and Yen. Remember, they never said specifically how this broke down. The basket will include bonds and 'low level securities' too. They're not going to take a bath on it. They'll optimize for earnings.

Hmmm! I can see quite thorny governance issues here as there are clear conflicts of interest between the promoters and the "clients" as to the optimal currency mix.
We are going a bit off topic, but the currency mix aspect is a bit of a negative for me and I certainly won't be using FBIcoin as a negatively correlated asset, though indeed that is what it will be - it will by definition move in the opposite direction to my spending currency which is the €.

 

[Duke of Marmalade]

This is somewhat revealing. You recommend the Libra as reading material but appear to have missed its central point - it is an attempt to establish a global currency for use by billions of people.
That means you and me, and whoever else wants to use it, including the billions of unbanked.

If you think you would have no need for it, and assuming you are generally rational with typical behaviours of most rational people in the developed world, then presumably not many people in the developed world will see the need to use this also?

This doesn't augur well for its future. Unless of course you still haven't grasped the concept of what is occurring in relation to cryptocurrency and realise what FB is about is to get you, and me, and as many people as possible to use its cryptocurrency.

Sorry, still a bit confused as to the thrust of this post. I don't think FBIcoin has much future in the developed world. Ironically the financial crisis almost bolsters one's faith in the status quo. I should have really lost all of my liquid resources as the whole Irish banking sector was bankrupt, but in a kind of "bail out dukes as a last resort" policy of the powers that be, I escaped unscathed. FBIcoin is a human institution; it always has the propensity to go badly wrong and I don't see any "bailers out of last resort" in the wings.
They are appealing to the unbanked provided they can afford a $40 smartphone. Hard to see much of a future there even if they are in the billiuons.

 

[WolfeTone]

Sorry, still a bit confused as to the thrust of this post. I don't think FBIcoin has much future in the developed world.

I can only assume that having recommended the Libra WP to read, that you have read it yourself?
Its quite explicit in its intention - a global currency. Sure, its initial target audience is the unbanked and those on the periphery of the financial system.
But for what purpose?
Is it so that they remain unbanked and on the periphery of the financial system? Or is it to empower them, affording real opportunities of wealth creation under the umbrella of a currency that is stable, has purchasing power and not open to manipulation by any tin-pot despot dictators?
If their vision bears fruit, what could possibly be the consequence? Could it be, a stable economic and political environment? Could it be opportunities to invest? Opportunities for foreign investment?

Its not just the developing world though, the poor in the US are also part of the target base. Here is a snippet from the WP (note the use of "All over the world" and not "In some parts of the world") which no doubt you have read;

"All over the world, people with less money pay more for financial services. Hard-earned income is eroded by fees, from remittances and wire costs to overdraft and ATM charges. Payday loans can charge annualized interest rates of 400 percent or more, and finance charges can be as high as $30 just to borrow $100.4 "

This is the US they are talking about. Check the reference for yourself.

So in all of this is my perception that you really haven't grasped much notion of what is going on, or what is potentially going to occur.
Money is changing. We can all attest to the diminishing use of cash. But there is a plethora of innovations and advancements occurring, from automation, AI, climate change, theories on basic income, etc.
Would it not be conceivable to you, in anyway shape or form, that in 10,20yrs from now we will have done away with the majority, if not all, fiat currencies?
I dont know what would replace them, bitcoin perhaps, perhaps Libra, perhaps other. But the crypto space is not going away, and is evident by FB entry into this space it is my view that it is only going to become more embedded into mainstream society.
Very much the way FB itself has become embedded into society. Which I imagine, few people saw a need for it back in Zuckerbergs college days.

So if you dont see a need for Libra for your personal use is totally fine. But that from that perspective you discount its potential usage elsewhere in the developed world, and considering all the internet related changes that have occurred and are occurring, it is that is what is revealing. You dont appear to have grasped any sense of fundamental change occurring albeit it is right in front of you.

Ironically the financial crisis almost bolsters one's faith in the status quo.

Because if you we're bailed out, why wouldn't you have faith?
On the otherhand, there were millions, if not billions, who were not bailed out. You might of heard of some of them, the so-called Arab Spring, the migrants drowning in the Mediterranean. And closer to home, the emigrants who had to leave, the share holders of Anglo, the pension funds that were raided and the homeless.
Google any major city in the developed world and its homelessness situation, is it all a coincidence? Or a consequence of the bailouts?
The Brexiteers and the Trump-ets are the marginalised too. They blame immigrants and the EU, but they are simply the marginalised growing in greater number.

 

[Duke of Marmalade]

I can only assume that having recommended the Libra WP to read, that you have read it yourself?
Its quite explicit in its intention - a global currency. Sure, its initial target audience is the unbanked and those on the periphery of the financial system.
But for what purpose?
Is it so that they remain unbanked and on the periphery of the financial system? Or is it to empower them, affording real opportunities of wealth creation under the umbrella of a currency that is stable, has purchasing power and not open to manipulation by any tin-pot despot dictators?
If their vision bears fruit, what could possibly be the consequence? Could it be, a stable economic and political environment? Could it be opportunities to invest? Opportunities for foreign investment?

Its not just the developing world though, the poor in the US are also part of the target base. Here is a snippet from the WP (note the use of "All over the world" and not "In some parts of the world") which no doubt you have read;

"All over the world, people with less money pay more for financial services. Hard-earned income is eroded by fees, from remittances and wire costs to overdraft and ATM charges. Payday loans can charge annualized interest rates of 400 percent or more, and finance charges can be as high as $30 just to borrow $100.4 "

This is the US they are talking about. Check the reference for yourself.

So in all of this is my perception that you really haven't grasped much notion of what is going on, or what is potentially going to occur.
Money is changing. We can all attest to the diminishing use of cash. But there is a plethora of innovations and advancements occurring, from automation, AI, climate change, theories on basic income, etc.
Would it not be conceivable to you, in anyway shape or form, that in 10,20yrs from now we will have done away with the majority, if not all, fiat currencies?
I dont know what would replace them, bitcoin perhaps, perhaps Libra, perhaps other. But the crypto space is not going away, and is evident by FB entry into this space it is my view that it is only going to become more embedded into mainstream society.
Very much the way FB itself has become embedded into society. Which I imagine, few people saw a need for it back in Zuckerbergs college days.

So if you dont see a need for Libra for your personal use is totally fine. But that from that perspective you discount its potential usage elsewhere in the developed world, and considering all the internet related changes that have occurred and are occurring, it is that is what is revealing. You dont appear to have grasped any sense of fundamental change occurring albeit it is right in front of you.



Because if you we're bailed out, why wouldn't you have faith?
On the otherhand, there were millions, if not billions, who were not bailed out. You might of heard of some of them, the so-called Arab Spring, the migrants drowning in the Mediterranean. And closer to home, the emigrants who had to leave, the share holders of Anglo, the pension funds that were raided and the homeless.
Google any major city in the developed world and its homelessness situation, is it all a coincidence? Or a consequence of the bailouts?
The Brexiteers and the Trump-ets are the marginalised too. They blame immigrants and the EU, but they are simply the marginalised growing in greater number.

Golly, what a soapbox. Why aim it at me, not all dukes are the toffs you imagine them to be.
Yes, I think fiat currencies will be around in 20 years time. They have served the developed world hugely. Imagine that with fiat you can have just as much currency as your economy needs - you are not tied to the supply of gold or of, say, bitcoin. Monetary policy can be subjected to reason and is not a prisoner of some physical or artificial scarcity. The invention of fiat is really on a par with the wheel and the internet. Of course in undeveloped political systems fiat can be printed to serve the needs of the Mugabe's of this world. That is not fiat's fault, it is a failure of the political system.
And for sure fiat will be even more crypto than it is today. I presume you were aware that crypto is very much at the heart of the security of modern money transmission systems. Crypto is not equivalent to blockchain. There is not a block in sight in FBIcoin.

 

[WolfeTone]

Yes, I think fiat currencies will be around in 20 years time.

Most probably will be, I agree. My point was that I can conceive a time where the plethora of different types of fiat has diminished greatly. In a global economy, a global currency just seems to resonate with me. I could of course be wrong, but im open to the possibility. Im not dismissive of it.

They have served the developed world hugely.

Certainly have, I have not suggested otherwise. But so did things like landline and newspapers. But things change, Im open to concepts of change, im open to money, its use and the format of that usage changing.

Imagine that with fiat you can have just as much currency as your economy needs - you are not tied to the supply of gold or of, say, bitcoin.

You mean if you run out of it, just print more?
Or if you print too much of it take measures to reduce it? Like imposing artificial scarcity.
How does that effect value? And for whose benefit?

Monetary policy can be subjected to reason and is not a prisoner of some physical or artificial scarcity.

If you can have as much currency as your economy needs, that is artificial scarcity.
Of course, knowing how much is "just enough" is subjective and subject to political means.
Depending on who are deemed necessary to receive the bailout, and who isnt, I suppose?

The invention of fiat is really on a par with the wheel and the internet

We will have to agree to disagree on that one.

Of course in undeveloped political systems fiat can be printed to serve the needs of the Mugabe's of this world. That is not fiat's fault, it is a failure of the political system.

Yes, as stated, fiat is subject to political means and aspirations. It open to corruption and manipulation instigating social unrest.
The wheel is just a wheel.

 

[tecate]

There is not a block in sight in FBIcoin.

Of course not. It's FBIcoin - not (real) crypto. That's part of the surprise people can get in on down the road

Of course in undeveloped political systems fiat can be printed to serve the needs of the Mugabe's of this world. That is not fiat's fault, it is a failure of the political system.

I don't agree. It's an intrinsic part of it (see the thread on systemic volatility). Mistakes are made by all central banks at some stage or another. Perhaps not to banana republic extents but significant nonetheless.

Imagine that with fiat you can have just as much currency as your economy needs

Or you can have too much of it a la quantitative easing. It has been deemed by some to be a success but its an experiment that hasn't fully played out yet. It's caused greater disparity as regards the gap in wealth - that much we know. Can systems be weaned off it?

And as regards interest rates, if rates are already on the floor they can't cut them anymore right (when faced with economic difficulties again).

 

[WolfeTone]

Ive been learned, it seems.

I always considered a BOHA to mean something that is worthless, but accepting at some point in time it may have held value in the past.
Value being subjective, reflected in monetary terms in its market price.
If that value is subsequently exposed as fraudulent, or misleading, or mismanaged, or whatever...it drives the price, that reflects the value, to zero (or next to zero relative to its peak price).

A simple example would be if Bruce Springsteen was to play sold out Sat and Sun nights in Dublin and I offered my ticket for sale for face value of €100.
To all intents and purposes, to those who wanted to buy one of these scare tickets that represents real value.
However upon the sale of the ticket on a Sunday morning, my fraudulent misleading management of the ticket is exposed. It turns out, the ticket im selling is for the Saturday night gig which occurred the night before .
All of a sudden, a ticket that held real value of €100 plummets to zero (or next to zero, relative to its peak price).
It transpires that all I was trying to do was sell a BOHA.
However, according to some, that is the wrong definition. A BOHA is something that never held any value, ever, at any point in time!
Apparently, bitcoin is, despite its associated and obvious price level (as volatile as it is) is a recognized BOHA, to some. Apparently the price level is not a reflection of the subjective value attributed to it. This is certainly unique thinking in the history of finance. But if it is accepted thinking, then everything is effectively a BOHA, because everything will return to zero at some point. Your house, your car, your job, your stocks, your pension, your savings etc...all will return to zero at some unidentified point in time. Under this prevailing reasoning everything must be a BOHA.

But that is not the accepted narrative. If someone does something, say, tell a joke, preach a sermon, offer financial advice, and someone is willing to pay to hear that joke, sermon, financial advice etc...then that is evidence or proof of value, and that value is reflected in the price paid.

Bitcoin is the first known and recognized BOHA in history. There is no other known or recognized BOHA in the history of finance or economics, with the exception, maybe, of a literal bag of hot air! These bags of hot air can differ to each other in many ways. I dont want to complicate matters so I will keep it simple -
a plastic bag of hot air, and a brown paper bag of hot air.
The assertion by some, for some several years now, is that the plastic bag, the brown paper bag, and bitcoin are one and the same thing!
Apparently, the price action and history of bitcoin, over 10yrs + now, will, at some unidentified point in time - 1yr, 5yrs, 10yrs+ from now, will reflect the price of the plastic bag and the brown paper bag. That may be so, but its no different to the Bruce Springsteen ticket.

Bitcoin is something that holds subjective value to many people, and that value is reflected in its current price.
So much so that some are betting on its current value, reflected in its price, returning not to zero, but to another identifiable price in order to profit from it and then declare that it has no value.

Could you make it up?

 

[Duke of Marmalade]

Could you make it up?

No

 

[elacsaplau]

I think that the Duke is to be applauded for his consistency, conviction and particularly courage in relation to all things BTC. Let me back this up.

My understanding is that BTC was first discussed in these here parts in c. 2015 when its price was c. 200 books. Back then, the Duke stated, as he has repeated consistently at pretty much every opportunity since then that BTC is a big fat BOHA (or words to that effect!)

In recent pages, I have learned that he has not only talked the talk but indeed very much walked the walk......by shorting BTC at $14k and very understandably and very prudently removing himself from this short position at $8k. In so doing, IMOBRO, he unequivocally demonstrates the qualities outlined in my opening statement.

 

[Duke of Marmalade]

Jayz elac, I don’t know whether that is praise or faint praise. Just as in the UK one is either a Brexiteer or a Remainer can you tell us are you a BOHA or a NBOHA?

 

[elacsaplau]

….can you tell us are you a BOHA or a NBOHA?

Nice one......

If I am being honest - well, yes, personally, I'm ordinarily full to the brim OHA. Occasionally, I, what is euphemistically termed, equalise. Such relief, or farting if you will, provides but temporary soulagement as dem ill winds don't be long in returning!

If you're asking about my views of BTC, it's hard to separate my views from my experience with BTC which has been a long and windy road that was probably not very good for my poor heart but was very kind to my wallet.

Of late, I have been forbidden from having serious skin in the BTC game - otherwise, all may not be so quiet on the domestic front. [For background, I was fortuitously an early adopter (meaning purchaser) and not an especially early seller of BTC - meaning that its journey has been financially very kind to me.] In relation to cryptos generally my main interest (probably academic given my emotional and literal attachement to my cohones) is in trying to work out what the smart play, meaning smart financial play, is! Probably past my bedtime to expand further for now but I may another day.

 

[WolfeTone]

I suppose in fairness to the Duke and co. they only have to be right once.
Being wrong for several years, quite spectacularly in this regard, amounts to little for when the day of reckoning descends on those who bought bitcoin.

 

[elacsaplau]

I know what you mean, WolfeTone

That's why I decided to get out of the Armageddon business......every time I was wrong, my error was there for all to see and when I'd eventually come good, I very probably would get no recognition at all.

 

[Duke of Marmalade]

I suppose in fairness to the Duke and co. they only have to be right once.
Being wrong for several years, quite spectacularly in this regard, amounts to little for when the day of reckoning descends on those who bought bitcoin.

I don't understand this. I have been proved right so far. My contention is that bitcoin can never succeed as a transactional currency, because as Satoshi noted and David Marcus belatedly concedes it has no intrinsic value - it is BOTHA. Currently less than 1% of btc transactions are to buy stuff, and even then I suspect it is to satisfy some nerdish narcissm.
If you mean that I have been wrong about its price, well I have only put that to the test once and was proved right, though I suspect that was just lucky. I do not have any confidence as to any medium term forecasts as to its price trajectory, and am unlikely to dabble again in that space.

 

[tecate]

I don't understand this. I have been proved right so far. My contention is that bitcoin can never succeed as a transactional currency, because as Satoshi noted and David Marcus belatedly concedes it has no intrinsic value - it is BOTHA. Currently less than 1% of btc transactions are to buy stuff, and even then I suspect it is to satisfy some nerdish narcissm.

Eh, not entirely. Having debated this with you over the best part of 2 years now, you've always seen this as a black and white winner takes all type of scenario. That's not the expectation - and nor is it in any way a reasonable expectation to bring about the level of adoption you're talking about.
BitPay are not the only processor in the market but even taking them as an example, they booked $1billion in Bitcoin transactions last year. It has problems in terms of scale, transaction time and volatility. In the case of the first two, they are likely to go away with lightning network - which continues to be developed and rolled out. Volatility will remain an issue for much longer. However, remember too that a lot of people in crypto circles are being corralled inside of it - so they have every reason to spend with BTC when they get the opportunity.

I see the transactional aspect to be a slower, long term development. What's more immediate is it's use as digital gold. You can carry on with saying that this was Satoshi's vision, yada, yada. Satoshi isn't around for itself to explain current thinking. Secondly, it won't have been the first time that a project started with one use case and found another more immediate use case.

If you mean that I have been wrong about its price, well I have only put that to the test once and was proved right, though I suspect that was just lucky. I do not have any confidence as to any medium term forecasts as to its price trajectory, and am unlikely to dabble again in that space.

A wise decision. Good to see some acceptance creep in to the discussion - even if it is a short/medium term consideration.

 

[Duke of Marmalade]

What's more immediate is it's use as digital gold. You can carry on with saying that this was Satoshi's vision, yada, yada. Satoshi isn't around for itself to explain current thinking. Secondly, it won't have been the first time that a project started with one use case and found another more immediate use case.

This is the David Marcus line. The Libra White Paper and associated Marcus commentary really is an eye opener. It doesn't single out btc for criticism but lists its obvious (fatal in my view) deficiencies. Not scalable, not stable, not economic and most of all has no intrinsic value. So, yes, forget that btc will ever achieve Satoshi's dream. So have we another position on the team for btc, ah yes let's put it in goal, it can be "digital gold" if you're talking to the plebs or an "uncorrelated asset" if you want to talk fancy. This is digital roulette IMHO.
Whilst Satoshi in desperate search for intrinsic value came up with the rather ingenious idea that if people think it has or will have utility as a transactional currency then ergo it will acquire intrinsic value. It was a stretch. But Marcus is really going a much larger stretch if he is arguing that if people think it is digital gold then it is digital gold. This false logic will collapse on itself eventually but, as I say, I will not hazard to speculate how long that will take.

 

[tecate]

This is the David Marcus line. The Libra White Paper and associated Marcus commentary really is an eye opener. It doesn't single out btc for criticism but lists its obvious (fatal in my view) deficiencies. Not scalable, not stable, not economic and most of all has no intrinsic value.

I guess this is something that you have difficulty in understanding. Scalability is already being addressed. But as I've found with previous discussion with you, you will never consider that anything can be improved upon or resolved. That's a mistake but so be it.

You seem very focused on the downside but never on the upside or vice versa when it comes to stuff that happens to support the position you're taking. FBIcoin has many downsides too - but one of them it can fix in the future when BTC happens to be prominent amongst those basket of currencies, bonds and securities.

Other than that, Bitcoin is an actual crypto, it's actually borderless (FBIcoin will only be borderless if given permission to be) - its immutable and is backed by the strongest network there ever was - lord knows there's been enough attempts to take it down over the course of 10 years.
The lights went out in NY the other night - Bitcoin is never offline. You can self custody so its unconfiscatable...but go ahead and ignore all the positives.

Sure, it's got major price volatility and it will take years for that to calm down - but the road is long, your dukeness.

o have we another position on the team for btc, ah yes let's put it in goal, it can be "digital gold" if you're talking to the plebs or an "uncorrelated asset" if you want to talk fancy. This is digital roulette IMHO.
Whilst Satoshi in desperate search for intrinsic value came up with the rather ingenious idea that if people think it has or will have utility as a transactional currency then ergo it will acquire intrinsic value. It was a stretch. But Marcus is really going a much larger stretch if he is arguing that if people think it is digital gold then it is digital gold. This false logic will collapse on itself eventually but, as I say, I will not hazard to speculate how long that will take.

Here's Grayscale Investment Trust's recent U.S. TV Advert. Grayscale's fund is now valued at $2 billion. One of its opening lines.... 'are you living in the past?' Food for thought, your dukeness.