How long before nation states buy bitcoin?

[Duke of Marmalade]

@WolfeTone I think Section 39(4) would allow NTMA to back High Definition for the Epsom Derby, if they thought it had a good chance of winning. And they have as much cause to take a punt on the Derby as on any crypto, in fact the former actually has more intrinsic value.

 

[tecate]

@NoRegretsCoyote : Just so that I fully understand this, the NTMA has never owned and can never own gold or gold ETFs or derivative products - as it's legally precluded from doing so?

 

[WolfeTone]

in fact the former actually has more intrinsic value.

Oh no! It's the "instrinic value" card being played, again!
I haven't heard this one since bitcoin was around $3,000.

 

[tecate]

Oh no! It's the "instrinic value" card being played, again!

Dukey's intrinsic value card is increasingly becoming a moot point. It's neither here nor there if bitcoin is being accepted as a store of value. Here is Robert Caplan, President of the Dallas Federal Reserve Bank saying "it's clear, bitcoin is a store of value'. That - from a central banker.

 

[Jim2007]

Of course it will, but the problem with identitying peak bubble is nobody knows how much the bubble will rise to, and what price it will crash to.

Implied in your comment is an assumption bitcoin is in a bubble, and at or near peak price?
You may be right, or you may be wrong... but I'm sure I have heard this before somewhere?

So long as the general public can't walk into a shop and buy a bar of soap with bitcoin it remains very vulnerable. If the Fed/ECB/BIS were to issue instructions for banks to stop the conversion of bitcom, how long to you think it would take for it to hit the floor? Most of the holders are not 'believers' and they will jump at the first sign of trouble... and once the race to the bottom begins.... With it all being so automated, I'd give it an hour.

 

[Jim2007]

Dukey's intrinsic value card is increasingly becoming a moot point. It's neither here nor there if bitcoin is being accepted as a store of value. Here is Robert Caplan, President of the Dallas Federal Reserve Bank saying "it's clear, bitcoin is a store of value'. That - from a central banker.

But it is no more being used as a store of wealth than the tulips were... it's value is primarily driven by fear and greed. And the minute if ventures into main stream it will have to be regulated and it will.

 

[Duke of Marmalade]

Dukey's intrinsic value card is increasingly becoming a moot point. It's neither here nor there if bitcoin is being accepted as a store of value. Here is Robert Caplan, President of the Dallas Federal Reserve Bank saying "it's clear, bitcoin is a store of value'. That - from a central banker.

Here we go again. How can two people see the same interview and draw opposite messages?
Sure he says bitcoin currently has a store of value aspect. Doesn't even Devil Roubini concede that? Heck, put a bitcoin in my pocket, I sure ain't goin' to throw it away.
But he clearly identifies that key word "adoption" as meaning adoption as a medium of exchange just as John Kelleher before him. He observes that the volatility is an impediment to that adoption.
He says CBDC will not be a SoV. I have been pointing this out in my recent posts. In fact it is a virtue of CBDC in its role as MoE that it would not have (hoardable) long term SoV.
Sure he says that as a central banker he is looking at bitcoin and CBDC. As @Jim2007 says, he is looking and as soon as he sees people buying bars of soap with it, he will smash it.

Just noticed a bar of soap has jumped 8% in btc price in the last 24 hours.

 

[WolfeTone]

If the Fed/ECB/BIS were to issue instructions for banks to stop the conversion of bitcom, how long to you think it would take for it to hit the floor?

I'm not sure how long it would take. I'm not sure it would hit the floor.

Most of the holders are not 'believers' and they will jump at the first sign of trouble...

But if CB's were to issue instructions to stop the conversion to bitcoin (I making the assumption from bitcoin also), where will they jump to?

 

[tecate]

So long as the general public can't walk into a shop and buy a bar of soap with bitcoin it remains very vulnerable.

It's price remains vulnerable - sure (regardless of whether you consider it in terms of a means of exchange/settlement layer/hedge/store of value use case). As it continues to establish network effect, overall vulnerability declines.

If the Fed/ECB/BIS were to issue instructions for banks to stop the conversion of bitcom, how long to you think it would take for it to hit the floor? Most of the holders are not 'believers' and they will jump at the first sign of trouble... and once the race to the bottom begins.... With it all being so automated, I'd give it an hour.

I've always said that if there's a full court press, then that will be an extremely bad day for those that speculate on the asset. However, they won't kill it. They will set its development back a number of years - but its something that I don't believe they will win in the long term.

But it is no more being used as a store of wealth than the tulips were... it's value is primarily driven by fear and greed.

Jim, hardly anyone ever tries to label it with the whole tulips deal anymore - and for good reason. They're in no way comparable. Whether people like it or not, unlike tulips, bitcoin possesses a number of the key characteristics of a store of value and a means of exchange. Other than that, I disagree re. it not being used as a store of wealth. It's formative in that role, yes - but its made significant advances in establishing that use case over the last few years. You've just heard the President of the Dallas Fed state that it IS a store of value. CB'ers are the antithesis of crypto-friendly folk - so that's significant.
Now alongside that, does there continue to be a major element of speculative interest - driven by fear and greed? Absolutely - I agree - all day long.

And the minute if ventures into main stream it will have to be regulated and it will.

I don't think that anyone has suggested otherwise. There are going to be major battles over this for years to come. Someone suggested a few weeks back here that the likes of Legarde et al can 'strip away the attributes that make it an asset'. That - they can't do. They can do a full court press re. banning the on and off ramps but they should have a mind to be careful. As network effect expands (and year on year, that's undeniable) - they're going to be stepping on more and more toes....to a point where their shenanigans become politically unacceptable. They can drive it underground and yes, set it back years but also they lose all control over it.
This thing has many twists and turns to take yet - it's not straightforward by any means - but with every passing day, it's becoming much more difficult for them to tame.

Here we go again. How can two people see the same interview and draw opposite messages?

You're absolutely right, Duke. Here we go again - with your bad takes.

Sure he says bitcoin currently has a store of value aspect.

That's a lie. You're deliberately twisting things. I quoted what he said which was this -> "it's clear, bitcoin IS a store of value".
There was no mention of 'currently' (as if to infer that bitcoin's store of value attribute is just a transitory phase).

Heck, put a bitcoin in my pocket, I sure ain't goin' to throw it away.

Don't worry Duke - there are eight decimal places when it comes to bitcoin. You'll need to make use of that feature by the time you cotton on to the world changing around you.

But he clearly identifies that key word "adoption" as meaning adoption as a medium of exchange just as John Kelleher before him. He observes that the volatility is an impediment to that adoption.

Back up the bus. You went back and forth for months saying that bitcoin couldn't establish itself as a store of value without first establishing itself as a means of exchange. Here you have the Dallas Fed President/CEO saying that it IS a store of value today - yet he mulls over what implications that has in efforts to use it as a means of exchange.
That all makes perfect sense to me. Remember, nobody here has disputed that it has a number of challenges to overcome when it comes to use as a means of exchange.
However, you do have a major bone to pick with Kaplan as it's clear that he completely disagrees with your assessment that bitcoin can't become a store of value without first being adopted as a means of exchange (given that he explicitly states that it IS a store of value today).

Sure he says that as a central banker he is looking at bitcoin and CBDC. As @Jim2007 says, he is looking and as soon as he sees people buying bars of soap with it, he will smash it.

Just noticed a bar of soap has jumped 8% in btc price in the last 24 hours.

No. You're now visualising what you WANT to happen. Whilst that's what I would expect from most CB'ers that's not the line that he has taken or expressed here.
Secondly, you should note that when he considers bitcoin's shortfalls as a medium of exchange, he does something that no crypto-naysayer here ever does - he's open to that situation changing. He states "that can change and that will evolve".

Clearly you're salivating at the notion of a total crypto ban Duke. However, note that as network effect continues to grow, the task of putting that genie back in the bottle becomes harder and harder.

 

[Duke of Marmalade]

But if CB's were to issue instructions to stop the conversion to bitcoin (I making the assumption from bitcoin also), where will they jump to?

Nice one! Every to has a twin from.
The CB are not terribly exercised by the SoV aspect of btc or indeed speculation thereof. They would be concerned if it began to be "adopted" meaning used as MoE. It would be very easy to shut it down as a mass adopted MoE. It will therefore never achieve that status and as John Kelleher argues, it will never achieve the MoE utility value to justify its current speculative SoV.

 

[tecate]

, it will never achieve the MoE utility value to justify its current speculative SoV.

And yet you've just heard the President/CEO of the Dallas Fed state explicitly that it already IS a store of value. Go figure...

Nice one! Every to has a twin from.
The CB are not terribly exercised by the SoV aspect of btc or indeed speculation thereof. They would be concerned if it began to be "adopted" meaning used as MoE. It would be very easy to shut it down as a mass adopted MoE. It will therefore never achieve that status and as John Kelleher argues, it will never achieve the MoE utility value to justify its current speculative SoV.

Try this on for size, Dukey. It just has to continue to stick around and increase its network effect. It's probably just as well that it's challenged as a means of exchange. It establishes itself as a store of value - whilst a number of the issues surrounding its use as a means of exchange get addressed and there comes a point where they can't turn that clock back. If people have a use case to utilise any digital asset (not just bitcoin), then they will likely end up transacting it also - to some extent as it will be easy to do so.
You've read The Internet of Money, I believe? Within it, Antonopoulos envisages a scenario where we all have digital wallets and in a transaction between two parties, those digital wallets will automatically negotiate the transfer of value depending on what digital assets/currencies are available and the preferences of each user (their order of preference in terms of what currency they'd like to send/receive). That's where we're headed.

 

[WolfeTone]

As @Jim2007 says, he is looking and as soon as he sees people buying bars of soap with it, he will smash it.

The day that people are using bitcoin to buy bars of soap is the day that the volatility in currency rests in the dollar, euro, yen or whatever currency, not bitcoin.

Bitcoin will only start to replace fiat currency, in my opinion, when it has a more stable value than fiat itself. Attempts to 'smash' bitcoin at that point will be futile.
This is point seems lost on you.

It is no secret that we are in an era of unprecedented money printing. History informs us that rapid expansion of the money supply can, and does, lead to instability. How that instability manifests itself, and the consequences are unknown.
There is a clear correlation between the creation of bitcoin and the collapse of the banking system in 2007-2009 (saved only by the magic money tree). The collapse in house prices, unemployment, emigration, spiralling debt rates etc were the consequences felt in this country. So much so that hundreds of thousands of people came out on to the streets to stop water charges. Signaling to government that people were starting to feel they were being pushed too far.
Charges were abandoned and with troika supports and some belt-tightening, calm and order prevailed, notwithstanding the crisis that remained in housing.

The point being, when a monetary system becomes unstable nobody knows what the consequences will be, or how those consequences will manifest themselves.
All we know, with a large degree of certainty, is that there will be consequences to all this money printing.
Who knows, the consequences could be positive? And the good ship global economy returns to safer, chartered waters and we can all chill out. CBs like to give out the impression that we can trust them to do exactly that.

On the other hand, there may be choppy, uncharted waters ahead. In which case, the variable interest rate on my mortgage may shoot up, or perhaps the govt raids my pension scheme, or they increase taxes on my income, insurance premiums rise, etc...etc...maybe the bar of soap rises 8% in a day, then 20% the next day, then falls 10% the day after, etc - in which case, retailers and consumers may look to something that, at that point, has more stability, more value, than the prevailing fiat currency.
It may, or may not be bitcoin, but at least anyone who holds bitcoin will have that choice. And that is a sentiment that is increasing, observable by virtue the price rise of bitcoin over the last decade.

 

[WolfeTone]

It would be very easy to shut it down as a mass adopted MoE

No it will not. How would it be easy?
I take it that CBs are not going to be too concerned if I am swapping some satoshis over a few horse bets and pints with lads in the pub?
You are clearly signaling a period of time where increasingly retailers and consumers are using bitcoin instead of the prevailing fiat currency.
In what type of economic circumstances do you think that would occur?
Once you have answered that, ask yourself how easy would it be to stop it?

 

[Duke of Marmalade]

@tecate I am not going to engage in silly semantic gotcha points like he uses the word "IS".
My position is perfectly logical, stop picking at its semantics.
I believe that bitcoin currently has/IS a store of value - proof, I wouldn't throw it away if I was gifted it.
As with John Kelleher, I believe that that SoV can only be justified long term if it achieves some utility value. The only utility that it can achieve (per JK) is as a MoE. That won't happen because if it even threatened to happen the authorities, in the interests of society, would nip it in the bud.
Meanwhile its SoV is purely based on speculation.

Bitcoin will only start to replace fiat currency, in my opinion, when it has a more stable value than fiat itself.

Well now what does more stable value mean? Bitcoin has fallen 8% in the last 24 hours. But wait a minute that means the dollar jumped 8%. Which is the unstable one? The answer is obvious, how has the price of a bar of soap moved in the respective currencies?
I can never see a day being allowed to happen when bars of soap are priced in bitcoin and their dollar/euro values are all over the shop.

 

[Duke of Marmalade]

No it will not. How would it be easy?

Do you know what mass adoption as an MoE looks like? Of course you do. Walk around Dunnes Stores. € prices scream at you everywhere. By mass adoption as a MoE I mean that a substantial section of the population think bitcoin. They at least want DS to display dual pricing. You don't think the authorities can stop that happening?
And while we are on the point, the higher the speculative price of bitcoin the greater is the requirement for mass adoption as an MoE to justify that speculation, as per JK.

 

[tecate]

@tecate I am not going to engage in silly semantic gotcha points like he uses the word "IS".
My position is perfectly logical, stop picking at its semantics.
I believe that bitcoin currently has/IS a store of value - proof, I wouldn't throw it away if I was gifted it.

Of course you're not - because what you did was wrong in trying to twist what he actually stated.

I believe that bitcoin currently has/IS a store of value - proof, I wouldn't throw it away if I was gifted it.
As with John Kelleher, I believe that that SoV can only be justified long term if it achieves some utility value. The only utility that it can achieve (per JK) is as a MoE. That won't happen because if it even threatened to happen the authorities, in the interests of society, would nip it in the bud.

Yeah - this is YOUR view - that's not the view that Robert Kaplan of the Dallas Fed stated (which is what you were trying to claim).

Meanwhile its SoV is purely based on speculation.

So you're saying that people have speculated on its development as a store of value and that Kaplan - as Dallas Fed President - is the latest in a long and growing list of notables that acknowledge that it IS a store of value? Yeah, that sounds about right.

Bitcoin has fallen 8% in the last 24 hours. But wait a minute that means the dollar jumped 8%. Which is the unstable one? The answer is obvious, how has the price of a bar of soap moved in the respective currencies?
I can never see a day being allowed to happen when bars of soap are priced in bitcoin and their dollar/euro values are all over the shop.

And the difference between your take and Kaplan's is that you say its volatile - so that's it - its done for as a means of exchange - no further discussion required. Kaplan specifically referenced bitcoin's volatility as a difficulty for its use as a means of exchange. However, he acknowledges that that 'may change and that will evolve'. He does. You don't.

 

[tecate]

Do you know what mass adoption as an MoE looks like? Of course you do. Walk around Dunnes Stores. € prices scream at you everywhere. By mass adoption as a MoE I mean that a substantial section of the population think bitcoin. They at least want DS to display dual pricing. You don't think the authorities can stop that happening?
And while we are on the point, the higher the speculative price of bitcoin the greater is the requirement for mass adoption as an MoE to justify that speculation, as per JK.

Store of value -> Means of Exchange -> Unit of Account.
You've jumped all the way through to unit of account with the above. You can have everything priced in euros/dollars, etc. and still have a scenario where payment is accepted in bitcoin at the checkout.

 

[WolfeTone]

The answer is obvious, how has the price of a bar of soap moved in the respective currencies?

Yes, as of today. But you are not considering, or deliberately avoiding the other scenario.
Where the price of soap, increasing 8% a day (or month, or year) against the dollar, in line with (or close to) bitcoin also increasing 8% against the dollar every day, month or year.
If such a correlation were to occur, for an sustained (undefined) period, retailers and consumers will move to using bitcoin instead of the prevailing fiat currency to buying and selling soap.
This is not speculation, it is what would happen in such circumstances.

By mass adoption as a MoE I mean that a substantial section of the population think bitcoin.

Yes. Think about it, a substantial section of the population thinking in Bitcoin, how do the authorities stop the population "thinking bitcoin"?

You don't think the authorities can stop that happening?

Possibly, but possibly not.
We are a generally law-abiding people. That said, there are always people trying to circumvent, alter, avoid the laws and customs we hold. But generally, the numbers of those people are insufficient to affect change.
Occasionally however, the opposite occurs. I refer again to the water charges. The authorities tried to bring in charges spending millions on meters for every household. And of course there were the people who protested against the charges, as always.
But because a substantial section of the population were thinking "I won't pay water charges" the authorities could not implement and enforce the scheme. The authorities were powerless to stop it.

If a substantial section of population are thinking bitcoin the authorities may be able to stop it, but there is also a tipping point (undefined) where it will be futile to try stop it. Good luck to whoever has that job in knowing when to clamp down and stop people "thinking bitcoin".

 

[tecate]

If a substantial section of population are thinking bitcoin the authorities may be able to stop it, but there is also a tipping point (undefined) where it will be futile to try stop it. Good luck to whoever has that job in knowing when to clamp down and stop people "thinking bitcoin".

So if there was growing adoption of bitcoin for store of value/investment purposes and your government came along and banned on/off ramps - tanking the price, you'd be more than a tad, annoyed, correct? If that grouping of people continues to grow year on year, does there come a point at which .gov droids won't dare touch it - as the backlash will be too much?
If they already have crypto and if there's yield to be gotten within the crypto-eco system, maybe they'll say screw your ban - I don't want to take my funds out of that system - go fish.

 

[WolfeTone]

And while we are on the point, the higher the speculative price of bitcoin the greater is the requirement for mass adoption as an MoE to justify that speculation, as per JK.

I kind of agree with this, but I think it is incomplete.
The higher the price of bitcoin suggests more and more people acquiring bitcoin.

More and more people acquiring bitcoin brings forth the day, or a tipping point, when people begin to exchange bitcoin with each other for goods and services.

The amount of people I know personally who hold bitcoin is 1 other. That is not to say that people I know don't have bitcoin, but just that I don't know if they have it or not.
But if the substantial numbers of people were "thinking bitcoin", it would become apparent soon enough. Thus inducing people to consider trading in Bitcoin.

It reminds me of FB. I thought nothing of ever having a FB account. But when it became apparent to me that those around me were communicating through FB, I opened an account and began communicating with them.

There is an obvious difference insofar as it cost nothing to open a FB account, whereas 0.10 of a bitcoin will cost you several thousand.