TwoCitiesCapital

We don't have to have the debate here and can continue the convo in the crypto thread - but BTC exploding from $1,100 - $20k during the 2017 hiking cycle suggests that it's not a bubble bet or even a bet on 0% interest rates. Even after blowing up in 2018, the lows were still 3x that of 2017 opening price. Highly volatile, inelastic, with a secular growth trend is probably more emblematic of it's price behavior

All significantly less traceable than crypto... As a matter of fact, crypto is being touted as a way to track commodities so you know their source specifically so we can trace things like blood diamonds and Russian oil exports. Wonder why it's good enough for use in tracing commodities and their origins but still to anonymous and difficult to track when it comes to criminals and their money.

Here's a more recent example. https://www.justice.gov/opa/pr/two-arrested-alleged-conspiracy-launder-45-billion-stolen-cryptocurrency They couldn't spend the money because of the scrutiny on the wallets and we're eventually identified, arrested, and proceeds recovered. Bitcoin is terrible for criminal enterprise. Direct quotes from the article: "Today’s arrests, and the department’s largest financial seizure ever, show that cryptocurrency is not a safe haven for criminals" "Federal law enforcement demonstrates once again that we can follow money through the blockchain, and that we will not allow cryptocurrency to be a safe haven for money laundering or a zone of lawlessness within our financial system"

KYC at primary on-ramps and off-ramps destroyed any utility to criminal organizations which is why you're having to go back 9-years for your example. It was only beneficial when you could anonymously transact without scrutiny and get BTC off exchanges and into fiat. There have been major efforts to lock down on-ramps and off-ramps and to have KYC attached to specific wallets. Even wallets separate from major exchanges can be partly identified through forensics and transactions from known wallets. Hence why lots of BTC from criminal activities has been recoverable and many recent hacks have had proceeds returned because the wallets were blacklisted and couldn't spend the money. This has been discussed extensively in the Cryptocurrency main thread and is an argument that hasn't held water for years now. Having your criminal activities publicly viewable and balances publicly traceable is laughably stupid for criminal enterprise.

I think at this point I don't expect the rate reset to be high enough for me to want to lock up money for 12-months. We'll see where it prices at in May if I buy more, but I think corporates, mortgages, and maybe even treasuries have the opportunity to do better in 2023 and beyond with high coupons locked in and duration to hedge falling rates/inflation. Also, at some point in 2023, I expect the stock market to look better going forward too so want the cash available for that.

The narrative about gold being an inflation hedge has ALWAYS been wrong. Gold's historical correlation to inflation has been near zero. Its a real rate hedge - when real rates are negative, gold does well (a la 2021). When they're getting less negative/more positive, gold doesn't do well. It's not the inflation - it's the relationship of inflation to interest rates. It's that simple. The Federal reserve started hiking rates earlier this year very agressively - real rates are less negative now than they were then. Thus gold peaked and dropped with other assets. Would add that being flat over the last 12 months is still fairly enviable relative to equities (which every else seems to believe are an inflation hedge) or TIPS (which everyone knows ARE an inflation hedge).

Is it 2016 again? Haven't we beaten this horse to death that there is NO value to criminal organizations to have all your funds visible/trackable/black-listable on a public blockchain? Can we put the trope of it being used for money laundering and drug deals to bed already? The USD is FAR more common in criminal enterprise than BTC ever was or will be.

+1 Earnings contraction is likely to continue. Rates have continued to move higher and CPIs have continued to lag PPIs (margin contraction). The other factors: 1) USD - off it's recent highs, but still significantly higher than a year ago which will continue to show poor comps YoY for exports 2) Oil prices are back down to where they were a year ago, but only after taking SPR reserves to multi-decade lows to accomplish it. What's the likelihood oil prices remain this low while physical shortages abound without additional releases of reserves? Oil may go modestly lower in a recession, but intermediate term outlook is for higher prices to destroy demand and fix the shortage. The story for Q3 earnings is that fewer companies are beating estimates for revenues/profits than historical quarters, and the few who do beat are beating by a significantly smaller margin than historical beats. And those "beats" are only occurring AFTER months of downward revisions. And all of this is occurring before the bulk of the lagged effect from rate hikes is felt and before labor market weakness is evident...

wBTC and wETH are controlled by DAOs. Certainly possible that they're misbehaving, but would be very hard to coordinate that misbehavior across a number of independent parties (wBTC protocol has 17 different organizations as DAO members). Not saying this isn't a potential point of failure, but is an unlikely one IMO and wasn't what the article was alleging Edit: the wBTC DAO website also identifies wallet addresses for the BTC reserves, their balances, and the issuance of wBTC against that so I think we can be relatively confident the BTC does exist since it's verifiable on a public blockchain. They also identify the entire history of redemption and creation so you clearly see people are redeeming for the underlying successfully. Primary concern would be the DAO losing control of the keys to those wallets.

https://protos.com/defi-protocol-aave-faces-bad-debt-and-centralized-points-of-failure/ I've mentioned Aave's strength through the failure of centralized lenders multiple times here, so am shocked to see articles like this. I feel I'm familiar with the protocol, but maybe someone here is more so? Aren't all of Aave's loans over collateralized and immediately liquidated when debt covenants are breached? I thought that was part of why they survived the prior fallouts was because they auto-liquidated collateral before anyone else could act. For anyone else that is familiar with the protocol, is this article just total FUD or does Aave actually extend credit on an uncollateralized basis?

But she isn't after the current decline - not anywhere close. You're measuring her from her top. I'm measuring Bitcoin much, much closer to it's bottom. And separately, BTC has survived multiple 80-90% corrections during that period of time and still went on to be the best performing asset class. Cathie did not. I think we're comparing apples and oranges here. ARKK seems clear or was a bubble. The behavior of Bitcoin less so since it seems like it matches it's historical pattern of booms and busts pretty closely.

My company recently made a similar point - and was quiet on it still being the best performing asset class over the last decade despite the 80% drop. These people are missing the forest for the trees.

+1 Tokens are just a different form of capitalization and ownership than stock. They're a commodity and reflect the value of both being a user and owner of the network. I'd also argue they better align incentives across as stakeholders as users/network owners are the same group of people versus stock ownership that pits the business owners against other stakeholders in a zero sum game. It'll be interesting to see what comes out of DAO type organizations, but will definitely take time for the industry to come back from this "bank run".

That's roughly the annual fee, so you haven't really identified anything troubling about the sales. 1.5-2% fees are high, but when buying at a 40-50% discount to NAV you're being well compensated for them. And I agree, the physical BTC is very likely held because Coinbase and BNY Mellon have very little to gain and a lot to lose otherwise.

Wouldn't this be required in their financial disclosures which solely disclosure BTC? Their 10-Q explicitly states that the Trust does NOT invest in derivatives instruments for example. Given that the assets are custodied by Coinbase and Administrated by BNY Mellon, isn't it unlikely that two publicly traded and SEC regulated companies would both be independently lying about the holdings of said Trust?

I'm dead

I honestly love fixed income for this reason. I also thought bonds were boring at one point. Then worked at a fixed income house for long duration pension plans that were +/- 40% in any given year and realized there's REAL money to be made in rates/credit.

Not sure there's a "fix". Credit is credit regardless of the currency it's extended in. Smart contracts can help with enforcement and facilitation of payment and contract law, but not certain I understand what's "broken" about credit to know how Bitcoin or other crypto might be expected to fix it?

The TL;DR Bitcoin fixes this

It would require a change to the protocol and a hard fork of the BTC Blockchain. Which has happened before. Go look at Bitcoin Cash (BCH) or Bitcoin Satoshi Vision (BSV) or Doge Coin. All are forks/copies of the BTC protocol with something changed. None have retained anywhere near the value of BTC in the long-run and will likely fade to obscurity. Any new hardfork likely faces the same fate. The only way it DOESN'T result in a hardfork is if you get a consensus amongst BTC market participants to take away the primary characteristic that gives BTC its relative value - it's scarcity. Why would the industry come to a consensus and change the protocol against their own best interest?

I own GBTC in my IRAs. I own Bitcoin in my hardware wallets. No reason no to own both, but I prefer direct custody of my BTC. Only buying GBTC because of the current discount and that I trust a spot ETF will eventually be a thing here in the US and am willing to wait years for it to happen since I'd be holding the BTC for years anyways.

All things are possible, but I think 1k is highly improbable. 10k I think is also unlikely, but could happen as sentiment grows even darker from the recent FTX scandal and the soon-to-be-seen collateral damage. I thought the prior lows of 16k might've done it. Now I think it's 50/50 that we go as low as 12-14k, but am absolutely open to being wrong on my bottom call. Just continuing to DCA. As for highs? I don't think several hundred thousand per coin is out of the realm of possibility. Is a question of how many countries have adopted it at that point, how many central banks have onboarded it, whether or not it's being used as a CB reserve asset or for a portion of int'l trade, etc. All supply/demand and sentiment based. But I've seen credible models that consider network effects and hypothesized values of networks suggest upwards of $500-$1M in the next decade if the network growth follows similar S-curve dynamics of prior tech trends (phone, internet z Facebook users, etc). So far it's been tracking higher than those prior trends.

And could've sold at $10-15 SMDH

Gold has a fixed supply that's above ground and new supply added each year from additional mining. That ratio is called stock-to-flow. In general it's about 70x (i.em there is 70x more gold above ground than added in new supply meaning new supply is only slightly inflationary). Many people consider this ratio important in describing general scarcity and relative value of commodities. Why is gold capitalized as more valuable than silver and platinum? It's stock-to-flow ratio is significantly higher. New supply is significantly more scarce. BTCs stock to flow is currently ~55x. At the next halving, it'll be ~110-120x. Significantly more scarce than gold on a relative basis and significantly less inflationary. At some point, annual supply basically drops to 0 and BTC becomes deflationary as people will still occasionally lose coins. Who is buying it? I've already covered sources in a prior post from yesterday. People are buying it for use in payments, people are buying it as a differentiated asset class, people are buying it for a balance sheet store of wealth given it's relative scarcity, Russia is considering it's use in global trade to avoid USD sanctions, central banks might be considering it as an alternative to gold and USD assets now that CB bank reserves have been weaponized, etc. Lots of use cases - some good and some bad. That network of people is generally growing every year and this demand for the coin is growing every year while new supply slows. Why is BTC going to outperform the S&P? Over what time frame? 10-years? 20-years? Because it's in a secular growth trend of growing demand and decreasing new supply making it highly inelastic. Price moves are explosive as we've seen time and time again. BTC could go to $1 million tomorrow and the number of new BTC issued in supply doesn't change. The only way to incentivize additional supply coming to market is paying a high enough price to convince someone to sell. 70+% of BTC in circulation hasn't moved in over a year - there aren't many sellers in these desperate times, how many do you expect when times are good and they're being rewarded for holding? Eventually BTC will trade at a significantly higher enough capitalization that forward returns will be pretty minimal as holding a currency should be. That point doesn't occur until mass adoption has happened which we're only seeing the beginning of. Lots and lots of new market participants have come around to accepting BTC since 2018 and I believe more will come around. Supply and demand. And yet over 3-year, 5-year, and 10-year periods BTC is trouncing the dollar despite being down 80% while the dollar is at 20-year highs? Which one was the real store of value over the intermediate-to-long term? Would also add last time BTC boomed was in 2017...when interest rates were rising. The top coincided with rising interest rates this time around. Interest rates didn't matter to it in 2016/2017. And interest rates weren't moving in 2013 when it had the prior bust. Pretty sure we can say historically over the 3 boom/bust cycles that there is ZERO correlation to interest rates.

Bitcoin is disinflationary/deflationary by design. No currency/store of value on that chart is so comparing to historical returns for currencies and commodities will be misleading. As to why to own it, the same reason you'd own any commodity. Demand is expected to outstrip supply - most of bulls think long term BTC adoption will continue while available supply slows be design. This is an entirely inelastic asset class which results in massive swings in price given that inelasticity. Historically those books have lead to higher highs and the busts to higher lows because this is a secular growth trend and not a bubble. Nobody is telling you to own it instead of an ETF. I'm not in the business of single asset allocations - I own a ton of stocks. I also have a ton of exposure to real estate via my home. And now I have a ton of exposure to crypto too.