Cryptocurrencies

[Cigarbutt]

6 hours ago, Dave86ch said:

“All truth passes through three stages.

First, it is ridiculed.

Second, it is violently opposed.

Third, it is accepted as being self-evident.”

Arthur Schopenhauer

Take this as a humble request from a noob (refer to the question directed to you on November 11th 2023 about a topic brought forward by you in relation to cryptocurrencies and the Cantillon effect). Can you please simply explain (instead of providing a quote)?

 

BTW, the quote that you use is often used in virtual/online debates and, in itself, does not mean much. The quote can be used to support the 'truth' but can also be used in pseudo-science circles etc

Going quote for quote, here's a relevant counter example: "But the fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright Brothers. But they also laughed at Bozo the Clown."

The quote is real and is from Carl Sagan, in Broca's Brain, page 75 (1980). Sagan was someone who supported open discussions, skeptical curiosity with respect and who was against suppression through authority (centralized or decentralized).

BTW, the quote that you use is often attributed to Schopenhauer but credible research supporting this is lacking. It appears that somebody at some point decided to attribute this quote to Schopenhauer and many just followed along without questioning the underlying fundamentals.

 

Please elaborate about the Cantillon effect and how this would benefit Bitcoin or cryptocurrencies in general?

Please elaborate (with in mind cryptocurrencies as a potential investment) how cryptocurrencies do not end up as creatures of the state?

 laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown.

[james22]

Not Dave, but I'll take the bait.

 

1 hour ago, Cigarbutt said:

Can you please simply explain (instead of providing a quote)?

 

Descriptive in Bitcoin's case, rather than predictive, no?

 

Or don't you take EFT approval as acceptance?

 

1 hour ago, Cigarbutt said:

Please elaborate about the Cantillon effect and how this would benefit Bitcoin or cryptocurrencies in general?

 

https://www.google.com/search?q="cantillon+effect"+bitcoin

 

https://www.google.com/search?q="nakamoto+effect"

 

1 hour ago, Cigarbutt said:

Please elaborate (with in mind cryptocurrencies as a potential investment) how cryptocurrencies do not end up as creatures of the state?

 laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown.

 

As opposed to what other investment?

[Cigarbutt]

32 minutes ago, james22 said:

Not Dave, but I'll take the bait...

Descriptive in Bitcoin's case, rather than predictive, no? ---)yes descriptive and another step towards price/value discovery.

Cantillon effect...

The questions are not to annoy or to trap into some kind of useless discussion.

i don't know how to value cryptocurrencies and want to learn..

IMO it's still not clear, to most, what a cryptocurrency really is and my current understanding is that if the definition evolves towards what money really is, cryptocurrencies are likely to become underwritten by publicly shared institutions based on trust.

With the evolving money experiments since GFC and Covid, 'we' have seen various versions of the Cantillon effect (with money preferentially permeating to lower income quintiles since 2020 (!) at least for now which is kind of the opposite of what the referenced links describe) and 'this' is still work in progress*. It's hard to see how money management at large becomes so decentralized without a major regime change overall.

*progress in the sense of general improvement over time given science, reason and humanism.

[TwoCitiesCapital]

1 hour ago, Cigarbutt said:

The questions are not to annoy or to trap into some kind of useless discussion.

i don't know how to value cryptocurrencies and want to learn..

IMO it's still not clear, to most, what a cryptocurrency really is and my current understanding is that if the definition evolves towards what money really is, cryptocurrencies are likely to become underwritten by publicly shared institutions based on trust.

With the evolving money experiments since GFC and Covid, 'we' have seen various versions of the Cantillon effect (with money preferentially permeating to lower income quintiles since 2020 (!) at least for now which is kind of the opposite of what the referenced links describe) and 'this' is still work in progress*. It's hard to see how money management at large becomes so decentralized without a major regime change overall.

*progress in the sense of general improvement over time given science, reason and humanism.

 

How to value it becomes the case of valuing any commodity. Supply vs demand. How much it's worth is how much someone is willing to pay for it to have immediate delivery. 

 

How much someone is willing to pay for it will depend on how much value it provides them. While I have no fancy/sophisticated model to map the supply vs demand date for current pricing minute-to-minute, there are some thoughtful models put together to try to assess the longer-term value which can then inform some smoothed price prediction removed from the minute-to-minute supply/demand imbalances. 

 

The best work I've seen done on this is by N-Squared where he applies the Metcalfe theory to the Bitcoin network in terms of describing network value based on the number of users the network has. Beyond that, he makes informed assumptions about how quickly that network will grow to get a smoothed price projection into the future. Then its just a matter if discounting back to the present with your hurdle rate for what price you should be buying it at. 

 

There's also the Stock-to-flow which is just focused on supply-side dynamics as has been a model for other commodities in the past. I like this one less for BTC because the price of Bitcoin would go to infinity once the supply dropped to 0 in 100+ years. With that, we know the model will break at some point. So far, it has been reasonably good at identifying inflections in the price and an upper bound as to which the price will likely trade and may continue to be useful in the intermediate term. 

[james22]

5 hours ago, Cigarbutt said:

The questions are not to annoy or to trap into some kind of useless discussion.

 

Sorry, should have said: Not Dave, but I'll try to answer.

 

5 hours ago, Cigarbutt said:

i don't know how to value cryptocurrencies and want to learn.

 

demand > supply = numbergoup

 

 

[james22]

4 hours ago, TwoCitiesCapital said:

How much someone is willing to pay for it will depend on how much value it provides them. 

 

In a 2022 paper published by BlackRock titled "Asset Allocation with Crypto," the investment management corporation suggests that the optimal Bitcoin allocation for a well-diversified portfolio is 84.9%.

 

This significant allocation highlights the growing recognition of cryptocurrencies as an essential asset class for investors seeking to maximize returns and diversify their portfolios in the ever-evolving financial landscape.

 

https://www.binance.com/en/feed/post/2023-07-25-according-to-a-2022-blackrock-paper-optimal-bitcoin-allocation-is-84-9-855701

[Cigarbutt]

Thank you @james22 and @TwoCitiesCapital, much to (read, absorb and) think about.

i get the network effect, the ease of access etc but continue to wonder if the demand factors will be significantly curtailed by institutions that are now basically in the wait and see mode.

Going back to the Cantillon effect which has been playing out since the GFC, my bet is that institutions will reform themselves, somehow. Maybe that assumption is wrong?

Below is an adapted picture showing the gradual disconnect since GFC with asset inflation (those with assets benefit more) and a combination of more asset inflation and consumer inflation compensated by temporary main street money creation, at least temporarily, since 2020. Of course more artificial asset inflation and more detrimental consumer inflation would eventually feed into the cryptocurrency demand story..

NB  Additional aspect: asset inflation works at two levels with the crypto demand dynamic, first through the negative social aspects tied to the Cantillon effect and second through the systematic relative attraction (hot potato effect) of risky assets, such as the crypto stuff..

[Dave86ch]

17 hours ago, Cigarbutt said:

Take this as a humble request from a noob (refer to the question directed to you on November 11th 2023 about a topic brought forward by you in relation to cryptocurrencies and the Cantillon effect). Can you please simply explain (instead of providing a quote)?

 

BTW, the quote that you use is often used in virtual/online debates and, in itself, does not mean much. The quote can be used to support the 'truth' but can also be used in pseudo-science circles etc

Going quote for quote, here's a relevant counter example: "But the fact that some geniuses were laughed at does not imply that all who are laughed at are geniuses. They laughed at Columbus, they laughed at Fulton, they laughed at the Wright Brothers. But they also laughed at Bozo the Clown."

The quote is real and is from Carl Sagan, in Broca's Brain, page 75 (1980). Sagan was someone who supported open discussions, skeptical curiosity with respect and who was against suppression through authority (centralized or decentralized).

BTW, the quote that you use is often attributed to Schopenhauer but credible research supporting this is lacking. It appears that somebody at some point decided to attribute this quote to Schopenhauer and many just followed along without questioning the underlying fundamentals.

 

Please elaborate about the Cantillon effect and how this would benefit Bitcoin or cryptocurrencies in general?

Please elaborate (with in mind cryptocurrencies as a potential investment) how cryptocurrencies do not end up as creatures of the state?

 laughed at Fulton, they laughed at the Wright brothers. But they also laughed at Bozo the Clown.

 

I run a full node and lightning node on an old ThinkPad. Mining is the process of converting physical energy into digital; anywhere there is untapped energy, it's possible to be part of the network, creating wealth. It is a means to keep in check every government, given the fact that every government has an interest in giving housing to wealthy, techno-savvy individuals willing to pay for a home which gives house to them and their bitcoin.

Both from the supply side and the demand side, there is a game theory playing out, empowered by coded greed, which has always been the preferred way to architect social structures. I can't see how this can be the creation of someone; at best, it becomes a perpetual challenge to gain control over it.

It is unique and a great vehicle for transferring money to a techno-savvy generation. From a historical perspective, it has always been a trouble to redistribute financial energy when stuck in a dead end.

Bitcoin is also a protocol; it is digital and can be integrated into many digital infrastructures. It is a means to escape the fiscal trap, a Noah's Ark for the wealthier, and an opportunity to provide financial energy to the techno-savvy of the future.

It inscribes information; it's a ledger. You can write information in it. One of the worst things we've experienced as humans is the lack of reliable history ledgers. In this case, the more energy invested, the more secure the information is.

I mean, how we can value all of this, I really don't know, but after many years, I realize that it has huge value for the civilization of the future.

[Castanza]

@Cigarbutt A few books if you have the time (below) . I think to understand Bitcoin you have to understand the perspective and reason for it's existence. A large degree of BTC value is derived from the fact that it is NOT institutionally backed or that is does NOT require government entities to maintain, defend, or secure it. History tell us that ALL centralized currencies trend towards zero in terms of value. History tells us that no country or empire lasts forever. BTC offers the truly first alternative to assets and wealth being tied to said institutions and governments. 

 

Now you can believe the above and also believe that BTC is not a good investment for a multitude of valid reasons. Time for one may not be on the side of the BTC investor. Governments could issue bans on it which would most definitely hamper it's adoption and make conversion to your relevant currency impossible. This could last your entire lifetime and is a REAL risk. However I think with some advancements in tech and the ease of ability to host a node yourself this defeats the above actions in time. Lastly, if your end goal of owning BTC is only for the conversion rate you might obtain some years down the road then I think that is a view lacking depth and scope but is also reasonable if viewed in the context of your lifetime. It's all about managing your own risk and sizing accordingly.

 

Gold -> digital gold is the first step BTC will conquer in my opinion. There is not a national currency that is backed by Physical gold. As the older generations move on, there are fewer individuals who will consider it valuable. Gold has 5000 documented years of being used as money....Some point to this as a staying power. But I look at the other end of that and think that history has 5000 years of life without computers. We truly live in the beginning of a new age for humanity and a lot of people really fail to grasp that. It's only logical that our Analog stores of value move to digital variants.

 

- The Bitcoin Standard

- The Sovereign Individual

- The Network State

- Softwar (The PDF can be found in this thread) 

[james22]

It's easy to overthink this, Cigarbutt.

 

10 hours ago, Cigarbutt said:

i get the network effect, the ease of access etc but continue to wonder if the demand factors will be significantly curtailed by institutions that are now basically in the wait and see mode.

 

Which institutions? Not the financial institutions that fought the government to create the product. They aren't in wait-and-see mode, they are looking to sell that product (and other financial institutions as well as soon as they can satisfy the due diligence requirements).

 

The government institutions may be in wait-and-see mode, but the financial institutions didn't spend billions to bring the product to market to easily give it up.

 

10 hours ago, Cigarbutt said:

Going back to the Cantillon effect which has been playing out since the GFC, my bet is that institutions will reform themselves, somehow. Maybe that assumption is wrong?

 

That seems unlikely. Best hope is forcible reform as voters grow increasingly unhappy as they become increasingly aware.

 

Krüger painted a compelling picture where individuals, previously unexposed to cryptocurrency, will begin to view Bitcoin as an integral component of their retirement planning strategy. He believes that the asset will likely be included in millions of 401(k) plans. This inclusion could lead many to align their views on financial dissatisfaction with the realization that Bitcoin offers an exceptional alternative to traditional financial systems.

 

https://ambcrypto.com/binances-net-balance-brings-cheer-to-investors-as-bnb-crosses-300/

 

 

2 minutes ago, Castanza said:

@Cigarbutt A few books if you have the time (below) . I think to understand Bitcoin you have to understand the perspective and reason for it's existence. 

 

I'd respectfully disagree. Whatever the reason for its existence, it's not what's driving price action today (FOMO). Seems enough to recognize the supply/demand imbalance. 

 

2 minutes ago, Castanza said:

- The Bitcoin Standard

 

That said, my copy just showed up and I'm looking forward to reading.

[rkbabang]

31 minutes ago, Castanza said:

- The Bitcoin Standard

- The Sovereign Individual

- The Network State

- Softwar (The PDF can be found in this thread) 

 

Great posts by @Dave86ch and @Castanza above.   The bottom line is that no one can "value" bitcoin over the next 5 or even 10 years.  If your looking for precisely what will bitcoin trade for in USD in 2030, no one can answer that question.  Bitcoin solves so many problems as it becomes the base layer for which every thing else is valued upon.   Not to mention the other problems it solves that Dave86ch mentioned about preserving long-term data and a whole new theory of warfare (see "Softwar").  The answer to how valuable is it is "very".   I don't know if BTC trades at $1M or $500M 15 years from now, but I'd be shocked if it wasn't somewhere in-between.

 

Right now:

1 BTC = 1 BTC

$1 = 0.000191 BTC

 

Someday:

1 BTC = 1 BTC

$1 = 0.00000001 BTC

 

Also add to the books listed above:

" Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better" by Lyn Alden

 

[Castanza]

I also think it's worth noting that we don't need to understand fully the future impact or utility of BTC to understand it's current "value." Much like the internet, the value is found in the utility derived from it's existence and the well spring of use cases that come from it. 

 

 

 

 

[james22]

 

[Luca]

19 hours ago, rkbabang said:

 

Great posts by @Dave86ch and @Castanza above.   The bottom line is that no one can "value" bitcoin over the next 5 or even 10 years.  If your looking for precisely what will bitcoin trade for in USD in 2030, no one can answer that question.  Bitcoin solves so many problems as it becomes the base layer for which every thing else is valued upon.   Not to mention the other problems it solves that Dave86ch mentioned about preserving long-term data and a whole new theory of warfare (see "Softwar").  The answer to how valuable is it is "very".   I don't know if BTC trades at $1M or $500M 15 years from now, but I'd be shocked if it wasn't somewhere in-between.

 

Right now:

1 BTC = 1 BTC

$1 = 0.000191 BTC

 

Someday:

1 BTC = 1 BTC

$1 = 0.00000001 BTC

 

Also add to the books listed above:

" Broken Money: Why Our Financial System is Failing Us and How We Can Make it Better" by Lyn Alden

 

Wow so a 20x in 15 years with reasonable probability? How large is your "position"?

[rkbabang]

4 hours ago, Luca said:

Wow so a 20x in 15 years with reasonable probability? How large is your "position"?

This was from the beginning of the year. Crypto (which is mostly BTC) was over 20% of net worth. And it’s more now as stocks and real estate hasn’t increased as much.  And Microstrategy represented almost 6% of my stock portfolio and that too is more now as that has been my best performing stock so far in 2024.

 

 

[rkbabang]

7 hours ago, Luca said:

How large is your "position"?

I went through the same exercise to figure out position sizing across all my accounts as of today.

 

Crypto went from 20.9% of net worth on Jan 8th to 22.9% today.  And Microstrategy went from a 5.7% stock position on Jan 8th to 6.7% today.  So if you pull Microstrategy out of stocks and add it to crypto (6.7% of 47%) + 22.9%, Crypto is about 26% of my net worth today.

 

 

[gfp]

Now there's someone who will survive a little inflation!

[rkbabang]

2 hours ago, gfp said:

Now there's someone who will survive a little inflation!

 

That's the idea.  I'm hoping to survive a lot of inflation.

[wachtwoord]

On 2/18/2024 at 7:19 PM, Cigarbutt said:

 

 

i don't know how to value cryptocurrencies and want to learn..

 

 

I shared this here early 2018 and the approach is still true today imo:

 

https://s3.eu-west-2.amazonaws.com/john-pfeffer/An+Investor's+Take+on+Cryptoassets+v6.pdf

[Dave86ch]

9 hours ago, wachtwoord said:

 

I shared this here early 2018 and the approach is still true today imo:

 

https://s3.eu-west-2.amazonaws.com/john-pfeffer/An+Investor's+Take+on+Cryptoassets+v6.pdf

Thank you for sharing  

[ValueArb]

The Winklevoss twins are still filthy rich apparently, giving $4.9M to a superpac. I was worried they'd gone broke because of Gemini Earn but apparently only their investors and clients did.

 

https://www.bloomberg.com/news/articles/2024-02-21/crypto-super-pac-fairshake-gets-4-9-million-from-winklevoss-twins?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTcwODUyODIyNCwiZXhwIjoxNzA5MTMzMDI0LCJhcnRpY2xlSWQiOiJTOTZJRUlEV1JHRzAwMCIsImJjb25uZWN0SWQiOiIzQTU2QUZFQkIwMjU0OUUxQkVBRkRENDc0RkI4MTc2OCJ9.VJTupMr74GMH_kv2BP3Lg69ymQhpKCu6P21xA6WuSz8

[TwoCitiesCapital]

5 minutes ago, ValueArb said:

The Winklevoss twins are still filthy rich apparently, giving $4.9M to a superpac. I was worried they'd gone broke because of Gemini Earn but apparently only their investors and clients did.

 

https://www.bloomberg.com/news/articles/2024-02-21/crypto-super-pac-fairshake-gets-4-9-million-from-winklevoss-twins?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTcwODUyODIyNCwiZXhwIjoxNzA5MTMzMDI0LCJhcnRpY2xlSWQiOiJTOTZJRUlEV1JHRzAwMCIsImJjb25uZWN0SWQiOiIzQTU2QUZFQkIwMjU0OUUxQkVBRkRENDc0RkI4MTc2OCJ9.VJTupMr74GMH_kv2BP3Lg69ymQhpKCu6P21xA6WuSz8

 

Gemini is still a functioning brokerage, no?

 

Thought they just halted withdrawals from their Earn program because Genesis couldn't make good on it? 

 

Could be wrong. So many bankruptcies in this space, but also this is how bankruptcy typically works. 

 

Adam Neuman is still filthy rich despite WeFail. Trump is still stupid rich despite having multiple bankruptcies. Bank CEOs circa 2008 largely remained super wealthy after the bank failures and consolidations. This was the intent of bankruptcy process - protect those taking the risks so they keep taking risks to push business forward. 

[ValueArb]

1 hour ago, TwoCitiesCapital said:

 

Gemini is still a functioning brokerage, no?

 

Thought they just halted withdrawals from their Earn program because Genesis couldn't make good on it? 

 

Could be wrong. So many bankruptcies in this space, but also this is how bankruptcy typically works. 

 

Adam Neuman is still filthy rich despite WeFail. Trump is still stupid rich despite having multiple bankruptcies. Bank CEOs circa 2008 largely remained super wealthy after the bank failures and consolidations. This was the intent of bankruptcy process - protect those taking the risks so they keep taking risks to push business forward. 

 

Lets not make false equivalencies, its a poor analysis tool. Adam Neuman got paid off because Softbank and other investors wanted to continue the business without him, as far as I know non alleged any fraud on his part, being a bad CEO and spending like a drunken sailor aren't crimes. 

 

Trump has been convicted of fraud, but not in combination with the bankruptcies of his subsidaries. He's mainly rich because of his inheritance. Bank CEOs always are well paid, and should be given their stewardship of billions in shareholder investments and client funds. In 2008 the administration should have clawed back more compensation in exchange for bailouts, but didn't. That's on the administration.

 

Gemini promoted a financially unsound Earn program (and illegal according to the SEC) to clients, promising imaginary returns that weren't supported by the collateral. Their own internal documents showed they knew this, and that they kept promoting it even when they knew Genesis was at risk of failure. The issue isn't that their main investment filed bankruptcy, its that they lied to clients about the safety of their investments, including using misleading language to lead clients to believe their deposits were FDIC insured. All of these allegations, if proven, are fraud.

[TwoCitiesCapital]

27 minutes ago, ValueArb said:

 

Lets not make false equivalencies, its a poor analysis tool. Adam Neuman got paid off because Softbank and other investors wanted to continue the business without him, as far as I know non alleged any fraud on his part, being a bad CEO and spending like a drunken sailor aren't crimes. 

 

Trump has been convicted of fraud, but not in combination with the bankruptcies of his subsidaries. He's mainly rich because of his inheritance. Bank CEOs always are well paid, and should be given their stewardship of billions in shareholder investments and client funds. In 2008 the administration should have clawed back more compensation in exchange for bailouts, but didn't. That's on the administration.

 

Gemini promoted a financially unsound Earn program (and illegal according to the SEC) to clients, promising imaginary returns that weren't supported by the collateral. Their own internal documents showed they knew this, and that they kept promoting it even when they knew Genesis was at risk of failure. The issue isn't that their main investment filed bankruptcy, its that they lied to clients about the safety of their investments, including using misleading language to lead clients to believe their deposits were FDIC insured. All of these allegations, if proven, are fraud.

 

What I'm hearing is you're making excuses for Adam Neuman, Trump, and Bank CEOS being rich after failure, but the Winklevoss can't be afforded the same excuses when  a firm they partnered with failed? 

 

Did I get that right?

 

Point is, this is what bankruptcy does. It takes the onus off the executives and decision makers and onto those capitalizing the firms debt/equity. It's ALWAYS the capital providers who lose in bankruptcy. Employees still get paid. Lawyers get paid. Trade claims get paid. Equity and debt? Well that's for the courts to work out. 

 

This is how EVERY bankruptcy works. Not just the Winklevoss' - which is itself a misnomer because their firm is still operating and avoided bankruptcy.

 

Outside of Gemini, the Winklevoss brothers are probably some of the largest holders of Bitcoin as it's estimated they still hold over 70,000 BTC that were purchased largely from their Facebook settlement proceeds. There was never any questions they'd still be filthy rich even if Gemini went bust. 

Edited February 21 by TwoCitiesCapital

[james22]