Cryptocurrencies

[ValueArb]

Matt Levine on Grayscale

 

Quote

We talked last week about the long-awaited approval of spot Bitcoin exchange-traded funds in the US. It has been widely assumed that these ETFs would be good for the price of Bitcoin: Spot Bitcoin ETFs are a convenient and easy way for normal people (and traditional institutions) to own Bitcoin, and now that they are here, perhaps more people (and institutions) will buy Bitcoin through the ETFs. Demand for the ETFs will drive demand for Bitcoin, because each dollar that flows into the ETFs will ultimately, through arbitrage, go to buying Bitcoins.

But there is another, minimalist view you could take of the ETF approvals:

1. The biggest pot of publicly traded Bitcoins is the Grayscale Bitcoin Trust (GBTC), which we have also talked about a number of times.
2. GBTC’s distinguishing feature, for most of its recent history, has been that you could put Bitcoins in, but you couldn’t take them out. When we talked about it last week, there was about $29 billion worth of Bitcoin in GBTC, and GBTC shareholders could not exchange their shares for Bitcoin.
3. GBTC led the charge for spot Bitcoin ETF approval, sued the SEC to get it done, won, applied to convert into an ETF, succeeded, and last week did in fact convert into an ETF.
4. Now you can take your Bitcoins out of GBTC. That is in a sense the point of the ETF structure. Now GBTC shareholders can sell their shares on the stock exchange, and if there are more sellers than buyers then arbitrageurs and “authorized participants” can deliver GBTC shares to Grayscale and get back Bitcoins.[7]
5. It is possible that the main effect of the launch of spot Bitcoin ETFs would be people taking money out of GBTC — which they have never been able to do before — rather than putting money into GBTC or the other ETFs.

That is, the launch of spot Bitcoin ETFs might be not a way to attract normal people into Bitcoin, but a way to let trapped GBTC investors out.

I’m not sure I’d bet on that as the main story or anything, but Bitcoin prices did fall since the ETFs launched, and GBTC has seen some redemptions,[8] and it would be a very funny story. What if GBTC has just trapped some demand for Bitcoin since 2017, and ETF approval finally released it? Here’s Bloomberg News with, I’m sorry, Anthony Scaramucci:

Bitcoin’s decline since the start of trading of exchange-traded funds that hold the cryptocurrency was driven in part by sales of Grayscale Bitcoin Trust shares, according to SkyBridge Capital founder Anthony Scaramucci.

“There seems to be of lot of selling of Grayscale,” Scaramucci said during a Bloomberg Television interview on Friday.

The hedge fund manager said that his trading desk noted that holders of the shares, which were converted from a trust this week when the US Securities and Exchange Commission signed off on the ETFs, were selling to book losses and shifting to lower fee alternatives.

“Shifting to lower-fee alternatives” should be neutral for Bitcoin — “Selling one Bitcoin product to buy another should not impact Bitcoin’s price, said Zach Pandl, Grayscale’s managing director or research” — but just getting out entirely would lower the price, and GBTC holders haven’t been able to do that for years.

 

[rkbabang]

On 1/13/2024 at 11:12 AM, TwoCitiesCapital said:

I dunno if ETFs get us "around" the 21 million hard cap any more than subdividing that 21 million into satoshis does.

 

I just saw this great tweet on that topic.  "MATH"?

 

“Give a man a fish and he’ll eat for a day.

Cut a fish into a quadrillion pieces and he’ll eat for a quadrillion days.”

 

 

 

[TwoCitiesCapital]

2 hours ago, rkbabang said:

 

I just saw this great tweet on that topic.  "MATH"?

 

“Give a man a fish and he’ll eat for a day.

Cut a fish into a quadrillion pieces and he’ll eat for a quadrillion days.”

 

 

 

 

[changegonnacome]

Quick question - outside the digital gold use case which admittedly with the ETF approval opens up the institutional/portfolio allocation to the 1-2% previously held by gold...which creates potential BTC upside from here....what are the remaining use case catalysts for the BTC narrative?

 

BTC trading on a stock exchange in an ETF is the final confirmation of its catergorization as a capital good in our taxation/regulatory system. Surely this finally kills the payments/L2 mastercard/visa competitor idea that was always the 2nd leg of the BTC to the moon story.

 

Put simply - a future ubiquitous payments system which creates a litany of short term / long term capital gains behind it is functionally useless, creates unacceptable friction and in doing so would be from a competitive position be unable to unseat digital fiat options (M/V) that don't have this problem. This is before we get into the technical issues with lightning (cost/network effects/chargebacks/fraud/centralization/throughput etc.).

 

In short a payments system with greater friction than the incumbent system is doomed to failure.

 

Put simply the BTC community lobbying for its inclusion in a stock market ETF and succeeding- have in doing so put the nail in the coffin of the payments/L2 use case.....imagine explaining to your mom that a gallon of milk purchased on lightning using BTC will likely trigger a tax event that she needs to speak to her accountant about and that all purchases made that year will need to netted off for gains on sale or loss on sale.....your mom would rightly say "son, where's my visa card? and please delete that lightning thing off my iPhone"

[james22]

3 hours ago, changegonnacome said:

Quick question - outside the digital gold use case which admittedly with the ETF approval opens up the institutional/portfolio allocation to the 1-2% previously held by gold...

 

When does Fidelity add a 1-2% FBTC allocation to their Target Date Retirement Funds?

[mattee2264]

Other thing I am wondering is whether with ETFs and so on the original thesis for BTC continues to stand up?

 

IE only 29M coins and therefore perfectly inelastic supply so price will increase with growing demand and use.

 

But if no one is trading coins but is instead trading ETFs and fractional trading of bitcoin is possible does that start to fall apart? 

[changegonnacome]

8 hours ago, james22 said:

When does Fidelity add a 1-2% FBTC allocation to their Target Date Retirement Funds?

I have no idea - I raised that point only to say that the ETF approval increases the likely hood of this crypto dream to come through (not saying it will but it’s certainly more possible post etf approval than before) while completely destroying the payments piece.

 

8 hours ago, mattee2264 said:

IE only 29M coins and therefore perfectly inelastic supply so price will increase with growing demand and use.

Yeah 21 million BTC! Finite coins but the etf approval creates the playbook…..for the future launch of ATC coins etf’s, XTC coins, doge coin's inside an ETF wrapper listed on NYSE/Nasdaq.

 

BTC is finite by design….whats not finite...are cryptographic coins with a fiat debasement story that can now find their way into an ETF wrapper and be sold to Joe Sixpack. What's also infinite is the creativity of promoters when presented with the oppurtunity to make money...which feeds the preceding point.

 

In this respect - cryptographic tokens with a fiat debasement story that might find themselves on Coinbase or inside an ETF wrapper isnt capped at 21 million....the number is potentially infinite.

 

 

 

 

Edited January 17 by changegonnacome

[TwoCitiesCapital]

14 hours ago, changegonnacome said:

BTC trading on a stock exchange in an ETF is the final confirmation of its catergorization as a capital good in our taxation/regulatory system. Surely this finally kills the payments/L2 mastercard/visa competitor idea that was always the 2nd leg of the BTC to the moon story.

 

Are currencies capital goods that are useless in transactions because there are futures/forward products that trade based on their value? 

[changegonnacome]

1 hour ago, TwoCitiesCapital said:

useless in transactions because there are futures/forward products that trade based on their value? 

 

Useless because of the friction created by using a payment instrument which generates capital gains/losses as part of its use - and this is of course relative to the alternative use of digital fiat - most notably the visa/mastercard network. USD is the L1 (not a capital good, the currency of the land therefore no capital gains) & then visa/mastercard as the L2 settling the transaction between buyer and merchant.

 

In this model - you purchase a gallon of milk and the transaction settles immediately. The milk cost $5, you paid with a visa debit - end of the transaction.

 

This is not necessarily new - but btc trading in ETF form dooms in it a sense to being a capital good in our taxation system.

 

So the L2 payments use case for btc (as rival M/V) is effectively using a capital good BTC (with a cost basis) to perform the same transaction. Generating a gain (or loss) on sale.

 

In this model - you purchase a gallon of milk at the store for $5....you fire up your L2 app as tap to pay.... you push/it pulls btc from your wallet to the L2.....a capital gain is created....the merchant gets $5 USD or btc if like a cost basis event.

 

But this is not the end of the transaction for you.

 

The cost of the milk - is $5 + whatever capital gain occurred on the btc at the point of btc liquidation......the milk is now $5 + 0.35c capital gain x 35% federal tax say ~$0.10c.....and you need to provide that transaction to your tax accountant in April the following year.

 

Doesn't sound like a great visa/mastercard scale competitor to me.

[Fly]

17 minutes ago, changegonnacome said:

 

Useless because of the friction created by using a payment instrument which generates capital gains/losses as part of its use - and this is of course relative to the alternative use of digital fiat - most notably the visa/mastercard network. USD is the L1 (not a capital good, the currency of the land therefore no capital gains) & then visa/mastercard as the L2 settling the transaction between buyer and merchant.

 

In this model - you purchase a gallon of milk and the transaction settles immediately. The milk cost $5, you paid with a visa debit - end of the transaction.

 

This is not necessarily new - but btc trading in ETF form dooms in it a sense to being a capital good in our taxation system.

 

So the L2 payments use case for btc (as rival M/V) is effectively using a capital good BTC (with a cost basis) to perform the same transaction. Generating a gain (or loss) on sale.

 

In this model - you purchase a gallon of milk at the store for $5....you fire up your L2 app as tap to pay.... you push/it pulls btc from your wallet to the L2.....a capital gain is created....the merchant gets $5 USD or btc if like a cost basis event.

 

But this is not the end of the transaction for you.

 

The cost of the milk - is $5 + whatever capital gain occurred on the btc at the point of btc liquidation......the milk is now $5 + 0.35c capital gain x 35% federal tax say ~$0.10c.....and you need to provide that transaction to your tax accountant in April the following year.

 

Doesn't sound like a great visa/mastercard scale competitor to me.

With something like Strike you use a USD bank account to instantly buy BTC, and send via L2 lightning network to the seller, who can also instantaneously change the BTC for USD which gets deposited to their bank account. No tax liability since the transaction occurs instantaneously. BTC L2 is merely used as a payment rail. 

[TwoCitiesCapital]

33 minutes ago, changegonnacome said:

 

Useless because of the friction created by using a payment instrument which generates capital gains/losses as part of its use - and this is of course relative to the alternative use of digital fiat - most notably the visa/mastercard network. USD is the L1 (not a capital good, the currency of the land therefore no capital gains) & then visa/mastercard as the L2 settling the transaction between buyer and merchant.

 

In this model - you purchase a gallon of milk and the transaction settles immediately. The milk cost $5, you paid with a visa debit - end of the transaction.

 

This is not necessarily new - but btc trading in ETF form dooms in it a sense to being a capital good in our taxation system.

 

So the L2 payments use case for btc (as rival M/V) is effectively using a capital good BTC (with a cost basis) to perform the same transaction. Generating a gain (or loss) on sale.

 

In this model - you purchase a gallon of milk at the store for $5....you fire up your L2 app as tap to pay.... you push/it pulls btc from your wallet to the L2.....a capital gain is created....the merchant gets $5 USD or btc if like a cost basis event.

 

But this is not the end of the transaction for you.

 

The cost of the milk - is $5 + whatever capital gain occurred on the btc at the point of btc liquidation......the milk is now $5 + 0.35c capital gain x 35% federal tax say ~$0.10c.....and you need to provide that transaction to your tax accountant in April the following year.

 

Doesn't sound like a great visa/mastercard scale competitor to me.

 

The capital gains is a tax policy. Not because of the ETFs.

 

Tomorrow Congress/IRS could agree to tax it differently and it would be taxed differently even with the existence of ETFs. 

 

Or they can provide guidance that the structure matters when it comes to taxes and treat ETFs in a brokerage account differently than spot just like futures contracts are taxed @ 60/40 long term/short term regardless of holding period unlike the spot/physical holdings. 

 

The approval of an ETFs in no way changes the tax implications or usefulness in transactions or cements that tax status. It's an entirely separate discussion. 

 

 

Edited January 17 by TwoCitiesCapital

[changegonnacome]

1 hour ago, Fly said:

Strike you use a USD bank account to instantly buy BTC, and send via L2 lightning network to the seller

 

So let me get this straight instantly switch out of USD into to BTC to instantly move it to the L2 is that it can instantly be sent to the merchant, who instantly needs to move into btc.......

 

Eh........OK......why are switching into btc to L2 to the merchant again then? Seems like about two additional superfluous steps in there with fees attached to complete a purchase......and for that reason it'll never compete with existing payment rails at scale where fiat currency is the L1....it doesn't instantly have to be converted into anything....it just is.

 

Sounds like Strike - should just be called Extra Step Strike

[changegonnacome]

15 hours ago, TwoCitiesCapital said:

The capital gains is a tax policy. Not because of the ETFs.

 

Tomorrow Congress/IRS could agree to tax it differently and it would be taxed differently even with the existence of ETFs. 

 

Or they can provide guidance that the structure matters when it comes to taxes and treat ETFs in a brokerage account differently than spot just like futures contracts are taxed @ 60/40 long term/short term regardless of holding period unlike the spot/physical holdings. 

 

The approval of an ETFs in no way changes the tax implications or usefulness in transactions or cements that tax status. It's an entirely separate discussion. 

 

 

Not really - the constitution is pretty clear.....there is the single domestic currency issued by government...it and it alone is not a capital asset.......in fact it is the unit of account which allows for the calculation of capital gains & losses on capital assets for the purpose of taxation of same.

 

Now I guess your trying to say that the house, the senate and president would vote and sign a tax reform bill, sometime in the near future, where they would introduce a special capital gain exemption for BTC such that it might become more frictionless in transactions that ordinarily might be done in the US dollar? Is that right?

 

On the face of it I think that it is beyond the realms of possibility in my lifetime....i find it implausible that such a political coalition could ever be assembled to get that done given its implications & competition that would create with the domestic currency for that transaction use case....turkeys dont vote for christmas and politicians don't vote to diminish the importance of the national currency (to do so would be a vote to diminish themselves).

 

In fact I would go further - taking a capital asset, exempting it for capital gains tax purposes in a congressional bill, for the express purpose that it would function more usefully as a USD transaction substitute currency would certainly find itself being challenged under constitutionality grounds in the Supreme Court under Section 8.

 

But like I said - turkeys voting for Christmas (exempting btc from cap gains)..kind of makes my last paragraph a moot point.

 

Its back to my earlier point - I'm hunting around for the next big positive tentpole catalyst for btc....and I'm not hearing any.....it feels like a dog that's had its day......and given it prices is determined by the robustness, attractiveness and believability of the future narrative around it......I guess what I'm saying is that 'the story' (with so many of the positive plot twists behind it) seems a little tapped out to me.

 

It feels like we are in the part of the BTC movie franchise where the Empire Strikes Back and Return of the Jedi have happened already.....and now were into Jar Jar Binks....and the Phantom Menace phase I say that joking but being kind of serious.

 

Regardles back to the payments use case dream - 'extra step' Strike is dead on arrival as a M/V rival...sure its niche neat trick but nobody outside of the folks on this thread will use it.....and so were  left with himalayan sized hurdle of congressional legislation that isn't unconstitutional exempting btc as a capital asset such that it might compete with the domestic currency issued by the same congressional authority....mmmmmmm ok.

 

Put em both together and btc becoming a ubiquitous payments solution rivalig M/V in volume terms - is a red herring IMO. 

 

Edited January 18 by changegonnacome

[TwoCitiesCapital]

15 hours ago, changegonnacome said:

 

Not really - the constitution is pretty clear.....there is the single domestic currency issued by government...it and it alone is not a capital asset.......in fact it is the unit of account which allows for the calculation of capital gains & losses on capital assets for the purpose of taxation of same.

 

So we're in agreement that the taxable status of BTC has absolutely nothing to do with the ETFs just launched/approved - nor do those ETFs preclude changes to changes in its tax treatment for use in payments at a later date. 

 

Glad we got on the same page there. 

[changegonnacome]

9 minutes ago, TwoCitiesCapital said:

So we're in agreement that the taxable status of BTC has absolutely nothing to do with the ETFs just launched/approved - nor do those ETFs preclude changes to changes in its tax treatment for use in payments at a later date. 

 

Glad we got on the same page there. 

 

 

@TwoCitiesCapital you've kind of ignored the impossibility of the tax change scenario that might open up capital gain free btc payments that I've outlined - but OK - I'll take that as some kind of indication that my points were somewhat difficult to develop counter arguments for and that they might have some validity. I'm really just attempting to war game out the probability here.

 

In regard to the tax status & ETF approval....I think you missed my earlier posts.......in my initial post from basically two days ago.....I said the below.....acknowledging btc's capital asset classification PRIOR to ETF approval.....but suggesting that the ETF approval is further entrenches its classification as such (i should have been clearer perhaps)

 

18 hours ago, changegonnacome said:

This is not necessarily new - but btc trading in ETF form dooms in it a sense to being a capital good in our taxation system.

 

 

Then followed up with the below. 

 

On 1/17/2024 at 1:42 AM, changegonnacome said:

BTC trading on a stock exchange in an ETF is the final confirmation of its catergorization as a capital good

[TwoCitiesCapital]

14 minutes ago, changegonnacome said:

 

 

@TwoCitiesCapital you've kind of ignored the impossibility of the tax change scenario that might open up capital gain free btc payments that I've outlined - but OK - I'll take that as some kind of indication that my points were somewhat difficult to develop counter arguments for and that they might have some validity. I'm really just attempting to war game out the probability here.

 

In regard to the tax status & ETF approval....I think you missed my earlier posts.......in my initial post from basically two days ago.....I said the below.....acknowledging btc's capital asset classification PRIOR to ETF approval.....but suggesting that the ETF approval is further entrenches its classification as such (i should have been clearer perhaps)

 

 

Then followed up with the below. 

 

 

It doesn't entrench it anymore than futures contracts entrenched their tax status to match that of spot commodities as mentioned. 

 

Just because I don't address every point of nonsense doesn't mean they're difficult to address. It just means I know I'm largely wasting my time in every engagement where we debate and we often rehash the same sh*t over and over. 

 

Futures are taxed differently than spot commodities/currencies and other investment assets. There is absolutely no reason to believe an ETF precludes BTC from any changes to tax treatment going forward. 

 

They can choose to tax Bitcoin ETFs differently than spot, or tax BTC used in transactions differently than brokerage transactions, just like we tax commodities futures differently than we tax commodities. They may not. That's definitely a possibility. But it has absolutely nothing to do with the approval of the ETFs nor do they entrench anything other than BTC as an widely available asset class

Edited January 18 by TwoCitiesCapital

[changegonnacome]

18 minutes ago, TwoCitiesCapital said:

That's definitely a possibility. But it has absolutely nothing to do with the approval of the ETFs nor do they entrench anything other than BTC as an widely available asset class

 

Sure point taken.

 

But not interested per ser in possibilities here.......I'm interested in probabilities.......as I said I'm trying to understand the next leg up in BTC.....and that next leg up seems to me to be wholly dependent on expanding use cases - all of which kind of revolve around payments or using btc in effective payment for service on other blockchains which would neccestate a sale of underlying btc.

 

So sure I'm trying to understand the avenues to this (the possibilities)which you've provided - tax code change......but more importantly I'm trying to understand the probabilities.

 

I think I would correct in saying that outside the exemption that exists for gain on sale of principal private residences......there exists no other capital asset exemption in the tax code that I'm aware off? I mean this is important if one of the tenants here is that an exemption would be forthcoming to solve the friction inherent in using a capital asset as a payment instrument 

 

There only other one I can think of is the deferment of capital gains in 1031 property transactions, which isn't the same thing.

 

So you know - capital gains exemption it's quite hallowed ground in the tax system.....and if the btc payment use case is kind of dependent on achieving that.....the industry is setting itself a very high bar here to get that done.....to the point that it seems implausible....and as such the use case narrative is one thats underpinned by a large structural technical problem.

Edited January 18 by changegonnacome

[TwoCitiesCapital]

44 minutes ago, changegonnacome said:

 

Sure point taken.

 

But not interested per ser in possibilities here.......I'm interested in probabilities.......as I said I'm trying to understand the next leg up in BTC.....and that next leg up seems to me to be wholly dependent on expanding use cases - all of which kind of revolve around payments or using btc in effective payment for service on other blockchains which would neccestate a sale of underlying btc.

 

So sure I'm trying to understand the avenues to this (the possibilities)which you've provided - tax code change......but more importantly I'm trying to understand the probabilities.

 

I think I would correct in saying that outside the exemption that exists for gain on sale of principal private residences......there exists no other capital asset exemption in the tax code that I'm aware off? I mean this is important if one of the tenants here is that an exemption would be forthcoming to solve the friction inherent in using a capital asset as a payment instrument 

 

There only other one I can think of is the deferment of capital gains in 1031 property transactions, which isn't the same thing.

 

So you know - capital gains exemption it's quite hallowed ground in the tax system.....and if the btc payment use case is kind of dependent on achieving that.....the industry is setting itself a very high bar here to get that done.....to the point that it seems implausible....and as such the use case narrative is one thats underpinned by a large structural technical problem.

 

I don't pay capital gains on currency conversions when I travel to a foreign country and spend the money. 

 

I don't pay capital gains tax when my credit cards do the conversion for me and post the charge in USD. 

 

I don't understand why BTC has to be different. 

 

What are the probabilities of that? I dunno - I find it very difficult to handicap the incompetence of Congress and/or decisions by courts. But it's not 0 and the courts/regulators have consistently been surprising to the upside when it comes to n Bitcoin so I'd guess is quite a bit higher than what you think it is. 

 

I'd argue the ETF approval increases the odds simply because it makes the asset class more accessible which likely makes it more acceptable in the eyes of many over time. And then  instead of having endless debates of 'bitcoin is for criminals and money launderers' the conversation can move to 'what can we actually do with Bitcoin' and what regulations need to change or be put in place to make that happen. 

Edited January 18 by TwoCitiesCapital

[ValueArb]

13 minutes ago, TwoCitiesCapital said:

 

I don't pay capital gains on currency conversions when I travel to a foreign country and spend the money. 

 

But you apparently have to pay taxes on that $20,000 watch you had in your luggage even though you were planning to donate to charity;)

[changegonnacome]

44 minutes ago, TwoCitiesCapital said:

I don't pay capital gains on currency conversions when I travel to a foreign country and spend the money. 

 

Yes very true - although the tax code allows for this eventuality and indicates that individuals purchasing foreign currency with the express intent purpose of using it in a foreign jurisdiction where USD is obviously not the currency of the land. So your outside the USA when this transaction occurs, dollars cant be used, your using a foreign currency to complete a transaction in a foreign country......so this is a sensible exemption....that preserves the dollars, single unit of account domestically with no competitors for transactions.

 

If you buy a foreign currency, in the USA, without intent or actual use of it outside the USA....that foreign currency is deemed a capital asset.....and your hit with capital gains....that a foreign currency acquired 'on-shore' in the US & never used overseas functions not as currency in our tax code but simply as another capital asset - you are in effect, domestically, a currency speculator with ensuing Gains/Losses.

 

Again BTC current position here is clear - even if you want to pretend its a foreign currency - that cuts no mustard when acquired and somehow used domestically in the United States to transact. Its a capital asset - being used as 'in-kind' barter transaction.

 

47 minutes ago, TwoCitiesCapital said:

I don't pay capital gains tax when my credit cards do the conversion for me and post the charge in USD. 

 

Again - your in a foreign land physically or digitally, forced to pay by virtue of that other sovereigns strict single domestic use laws ..and the CC company pays the merchant in the local currency for you...and charges you back in the equivalent fx adjusted dollar amount. It's like the above example....USD isnt a currency option for you....the foreign currency is the only unit of account in the country in which you effecting a transaction.

 

In the same way that Amazon USA.....isnt all of sudden going to give you the option to pay in Yen for an item sitting in their warehouse in New Jersey.

 

50 minutes ago, TwoCitiesCapital said:

I don't understand why BTC has to be different. 

 

To say this - would be also to advocate for I dunno the Mexican peso to be allowed to be used in the US for transactions by giving it also a small use capital asset tax exemption. I mean there are lots of people who hold mexican pesos in the USA due to their place of birth/family members/travel there....I would guess that perhaps the holders of mexican pesos in the USA equals the population of holders of BTC

 

It seems a touch crazy to advocate for a mexican peso capital gains exemption such that it might be used for domestic transaction....and so its equally crazy to say it about BTC.

 

I mean to the above @TwoCitiesCapital do you think that folks who have mexican pesos right now in the USA.....who easily number in the millions.....should be able to use them to buy goods and services here?

 

I guess the Alexander Hamilton monterist answer is that two effective circulating currencies - which a capital asset (with cap tax exemption for small transactions attached) would effectively & functionally be....is a recipe for chaos.....USD is the unit of account from which all other capital asset gains/losses/cost basis calculations are derived.

 

Two effective currencies in circulation = unit of account/tax accounting chaos....to say nothing about how it would diminish the power imbued in government to tax/spend/borrow when they hold the right to be the only issuer of the currency of the land (which I get btc'ers are railing against here & hope btc is a tojan horse that will bring governments debt binge to heel in time).

 

The issue with this theory, as regards payments, is that you need that very same government to vote its leverage/power away.....by turning a capital asset BTC, into a defacto competing currency by tax exempting it for transactions.

 

The BTC payments dream is the functional equivalent of a francophile one day dreaming that he might be able to use french francs to buy a coffee in Dunkin Donuts in D.C.

 

That outcome for all the reasons I've given above is just deeply deeply structurally unlikely when you think through the political, legislative pathway.

 

Think I said turkeys voting for thanksgiving before.

 

BTC, capital asset tax exemption for transactions, is you telling me in the future turkeys will vote for thanksgiving.

 

[wachtwoord]

Governments ALWAYS need to be forced to reduce their power and never do it uncoerced. That doesn't preclude governments ever reducing their power. The hands of those in power simply need to be forced in some way.

Edited January 19 by wachtwoord

[changegonnacome]

9 hours ago, wachtwoord said:

That doesn't preclude governments ever reducing their power. The hands of those in power simply need to be forced in some way

 

And you think the use of btc as a transaction layer in the economy brought about by granting it a capital asset tax exemption....is a tent pole issue of sufficient interest to the broad public....that it would gain a sufficiently widespread grassroots support and become like the civil rights marches of the 1960's or opposition to the Vietnam war or something akin to the revolutionary war....which might be examples where the general public forced the hands of a domestic or foreign government?

 

The reality I see - is that monetary debasement, hard money, the federal reserve system, the growing debt, fractional reserve banking - these remain for want of a better word things that a tiny sliver of kind of monetary 'nerds' in the population fall down the rabbit hole into and start to deeply care and are obsessed by......most everybody else is kind of whatevs.

 

I'm sympathetic to the idea of reducing the "tyranny "of government that manifests itself in the structure of our monetary system of debasement & debt.........but most everybody else I meet....I mean they don't care.....in the way that fish don't care about water, they dont even realize they are swimming in water....the general public is the same.....watch the median person's eyes glaze over when you talk them about monetary debasement and such.

 

 

Edited January 19 by changegonnacome

[rkbabang]

Does anyone really think that the U.S. is going to outlast our lifetime in its current form?  When TX then NH then others exit the union there will be places in North America where you can live and you can use BTC without capital gains taxes.

[changegonnacome]

This feels to me like the part of the BTC narrative where to move to the next catalyst it involves  'jumping the shark' like states seceding from the Union or BTC through gov legislation being given a deeply privileged position in the tax code such that it isn't a capital asset so that it might be seamlessly used for transactions & compete head on with the dollar issued by the same legislature.

 

What came before was improbable but plausible (adoption, commodification via CFTC, etf-ization via SEC) it's been a fantastic run and hats off to those who stuck with it.........but what's required to come next to maintain say BTC's 10yr cagr rate, ubiquitous btc payments, is improbable because its implausible....and that is a very different risk/reward IMO.

 

Edited January 20 by changegonnacome

[wachtwoord]

21 hours ago, changegonnacome said:

 

And you think the use of btc as a transaction layer in the economy brought about by granting it a capital asset tax exemption....is a tent pole issue of sufficient interest to the broad public....that it would gain a sufficiently widespread grassroots support and become like the civil rights marches of the 1960's or opposition to the Vietnam war or something akin to the revolutionary war....which might be examples where the general public forced the hands of a domestic or foreign government?

 

The reality I see - is that monetary debasement, hard money, the federal reserve system, the growing debt, fractional reserve banking - these remain for want of a better word things that a tiny sliver of kind of monetary 'nerds' in the population fall down the rabbit hole into and start to deeply care and are obsessed by......most everybody else is kind of whatevs.

 

I'm sympathetic to the idea of reducing the "tyranny "of government that manifests itself in the structure of our monetary system of debasement & debt.........but most everybody else I meet....I mean they don't care.....in the way that fish don't care about water, they dont even realize they are swimming in water....the general public is the same.....watch the median person's eyes glaze over when you talk them about monetary debasement and such.

 

 

 

Please don't say things I "am saying" that I'm clearly not saying. I previously explained that the transaction layer of Bitcoin was kept simple on purpose as its main purpose is store of wealth not means of transaction. Of course you need to be able to assign that stored value to another entity but for everyday transactions much more insecure systems will be optimal as the extreme security Bitcoin provides is overkill (and therefore too expensive, cause in any free market system those two terms are equivalent).

 

The point I WAS trying to make is way more generic. On this topic you are wrong once again with your belief that grass root movements are anything but a fringe factor for governmental change at best, and completely planned and controlled at best. The primary method to changing governments, rather than overthrowing them, is through mostly economical incentives. So that in your eyes most normal people don't recognize the occurring oppression through the financial system (at least not accurately, they are clearly mobilized to dislike "the rich") shouldn't really matter for that. It's about emergent organizations of macro behaviour anyway.