Cryptocurrencies

[Gregmal]

Cool article

 

https://www.forbes.com/sites/stevenehrlich/2020/09/23/visas-crypto-strategy-is-driving-its-next-stage-of-growth/#10d4f26a5c4c

 

Yea, Visa has a crypto division.

 

Widespread acceptance has begun. Its happened slowly, and gradually over the past several years. But the table seems set and its hard to see what if anything can stop this. There is essentially no fundamental or execution risk that would normally be an issue with a company. Its all about adding users so to speak.

[Fly]

Thoughts?

 

https://doubleline.com/dl/wp-content/uploads/The-Pandoras-Box-of-CB-Digital-Currencies-October-2020.pdf

[Cigarbutt]

Thoughts?

 

https://doubleline.com/dl/wp-content/uploads/The-Pandoras-Box-of-CB-Digital-Currencies-October-2020.pdf

This is an interesting topic with potential investment implications. But it's about 'public' digital currencies which is not exactly the spirit of this thread. I can think of three reasons why central banks would venture into digital currencies and investment implications depend on the reason. Is there a specific aspect of the article that concerns you?

[John Hjorth]

CBDC has been in 'test' for some time (eKrone), and has been very successful ....

 

SD

 

Sharperdigaan,

 

What's your source for posting this?

[SharperDingaan]

CBDC is doing very well thank you; the impediment is not the technology, it is the corporate social responsibility that goes with implementation. A very real restraint under Covid, as we need the work that existing systems generate.

 

A very narrow, sectoral, example.

Similar things would play out in other sectors as well, and at about the same time.

• Were a global CBDC in place (one ring that rules them all), ALMOST ALL securities transactions AROUND THE WORLD would settle almost immediately. Value changing hands at the CB wallets, beneficial interest changing hands in a ledger similar to that used by CBDC. To do this at scale, we need to use the hyperledger and private oracles/ledgers. At present we can only do parts of what is required, and don't have the armies of hyperledger coders necessary - a temporary limitation.
   
  Every 'financial' city around the world has thousands of clerks involved in transaction settlement, occupying floors of high priced real estate. Settle via CBDC and they are both instantly redundant AND obsolete. All those involved in credit card settlement, A/R, and A/P are gone as well. How on earth do you manage that scale of permanent mass layoff, without it blowing up on you? Corporate Social Responsibility.

   

Velocity of money is simply level of economic activity (transactions value/money supply). Covid materially reduced economic activity, and QE materially increased money supply. Hardly surprising that Velocity has dropped like a brick. In many places the solution has been to just give people a minimum payment every month. Incremental QE simultaneously distributed through mass payment, and withdrawn from the total money supply. Higher activity, on the same net supply of money, but hated by money centers as it deflates asset value bubbles.

 

If ever there was a silver lining to Covid, it is the forced rethink as to how crypto is going to be implemented.

Change management and Corporate Social Responsibility forced into front and center.

All good.

 

SD

 

 

[SharperDingaan]

CBDC has been in 'test' for some time (eKrone), and has been very successful ....

 

SD

 

Sharperdigaan,

 

What's your source for posting this?

 

The Riksbank's e-krona project

https://www.riksbank.se/en-gb/payments--cash/e-krona/

 

Designing a CBDC for universal access

https://www.bankofcanada.ca/2020/06/staff-analytical-note-2020-10/

 

Riksbank is the best source for usage experience. Bank of Canada is the best source for principles.

There is also related material at both the Bank of England and the Bank of International Settlements. Much of it not public, and for obvious reasons. Point is that CBDC is implementable, it is here, and it works. 

 

SD

 

 

 

 

 

[Cigarbutt]

CBDC has been in 'test' for some time (eKrone), and has been very successful ....

SD

Sharperdigaan,

What's your source for posting this?

The Riksbank's e-krona project...https://www.bankofcanada.ca/2020/06/staff-analytical-note-2020-10/

...

CBDC is doing very well thank you; the impediment is not the technology, it is the corporate social responsibility that goes with implementation.

A very real restraint under Covid, as we need the work that existing systems generate.

A very narrow, sectoral, example.

Similar things would play out in other sectors as well, and at about the same time.

• Were a global CBDC in place (one ring that rules them all), ALMOST ALL securities transactions AROUND THE WORLD would settle almost immediately. Value changing hands at the CB wallets, beneficial interest changing hands in a ledger similar to that used by CBDC. To do this at scale, we need to use the hyperledger and private oracles/ledgers. At present we can only do parts of what is required, and don't have the armies of hyperledger coders necessary - a temporary limitation.
  Every 'financial' city around the world has thousands of clerks involved in transaction settlement, occupying floors of high priced real estate. Settle via CBDC and they are both instantly redundant AND obsolete. All those involved in credit card settlement, A/R, and A/P are gone as well. How on earth do you manage that scale of permanent mass layoff, without it blowing up on you? Corporate Social Responsibility.

   

Velocity of money is simply level of economic activity (as transactions value)/money supply. Covid materially reduced economic activity, and QE materially increased money supply. Hardly surprising that Velocity has dropped like a brick. In many places the solution has been to just give people a minimum payment every month. Incremental QE simultaneously distributed through mass payment, and withdrawn from the total money supply. Higher activity, on the same net supply of money, but hated by money centers as it deflates asset value bubbles.

If ever there was a silver lining to Covid, it is the forced rethink as to how crypto is going to be implemented.

Change management and Corporate Social Responsibility forced into front and center.

All good.

SD

The Swedish central bank's project is only a pilot project which has skipped almost all controversial aspects, continues to be based on the traditional two-tier banking system and is simply a reflection of the general declining use of physical cash by Swedes.

Going to digital currencies will improve domestic and cross-border payments efficiency but traumatic mass layoffs are a wild stretch of the imagination. i would say the introduction of ATMs was much more potentially impactful on clerical jobs so..

The velocity-of-money comments are where the money is for public digital currencies and asset deflation has no direct effect on money supply. Centrally-based mass payments (virtual or helicopter) means crossing the Rubicon and fundamental laws would need to be changed although we're moving closer to that every day unfortunately, with the obvious risk that private cryptocurrencies may somehow represent an interesting alternative.

 

[Spekulatius]

Aren’t the e-currencies much more disruptive to banks? After all, if I can store my digital currency in any type of digital wallet, I don’t need a checking account any more. Assuming the Digital wallet has transactional features, what would the point of a checking account be, especially with banks offering no interest ?

How would the banks getting deposits in this scenario?

[SharperDingaan]

E-krona is hard evidence that the public is accepting of digital currency, and using their phone/device as their bank account. And it comes with 2 yrs+ of quant data, covering everything from adoption rate through to granular monetary velocity in whatever sector you would like to know about. If it is representative, incredibly valuable data and impossible to dispute.

 

If I use CBDC I don't need a checking account, and the CB sets the interest rate on my overnight balance of surplus funds. Hence, if a bank wants my money as a deposit - it has to outbid. It means NO negative interest rates, as why pay a bank to keep my money - when the CB with a better credit rating will do it for free? 

 

Obviously, this makes a lot of people very nervous - hence change management.

The best mouse-trap in the world is pretty useless, if nobody thinks they will survive the disruption.

 

SD

 

 

 

 

 

[Spekulatius]

E-krona is hard evidence that the public is accepting of digital currency, and using their phone/device as their bank account. And it comes with 2 yrs+ of quant data, covering everything from adoption rate through to granular monetary velocity in whatever sector you would like to know about. If it is representative, incredibly valuable data and impossible to dispute.

 

If I use CBDC I don't need a checking account, and the CB sets the interest rate on my overnight balance of surplus funds. Hence, if a bank wants my money as a deposit - it has to outbid. It means NO negative interest rates, as why pay a bank to keep my money - when the CB with a better credit rating will do it for free? 

 

Obviously, this makes a lot of people very nervous - hence change management.

The best mouse-trap in the world is pretty useless, if nobody thinks they will survive the disruption.

 

SD

 

I assume a central bank sponsored e-currency would run with a ledger at a de trial bank? that’s the only way this would make sense I assume.

 

Again, if so, why is the point of a bank collecting deposits? There is none, at least not with zero interest rates. The banks then would simply lend from the central bank directly and maybe that simply defines what a bank is going forward. lending still requires expertise in most cases, but such a system also could encourage direct lending from a central bank.

 

The central bank would have much more information  than it has now, since it had the ledger of any transaction. This would weaken the status of banks, credit record agencies and all sorts of financial intermediaries, money launderers etc.

 

[SharperDingaan]

Ledger at the CB only, and no trial bank. Everyone with a wallet at the CB, accessed via a phone/device.

There is a need for change management, but not a trial bank (CB can privately check the mirroring of existing bank accounts).

 

A bank, lender, or credit card company is an intermediary - and blockchain is at heart a P2P technology that eliminates intermediaries. The CB network, combined with P2P technology, creates a monopoly – that can be easily regulated, with 21st century tools. In a Canada, this is existing practice, and we still do everyday banking. If you do what the regulator (OSFI) tells you, when they tell you, you will enjoy a nice life. Don’t, and you will either be replaced, or permanently kicked out of the banking cartel. It works, it is effective, and it is robust.

 

Very different to the practices in many other places, that rely on both old plumbing, and the plumbing staying that way. Blockchain doesn’t rip out the old plumbing - it by-passes it, and makes it too expensive to use. Those other places can bitch all they want, but they either get with the program or go out of business, as economics is a bitch.

 

Of course, the underlying assumption is that the ruing CB isn't corrupt. We have Bitcoin as the antidote, it was designed for almost exactly this condition (zero trust), and it closes the circle. Next time you see an anarchist, give him/her a kiss!

 

Yin and Yang, alive and well.

 

SD

 

[rkbabang]

Ledger at the CB only, and no trial bank. Everyone with a wallet at the CB, accessed via a phone/device.

There is a need for change management, but not a trial bank (CB can privately check the mirroring of existing bank accounts).

 

A bank, lender, or credit card company is an intermediary - and blockchain is at heart a P2P technology that eliminates intermediaries. The CB network, combined with P2P technology, creates a monopoly – that can be easily regulated, with 21st century tools. In a Canada, this is existing practice, and we still do everyday banking. If you do what the regulator (OSFI) tells you, when they tell you, you will enjoy a nice life. Don’t, and you will either be replaced, or permanently kicked out of the banking cartel. It works, it is effective, and it is robust.

 

Very different to the practices in many other places, that rely on both old plumbing, and the plumbing staying that way. Blockchain doesn’t rip out the old plumbing - it by-passes it, and makes it too expensive to use. Those other places can bitch all they want, but they either get with the program or go out of business, as economics is a bitch.

 

Of course, the underlying assumption is that the ruing CB isn't corrupt. We have Bitcoin as the antidote, it was designed for almost exactly this condition (zero trust), and it closes the circle. Next time you see an anarchist, give him/her a kiss!

 

Yin and Yang, alive and well.

 

SD

 

 

Just a note that anarchists do not want you to kiss us.  A hug would do.

 

[Gregmal]

Yee-haw!

[TwoCitiesCapital]

When does the mania start?

 

I use the premium on GBTC to measure sentiment - when it's below 15%, sentiment is typically terrible and the Bitcoin pricing is declining. When it's 25+%, sentiment is euphoric and the price is rising. Pretty easy to swing trade this (premium was @ just 7% a month ago and is closer to 22-23% today near the close and have successfully done this 3x times now this calendar year).

 

That being said, we're still not in euphoric 25+% premiums to NAV despite the 50% rise which is surprising to me. Is this a flawed measure of sentiment OR is 50% in a single month so underwhelming relative to expectations that it doesn't yet deserve the NAV premium? Or something else I'm missing?

 

Another piece of anecdotal evidence - at these prices in 2017, every single one of my finance friends were following it, trading it (and shit coins), and talking about driving lambos to work. This time around? Not a freaking peep!

[Gregmal]

Ive made a few minor sells(like 1-2%) of my position around $15k. Nothing other than heeding the big move and recalling that when this goes, it rips hard but typically does retreat a little while later on large(20%+) price movements. That said, I really think this is just getting started longer term. I said it years ago but its a very rare instance where retail beat Wall Street to the punch. 2018 is where retail shook out and passed the baton to the institutions. Slowly this is now becoming mainstream. Who knows where it goes anymore than one knows where gold is going. But hey, thats the fun part.

[Lance]

Gregmal, how do you think about sizing your position? 

 

Thanks

Lance

[Gregmal]

Honestly...I didnt/dont consider it at all.

 

This kind of piqued my interest during the big run up in 2013. I looked into it. Digital money, why not, right? It made sense on a very connect the dots kind of way but I also inherently shared the same views as the Buffetts and Dimons of the world. I decided to chuck a rather irrelevant amount of money at it after the big crash because it shared a lot of the traits that I have seen in very successful investments prior. From there I was a bit of a closet buyer. A thousand here and thousand there, etc. It was hard because this is the type of stuff you look like a fool here, or more importantly to my investors for being an advocate of...but on a certain level it made sense to me. Along the way Ive just made sure to trim the rips and moderately buy the dips. Overall on a cost basis perspective it is maybe 1% of a position. I've recouped my initial investment already and at this point will let about 80% ride regardless and for fucks trade the other 20%.

 

 

[rkbabang]

Honestly...I didnt/dont consider it at all.

 

This kind of piqued my interest during the big run up in 2013. I looked into it. Digital money, why not, right? It made sense on a very connect the dots kind of way but I also inherently shared the same views as the Buffetts and Dimons of the world. I decided to chuck a rather irrelevant amount of money at it after the big crash because it shared a lot of the traits that I have seen in very successful investments prior. From there I was a bit of a closet buyer. A thousand here and thousand there, etc. It was hard because this is the type of stuff you look like a fool here, or more importantly to my investors for being an advocate of...but on a certain level it made sense to me. Along the way Ive just made sure to trim the rips and moderately buy the dips. Overall on a cost basis perspective it is maybe 1% of a position. I've recouped my initial investment already and at this point will let about 80% ride regardless and for fucks trade the other 20%.

 

Similar to me.  I looked in to Bitcoin when it was below $1  when people were talking about it on the anarchist boards and the only place to buy it online was mtgox.  I looked into it, but thought that wiring money to mtgox sounded sketchy.  I never did anything until it went up over $1k in 2013 then back down.  By then there was other ways to buy it, so I started buying at under $200 and even got some under $100. I put in about a 2% position back then, then I created a coinbase account and setup a $30 every 2 weeks auto-buy which has been going for all these years through the ups and downs.  I've never sold any at all.  I wish I had wired $5k-$10 to mtgox back when it was around $1 then transferred it to a private wallet.  But oh well, that will be forever the one that got away.  :(

 

[clutch]

I have a simple rule right now. Keep 5% of liquid assets in BTC. If my net worth increases, that percentage might drop somewhat (~1%). I just followed Chamath P's reasoning and his recommendation for the allocation.

 

I don't consider this investment a significant part of my retirement plan. It's more of a hedge. And if things work out perfectly (both traditional assets and BTC appreciate), I will just buy a brand new 911 with the gain from BTC.  ;D

[TwoCitiesCapital]

I have a simple rule right now. Keep 5% of liquid assets in BTC. If my net worth increases, that percentage might drop somewhat (~1%). I just followed Chamath P's reasoning and his recommendation for the allocation.

 

I don't consider this investment a significant part of my retirement plan. It's more of a hedge. And if things work out perfectly (both traditional assets and BTC appreciate), I will just buy a brand new 911 with the gain from BTC.  ;D

 

I've got a 996 to sell you if you're willing to pay me the right price in BTC

 

;D

[SharperDingaan]

Sadly the reality is that for someone in North America, BTC is just a sh1te investment.

Most cannot margin against it and at today's USD 15,400/BTC - you could buy a lot of materially better quality stock, which both pays a dividend AND is marginable. Bit different if you live somewhere where your fiat currency is devaluing monthly (South America, South Africa, etc), but even then it is NOT an investment - it is just a less risky alternative to holding wads of scarce USD notes.

 

A young person would be far better off using the USD 15,400 to learn coding instead, and simply contracting out some of their weeknights/weekends to do coding. Pays way better than McDonalds; at USD 25/hr you only need code an average 25-30 hrs/month to make 50%+/yr on your investment. Not that big a big stretch.

 

SD

 

[gg]

Sadly the reality is that for someone in North America, BTC is just a sh1te investment.

Most cannot margin against it and at today's USD 15,400/BTC - you could buy a lot of materially better quality stock, which both pays a dividend AND is marginable. Bit different if you live somewhere where your fiat currency is devaluing monthly (South America, South Africa, etc), but even then it is NOT an investment - it is just a less risky alternative to holding wads of scarce USD notes.

 

I actually think that your logic is one of the reasons that US investors, to their detriment, will be later to the game than many others around the world. If you live in Argentina, Venezuela, South Africa, Iran, etc... then monetary debasement is not a philosophical issue, and you are probably certainly willing to take small positions in any assets that potentially have the ability to hedge that risk.

 

A young person would be far better off using the USD 15,400 to learn coding instead, and simply contracting out some of their weeknights/weekends to do coding. Pays way better than McDonalds; at USD 25/hr you only need code an average 25-30 hrs/month to make 50%+/yr on your investment. Not that big a big stretch.

 

On this point, there is nothing that says you need to buy 1 bitcoin at a minimum. You can buy very tiny fractions worth of one bitcoin. And I think while that's already been happening, the introduction of bitcoin purchases on highly mainstream financial companies like Paypal and Square will only make this more common place. So I would agree that if a young person only had 15,400 of dsicretionary spending this year, they'd be better off learning to code than they would be buying a bitcoin. But they might be best off spending 15,000 learning to code and buying 400 in bitcoin.

[rkbabang]

A young person would be far better off using the USD 15,400 to learn coding instead, and simply contracting out some of their weeknights/weekends to do coding. Pays way better than McDonalds; at USD 25/hr you only need code an average 25-30 hrs/month to make 50%+/yr on your investment. Not that big a big stretch.

 

This may be true, but I'm not a young person (most on this board aren't).  I already know how to code.  This advice can be given to someone thinking of investing in anything.  If you are a young person, invest in acquiring skills first and foremost, but this is an investment board not a career advice board for young people.

 

[clutch]

A young person would be far better off using the USD 15,400 to learn coding instead, and simply contracting out some of their weeknights/weekends to do coding. Pays way better than McDonalds; at USD 25/hr you only need code an average 25-30 hrs/month to make 50%+/yr on your investment. Not that big a big stretch.

 

This may be true, but I'm not a young person (most on this board aren't).  I already know how to code.  This advice can be given to someone thinking of investing in anything.  If you are a young person, invest in acquiring skills first and foremost, but this is an investment board not a career advice board for young people.

 

Yup that was an empty statement. A young person would be far better off using the USD 15,400 to learn coding instead of <b>buying anything else</b>.

[SharperDingaan]

Whether the investment $ is spent learning coding, buying satoshi, or buying something else; the financial metric is the same - risk adjusted internal rate of return. A person invests in their highest IRR investments first, then goes down the list. To a young person interested in crypto, learning how to code will most likely be the better investment. If you are ancient, or already know how to code, your highest IRR opportunities have already been used up!

 

The real value of Bitcoin is its utility as an anonymous mobile alternative to gold and hard currency (USD, Euro, etc). That ability to reliably and quickly move unlimited sums around inflation, capital controls, and corrupt regimes is incredibly valuable. The underworld involvement also keeps it relatively honest - as they collectively have the most to use. North Americans just do not get that.

 

SD