Cryptocurrencies

[rkbabang]

I find the transactional improvement argument a more attractive investment thesis compared to the "store of value" argument.

 

Question then is, what is the most direct investment vehicle to express that thesis? I would guess ethereum?

 

Ethereum is my guess.  I find both compelling and so own BTC and ETH.

 

[widenthemoat]

 

Thanks for the responses.

 

"If the US is serious about releasing a digital dollar..."

 

Doesn't that already exist in substance?  I get paid electronically in US dollars.  I pay my bills electronically using US dollars.  I pay merchants the same way.  I'd guess that 99 percent of my inflows and outflows are electronic and in US dollars.  So why do I need a different electronic currency?

 

[/Quote]

 

Is it really though? Because for some reason it takes 3-5 business days for ACH transactions to go through, a month for credit card companies to deliver receivables to merchants, and 4-6 weeks for my bank to reliably schedule an auto-pay. Seems weird that these transactions would take days if they were truly electronic in nature and in plumbing. Shouldn't it be instantaneous?

 

And this isn't a hypothetical. The US is looking at a digital dollar just the China is rolling out a digital yuan. Seems like even the authorities disagree with you in terms of already having the benefits of digital currencies.

 

What opportunity?  Buying bitcoin doesn't give you partial ownership of the system any more than having US dollars in a bank gives you partial ownership of the bank or paying for things using a Visa gives you ownership of Visa.

 

Maybe you should ask yourself what it is that Square, Visa, PayPal, and other payment processors who are expanding the use of digital currencies must see since they're the experts. It's not just a couple of guys on a forum telling you this stuff. The industry is rapidly moving that direction.

 

We can talk til we're blue in the face to get you to understand what it is and that it has value - or you can just look what the experts are doing. Acquiring crypto and developing crypto solutions...

 

The reason the transactions aren’t instant is because of regulation. The government is trying to prevent criminal activity. That alone should sound serious alarm bells.

 

They must have skipped the criminal activity part

 

https://perspectives.dtcc.com/articles/leading-the-industry-to-accelerated-settlement

 

Q: Why stop at T+1 or T+½? Why not go to real-time settlement?

 

A: Real-time settlement is a simple technical solution but a very complicated market structure change. While the industry should continue to aspire to real-time, it is more pragmatic to reduce the settlement cycle in stages to capture the benefits faster. With real-time settlement in today’s market structure, the entire industry – clients, brokers, investors – loses the liquidity and risk-mitigating benefit of netting, and that is particularly critical during times of heightened volatility and volume. For example, on a typical trading day, NSCC processes an average of about $1.7 trillion in equities transactions. The multilateral netting process reduces that number by about 98%, and the total value settled is around $38 billion. Netting allows brokerages to transfer that $38 billion between parties only once at the end of the day. In a real-time settlement scenario, netting is not possible and trillions of dollars in cash and securities must move through the financial system on a continual basis throughout the trading day. This creates massive market and capital inefficiencies, increases credit and operational risks, and increases costs between trading parties, possibly undermining the stability of the markets.

 

Accelerating settlement requires careful consideration, industry coordination, and a balanced approach so settlement can be achieved as close to the trade as possible (for example, T+1 or T+½), without creating capital inefficiencies and introducing new, unintended market risks, such as eliminating the enormous benefits and cost savings of multilateral netting.

 

I'm very confused. Why are you guys referencing settlement times for equity securities? I can quite easily transfer small dollar amounts of my money to another individual today, instantly. Anything large has limitations and takes more time, due to regulations. What am I missing?

 

You're missing that no settlement happens INSTANTLY in today's financial system. Not for securities. Not for cash.

 

ACH takes 3-5 business days. Stocks take 2 business days to settle. Wires can still take a few hours and cost $. Even solutions like Venmo that seem instantaneous take a few days for cash to reach your account.

 

The only solutions where cash moves "instantly" are solutions where a liquidity provider is giving you their cash while they wait for the cash you transferred to arrive (like trading Schwab allowing me to trade my cash deposit immediately or paying a fee to use an ATM).

 

Cash does NOT move instantly in today's system - this is a result of the plumbing and structure and not of government regulation.

 

 

Also, securities will exist as tokens and be traded on a blockchain in the future as well.  Maybe on a chain such as Ethereum.  Companies will issue shares directly to the blockchain and be able to buy-back and remove them.  You will be able to see in real time how many shares exist.  You will also be able to trade them almost instantly without 3rd party involvement.

 

This I can understand, and I see the value. Why does this mean Bitcoin is worth $50,000 though? Even if real-time settlements don’t happen, it sure seems like they do to me as the consumer. Why does better plumbing, that I don’t even see, make Bitcoin worth $50,000?

[rkbabang]

 

Thanks for the responses.

 

"If the US is serious about releasing a digital dollar..."

 

Doesn't that already exist in substance?  I get paid electronically in US dollars.  I pay my bills electronically using US dollars.  I pay merchants the same way.  I'd guess that 99 percent of my inflows and outflows are electronic and in US dollars.  So why do I need a different electronic currency?

 

[/Quote]

 

Is it really though? Because for some reason it takes 3-5 business days for ACH transactions to go through, a month for credit card companies to deliver receivables to merchants, and 4-6 weeks for my bank to reliably schedule an auto-pay. Seems weird that these transactions would take days if they were truly electronic in nature and in plumbing. Shouldn't it be instantaneous?

 

And this isn't a hypothetical. The US is looking at a digital dollar just the China is rolling out a digital yuan. Seems like even the authorities disagree with you in terms of already having the benefits of digital currencies.

 

What opportunity?  Buying bitcoin doesn't give you partial ownership of the system any more than having US dollars in a bank gives you partial ownership of the bank or paying for things using a Visa gives you ownership of Visa.

 

Maybe you should ask yourself what it is that Square, Visa, PayPal, and other payment processors who are expanding the use of digital currencies must see since they're the experts. It's not just a couple of guys on a forum telling you this stuff. The industry is rapidly moving that direction.

 

We can talk til we're blue in the face to get you to understand what it is and that it has value - or you can just look what the experts are doing. Acquiring crypto and developing crypto solutions...

 

The reason the transactions aren’t instant is because of regulation. The government is trying to prevent criminal activity. That alone should sound serious alarm bells.

 

They must have skipped the criminal activity part

 

https://perspectives.dtcc.com/articles/leading-the-industry-to-accelerated-settlement

 

Q: Why stop at T+1 or T+½? Why not go to real-time settlement?

 

A: Real-time settlement is a simple technical solution but a very complicated market structure change. While the industry should continue to aspire to real-time, it is more pragmatic to reduce the settlement cycle in stages to capture the benefits faster. With real-time settlement in today’s market structure, the entire industry – clients, brokers, investors – loses the liquidity and risk-mitigating benefit of netting, and that is particularly critical during times of heightened volatility and volume. For example, on a typical trading day, NSCC processes an average of about $1.7 trillion in equities transactions. The multilateral netting process reduces that number by about 98%, and the total value settled is around $38 billion. Netting allows brokerages to transfer that $38 billion between parties only once at the end of the day. In a real-time settlement scenario, netting is not possible and trillions of dollars in cash and securities must move through the financial system on a continual basis throughout the trading day. This creates massive market and capital inefficiencies, increases credit and operational risks, and increases costs between trading parties, possibly undermining the stability of the markets.

 

Accelerating settlement requires careful consideration, industry coordination, and a balanced approach so settlement can be achieved as close to the trade as possible (for example, T+1 or T+½), without creating capital inefficiencies and introducing new, unintended market risks, such as eliminating the enormous benefits and cost savings of multilateral netting.

 

I'm very confused. Why are you guys referencing settlement times for equity securities? I can quite easily transfer small dollar amounts of my money to another individual today, instantly. Anything large has limitations and takes more time, due to regulations. What am I missing?

 

You're missing that no settlement happens INSTANTLY in today's financial system. Not for securities. Not for cash.

 

ACH takes 3-5 business days. Stocks take 2 business days to settle. Wires can still take a few hours and cost $. Even solutions like Venmo that seem instantaneous take a few days for cash to reach your account.

 

The only solutions where cash moves "instantly" are solutions where a liquidity provider is giving you their cash while they wait for the cash you transferred to arrive (like trading Schwab allowing me to trade my cash deposit immediately or paying a fee to use an ATM).

 

Cash does NOT move instantly in today's system - this is a result of the plumbing and structure and not of government regulation.

 

 

Also, securities will exist as tokens and be traded on a blockchain in the future as well.  Maybe on a chain such as Ethereum.  Companies will issue shares directly to the blockchain and be able to buy-back and remove them.  You will be able to see in real time how many shares exist.  You will also be able to trade them almost instantly without 3rd party involvement.

 

This I can understand, and I see the value. Why does this mean Bitcoin is worth $50,000 though? Even if real-time settlements don’t happen, it sure seems like they do to me as the consumer. Why does better plumbing, that I don’t even see, make Bitcoin worth $50,000?

 

That was just an aside.  But you won't be buying 25 shares of Amazon with $USD, value will be stored in BTC not cash.

 

[TwoCitiesCapital]

 

This I can understand, and I see the value. Why does this mean Bitcoin is worth $50,000 though? Even if real-time settlements don’t happen, it sure seems like they do to me as the consumer. Why does better plumbing, that I don’t even see, make it worth $50,000?

 

Why does a company whose only function in society is moving cash from point A to point B have an enterprise value > $450 billion? Yet we've all determined this is what Visa is "worth" and they're not the only payment processor.

 

Back in 2018 when I first understood BTC's "purpose" in payments, all I did was sum the enterprise value of first 5 payment processors I could think of. Visa, MasterCard, American Express, PayPal, and Square and then divided by the maximum 21 million coins that will eventually be outstanding. The outcome of that rough calculation? 50k per coin. To me, that was the value American society had placed on "processing payments."

 

It's a rough analysis - doesn't consider other payment processors in America (or globally), other use cases, lost coins, or the fact that 21 million won't be outstanding for awhile - all of which drive the terminal value above $50k per coin but it was a start and the start I needed to begin acquiring.

[LC]

https://michael08.medium.com/why-visa-and-mastercard-will-continue-to-reign-supreme-in-an-increasingly-digital-world-5c4a9adf0a0e

[JRM]

 

This I can understand, and I see the value. Why does this mean Bitcoin is worth $50,000 though? Even if real-time settlements don’t happen, it sure seems like they do to me as the consumer. Why does better plumbing, that I don’t even see, make it worth $50,000?

 

Why does a company whose only function in society is moving cash from point A to point B have an enterprise value > $450 billion? Yet we've all determined this is what Visa is "worth" and they're not the only payment processor.

 

Back in 2018 when I first understood BTC's "purpose" in payments, all I did was sum the enterprise value of first 5 payment processors I could think of. Visa, MasterCard, American Express, PayPal, and Square and then divided by the maximum 21 million coins that will eventually be outstanding. The outcome of that rough calculation? 50k per coin. To me, that was the value American society had placed on "processing payments."

 

It's a rough analysis - doesn't consider other payment processors in America (or globally), other use cases, lost coins, or the fact that 21 million won't be outstanding for awhile - all of which drive the terminal value above $50k per coin but it was a start and the start I needed to begin acquiring.

 

Because they make money and pay dividends.

[TwoCitiesCapital]

 

This I can understand, and I see the value. Why does this mean Bitcoin is worth $50,000 though? Even if real-time settlements don’t happen, it sure seems like they do to me as the consumer. Why does better plumbing, that I don’t even see, make it worth $50,000?

 

Why does a company whose only function in society is moving cash from point A to point B have an enterprise value > $450 billion? Yet we've all determined this is what Visa is "worth" and they're not the only payment processor.

 

Back in 2018 when I first understood BTC's "purpose" in payments, all I did was sum the enterprise value of first 5 payment processors I could think of. Visa, MasterCard, American Express, PayPal, and Square and then divided by the maximum 21 million coins that will eventually be outstanding. The outcome of that rough calculation? 50k per coin. To me, that was the value American society had placed on "processing payments."

 

It's a rough analysis - doesn't consider other payment processors in America (or globally), other use cases, lost coins, or the fact that 21 million won't be outstanding for awhile - all of which drive the terminal value above $50k per coin but it was a start and the start I needed to begin acquiring.

 

Because they make money and pay dividends.

 

Only along as they remain the most convenient and relatively cheap option. Those dividends are funded by Visa taking a 1-2% cut of e-commerce.  Crypto has the potential to change that and take a much smaller cut - and it has an easier time growing/spreading than any of Visa's prior competitors.

 

Heck, it's already a global payment network that processes hundreds of thousands of transactions a day (just on BTC - not considering DeFi on ethereum) and we're just 12 years from its advent and haven't even hit the vertical climb portion of its S-curve yet.

 

It's possible these credit card companies will dig out their own niche in the land of blockchain - but it's going to be MUCH more competitive for them from here on out and their value proposition will have to evolve. My guess is companies like AmEx will find it easier to adapt - the desire for overspending on revolving credit won't disappear just because blockchain allows you to do it quicker and cheaper.

 

 

[JRM]

That's all fine, but owning Bitcoin is not the same as owning Visa.  I'm not anti Bitcoin, I just don't think that's a good analogy.

 

The tokens that Paypal uses for payments\transfers are essentially free.  Why aren't Paypal tokens worth 50k?

 

I'll answer my own question; because they're not scarce.  I think what sets Bitcoin apart is scarcity.

[SharperDingaan]

I find the transactional improvement argument a more attractive investment thesis compared to the "store of value" argument.

 

Question then is, what is the most direct investment vehicle to express that thesis? I would guess ethereum?

 

Three approaches. Go with the large numbers of moderate sized players, experimenting with blockchain via ETH token. Go with the fewer but more influential bigger players implementing on the hyperledger, using the cloud providers and consultants. Park-in/trade-around BTC in anticipation of a coming global currency 'reset'. ie: An asset allocation to crypto, and two/more strategies within that allocation.

 

For meaningful results, a larger asset allocation is required. As it will take time for ETH demand to develop, arguably the allocation can be 'grown' to target, versus fully funded at start. Risk tolerance and time horizons are the major drivers.

 

We have chosen to 'grow' the allocation, by trading BTC; the allocation growing again as the portfolio repatriates some of its capital. We take the long view, and view the allocation as akin to putting ships out to sea. Hopefully, 3 years out, they are arriving back in port as our oil/gas investments are waning. Time as our friend.

 

Different strokes.

 

SD

 

 

 

[K2SO]

 

Why does a company whose only function in society is moving cash from point A to point B have an enterprise value > $450 billion? Yet we've all determined this is what Visa is "worth" and they're not the only payment processor.

 

 

If that's their "only" function it's a pretty critical function. And the cost of a new entrant to replicate V and MA's networks is such that no new competitors will emerge. They own the space and are building services all around it.

 

[TwoCitiesCapital]

 

Why does a company whose only function in society is moving cash from point A to point B have an enterprise value > $450 billion? Yet we've all determined this is what Visa is "worth" and they're not the only payment processor.

 

 

If that's their "only" function it's a pretty critical function. And the cost of a new entrant to replicate V and MA's networks is such that no new competitors will emerge. They own the space and are building services all around it.

 

"No new competitors" is a weird way to say "Bitcoin". As mentioned above, it's already a global payment network with hundreds of thousands of transactions processed daily - in less than 12 years from being just one guys' hobby. That's a pretty powerful track record and it's getting faster and cheaper with new second layer solutions (like Visa exists on the second layer of USD infrastructure).

 

And no one is saying that's its NOT an important function. That's the only value I ascribe to BTC, so of course it's important. My only reason in saying that was to juxtapose Visa's purpose with BTC's purpose which is that they're the same. And if BTC can do what Visa does more quickly, more securely, and more cheaply - than it's hard for me to see how BTC doesn't accrue that value while Visa likely loses a good portion of it.

 

And if I'm right on that, than Visa and Mastercard will NOT retain that value - it will be ceded to BTC.

[LC]

Thank you for the reply, SD. I am not sure I have the cojones to try and trade BTC, but I do agree with your approach of (1) growing the investment over time as the use case popularizes ; (2) Trying to decide between your first two approaches (e.g. spread amongst moderate sized players vs. consolidating in larger players performing the implementations). Good food4thought.

[LC]

https://michael08.medium.com/why-visa-and-mastercard-will-continue-to-reign-supreme-in-an-increasingly-digital-world-5c4a9adf0a0e

 

There are a few interesting debate points which are presented in this article, which I will reproduce here. Apologies in advance for the wall-of-text:

 

Bitcoin & Cryptocurrencies

 

Gosh.. where do I begin? I was reluctant to offer a view on Bitcoin and crypto so as to not insult anyone reading this. Let me begin by just saying I have never owned any crypto assets nor intend to anytime soon (I am clearly opposed to making $). It is however one of the more polarising debates I have ever seen. You are either a maximalist and think it is worth something — say $1m — or a minimalist and think it is worth nothing. Say, precisely $0. What I find fascinating is that there are people who I have deep respect for on both sides of the Bitcoin debate. There doesn’t seem to be a middle ground which means higher vol and lower Sharpe ratios.

 

The payments industry is undergoing a tremendous amount of change with billions of capital being injected into the start up and late stage scene every year. Allocating capital to public payment businesses means you have to have a flexible and open mind. I do subscribe to the view that anytime there is so much hype and concurrent financial asset bubble, that usually means there is something there and built upon some semblance of truth. Roy Amara, past president of the Institute for the Future, and his eponymous law stated that “we tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.” Amara’s Law is very relevant to payments and seems inevitable that the movement of money will continue to be digitalised. How economies and governments will go about crossing this bridge is clearly important for investors to grasp. History does suggest however, that the first iteration of hype doesn’t necessarily always get widely adopted. Archie Query Form, Yahoo! Search, LookSmart, Excite preceded BackRub/Google Search in 98’. A similar dynamic played out in mobile phones. Investors and institutions clearly think Bitcoin will be the Google Search of crypto and digital currencies but only time will tell.

 

What is Bitcoin?

Questioning what problems will be solved (and drive change in payments) in the next 5–10 years is a good place to start. Questioning what won’t change in 5–10 years is a better place to start. Before tackling this question, I need to first answer this seemingly simple question: what on earth is Bitcoin? A new asset class, new digital currency, anti-establishment vehicle, religion..? Let’s start with the notion that Bitcoin is a new form of currency and payment solution. Satoshi Nakamoto’s whitepaper in 2008 did indeed state that Bitcoin will be “a purely peer-to-peer version of electronic cash [and] would allow online payments to be sent directly from one party to another without going through a financial institution.” This sounds like Satoshi is talking about a new form of money.

 

But what are the functions of money? Money is 1) a store of value (SoV) to transfer purchasing power to the future 2) a medium of exchange (MoV) to buy stuff and 3) a unit of account (UoA) to measure what stuff is worth. Bitcoin’s success (higher price), scarcity value (21m max supply) and volatility (realised vol of 120%+) all make it an unlikely mechanism for transacting or at least adopted to a point that will challenge the current payment competitive structures. Bitcoin cannot fulfil the MoV or UoA properties of money. Spending Bitcoin does not make logical sense. Why would someone want to spend something that has built in deflationary (system was designed to reward early adopters) properties vs. spending inflationary fiat currencies. Bitcoin maximalists are also generally part of the #neversell camp, or more to the point, #neveruse. I.e.: a security with an investor base of HODL’ers ≠ payment utility.

 

Let’s bring this to life with some examples. A certain individual with an apparent affinity for SPACs purchased a Lake Tahoe property for $1.6m in 2014. The interesting point is that he paid for the house in Bitcoin and for a total amount of 2,739 Bitcoins. Using today’s price of roughly $46k, he paid $126m for the property. Not an insignificant difference. Another fun example is Bitcoin Pizza Day. On May 22nd 2010, an individual by the name of Lazlo Hanyecz became hungry and longed for two pizzas. Instead of wasting his real money, he thought it would be a smart idea to offer 10k Bitcoins for two delivered Papa John’s pizzas. No one took the bait. This was until a Brit took him up on his offer and paid $25 for two Pizzas and in turn received 10k Bitcoins. Lazlo was no longer hungry and still had an extra $25 to his name. Great deal he must of thought to himself while getting stuck into the second pizza. Fast forward to today and 10k Bitcoins is now worth… more than $25. These are extreme examples but the main point remains: Gresham’s Law is real.

 

There are various other important limiting factors that make Bitcoin an unlikely mechanism for low value high frequency transactions at scale. Transacting in Bitcoin is grossly inefficient and expensive (currently USD $22.32 average transaction fee). The limit for Bitcoin is 1mb meaning the capacity to process is currently 7–10 transactions per second (vs Visa’s 65k per second capacity). Transactions can also take between several minutes and days to get confirmed . The Lightening Network is undoubtedly super interesting and looks to address this scalability issue but has its own set of challenges and teething issues.

A recent Bloomberg opinion piece noted that “One Bitcoin transaction would generate the CO2 equivalent to 706,765 swipes of a Visa credit card, according to Digiconomist’s closely-followed index.”. There has been some debate about the cogency of the article but I continue to challenge the need to expend such a considerable amount of energy to try replicate something that is already incredibly efficient and works very well (consumers have made the choice to use debit and credit networks).

 

Bitcoin can also just simply be “lost” and there is nothing one can do about it. If a virus corrupts data or a wallet, Bitcoin will forever be lost in the system. If you mistakenly throw away or misplace a hard drive with mined Bitcoin on it, there is nothing you can do about it. Mt. Gox lost $400m of customer’s money after finding a basic flaw in the code. If your entire net worth is in Bitcoin, you could be bankrupted within seconds. Various exchanges have also at times (most recently Binance) suspended withdrawals due to network congestion (liquidity?).

 

Further, if you buy something in Bitcoin and you would like reverse or dispute the transaction, there is nothing you can do about it. Wait… so will consumers really be willing to give up their credit card rewards for the luxury of not being able to reverse a transaction? This is why there is no free lunch in payments. The associated cost ensures trust and security (through incentives) as well as the ability to dispute (this is entirely different infrastructure that needs to be put in place to support back office). Lastly, the elephant in the room: regulation. There has been various cases of fraud (remember ICOs) and governance issues. The bigger Bitcoin becomes, the more it will need to come inside the public policy envelope. What this looks like remains to be seen but Gary Gensler being named SEC Chairman is nonetheless very interesting.

 

Visa, MasterCard, Adyen and various other payment companies have shared similar sentiments (not a payment mechanism) to the above. Perhaps they are biased and talking their book. Let’s look at what others have said and done who helped create and develop the industry. Coinbase’s (crypto exchange recently marked at $100bn) pivot in the early days offers some interesting clues. Their initial strategy was to facilitate payments but later moved toward being a brokerage. They discovered that Bitcoin was indeed more an asset class vs. consumer demand for transacting. Back to Satoshi Nakamoto and his famous whitepaper and subsequent blog posts. Here are a few interesting comments to help understand his vision (h/t @danheld):

 

- “Bitcoins have no dividend or potential future dividend, therefore not like a stock. More like a collectible or commodity.” Link. (2010)

- “It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self-fulfilling prophecy.” Link. (2009).

- “In this sense, it’s more typical of a precious metal. Instead of the supply changing to keep the value the same, the supply is predetermined and the value changes. As the number of users grows, the value per coin increases”. Link. (2009)

 

I continue to believe Bitcoin is a store of something. I’m just not entirely sure yet what that something is — perhaps value, speculation or both? Being a store of something means Bitcoin is therefore a new asset class or “digital gold” and not a payment mechanism.. for now (subject to change as always, a good heuristic is not bet against curious engineers). It does make sense that the market cap of Bitcoin has gone parabolic. Limited supply, growing cult following, excess liquidity, and now, new interest from institutions is a cocktail for euphoria. With that said, I don’t exactly see the problem Bitcoin is solving in the payments industry. Even if it was solving a problem, it would need to overcome Visa’s scale and ubiquity with both merchants and consumers. Further, the current incentive structure in all parts of the ecosystem make this challenge even harder to overcome.

 

Stablecoins

Private (FB’s Diem, JPM’s coin for interbank payments between clients) and public (Central Bank Digital Currencies or CBDCs) stablecoins backed by fiat currency look to solve the aforementioned volatility problem facilitated by new modern centralised (vs decentralised) distributed ledgers and networks. There are currently over 50 CB’s working on digital currencies with the PBOC ostensibly the furthest (interesting implications for Alipay and WeChat). Christine Lagarde of the ECB commented that she wouldn’t be surprised to see a digital Euro within the next 5 years. Using a digital Dollar or Euro to buy stuff transaction free — or a lot less — will compete with cash, networks and potentially upend the entire global payments industry. This has the potential to be undeniably disruptive long term and especially for the Network’s cross border businesses.

 

What is not clear is what model (through banks or directly through CBs), infrastructure and applications will underpin CBDCs around the world. The implementation of CBDCs will be incredibly complex and multivariate with a high price for any missteps. Governments generally lack the technical wherewithal to build a payments network from scratch and often seek out private partners to assist them in the buildout process. Who has deep payments expertise? The Networks. Who is building out additional rails to facilitate all movement of money and be network agnostic? The Networks. Ongoing public payment innovations and modernised network buildouts such as real time payments (RTP) have in the past sought the help of the Networks. The infrastructure is one thing, the applications that sit atop are another. MasterCard, for example, through its acquisition of Vocalink and Nets, has already partnered with governments and consortiums such as The Clearing House (TCH). This is indicative of how the Networks operate: they end up partnering with would be public and private competition.

 

Visa is one of crypto’s biggest cheerleaders (huh?)

Visa is already very active in crypto, stablecoins and blockchain initiatives and has made a concerted effort to steer all potentially consequential initiatives into their orbit (it is a classic case of buying insurance protection should it actually become a thing). What progress have they made? Visa recently announced that 35 of the leading digital currency platforms and wallets (Coinbase, Blockfi, Bitpanda etc.) have chosen to partner with Visa and issue Visa credentials. This will allow users to purchase crypto with a Visa card or to cash out onto a Visa card to use at any of their 70m+ merchants. I.e.: the decentralised opens up to the centralised. Last year, they made an investment into Anchorage (crypto custody platform). Just this month, they announced Visa Crypto APIs (built on Anchorage) that will give banks and fintechs the ability to integrate and allow trading of crypto. On the B2B side, their Visa B2B Connect platform utilises blockchain architecture for high value cross border payments between corporates. This initiative is really interesting and disruptive as it will try eat away at SWIFT’s near monopoly who are clearly overearning.

 

On the public stablecoin front, both the Networks are actively engaging with governments and policy makers around the world to shape the dialogue in helping them understand digital currencies. The World Economic Forum (WEF) have issued a recommendation “CBDC Policy Maker Toolkit”. Who contributed to the paper you may ask? Visa. Their research lab has also written various recommendation whitepapers which call for CBDCs to run on an offline (no internet) payment system protocol underpinned by two tiered trust infrastructure (their rails). I can go on but this is regulatory capture in the wild. My sense is that the path of least resistance (money, time, security , ubiquity, expertise) for policymakers would be to run CBDCs on one of Visa’s networks. This will all but ensure Visa will participate in any future innovation in the global payments landscape.

[SharperDingaan]

Net of mitigation, trading BTC is a lot less risky than many realize.

Example: Buy 2 BTC @ 17.5K for 35K. BTC rises to 35K, sell for 70K and take a break. Buy a put or continue?

 

Reinvest the original 35K for 1 BTC, sell at 55K. You had 50% of original exposure, & it worked out. Great!

But what if it had crashed to 25K? You still only had 50% of original exposure, you only lose 10K if you sell, and you are already up 35K - affordable. Alternatively you could have just HODLed, benefited from the forced stop (delusions of invincibility), and waited for another round of mainstream portfolio allocation to raise prices. Hence, the actual risk here? not a lot.

 

It is the same process as trading oil/gas (commodity stocks); applied to BTC, the only difference is the name.

It even has LESS volatility than oil/gas when coming off the bottom of the cycle.

Again, not a lot of INCREMENTAL risk here.

 

Obviously not for everyone,

but also not the stretch that many think.

 

SD

 

 

[ValueArb]

https://www.wsj.com/articles/you-can-earn-6-8-even-12-percent-on-a-bitcoin-savings-account-yeah-right-11614959768?mod=djintinvestor_t

 

"You Can Earn 6%, 8%, Even 12% on a Bitcoin ‘Savings Account’—Yeah, Right

New trading platforms want to borrow your cryptocurrency, and are willing to pay a pretty crypto-penny for the privilege. Just don’t let anyone convince you it’s like putting your money in a bank."

[Ice77]

First the early adopters/punters got in, then the uber rich (Thiel, Winklevii, Chamath), then the corporations (Apple, Tesla...) and next will be the central banks and then it goes mainstream with 4th generation cryptos. Don't own any but it's not hard to envisage BTC going to $500K-1m. Not enough around for everyone (88% odd have been mined already IIRC)

[Longnose]

I was recently gifted some crypto. Being gifted it helped break down the barriers to entry and helped me learn more about it. I started thinking about buying more but I keep running into fees. Every time I want to do a transaction there is a fee if I want to move it from my exchange (coinbase)  to my crypto wallet (exodus) there is a fee. And what what I have gathered if I want to send or buy something in crypto there is also another fee.

 

Seems to me that If I don't buy a crypto like an old school investment (back when all the brokers charged fees for transactions). That inactivity and speculating that its only going up is the only right answer with crypto.

 

Correct me if If I am wrong or direct me to where I can move crypto around without paying the so called "miners" every time something moves.

[rkbabang]

First the early adopters/punters got in, then the uber rich (Thiel, Winklevii, Chamath), then the corporations (Apple, Tesla...) and next will be the central banks and then it goes mainstream with 4th generation cryptos. Don't own any but it's not hard to envisage BTC going to $500K-1m. Not enough around for everyone (88% odd have been mined already IIRC)

 

There is a lot of BTC.  It is currently divisible to 8 decimal places.  At $1M/BTC the lowest unit (1 Satoshi) would be worth a penny and one μBTC (micro-bitcoin) would be worth $1.  If there are 21M BTC then there are 2,100,000,000,000,000 Satoshi (2.1 quadrillion Satashi) and 21,000,000,000,000 μBTC (21 trillion μBTC).

 

[LC]

I was recently gifted some crypto. Being gifted it helped break down the barriers to entry and helped me learn more about it. I started thinking about buying more but I keep running into fees. Every time I want to do a transaction there is a fee if I want to move it from my exchange (coinbase)  to my crypto wallet (exodus) there is a fee. And what what I have gathered if I want to send or buy something in crypto there is also another fee.

 

Seems to me that If I don't buy a crypto like an old school investment (back when all the brokers charged fees for transactions). That inactivity and speculating that its only going up is the only right answer with crypto.

 

Correct me if If I am wrong or direct me to where I can move crypto around without paying the so called "miners" every time something moves.

 

https://bitinfocharts.com/comparison/bitcoin-transactionfees.html

 

Currently costs about $19 per BTC transaction.

[rkbabang]

I was recently gifted some crypto. Being gifted it helped break down the barriers to entry and helped me learn more about it. I started thinking about buying more but I keep running into fees. Every time I want to do a transaction there is a fee if I want to move it from my exchange (coinbase)  to my crypto wallet (exodus) there is a fee. And what what I have gathered if I want to send or buy something in crypto there is also another fee.

 

Seems to me that If I don't buy a crypto like an old school investment (back when all the brokers charged fees for transactions). That inactivity and speculating that its only going up is the only right answer with crypto.

 

Correct me if If I am wrong or direct me to where I can move crypto around without paying the so called "miners" every time something moves.

 

https://bitinfocharts.com/comparison/bitcoin-transactionfees.html

 

Currently costs about $19 per BTC transaction.

 

Which is amazingly cheap for large transactions.  If you were a large institution which had $1B in gold in your safe in the US and you wanted to move it to another institution in Japan.  How long would it take, how much would it cost, and what safety precautions would need to be taken?  Even moving dollars rather than gold it would be much easier, quicker, safer, and cheaper with BTC.

 

And as far as I know there is no other way to cross international borders carrying tens of thousands to billions of dollars safely in your head by memorizing 12 words.

 

 

[TwoCitiesCapital]

I was recently gifted some crypto. Being gifted it helped break down the barriers to entry and helped me learn more about it. I started thinking about buying more but I keep running into fees. Every time I want to do a transaction there is a fee if I want to move it from my exchange (coinbase)  to my crypto wallet (exodus) there is a fee. And what what I have gathered if I want to send or buy something in crypto there is also another fee.

 

Seems to me that If I don't buy a crypto like an old school investment (back when all the brokers charged fees for transactions). That inactivity and speculating that its only going up is the only right answer with crypto.

 

Correct me if If I am wrong or direct me to where I can move crypto around without paying the so called "miners" every time something moves.

 

https://bitinfocharts.com/comparison/bitcoin-transactionfees.html

 

Currently costs about $19 per BTC transaction.

 

Which is amazingly cheap for large transactions.  If you were a large institution which had $1B in gold in your safe in the US and you wanted to move it to another institution in Japan.  How long would it take, how much would it cost, and what safety precautions would need to be taken?  Even moving dollars rather than gold it would be much easier, quicker, safer, and cheaper with BTC.

 

And as far as I know there is no other way to cross international borders carrying tens of thousands to billions of dollars safely in your head by memorizing 12 words.

 

Yes - as of right now the transaction fees make it superior for LARGE payments. They're still working on the solution for small everyday payments. But even the article you shared regarding VISA showed that credit cards were also a disaster and not practical for small transactions when they first started. Only through decades of iteration and improvement have credit cards become ubiquitous and taking more than half of transactions.

 

BTC is moving much more quickly in that direction than even VISA did, but it's not there yet. Same with Ethereum - while I can get very attractive returns on the Ethereum network simply from savings/lending stable coins, it does cost money to get into it and those fees are a current barrier to entry for the average person who isn't moving 20k at a time AND a barrier to increasing acceptance. This is also being worked on, but I'm optimistic that there will be a solution given the benefit of DeFi versus 2017 when ethereum was known for cat trading cards....

[ValueArb]

Any love for MARA?

 

They believe they will be one of, if not the largest BTC miner in the world by end of year when their 70,000 next generation Antminer S-19 ASIC Miners finish installation.

 

Plus $230M in BTC on balance sheet and another $200Mish in cash. BTC mining revenues hit $845,000 in Q3, 2020. All to support a $3B market cap.

 

And doing it all with 3 employees.

 

Disclosure: I own MARA....puts.

 

Reviewing the entire list of mining equipment they have on order or already purchased, including 70,000 Bitmain S19s  and 10,500 Bitmain S19 Pros, at current BTC prices I come up with a little over $1B in annual net revenue (after energy costs) when they are all up and running at year end.  This of course includes their claim that Beowulf will be providing power at $0.006 per KWH which seems insanely cheap.

 

I can't decide if this thing is a total fraud due to it's history of constantly switching businesses, employment count, executive turnover, massive share count increase, etc, or a potential huge value play. I mean if my math is right even at $10,000 BTC they probably justify their current market cap.

[rkbabang]

Any love for MARA?

 

They believe they will be one of, if not the largest BTC miner in the world by end of year when their 70,000 next generation Antminer S-19 ASIC Miners finish installation.

 

Plus $230M in BTC on balance sheet and another $200Mish in cash. BTC mining revenues hit $845,000 in Q3, 2020. All to support a $3B market cap.

 

And doing it all with 3 employees.

 

Disclosure: I own MARA....puts.

 

Reviewing the entire list of mining equipment they have on order or already purchased, including 70,000 Bitmain S19s  and 10,500 Bitmain S19 Pros, at current BTC prices I come up with a little over $1B in annual net revenue (after energy costs) when they are all up and running at year end.  This of course includes their claim that Beowulf will be providing power at $0.006 per KWH which seems insanely cheap.

 

I can't decide if this thing is a total fraud due to it's history of constantly switching businesses, employment count, executive turnover, massive share count increase, etc, or a potential huge value play. I mean if my math is right even at $10,000 BTC they probably justify their current market cap.

 

I'm confused.  Then why did you buy puts?

 

[ValueArb]

Any love for MARA?

 

They believe they will be one of, if not the largest BTC miner in the world by end of year when their 70,000 next generation Antminer S-19 ASIC Miners finish installation.

 

Plus $230M in BTC on balance sheet and another $200Mish in cash. BTC mining revenues hit $845,000 in Q3, 2020. All to support a $3B market cap.

 

And doing it all with 3 employees.

 

Disclosure: I own MARA....puts.

 

Reviewing the entire list of mining equipment they have on order or already purchased, including 70,000 Bitmain S19s  and 10,500 Bitmain S19 Pros, at current BTC prices I come up with a little over $1B in annual net revenue (after energy costs) when they are all up and running at year end.  This of course includes their claim that Beowulf will be providing power at $0.006 per KWH which seems insanely cheap.

 

I can't decide if this thing is a total fraud due to it's history of constantly switching businesses, employment count, executive turnover, massive share count increase, etc, or a potential huge value play. I mean if my math is right even at $10,000 BTC they probably justify their current market cap.

 

I'm confused.  Then why did you buy puts?

 

May have jumped the gun.

 

When I bought the puts it was trading at roughly 8x book and 1,000 times sales, and had a long list of red flags (long promotional history, few employees, exec turnover, massive increase in share count (8M to 100M) in single year. I thought the massive increase in tradable shares alone was going to depress the stock back towards book value. But I didn't do the math on how fast they could grow their revenues, and now I'm not sure what to do. A lot depends on BTC if it has any significant sell-off their potential is equally diminished.

 

Though my puts are already profitable, so if I decide to nope out I can probably do it without losing. Or keep them as a BTC hedge.

[Parsad]

Reading through this thread, it's interesting to see that even bitcoin advocates can't seem to agree on what bitcoin actually is.  Last week when the Microstrategy CEO was on CNBC talking his book after borrowing $1 billion to buy bitcoin, he said the following:

 

"bitcoin is a bank in cyberspace"

 

"it's a store of monetary energy"

 

"the price of bitcoin reflects the monetary energy of the bank in cyberspace"

 

"bitcoin is property not a security"

 

"bitcoin is the most widely held investment asset in the world"

 

"bitcoin is the dominant digital monetary network"

 

"bitcoin is an egalitarian progressive technology"

 

"it's the ideal institutional safe-haven asset"

 

"it will replace stock indexes like the S&P 500 and the Dow, bond indexes, and the like"

 

There was an article in the WSJ within the last week that I thought said it best...ultimatley bitcoin is software. More specifically, it is a decentralized account ledger that tracks the finite digital coins & transactions within the network.

 

The decentralized account ledger, which is essentially a function of blockchain technology, is what is valuable.  You can track anything in such a ledger...real estate, stock certificates, bonds, pretty much any asset or anything.  BTC itself is worthless and has zero utility...you could do the same thing with tulips if there was demand.  Cheers!