Long-Term Effect of Stablecoins Purchasing U.S. Treasuries

[wabuffo]

Feel free to elaborate on that one, considering the first BTC payment was done >10 years ago and BTC payments are still occurring daily...

 

There have been many examples and all ended because BTC is too volatile to be used as a transaction medium (Stripe in 2018 among many others).   

 

The most thorough example was El Salvador's attempt to introduce BTC as a national payment medium in 2021. 

 

Here was a perfect real world laboratory that had all the necessary ingredients:

- a third world country with a less-than-developed banking system with most of the population un-banked.

- a weak national currency with high inflation, and, most importantly,

- the power of the State using all of its coercive muscle to force acceptance among merchants and citizens.   

 

And it failed.  Utterly. Earlier this year El Salvador pulled the plug on the whole thing.

 

This substack article goes into great detail and catalogs the failure of BTC as a national payment medium of exchange in El Salvador.

 

https://www.moneyness.ca/2025/02/the-end-of-el-salvadors-bitcoin.html

 

I don't see how BTC is going to ever replace national currencies of developed countries, if it can't even succeed in a third world country that puts its full support behind it.

 

Bill

Edited September 3, 2025 by wabuffo

[Parsad]

46 minutes ago, wabuffo said:

Feel free to elaborate on that one, considering the first BTC payment was done >10 years ago and BTC payments are still occurring daily...

 

There have been many examples and all ended because BTC is too volatile to be used as a transaction medium (Stripe in 2018 among many others).   

 

The most thorough example was El Salvador's attempt to introduce BTC as a national payment medium in 2021. 

 

Here was a perfect real world laboratory that had all the necessary ingredients:

- a third world country with a less-than-developed banking system with most of the population un-banked.

- a weak national currency with high inflation, and, most importantly,

- the power of the State using all of its coercive muscle to force acceptance among merchants and citizens.   

 

And it failed.  Utterly. Earlier this year El Salvador pulled the plug on the whole thing.

 

This substack article goes into great detail and catalogs the failure of BTC as a national payment medium of exchange in El Salvador.

 

https://www.moneyness.ca/2025/02/the-end-of-el-salvadors-bitcoin.html

 

I don't see how BTC is going to ever replace national currencies of developed countries, if it can't even succeed in a third world country that puts its full support behind it.

 

Bill

 

+1!  This is the primary real world example of why it doesn't work as is...yet hardly made a dent in the juggernaut of belief in BTC.  That's kind of why I'm concerned that this tulip bubble may grow far larger than any other bubble at some point and wreak the havoc that all bubbles do when they burst!  Cheers!

[73 Reds]

19 minutes ago, Parsad said:

 

+1!  This is the primary real world example of why it doesn't work as is...yet hardly made a dent in the juggernaut of belief in BTC.  That's kind of why I'm concerned that this tulip bubble may grow far larger than any other bubble at some point and wreak the havoc that all bubbles do when they burst!  Cheers!

Yep.  My fear is when the bubble finally bursts, it will happen fast.  It will probably create a short-lived buying opportunity for everything left in its wake.  

[Fly]

3 hours ago, wabuffo said:

Feel free to elaborate on that one, considering the first BTC payment was done >10 years ago and BTC payments are still occurring daily...

 

There have been many examples and all ended because BTC is too volatile to be used as a transaction medium (Stripe in 2018 among many others).   

 

The most thorough example was El Salvador's attempt to introduce BTC as a national payment medium in 2021. 

 

Here was a perfect real world laboratory that had all the necessary ingredients:

- a third world country with a less-than-developed banking system with most of the population un-banked.

- a weak national currency with high inflation, and, most importantly,

- the power of the State using all of its coercive muscle to force acceptance among merchants and citizens.   

 

And it failed.  Utterly. Earlier this year El Salvador pulled the plug on the whole thing.

 

This substack article goes into great detail and catalogs the failure of BTC as a national payment medium of exchange in El Salvador.

 

https://www.moneyness.ca/2025/02/the-end-of-el-salvadors-bitcoin.html

 

I don't see how BTC is going to ever replace national currencies of developed countries, if it can't even succeed in a third world country that puts its full support behind it.

 

Bill

 

Correct it has not gained traction in El Salvador. Bitcoin is an opt-in network and cannot be forced upon anyone like we see with something like the USD. This was a failure of Bukele's ability to force usage, but that does not mean it has been a failure for the network and system as a whole, evidenced by those who have opted into usage/holding of the asset. 

 

Will bitcoin be volatile forever? Does a "failure" today mean it is useless tomorrow? Again, the beauty of bitcoin is the ability to use it or not. Bitcoin will not fire missiles against you if you don't want to use it. 

 

[73 Reds]

1 minute ago, Fly said:

 

Correct it has not gained traction in El Salvador. Bitcoin is an opt-in network and cannot be forced upon anyone like we see with something like the USD. This was a failure of Bukele's ability to force usage, but that does not mean it has been a failure for the network and system as a whole, evidenced by those who have opted into usage/holding of the asset. 

 

Will bitcoin be volatile forever? Does a "failure" today mean it is useless tomorrow? Again, the beauty of bitcoin is the ability to use it or not. Bitcoin will not fire missiles against you if you don't want to use it. 

 

Doesn't BTC require usage to support and increase its value?

[Fly]

2 hours ago, 73 Reds said:

Doesn't BTC require usage to support and increase its value?

 

BTC requires developers to maintain the code, node operators to uphold the rules, and miners to provide the work. Anything beyond that is up for discussion.

 

[73 Reds]

7 minutes ago, Fly said:

 

BTC requires developers to maintain the code, node operators to uphold the rules, and miners to provide the work. Anything beyond that is up for discussion.

 

OK, but I thought the entire investment thesis depended on more adaptation and usage.

[Fly]

8 hours ago, 73 Reds said:

OK, but I thought the entire investment thesis depended on more adaptation and usage.

 

If you are buying BTC because you want the BTC/USD price to go up then it is simple supply/demand. In that case we don't need increased adoption for transactions or purchases, we just need people to buy more BTC and/or sell less. Or even just keep the demand level and wait for people to lose coins as the circulating supply decreases. Number goes up and everyone is happy?

 

The problem comes in the year 2140. Remember before I mentioned miners provide work to keep the chain moving forward. They expend large amounts of energy to solve a computation problem. When they solve the problem it creates a new block in the chain and they get a reward, currently 3.125 BTC. In addition to that block reward they get any transaction fees that users have included to pay for their transaction to be processed faster than someone else's. Once year 2140 comes there will be no more block reward. There will only be transaction fees that provide the incentive for a miner to do work. That is the point at which we need to have enough adoption and usage to keep miners doing their work. As you can see we have a long ways to go to get to that point:

 

https://charts.bitbo.io/fees-percent-of-reward/

 

I'm not overly concerned though, since we do have over 100yrs to get there. So current day if El Salvador fails at forcing bitcoin adoption then that's ok. There will be other failures and other small successes. Personally, I view bitcoin like a seed being planted to a tree I will never sit under. I doubt I will ever sell in my lifetime. It will either go to $0 or it will provide shade for my children to enjoy.

 

 

Edited September 4, 2025 by Fly

[73 Reds]

10 hours ago, Fly said:

 

If you are buying BTC because you want the BTC/USD price to go up then it is simple supply/demand. In that case we don't need increased adoption for transactions or purchases, we just need people to buy more BTC and/or sell less. Or even just keep the demand level and wait for people to lose coins as the circulating supply decreases. Number goes up and everyone is happy?

 

The problem comes in the year 2140. Remember before I mentioned miners provide work to keep the chain moving forward. They expend large amounts of energy to solve a computation problem. When they solve the problem it creates a new block in the chain and they get a reward, currently 3.125 BTC. In addition to that block reward they get any transaction fees that users have included to pay for their transaction to be processed faster than someone else's. Once year 2140 comes there will be no more block reward. There will only be transaction fees that provide the incentive for a miner to do work. That is the point at which we need to have enough adoption and usage to keep miners doing their work. As you can see we have a long ways to go to get to that point:

 

https://charts.bitbo.io/fees-percent-of-reward/

 

I'm not overly concerned though, since we do have over 100yrs to get there. So current day if El Salvador fails at forcing bitcoin adoption then that's ok. There will be other failures and other small successes. Personally, I view bitcoin like a seed being planted to a tree I will never sit under. I doubt I will ever sell in my lifetime. It will either go to $0 or it will provide shade for my children to enjoy.

 

 

Let me ask the same question a different way:  Don't all investments need a catalyst?  What is the catalyst for BTC?

[TwoCitiesCapital]

1 hour ago, 73 Reds said:

Let me ask the same question a different way:  Don't all investments need a catalyst?  What is the catalyst for BTC?

 

Secular growth in network adoption is long term catalyst. 

 

Short term catalyst is growth in global M2 money supply. 

 

I don't view El Salvador as a failure. El Salvador's banking system is a failure in that it has had decades and still isn't part of the every day life of most El Salvadorans. Bitcoin wallets/payments are a new technology and have had less than 5-years. Let's keep things in perspective. 

 

1) Per Gresham's law, while fiat currencies are the de facto default, I'd expect people to spend those and save in Bitcoin. Why spend the currency that is appreciating and hold the currency that is depreciating? The ability to spend is there, but the demand to do so is low. Even me, who believes in the technology, is hoarding my BTC. 

 

2) It is a requisite step to first be a store of value BEFORE you become a medium of exchange. Even the USD followed this path by bootstrapping to gold. Once enough people have value stored in Bitcoin, then there will be demand to spend that Bitcoin into the economy. We're starting to see that some with certain businesses accepting payment in Bitcoin (a la Ferrari) but is a slow process that will take the better part of a generation for mass adoption. 

 

3) El Salvador was FORCED to give it up by the World Bank. Not because they voluntarily wanted to. And yet, it's been the World Bank that was wrong about the risks to El Salvador since the inception of the program. El Salvador has made good on it's debts while still regularly accumulating Bitcoin and now has significant unrealized gains on that position. What will they do when they no longer need the World Bank's monies and intrusive policies that are attached to it? 

 

 

 

[73 Reds]

16 minutes ago, TwoCitiesCapital said:

 

Secular growth in network adoption is long term catalyst. 

 

Short term catalyst is growth in global M2 money supply. 

 

I don't view El Salvador as a failure. El Salvador's banking system is a failure in that it has had decades and still isn't part of the every day life of most El Salvadorans. Bitcoin wallets/payments are a new technology and have had less than 5-years. Let's keep things in perspective. 

 

1) Per Gresham's law, while fiat currencies are the de facto default, I'd expect people to spend those and save in Bitcoin. Why spend the currency that is appreciating and hold the currency that is depreciating? The ability to spend is there, but the demand to do so is low. Even me, who believes in the technology, is hoarding my BTC. 

 

2) It is a requisite step to first be a store of value BEFORE you become a medium of exchange. Even the USD followed this path by bootstrapping to gold. Once enough people have value stored in Bitcoin, then there will be demand to spend that Bitcoin into the economy. We're starting to see that some with certain businesses accepting payment in Bitcoin (a la Ferrari) but is a slow process that will take the better part of a generation for mass adoption. 

 

3) El Salvador was FORCED to give it up by the World Bank. Not because they voluntarily wanted to. And yet, it's been the World Bank that was wrong about the risks to El Salvador since the inception of the program. El Salvador has made good on it's debts while still regularly accumulating Bitcoin and now has significant unrealized gains on that position. What will they do when they no longer need the World Bank's monies and intrusive policies that are attached to it? 

 

 

 

That actually all makes sense.  (But not enough to convince me to invest LOL).

[wabuffo]

Even me, who believes in the technology, is hoarding my BTC. 

 

And this is the reason it has failed as a currency.   It is like a can of shite!

 

https://en.wikipedia.org/wiki/Artist's_Shit

 

Quote

"A tin was sold for €124,000 at Sotheby's on May 23, 2007. In October 2008, tin 83 was offered for sale at Sotheby's with an estimate of £50,000–70,000. It sold for £97,250. On October 16, 2015, tin 54 was sold at Christies for £182,500. In August 2016, at an art auction in Milan, one of the tins sold for a new record of €275,000, including auction fees. The tins were originally to be valued according to their equivalent weight in gold – $37 each in 1961 – with the price fluctuating according to the market."

 

From $37 USD in 1961 to $308,000 USD in 2016 (using Aug 2016 forex rate for USD/EUR).  

 

Hope you have a sense of humor.   My point is that lots of things go up in value (rare comic books, baseball cards, beanie babies, art, etc) but that doesn't make them currencies. 

 

I don't have a problem if BTC continues to go up in value but it has utterly failed as a currency and never will become one.

Bill

Edited September 4, 2025 by wabuffo

[TwoCitiesCapital]

6 minutes ago, wabuffo said:

Even me, who believes in the technology, is hoarding my BTC. 

 

And this is the reason it has failed as a currency.   It is like a can of shite!

 

https://en.wikipedia.org/wiki/Artist's_Shit

 

 

From $37 USD in 1961 to $308,000 USD in 2016 (using Aug 2016 forex rate for USD/EUR).  

 

Hope you have a sense of humor.   My point is that lots of things go up in value (rare comic books, baseball cards, beanie babies, art, etc) but that doesn't make them currencies. 

 

I don't have a problem if BTC continues to go up in value but it has utterly failed as a currency and never will become one.

Bill

 

Kingdoms and countries hoarding gold isn't what made gold a bad medium of exchange. It's precisely why it was one. 

[wabuffo]

Kingdoms and countries hoarding gold isn't what made gold a bad medium of exchange. It's precisely why it was one. 

 

And yet, gold is no longer a monetary asset.  I wonder why it's been rejected.   

 

Maybe there's a reason society has favored optimizing:

1) economic growth AND price stability, and not

2) only price stability.  

 

Bill

Edited September 4, 2025 by wabuffo

[Paarslaars]

Yes in a country run (lobbied) by the elite, they chose to favor economic growth over purchasing power... Since Nixxon took the US off the Gold Standard, assets have skyrocketted while the dollar has lost 90% of its purchasing power. People's savings have been wiped out...

 

Meanwhile the economy is basically flat while measured gold, all that growth is an illusion, it just masks monetary decay.

[wabuffo]

Yes in a country run (lobbied) by the elite, they chose to favor economic growth over purchasing power.

 

lolz.    I said BALANCE/WITH not FAVOR/OVER.   

 

However, I don't favor a world where there is an economic depression every 10 years that causes widespread unemployment and misery because the only thing that should matter is making money a scarce asset and forcing deflation.   

 

Not sure that is a better world, brother!   Society has been there and done that and has rejected it.  

 

I dunno, but the current economic environment feels pretty good to me. 

 

I guess, that makes me a Fiat Maxi!  lolz.

 

We've drifted from the original point, which was that BTC will never be a currency.   Again I mean no ill will to the crypto romantics.

 

Bill

Edited September 4, 2025 by wabuffo

[TwoCitiesCapital]

4 hours ago, wabuffo said:

Kingdoms and countries hoarding gold isn't what made gold a bad medium of exchange. It's precisely why it was one. 

 

And yet, gold is no longer a monetary asset.  I wonder why it's been rejected.   

 

 

It wasn't rejected. The powers that be ended up spending more paper backed by it than we had backing, on multiple occasions, and we're eventually forced to abandon it instead of outright defaulting on their obligations. 

 

Sound money wasn't a bad thing nor did the populace ever choose to reject it. It was always foolish leadership that abandoned it because they couldn't keep their spending confined to a budget. And pre-technology commoners didn't have the means to observe the cheating nor enforce balances budgets until it was too late. 

 

Bitcoin provides both. 

 

Edited September 4, 2025 by TwoCitiesCapital

[wabuffo]

It wasn't rejected.

 

You need to research the populism growing against the gold standard by the late 1890s.  People were fed up with the frequent crashes in economic activity and the disruption to human lives because of it.

 

https://en.wikipedia.org/wiki/Cross_of_Gold_speech

 

Anyhoo.  Thanks for the conversation.  All the best.

 

Bill

[nsx5200]

6 hours ago, Paarslaars said:

Yes in a country run (lobbied) by the elite, they chose to favor economic growth over purchasing power... Since Nixxon took the US off the Gold Standard, assets have skyrocketted while the dollar has lost 90% of its purchasing power. People's savings have been wiped out...

 

Meanwhile the economy is basically flat while measured gold, all that growth is an illusion, it just masks monetary decay.

You're saying the economy with all the advancement in medicine, computing, whatever... essentially massive increase in living standard after the US got off the Gold Standard is all for naught.

 

I would, very compassionately say, that you're picking one very specific way to measure the economy and not looking at the bigger picture.  I can only imagine what Munger would say to that, given his propensity not to suffer fools gladly.

[TwoCitiesCapital]

16 hours ago, nsx5200 said:

You're saying the economy with all the advancement in medicine, computing, whatever... essentially massive increase in living standard after the US got off the Gold Standard is all for naught.

 

I would, very compassionately say, that you're picking one very specific way to measure the economy and not looking at the bigger picture.  I can only imagine what Munger would say to that, given his propensity not to suffer fools gladly.

 

There were economic and technological revolutions occurring long before we left a hard money standard. 

 

Advancements in healthcare and technology are hardly a defense of fiat. But there ARE arguments to be made how a permanent and persistent debasement of your money/savings/labor contributes to health outcomes by slowly eroding your purchasing power and incentivizing trash foods at low prices for ever decreasing portions to appease the affordability level of those who can't keep up. 

 

Of course it's not the only cause. It's all inter-related in a complex system - but I'm fairly confident hard money systems do better than persistent inflation-bases ones all things being equal.

 

Will never understand how people can defend the US policy of stealing the value of preserved labor via inflation and call it a good thing...

Edited September 5, 2025 by TwoCitiesCapital

[Paarslaars]

17 hours ago, nsx5200 said:

You're saying the economy with all the advancement in medicine, computing, whatever... essentially massive increase in living standard after the US got off the Gold Standard is all for naught.

Ow yeah all that medicine that the entire US population can definitly afford. 

Edited September 5, 2025 by Paarslaars

[wabuffo]

Will never understand how people can defend the US policy of stealing the value of preserved labor via inflation and call it a good thing...

 

The horror, the horror,.... lolz.   Labor is doing just fine, man, at least, in the USA.

 

[wabuffo]

Will never understand how people can defend the US policy of stealing the value of preserved labor via inflation and call it a good thing...

 

Another view - this time the bottom quintile.   Seems like an hour of their time still buys more now generally than it did in the past.  

 

[Dalal.Holdings]

I can't believe people glorify the pre-Fed 1800s like it was a Golden age of living standards and innovation. Gold bugs are weird

[nsx5200]

12 hours ago, TwoCitiesCapital said:

There were economic and technological revolutions occurring long before we left a hard money standard. 

I agree that the advancement started happened before the US got off the gold standard, but the statement "Meanwhile the economy is basically flat while measured gold, all that growth is an illusion, it just masks monetary decay." implies that the economy and living standards stood still after the the US got off the gold standard.  That, I have serious issues with.  If you truly believe that the national capabilities, as whole, has stood still since we got off the gold standard, well... 

 

Whether the advancement would've happened quicker or slower if the US stayed with the gold standard is debatable.  For that, we would need to look at the historical evidence, which I'm not an expert in.  Crashes tend to slow and pause progress a bit, although it's sometimes necessary to prune out the bad ideas (ex. 2000, 2008).  So a quick Google AI search on crash yielded "Crashes and major financial crises happened with greater frequency and severity before the U.S. fully abandoned the gold standard, with the consensus among economists and historians being that economic volatility was higher in the 19th century and during the gold standard era compared to the post-WWII period.", with citations.  If you have evidence that Google's AI's hallucinating on this, you're free to share.  If you disagree with those historians, well..

 

I guess some people can favor more frequent crashes the same way some people are masochist.  In that case, I'll have to file these data points in my own collection of patterns of... interesting behaviors.