SnoopRob
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88 or 89?
Crypto crashing - reversed by Crypto Reserve tweet
- Thread starter nycfan
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MOUNTAINH33L
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89 Rated Rookie.
SnoopRob
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That’s a fresh card. You’ll certainly be living high life any day now.
uncgriff
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I have a silver battle of the Nile medal given to the lieutenants of the English fleet after the most glorious victory of British naval arms other than Trafalgar. Only 150 were made. Probably 50 of those lie on the bottom of the ocean or lost completely. It's pure silver, very rare, 225 years old, historically significant, in near pristine shape and beautiful. Probably worth $4k. My prized possession actually but definitely nowhere near the most valuable.
Crazy to me that people would spend $100k on some 1s and 0s.
Crazy to me that people would spend $100k on some 1s and 0s.
gtyellowjacket
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That is pretty cool though.I have a silver battle of the Nile medal given to the lieutenants of the English fleet after the most glorious victory of British naval arms other than Trafalgar. Only 150 were made. Probably 50 of those lie on the bottom of the ocean or lost completely. It's pure silver, very rare, 225 years old, historically significant, in near pristine shape and beautiful. Probably worth $4k. My prized possession actually but definitely nowhere near the most valuable.
Crazy to me that people would spend $100k on some 1s and 0s.
uncgriff
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Don't get me started on my fossils and antiquities....
superrific
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Being a "store of value" is not a property of a currency at all. In fact, it's a downside. A currency is a medium of exchange. You don't want it to have intrinsic value. If you want to store value, buy a bond or muni or a money market ETF.
The main reason that no crypto can be a currency is that there is no crypto economy. Until and unless companies are paying their workers, suppliers and taxes with crypto, then it's just a weird extra step in a transaction.
Think about it. Suppose you run a business in America that exports to Mexico. You sell your product for X pesos and your costs are Y dollars and fortunately X converted to dollars > Y. But you are nonetheless exposed to a currency risk. If the peso falls against the dollar, X as converted might not be greater than Y. You would have to raise your price X (which would potentially devastate your business) or take a loss on each sale (also devastating). As a result, you'd like to hedge your peso exposure and for that perhaps you buy or sell currency on a forward basis. Ultimately the problem is that your revenue comes in pesos and your expenses in dollars and your bottom line depends on the conversion factor.
Now introduce BTC (or any other crypto currency). How does it help you to sell your goods in bitcoin? It doesn't. Your customers don't get paid in bitcoin, so demand for your product depends on the BTC: MXN ratio. Your vendors don't get paid in bitcoin, so your costs depend on the BTC:USD ratio. And the underlying trade dynamic still depends on MXN:USD. Now you've got three currency risks to manage. Progress? Under certain assumptions, maybe you can reduce the risks to two (that is, if the BTC market is liquid enough, then the BTC:USD and BTC:MXN ratios should be collinear, but the BTC conversion is still there) -- but you've still doubled your currency risks and for what? What benefits have you gained? None. This is why nobody uses bitcoin.
Imagine, instead of "Bitcoin," you decided to price your goods in "square meters of grade A corrugated cardboard." So your product in Mexico trades for, say, 4.3 square meters. Let's assume that consumers can instantly convert cardboard costs to pesos, so it's mostly an inconvenience. But why? Why would you do that? You wouldn't. And thus would you wouldn't use Bitcoin either, because financially speaking the two are the same. They are commodity-based measures whose value depends on an independent market for them, and that can be converted into actual currencies.
uncgriff
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I meant to make that point as well. A currency that has to be changed to a different currency to actually be spent in the normal course of an economy isn't a currency
gtyellowjacket
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Honestly wouldn't mind. Even if you have to start a new thread. Love that cool stuff. Brag away.
I haven't read your whole post (I will after this), but my understanding that to be considered a currency, all 3 things have to be true...the currency must be:
- a unit of account
- a medium of exchange (for goods, services, other currencies)
- a store of value
Do the dollar is obviously all 3 of those. What a currency is "worth" (exchange rates) is generally consensus and market factors.
If I have a fundamental misunderstanding here, let me know. I don't expect you to fully explain, that can be left an an exercise for the reader (me).
(oops, i quoted the wrong post, this was responding to super...)
Sorry, maybe I should have read your post first.
What you're saying makes sense. But is your post based on bitcoin/cryptocurrencies not being widely used (right now)? In an imaginary world, where bitcoin is widely adopted, would doing the transactions in a cryptocurrency make sense? (This is probably getting past my understanding on this topic as of right now.)
In thinking of the use cases, I think there are like a billion "unbanked" people in the world. That seems like a use case. If you're a refugee, you can keep/store all of your personal wealth on a hardware key, if you needed to. (Like you said, using it, right now, is another story.)
It's an interesting topic to me, but I certainly have a lot to learn. I tend to agree with you that practical, real world uses might never happen. And maybe shouldn't happen.
4thgenheel
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which one of you told me to sell all my DOGE a while back?
my shares that were worth @ $1800 are now worth @ $550.
i only paid like $60 for all of it, so no big deal either way but woof.
my shares that were worth @ $1800 are now worth @ $550.
i only paid like $60 for all of it, so no big deal either way but woof.
superrific
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This is basically asking whether bubbles can go on permanently and that's a persistent question in financial economics that has no clear answer.
I don't think there's any reasonable debate that crypto is a bubble. I've asked a single question of every crypto "investor" and never have gotten an answer that is remotely satisfying: at what price level should I be willing to buy or sell a crypto. Like, if BTC drops by 20%, should I buy it? What's the minimum price at which I should always buy? And the answer always -- without exceptions -- involves charts. Well, this shape here on the chart indicates a double peak, which is a market signal that the asset hasn't broken through a top indicator and therefore buying momentum will decrease and the asset value will fall so yeah, selling now is a good idea. That is, of course, an epic fail of an answer to a legit question.
ON THE OTHER HAND, the value of paintings and other fine art can certainly fluctuate, but it's hard to imagine a world in which Picasso's Les Femmes D'Alger -- last sold for $179M -- would ever be worth less than $10M and it certainly wouldn't be worthless. Why? Nobody can answer those questions above about a painting either. So is this also a bubble? By the common definition, yes. So why can we never imagine it going to zero? Is it because the painting itself is so wonderful? I mean, maybe, but nobody ever displays a $150M painting. The painting is in professional storage before the transaction; it remains in professional storage afterwards; and the title changes.
For actual collectibles, you could argue that the real "value" comes from being the person who owns a famous painting. It's the ultimate in conspicuous consumption. Its value is that the owner now gets to say, "I'm so rich I can buy a painting for $150M." Or maybe it's just like the ultimate first date line: "oh, that's your favorite painting? I love it too. In fact, I own it." And that obviously can't be said about bitcoin (this was why, I think, the NFT craze took off).
But then there is gold. Why is gold valuable? Why is it trading for $3000/oz? People say it's a hedge against inflation, but why? There's nothing inherent about gold that should keep its value so far above its value as an industrial element. And yet: it's maintained some excess value for the entire history of fiat money. People expect that others will use gold to hedge inflation, so if you want to hedge inflation and you think you're ahead of the market sentiment, then you can buy gold and expect that others will hedge with it after you do. There's decades of experience that this is the case. Why?
I've lost touch with financial economics to some degree, but to my knowledge there is no really satisfying theory. In fact, some economists think it's not an economics question at all.
superrific
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1. I don't think the extent of use makes any difference. Forget crypto for a minute. Why don't we price goods in Apple Stock? Go to a car dealer, and find out that the list price is 2000 shares of Apple stock. Well, billions of shares of Apple stock trade each day. It has a minimum financial value. So why not quote car prices in Apple stock? Because why would you? One of two things are happening: you're just expressing a price in weird terms for no reason, since the transaction is going to take place in actual currency. In which case, really what is the point? Or the transaction will take place in Apple stock, which seems downright inefficient. I don't want ownership of Apple stock to be a prerequisite for my customers to purchase my product, and I don't really want the Apple stock either, because I will just turn around and sell it (if I wanted Apple stock, I could buy it independently on the market).
2. I very much doubt any crypto currency helps unbanked people at all. What barrier is there to opening a bank account that doesn't apply even more so to opening a crypto account? All of the reasons that a person might not be able to open a bank account also apply to crypto. If I'm a refugee, I'd rather have a credit card than crypto, because if my credit card is stolen I can cancel it but if my crypto shard is stolen I'm fucked.
The barrier, in most cases, is infrastructure to build and secure a bank. Many parts of the world don't have it. But if you have a phone or internet connection, you can buy crypto. (but you still need an accepted currency somewhere along the line to purchase it.)
That said, the hardware wallet point is true.
rodoheel
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So how are you going to purchase crypto without a bank account where your "accepted currency" is? Is there somewhere I can feed dollar bills into a machine and get digital shares of crypto in return?
How many of the world's 1 billion "unbanked" people have a smartphone and a reliable internet connection?
Yeah, I mentioned your first point. There still has to be "seed" money if you will.
I don't know your answer to your second question, but I'd be willing to bet it's a somewhat high number. 25-50%?
I'm playing both sides of the issue here, just thinking out loud. I read Satoshi's whitepaper a year or two after he released it, and have always been passively interested. I do own a very small amount of crypto currencies, for fun mostly.
I can't really put together a strong pro-cryptocurrency argument, obviously. Trump being pro-cryptocurrency sets any confidence I had in it back at least 2-3 steps, so there's also that.
CRHeel94
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I have seen some persons in El Salvador (which has made all sorts of wild bets on crypto) speculate that crypto could be a game changer for remittances. The working theory is that crypto could help against current friction (fees the money senders charge, KYC limitations) as well as possible future roadblocks (there has been a growing feeling that the Trump admin could slap remittances with really high taxes). That still hasn't played out at a large scale in ES which receives billions in remittances per year and has tried to push out the crypto payments web.
superrific
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It seems to me that you've been getting some crypto "education." The first and only rule about crypto education is that it's bullshit top to bottom. Anyone who is a crypto enthusiast, or any site trying to explain how to invest in crypto, is telling you lies.
Let's look at these properties of money. A unit of account? That's not an independent property. It follows from a medium of exchange. If you can trade with it, it means it has cardinality (i.e. it can be counted and manipulated arithmetically), and cardinality is all that is needed for being a unit of account. I can't think of anything that can't be a unit of account. You can quote prices in oak-tree equivalents, or the price of weather derivatives traded on the Singapore futures market. I suppose you can't quote prices in "dreams" but you can't use dreams for exchange either.
So why is it there? Because having three properties of money makes it seem more professional. The old rule of three. If there are only two, people might ask, "why is store of value important?" But people don't always want to put mental effort into debunking two requirements. They are more willing to accept a list of three as an expert evaluation rather than a list of two. And this isn't about stupidity. Not everyone is a weirdo like me who scrutinizes virtually every statement made to me or I make for its truth. Most people like to chill sometimes, and they don't necessarily like to spend their free time thinking about currencies (note: being a professor meant that I could get paid for thinking about them). But the upshot of this is that people are vulnerable to scams from con artists who present a veneer of respectable theory when it's all bullshit.
All right, so the unit of account is silly, and maybe the list is more marketing than science, but so what? It's that store of value piece. Why is that important? Because it leads to the next step: scarcity is the store of value. This is supposedly why bitcoin is so great: its supply is limited. There are many problems here:
1. Let's assume that scarcity is necessary for having value. That doesn't mean scarcity is the source of value, which is what the crypto people want you to believe. It doesn't mean that everything that is scarce is valuable. I've never seen anyone create a sculpture out of human vomit, and I doubt one exists. So if I made one, it would be extremely scarce. I also think I would have a lot of trouble selling it.
2. It is not in fact true that scarcity is necessary for value. I suppose that we could say that something that is truly infinite might not be valuable, but aside from weird math hypotheticals, let's look. There are way more shares of Apple stock in circulation now than 30 years ago. Does that mean they are less valuable? Of course not. Leaded gasoline is much rarer than it once was. Is it more valuable? It is not.
The "scarcity creates value" line is the most pernicious and fraudulent of the contentions. So much "analysis" is premised on this nonsense. Invariably that analysis tells you how to use all sorts of bizarre metrics that have no bearing on the real world to determine that crypto will go up in value.
3. As a technical matter, there's no sense in which crypto is "scarce." First, there are no limitations on the number of crypto tokens that can be started. In what way are crypto tokens not fungible? What value do I get out of DOGE coin that I wouldn't get our of Litecoin or any number of other tokens? None. As importantly, everything that is infinitely divisible (which bitcoin promoters love to trumpet) has no intrinsic scarcity. The set of rational numbers between 0 and 1 is countably infinite, the same as the set of all rational numbers period. So if there's an infinite number of values that a currency can have, there's the same number of values for bitcoin.
Put it all together, and there's only one criterion for money: it's a medium of exchange. In fact, it works better when its value is entirely set by fiat as opposed to having "intrinsic" value. Intrinsic value gold coins, for instance, tend to get smaller and smaller over the years. Why? Because everyone has incentive to scrape off just a bit of the coin before using it. If the coin is 10 cents because the government says it's 10 cents, we don't have this problem.
But the idea that money is nothing but a medium of exchange destroys a lot of crypto narratives about its "value" so they wrap it in all this bullshit and ask people to slurp it up.
superrific
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Virtually every country has a central bank. Every country has buildings. Every country has secure communication networks (otherwise commerce would be impossible). Infrastructure is not a limiting factor.
To the extent that there are barriers to the establishment of banks, they are financial. Banks make money by acquiring capital (in the form of deposits or debt) and then loaning the money out. Loans carry risks, which is why they carry interest, but still the bank needs to diversify or it is prone to failure. Well, if a bank is trying to serve a tiny community, there might not be a potential for diversification. That's bad. It also might not have enough access to capital to justify the bank executives' salaries. And of course, in unstable countries wracked by civil war, no institution is particularly reliable, meaning that outside capital doesn't want to pour in.
In such circumstances, crypto won't help. An economy too small to maintain a bank is probably too small for anyone to have enough savings for crypto to help them. A large number of unbanked people are subsistence farmers. Crypto helps them not at all.