At its core, the current cryptocurrency craze is simply an unprecedented wealth transfer to China from the rest of the world.
Until the end of 2013, Bitcoin was predominantly traded for US dollars. However, after the crash of 2013, miners consolidated in China and Bitcoin mostly traded for Chinese yuan[1]. At the start of 2017, regulators in China cracked down on digital currency exchanges[2] and trading quickly moved to Japanese yen and, more recently, South Korean won[3].
All of the early buyers are selling. This won't end well.
I agree that this might be a wealth transfer to China. Bitcoin inherently does not hold any value, it is a ledger. When someone buys bitcoin, someone else sells it and takes the cash out of the system.
Right now, a lot of mining is still taking place in China since energy is cheap. These miners sell their coins outside of China and bring cash back into the mainland to pay for the energy and hardware used for mining. So in it's most simplistic form, when you buy a bitcoin, you are adding to the earnings of Chinese energy companies and hardware companies (and some naturally goes to speculators and miner margins).
That's an interesting statement. I've never thought of it that way. In essence, Chinese miners are exporting subsidized Chinese energy (via mined coins) for foreign currencies. Sounds very much the M.O of Chinese trade practices (not meant to be overly negative, I'm just saying).
Other communist states were/are doing the same: exporting a product of their captive workforce for foreign hard currency. For instance Uzbekistan is exporting cotton picked up by school students which are essentialy a slave work force. China is just a bit more "liberal" in this regard.
No, bitcoin is not subsidizing Chinese energy. They're paying for the energy being used at the price it costs to use it. I imagine the amount of energy used to mine in China is not a significant fraction of the overall energy production of China.
I think you got the causality backwards in the parent comment. China is subsidizing energy and, indirectly, Bitcoin. The parent assumes the price of energy in China is below cost. I'm not sure, but I wouldn't be surprised to learn this was true.
> Bitcoin inherently does not hold any value, it is a ledger.
I just want you to be aware that those 2 sentiments are directly contradictory. A ledger has value -- an online, world-wide, decentralized, distributed, peer-to-peer ledger moreso. Estimate the value of the ledger (this is a significantly different endeavour than estimating market cap), divide that value by the total number of BTC in circulation, and you have estimated the value of a BTC.
Why? Based on what? That's like saying "a state machine has value". That might be true in some contexts, but an arbitrary implementation of a concept is not necessarily valuable. Certainly, the value prospect of the ledger has no relationship to how many cryptotokens the ledger accounts to one's balance (that is to say, buying up cryptotokens is purely speculative because owning more does not make the ledger more useful)
A ledger that me and another entity (such as a friend I owe money to or a retailer I want to buy from) can both agree on to use to accomplish transactions is pretty handy.
their direct possessions (money, real estate, license, ...) are much smaller then their total value. fractional reserve banking and all that. A significant fraction of their value comes from their reputation (to have an incorruptible ledger), ability to transact and Branding. bitcoin has those as well.
I see what you're saying, and that's an interesting way of thinking about the intrinsic value of Bitcoin. I suppose in estimating the value of the ledger you should also consider the negative value contributions to having this particular ledger, such as environmental impact, potential to destabilize governments, expected loss from hacking/user error, etc and see whether that outweighs the benefits of what some may perceive to be positive value.
I suppose what I meant to say is there is technically no money sitting somewhere held for owners of bitcoin to lay claim to.
The dollar just ledges itself, since it's not backed by gold anymore. Most dollars are just entries in a database somewhere (and I would argue that paper dollars are really a distributed kind of ledger too).
Some people claim the dollar has value because the government accepts it for taxes, but the IMF's SDRs function as currency (within an exclusive population), aren't backed by anything, aren't accepted for taxes by anyone, and are worth $300 billion.
I thought a lot of it was capital flight - Chinese nationals moving yuan out of the country, but to USD assets under their control, rather than an actual influx of wealth to China.
After all, we have no real idea of "where" the bitcoin is held, if that means anything at all.
You seem to be confusing volume with liquidity. The question is not how many times a bitcoin (allegedly) changes hands on an exchange, but how many USD/CNY/JPY etc. are bidding on bitcoins right now.
Why wouldn’t the CNY/JPY/KRW markets have much higher volume when they have zero trading fees?
The magnitude of an exchange is measured by how many funds they have on deposit, not how often these deposits change owner according to the exchange’s internal database.
They don’t need bitcoin for the first stream, just for the second. Besides, there is plenty of excess capital floating around in china anyways, they don’t need many initial investment from the outside.
The outflow of the capital from China via bitcoin must definitely be larger than inflow. And those who transfer wealth from China via bitcoin are keenly interested in bitcoin growing as much as possible without crashing. They likely have bought a lot for a much lower price, and want to cash out in the West, at least partially, without trouble.
Yes, I'm aware that an article from January 2017 has data backing up an assertion about global Bitcoin trading volume from 2012 to 2017. What is your point?
> At its core, the current cryptocurrency craze is simply an unprecedented wealth transfer to China from the rest of the world.
Actually it's a wealth transfer from china to the US. The chinese are using bitcoins as a means to evade CCP capital controls.
There's a reason why china cracked down on bitcoin. Do you think china would stop wealth transfer to china? Of course not. They are trying to stop wealth transfer from china to the US.
This thread reminds me that even on HN most comments on the internet are from people with very little understanding. I expected the "bubble", "tulip", "no value" arguments to come from the chicken littles on Forbes.
If you think Bitcoin is overvalued, fine. Pour yourself a stiff drink and accept some people might lose some money.
The sort of emotional hyperbole on here about "cryptocurrencies need to be banned by the loving, paternal, incorruptible government to save the world from ourselves" is not just getting old, its absurd.
Having a censorship-resistant, globally-accepted asset would grant an unparalleled financial opportunity. Even if Bitcoin falls short in practice – it’s closer to the mark than any non-crypto asset.
Being able to send money around the world with real-time market-based fees that are often lower than many alternatives is useful. Having a place to park value when banking is not available is also useful. The list goes on…
Do you trust the government and the financial institutions that much that you're willing to hand them back the reigns of your financial future?
> The sort of emotional hyperbole on here about "cryptocurrencies need to be banned by the loving, paternal, incorruptible government to save the world from ourselves" is not just getting old, its absurd.
Why is it "getting old"? It's a fair concern that something so volatile should be examined critically and relentlessly. People don't just "get a stiff drink and accept they'll lose money" if it goes down---they jump out of windows.
I'm hesitant to jump in cryptocurrency discussions because 1) I know too little about them, even at a technical level and 2) they're consistently filled with "emotional hyperbole" (that we agree on) from both ends.
I think governments/regulators should have some say the same way you'd want them to regulate any financial instrument and punish Ponzi schemers and pump-and-dumpers.
I'd like to think about the motives of both sides from being so passionate. For naysayers, I imagine it's a bit of sour grapes. For yaysayers, it's a bit more obvious---once the hype dies, they'll stop making money.
> It's a fair concern that something so volatile should be examined critically and relentlessly.
I agree - but backed with concerns based on legitimate understanding not "price is going up quickly, must be a scam".
> I think governments/regulators should have some say the same way you'd want them to regulate any financial instrument and punish Ponzi schemers and pump-and-dumpers.
Because they did such a great job in 2008? When are they planning to punish the architects of the financial crisis? Who's going after the banks when they launder money for mexican cartels and ISIS? You really think these people are trying to protect the public?
> I'd like to think about the motives of both sides from being so passionate.
I can't speak for anyone else but I come to these threads hoping to find sensible insight and technical analysis not "THIS IS A BUBBLE! BAN IT!"
> For yaysayers, it's a bit more obvious---once the hype dies, they'll stop making money.
There may well be a huge correction but the overall market is anti-fragile and here to stay.
> I agree - but backed with concerns based on legitimate understanding not "price is going up quickly, must be a scam".
Something that goes up and down so quickly and so frequently does warrant concern. Nobody has that understanding at the moment and it needs investigating.
> Because they did such a great job in 2008?
Maybe not the American government, but IIRC, Iceland is punishing the bankers (jail!) and the Canadian government has been praised for having kept a steady ship during the crisis through their economic policies. Governments can work.
> Something that goes up and down so quickly and so frequently does warrant concern.
Why is "going up and down so quickly" inherently bad? There's no moral or legal standard on volatility. It's just a metric, everyone is aware of it, and everyone should act accordingly.
Despite mass perceptions and previous assertions long in the past by its creator, bitcoin is not a currency, nor are most people attempting to use it as one. Neither is it digital gold, or an asset management system, or any other easy label. These terms were and are used as analogies to help people grasp blockchain technology, but it is a new and altogether different beast from previous monetary instruments, and not subject to the same constraints.
You probably don't live in Zimbawe, Venezuela or trying to get money out of China or another country for that matter. If you want to take over 10 grand out of the country you have to declare it or risk having it siezed.
I don't, you are right. But then why would I buy BTC? I don't need it if I live in the US. If it is so amazingly valuable to people in these countries, then why are we buying it and hoarding it instead of giving it to the people in need?
Because it's the current get-rich-quick scheme and human nature is rather selfish than altruistic? Because it's been a good tools to store value and move it over borders?
Well there are people on here that are saying literally:
- cryptocurrencies should be banned
- government regulation is the solution (with the implication that government is extremely concerned about the well-being of the populace in general, and investors/speculators specifically)
- the people investing don't know what they are doing and need to be protected from potential losses
If there's something I've left out from this particular argument please let me know.
I believe Venezuela, Zimbabwe, South Sudan, Argentina and others greatly appreciate Bitcoin as a store of value due to their hyperinflation travails. These locations are the exact places where a complete loss trust exists toward government and the financial institutions therein.
Updated: South Korea Clarifies Position After Reports of Possible Ban on All Crypto Transactions
"On Monday, Financial Services Commission (FSC) Chairman Choi Jong-ku clarified to reporters at a luncheon meeting that “the FSC is mapping out measures to restrict [cryptocurrency] transactions to some extent,” which he did admit include “an all-out ban,” Yonhap reported. “The restriction is aimed at minimizing side effects of bitcoin transactions and reducing speculative investment,” the news outlet added. Choi was then quoted by Asia Economy:
We are discussing to what extent the government will regulate the trade, including the prohibition of trade.
The chairman noted that the Ministry of Justice is currently reviewing measures to regulate cryptocurrencies. News.Bitcoin.com reported last week on this ministry being put in charge of a new Virtual Currency Task Force in order to “set up and implement the regulatory measures through consultation between the related ministries.”
And also "It is expected that the government measures related to virtual currency will not be a one-sided regulation that prohibits virtual currency trading altogether, but a regulation that limits investment amount and investment qualification."
No it's not. It may be hard to prevent all SK citizens from using cryptocurrencies as SK is a reasonably open society, but it would be straightforward to ban their use.
A ban won't stop crypto any more than it stops illegal drugs, prostitution, etc. That said, there would be an effect on the crypto markets if a handful of major nations took action. So the question I have would be: will they aim for the taxes (presumably allowing crypto trading), or for an outright ban?
Well, they are now the price has shot up. Although this does remind us that "affluent" and "liquid" are not the same thing and that capital gains tax usually requires realising gains to be a taxable event.
Its ironic that the same people who keep saying cryptocurrency has no underlying value, that its just a speculative bubble, are saying that profits from its increase in price should be aggressively taxed.
I don't see why it's ironic. Whether something is useful or not, and whether it's increases in value should be covered under financial taxes like any other commodity are separate issues.
Commodity:
noun, plural commodities.
1.an article of trade or commerce, especially a product as distinguished from a service.
2.something of use, advantage, or value.
3.Stock Exchange. any unprocessed or partially processed good, as grain, fruits, and vegetables, or precious metals.
4.Obsolete. a quantity of goods.
So if you're saying its a commodity (and therefore should be taxed), it has value (and has to be based on something).
But semantics aside, taxation is theft, even more so in this case - there's no justifiable reason to hand over a portion of the gains to a government that had no involvement in the creation of the source of revenue.
Please keep generic ideological tangents off HN. They lead to angry-samey discussion rather than thoughtful-curious. Fortunately that didn't happen in this case, but then not all sparks lead to wildfires, even in a dry forest.
They may be affluent, particularly when compared to people struggling to buy food. That doesn't make them tax evaders. Though it should be added that the tax situation regarding crypotcurrencies isn't clear in every country.
The people in Venezuela and Zimbabwe that are now using crypto as an opportunity not to starve now that their fiat currency is worth less than toilet paper disagree.
edit: Rather than downvote - could you please explain why you think crypto is not beneficial to the billions of people worldwide currently excluded from the financial system?
I don't know why people are downvoting, but what I'd like to know is how prevalent Bitcoin usage is in each country. Is it 10%? 50%? Who is it leaving behind? The article suggests it's not based on a scientific sample. I also wonder what the skew is in usage demographically and geographically.
And then I'd like to see this contrasted with other hyperinflation instances were people abandon the local currency and start trading in either a neighbor's currency or even USD.
People are downvoting because we've seen the Venezuela example used thousands of times by now. Yes there is value in a thing that is difficult for oppressive governments to seize of devalue. The question is whether that is in any way related to the current price of BTC. It seems like the large majority of trading is happening among people who live in other nations and who already have wealth. This isn't a technology that protects the developing world against monied interests. Its a technology that amplifies inequality due to an enormous difference in cost depending on when you joined the network.
> The question is whether that is in any way related to the current price of BTC.
Of course it is. People paying money on foreign exchanges contribute to the price too. Foreign remittances are a fantastic use case for crypto (mostly to these same countries).
Also, what inspires many people to enter crypto, is general lack of trust in government and financial institutions. People choose to buy crypto rather than buying other asset classes or to hold fiat (this is a decision with a strong geopolitical basis).
> It seems like the large majority of trading is happening among people who live in other nations and who already have wealth.
Possibly, but thats besides the point. This argument is a refutation to several arguments that detractors make:
- there's no use case for crypto
- there's no underlying value to crypto
- crypto can't replace a fiat currency
> This isn't a technology that protects the developing world against monied interests. Its a technology that amplifies inequality due to an enormous difference in cost depending on when you joined the network.
As the Big Lebowski said "that's just like, your opinion man".
Joking aside, there are good reasons to think that crypto could in fact allow many people who are currently stuck outside the financial system to have access. This may me a small use case right now but its still early days for the technology.
I'd encourage you to watch: A. M Antonopoulos 'What Bitcoin Means For Unbanked Economies
https://youtu.be/xeSfDbbcN2c
I always downvote those Venezuela posts because they are invariably Bitcoin propaganda. The linked stories inevitably originate in a bitcoin news site and are backed by more wishful thinking than actual data.
The article I linked to was from ABC news (as mainstream a news source as you could find).
How is this propaganda? You're saying people in countries with hyperinflated currency have no use for crypto and don't use it? Can you back this up? Can you explain why there are significant premiums for Bitcoin when buying from exchanges from these countries? Or is this propaganda too?
Of course there isn't data (except of course from the exchange rates). These people are breaking the law and at risk of death or imprisonment. What type of evidence would satisfy you?
Its probably impossible to quantify (mostly because those people using crypto are largely doing it at risk of imprisonment or death) - I'd imagine its a small number of tech savvy individuals.
venezuela shows exactly why bitcoin cannot be used as currency. venezuela currency lost its value because the trust in central authority has evaporated, meaning it is now decentralized. look at it - venezuela currency value graph looks like bitcoin value graph upside down. people are quoting different value. some local areas are creating their own currency (just like bitcoin forks!). it is totally out of control. nobody can use it as currency.
If South Korea bans exchanges in the country or at least restrict their operations that could have a major impact.
It would still be easy for Koreans to trade one crypto for another but much more difficult to exchange crypto for USD or any other currency.
I don't think law makers ever expect a law to stop a criminal behaviour. Making it more difficult (remove apps, shut down web sites) is likely to have some impact though.
What is the crime here exactly? Breaking up the financial cartels? Regardless, I have no doubt that the government will do their best to use this as yet another opportunity to steal wealth from their citizens.
You could consider it a crime to help facilitate actions that can be a danger to the society and individuals, like others have explained elsewhere in comments. This would be similar to unregulated lotteries, ponzi schemes, smoking bans, etc.
I definitely don't agree about criminalisation of cryptocurrencies (which also didn't happen), but there are valid points that are not only about stealing wealth.
> Everyone in SK withdraw from the exchanges before they seize it!
Pick 100 random Koreans who traded in any cryptocurrency in the past 30 days, and I guarantee that 95 of them will never figure out how to store their coins in their hard drive even if someone held a gun to their heads.
You don't have to bust doors to seize cryptocoins. Just make its usage sufficiently "socially unacceptable", and people will find it's not worth the hassle.
Sure, some determined people will keep using them, but they are not what the government is worried about. The government is worried about all those average Kims and Parks who threw their life savings into $(some coin nobody heard about), because when the inevitable hits these people and their families may lose jobs, career, and livelihood.
> Australia’s central bank governor Philip Lowe warned on Wednesday the fascination with the assets felt like a “speculative mania.”
Just curious, what is it about speculation that has govs so worried? It’s quite clear at this point Bitcoin has grown far too large and most are now speculating on its value as a store so what benefit is there to step in, attempt to regulate it, and risk its undoing? To me, I’m reminded of Sean Parker’s Social Network quote about putting ads on TheFacebook, It’s like you’re throwing the greatest party on campus and someone’s saying it’s gotta be over at 11
"a period of civil disorder in Albania in 1997, sparked by Ponzi scheme failures. The government was toppled and more than 2,000 people were killed" .. "By January 1997, Albanian citizens, who had lost a total of $1.2 billion—the population being only three million—took their protest to the streets"
There are now reports of people taking out mortgages or HELOCs to buy bitcoin. That is a disaster waiting to happen - it was bad enough when the mortgages were underwater because they'd been invested in houses which lost value, but bitcoins can potentially fall a lot further. Or be easily lost entirely.
I call FUD on the reports of people going into deep debt to buy bitcoin.
Sure there will always be some people that do this. And it makes for a good story, so the media reports it. But I don't think this is something that is happening in significant numbers.
I don't know about deep debt, but I've had multiple people whose are basically technically illiterate ask me about bitcoin and how to buy them. One of them even asked me which bank they could drive to open an account and buy bitcoin!
There is a new wave of people who've read the 10,000% return articles on fb or whatever who now wanna invest every penny that they have into bitcoin
Let's be enormously speculative and consider what might happen if cryptocurrencies do not collapse. The implications of this are interesting. They would end up being a worldwide asset that hedges against pretty much everything except worldwide economic collapse. That's sounding like the makings of the next reserve currency. What would be the implications of this for nations that currently benefit from the current world reserve currency? What would be the implications of economic vessels like national bonds and other treasuries that nations rely on to borrow money?
It would also all but entirely nullify a major chunk of government power and control. If a nation is unhappy with the economic direction of their country they can inflate or deflate the monetary supply, manipulate national holding rates, and more. Or take 'offensive economics.' If a nation wants to attack an individual, group, or even another country assets can often be frozen. And we haven't even gotten into the implications this would have on the international banking system.
It's funny in a way. You just don't know if you're on the doorstep of a complete shift of era in economics, or if you're just watching another boom bust cycle. One's certainly much more likely than the other, but if I had a major vested interest in one outcome over the other - I'd certainly be looking to take proactive action to try to ensure it.
In the 80s and 90s, we found a way of connecting many computers together and here we are.
Now we found a way to create programmable: trust, value, scarcity and incentives. If that's not going to change the society over the next 20-30 years, I don't know what will.
Only land ownership could remain in the space of interest of governments then (being immovable).
>Now we found a way to create programmable: trust, value, scarcity and incentives.
I've seen variations of this argument repeated often. It sounds sexy but then when you probe it's hard to nail down something big enough we can't currently do that becomes possible. Financial markets are already very sophisticated and if anything retail investors are still not using the great products out there as much as they should (index funds are huge and yet most people still prepare very poorly for retirement). Maybe it's just a case of we still not knowing the actual killer app of crypto currencies and contracts and this is just like connected networks in the 70s. Or maybe this is like the segway and smart people are convinced it will revolutionize things but in the end it's just handwaving.
Hundreds of years ago, you could transfer money across the world just like you can now. It would just take having the right connections and a lot of time. Does that mean our global banking system is unnecessary?
Bitcoin et al unlock a potential economic powerhouse the likes of which can be comparable to the internet. Just because you can do mostly everything that blockchain tech provides without one, doesn't mean it isn't incredibly valuable.
>Just because you can do mostly everything that blockchain tech provides without one, doesn't mean it isn't incredibly valuable.
If you can already do everything that it provides that's pretty much the definition of not having any extra value. This is just extending the hand waving. What transactions will you be able to do with cryptocurrencies you can't already do with the modern financial system?
The ones no-one imagined before. Just like few people saw social networks coming, it's currently hard to predict what can be done when huge number of people is connected in networks of value. But a few examples can be: borderless financial system; programmable instruments, derivatives by just about anyone; stable-coin (a stable reference currency)
Exactly that, you can do secure financial transaction without the modern financial system. I would say that's incredibly valuable, and the vast majority of people who don't have equal access to the modern financial system would probably agree.
> index funds are huge and yet most people still prepare very poorly for retirement
Retail financial products are only just now entering the internet era. At least in UK, before 2017 we did not have Vanguard, Monzo, Revolut. Nutmeg was less known. Older banks and investment accounts are still relatively hard to use via the internet (e.g. requiring ancient identity verification methods) and understand for unexperienced.
Cryptocurrencies have a chance to bring much faster improvements to this space. I think the biggest question right now is whether crypto can become self-regulated in practice and avoid being regulated by traditional centralised means. If we can protect average Joe from scams and help him navigate the finance space cheaper and simpler, we don't need old government for this.
It's pretty much inevitable IMO, given enough time, because removing intermediaries reduces cost and friction of the flow of value. In the future, the average Joe might:
- create his personal wealth account with a portfolio, after evaluating his character and beliefs (similar to how robo-advisers work)
- instead of keeping any wealth in cash money, a small chunk of his portfolio will be spent for each transaction he makes (while being converted on the fly to a chunk of seller's portfolio, with value expressed in a stable-coin)
I think the goal should be to stop using any form of cash as a store of value, which is just a part of pre-internet history now. With cryptocurrencies available now for anyone to invest, make mistakes and learn, we have a pretty good start.
>I think the goal should be to stop using any form of cash as a store of value
No one should use any currency as a store of value, use actual productive assets. And your argument that we should make financial products enter the Internet era is completely true. I just don't see where the cryptocurrencies help.
Have you looked? There are better savings accounts with proof of stake systems. There are programmable components with ETH, EOS, Lisk, various others. There are bank/savings accounts that can be signed up for with a web browser (smartcash). The list is endless.
I think the major appeal is in what can't be done.
Did you know, for instance, that in the past ~8 years we nearly quadrupled the US monetary base? [1] What are your opinion on the economic decisions that led to this? The Fed themselves seem to believe it has failed to achieve what they set out to do which was to increase inflation, and to indirectly increase the real GDP. Here are a couple of interesting articles. [2][3] What of increasingly speculative ideas like negative interest rates? How do you feel about the government's decision to more or less ignore the mounting debt of the US? If the US dollar lost strength, perhaps as we move beyond the petro dollar, do you think it will maintain it's value as world reserve currency? Do you believe that banks, the Fed, and the government have your best interest in mind when making their decisions? [4]
These questions are rhetorical because your response doesn't matter. Nobody's does. Except 7 people in a room (currently 4). They make their decisions, you live with the consequences. Decentralized currencies change this enabling people to place their 'value' into something that nobody can manipulate, beyond normal market forces. The current absurd rise of Bitcoin is indeed somewhat scary and looks like it should be due for a major price correction at the minimum. If there was a central body in charge of Bitcoin then now might be the next time they decide that the next few hundred blocks will yield 10,000 bitcoins instead of 12.5 - just to try to lower the price and 'stabilize' the currency a bit. But this will not happen. The currency will continue unabated, controlled by market forces alone. This could be a good thing, it could be a bad thing. But you can make a decision without having to worry about the implications of what 4 people in a room decide. Interestingly this [inflation of supply] could be done theoretically in a fork, but then again it would be up to the market to decide the value and merit of such things instead of our 4 people.
In my opinion taking trust and centralization out of anything is a good idea. And this is something that decentralized currencies offer. Currencies whose value tends to increase over time have a sordid past. On the other hand I think that rather begs the question of whether we've 'solved' economics, or are just building up for an even lovelier epitaph before we even hit the centennial of 1929.
I personally suspect it's a really bad idea to replace monetary policy with a fixed deflationary currency. But independently of that people should not be holding currencies as assets for more than very short term needs and emergency funds so if the comparison is Cryptocurrency vs Dollar then cryptocurrencies have a very long way to go before they're even half as good as fiat currencies for day to day transactions (nobody accepts them, they fluctuate too much, etc). If the comparison is Cryptocurrency vs Assets then I'd rather use as a store of value actual scarce and useful assets like companies and land than things that are useless by design like gold and bitcoin. If central bankers are untrustworthy is not really relevant for any of the two discussions.
Suppose that bitcoin or similar are used as currency in practice (that it's very far of happening, by the way). Even if you are able to do all your operations in a cryptocurrency, you will need to pay taxes. Governments only accept their own currency, so, you need to get it to pay taxes, so, demand of national currency is going to exist always.
>> "economic vessels like national bonds and other treasuries that nations rely on to borrow money?"
This is only an institutional arrangement. Nations with their currency don't really need markets to get money. For instance, in the case of USA, the FED can produce so much money as they think is appropriate (1).
I think that cryptocurrency fans suffer from that old illusion that economy can be separated from politics.
The people of Zimbabwe and Venezuela appear to disagree with your sentiment that national currencies aren't risky.
Your notion that crypto fans can't separate economy from politics doesn't seem right. Re-read the Bitcoin genesis block. Bitcoin began because of bullshit by bankers and barristers. Politics is the reason for Bitcoins existence.
The people of Zimbabwe and Venezuela suffered a fall in productive and/or export capacity (agricultural and oil respectively).
Never mind the currency, crypto or not, you can expect inflation when real resources are reduced and you have to grow the monetary base to keep the economy working. See (1) for more details.
I didn't say anything about risk.
I didn't say that crypto fans can't separate economy from politics, quite the opposite, I said that, it seems to me, crypto fans think, erroneously, that economics can be separated from politics.
But wouldn’t that have a profound impact on the value of a currency? If all demand for it dissappeared except taxes what would happen to it’s value relative to other currencies? What would happen to trade?
> Instead of exchange currencies in order to be able to pay taxes, why not accepting payment in the government currency in the first place?
You don't need to exchange all your currency to pay taxes, and in the hypothetical scenario we're discussing you would want the rest to remain in cryptocurrencies because that is what you need to pay all your other expenses. Beyond the network effect, exchanging only the amount you need for taxes would improve security and limit your exposure to currency manipulation.
If non-professional investors start putting their life savings into Bitcoin and it crashes, the government can't just say "though break, you will starve on retirement"
I think this almost certainly is not the reason. You can take something as simple as lotteries to show this. Lotteries specifically target and exploit lower income individuals who we can say are probably not 'professional investors.' And they're huge money. In 2016 $80.55 billion was spent on lottery tickets in state lotteries in the US. [1]
That's hundreds of dollars per person if each and every adult in the US bought exactly an equal share of all lottery tickets. In reality only x% of people play and the distribution is going to he heavily distorted. Lotteries are a major drain on society, but government's love the 'free' money. So we have them.
> You can take something as simple as lotteries to show this.
Lotteries explicitly and extensively inform the consumer precisely what their odds of getting a significant ROI are (namely "slim to none") and lotteries are heavily audited and regulated to make sure they deliver exactly those odds. When polled, those that play understand those odds for the most part and those who play the lottery compulsively understand that they have a problem, in spite of the compulsion.
A rather poor choice of analogy since I think all of us would be perfectly happy if these cryptocurrencies were managed the same way.
Where I live (in Canada), it isn't just the lottery. Some provincial governments run full-fledged casinos, and pocket the revenue from that. It can be quite easy to sink a great deal of money into casinos, and unfortunately, some do.
The data would beg to differ. You have to keep in mind the demographic makeup of the US. More than half of Americans have less than $1,000 in savings - total. [1] Only 15% of Americans have more than $10k saved. Now take that $80 billion figure from the lottery. There are currently about 245 million adults in the US. About 49% of Americans play state lotteries. [2] Now let's do the math. That's $80.55 billion / (245 million * 0.49) = $671 spent on lotteries on average!! It is very safe to say that there are alot of people spending all, or near all, of what could be their life savings on lottery tickets.
Lottery tickets are almost always negative expected value which means you're basically lighting money on fire, and governments worldwide love them. More generally the US government acts as an oligarchy. Government self interest, followed by special interests are what generally drive government action. Public utility (and opinion) play a very minor role. And yes, I even have a source for this as well as I understand this is not what many people want to believe. [3]
Half of Americans have < $1,000 in their savings account - yes, that is true.
However, around 64% of Americans own their home [1]. How many of them are taking out HELOCs against their homes to buy lottery tickets? Once concern is people are taking out HELOCs for crypto speculation.
I think that stat means 64% of Americans don't rent.
Homeowner is not the right term for most of that 64%, because most have a mortgage balance, which when subtracted from their < $1,000 in savings, makes the picture even uglier, and makes most of their future financial well-being dependent and correlated with their local real estate market.
Edit: The stat actually means 64% of homes are occupied by their owner. But "owner" is still misleading, as the article linked to above says:
"However, homeowner equity has fallen steadily since World War II and is now less than 50% of the value of homes on average."
I'm not saying that is a good situation or the picture is rosy. The real question here is one of semantics - do you include home equity in "life savings"? I would say yes. And using a HELOC for a crypto or lottery tickets are both bad things IMO.
I totally agree, just wanted to clarify that "homeowner" is a generous term in the US intended to make people feel like they own an entire home on the day they close the sale, instead of the reality that they usually own a mortgage balance along with a small chunk of that home.
You don't understand the point, or you don't agree?
Because to me it should be easy to understand that Lottery isn't marketed/treated as an investment (crypto has started to be legitimately treated as such), and historical returns don't suggest it would work.
Crypto is just attractive enough it could pull the wrong type of attention from everyday people acting as investors.
I don't agree with direct regulation, but I can definitely see why the government would be worried.
I'm not on the hook for "my share" of the national debt. The government isn't going to knock on my door with a $62k tax bill next month. That's the government's debt, not mine.
If I spend all my money but still owe creditors more, that's what I'm on the hook for. That's real debt.
"Economists regard seigniorage as a form of inflation tax, redistributing real resources to the currency issuer. Issuing new currency, rather than collecting taxes paid out of the existing money stock, is then considered in effect a tax that falls on those who hold the existing currency."
Eh. But inflation only affects nominal assets like bonds and bank account balances. Real assets like houses or stocks (to a degree) would be expected to rise along with inflation.
That makes inflation distortionary, not some ideal tax on wealth. Governments can't just run away with inflation as an alternative to tax.
Because a) this debt at least pretends to pay for the comforts of their lives like infrastructure, security - and in some countries - education and healthcare; and b) national debt does not work the same way a private individual's debt works.
a)So taking on debt pretending to do something good is fine?
What if I say they do something bad with that debt too, is it still OK?
b) Interest rates are being paid for decades via taxes, money that could have been put to use much better. I'd say it's similar enough and don't think "it works differently" is an argument here
It works differently because the US can just issue more currency to pay off debt. Honestly sovereign debt is a currency manipulation / money supply tool more than anything.
It's inconsistent that the govt "saves" you from losing your life savings yet indebts you with a nontrivial amount plus lifelong interest rate payments.
Put as question: how much would you like legally binding financial advice by someone up to their ears in debt?
I don't owe $60k because the USG has $60k in per capita debt. Nobody's coming to me for that. The mental gymnastics you need to go through just to equate the two is exhausting.
"Legally binding" and "advice" are mutually exclusive concepts. And it's 100% possible you can give great financial advice and be in debt. "Max out your 401k and a Roth IRA" is great advice in 99% of circumstances. Just because someone is paying off high interest credit cards instead doesn't make the advice invalid or their choice of priorities incorrect.
I can see where @dmichulke is coming from, nobody is going to come to your door looking for that money in the fashion you describe but you are paying for it one way or another. Who knows, maybe if the debt levels weren't so high the US would be able to afford a healthcare system like the rest of the developed world.
Anyone who has applied a modicum of thought to the issue. The US already has more per-capita public funding going to healthcare than any other nation, we simply don't get a good return on it because that is perceived as "socialism".
And pursuing a highly conservative fiscal policy (far off the right side of the Overton window) is not going to change that, nor advance the cause of said "socialist" policies. It's flabbergasting that you would suggest that as any kind of a reasonable cause-and-effect.
When a bubble bursts, it's not just about some people, but it brings down the whole economy. I can't believe people have already forgotten what CDO has done to this economy. Bitcoin & cryptos are financial weapons of mass destruction. Any responsible government ought to outright ban them all already.
> Bitcoin & cryptos are financial weapons of mass destruction.
You need to explain this. Many of us just think it's a good replacement for gold and other precious metals. Is gold a "financial weapon of mass destruction"?
No, it's a "barbarous relic" in the words of Keynes, which is why it's not really used as currency any more. There are real reasons why the world went off the gold standard.
Yes, because governments want to print fiat money to finance their debt. It has a nice side effect of moving more money into spending / investment, because inflation eats savings. Instead of gold, people buy homes and stock.
Serious question, Keynes was born in the late 1880 and didnt publish anything until 1900s... we had boom and bust cycles long before this. How do you explain that?
Yes there were other boom and busts. But Keynes makes sure of it. According to Hayek (and many others), Keynesian spending policies are not a solution to unemployment or economic crises. On the contrary, they are a real threat to economic stability.
that's a valid question. three reasons why bitcoin & crypto is NOT like gold and very dangerous. 1) limited supply: drives up price enormously. almost endless. minimal supply, infinitely increasing demand. depending on how far this will go it can potentially suck up all liquidity in the world. 2) no authority, no price stabilization, meaning extreme volatility that adds fuel to vol & price rise, 3) ease of access: anyone can buy with a dollar, also fueling to vol & price rise.
how bitcoin will end looks very ugly to me in any case. either collapsing a global economy or bringing an unprecedented global inflation
1- Limited supply prevents money printing and inflationary theft. Besides there are many coin alternatives and a BTC can be divided to a hundred million units.
2- No `central` authority is a big plus (probably the best property of it). Once crypto coin pass its infancy, the volatility will be much lower.
1 - money printing is not crony capitalism like what bitcoin creators tout them to be. it is a method of stabilizing value. when used wrong it can destroy economy (venezuela, zimbabwe), but that is a question of politics (voting wrong people). bitcoin or crypto's decentralization is NOT a solution to this problem. also bitcoin is particularly problematic because it gained traction. value is simply sum of people's belief. when other coins gather enough followers then it will similarly be a problem, but not at the moment.
2 - this is false. if you know how currencies work you will know that this whole "decentralization" makes no sense. central authority is required for a currency because price needs to be stabilized. unlike what some people believe, bitcoin will not "self-stabilize" because currency stabilization has nothing to do with how many people use it. currency stabilization works by an authority dictating how much it should worth and manipulating market towards it. this is not some conspiracy, it is a protection provided for all currency users. not only bitcoin offer zero protection (completely exposed to vol risk), but also it is not really decentralized as 40% of entire bitcoin owned is owned by 1000 people only.
3 - yes, this is a good property. so there should be a state sponsored coin.
us economy is big so bitcoin feels like a noise right now. in other countries, it is a real threat. it's going to take some years until us feels the heat, but by then it will be too late.
I’m curious. How would it bring about global inflation since almost all of bitcoin is not really used for getting goods/services and people need to exchange real dollars/yen/etc to drive up its price? Doesn’t it actually suck out liquidity from other assets and drive down inflation of other assets?
bitcoin's price increase creates inflation because it makes holders wealthy. inflation is not a bad thing when driven by fundamental growth (value creation). bitcoin is not creating value.
it is far easier to transfer 10 million dollars wworth of bitcoin than it is 10 million of gold.
this comparisons are _not_ doing either bitcoin nor gold justice.
bitcoin is far more liquid, accessible and usable than gold ever will be. I will start calling it Internet Liquid Gold... because while the transactions might be slow, being able to transfer it across continents multiple times back and forth is possible before someone can go to their version of fort knox and put actual gold in a truck.
Precisely, because it's slow and expensive. If you're going to hold out transfers of IOUs in place of actual gold, that can work for any commodity; a Bitcoin IOU would function just as well as a gold IOU. As a practical example, most Bitcoin exchanges allow transfers between members instantaneously and without any notable fees. Of course, that reintroduces a trust relationship. The point of having actual gold in-hand, or actual bitcoins recorded on the blockchain, is that the transfer is completed and effectively irreversible. You don't get that with IOUs.
> I can't believe people have already forgotten what CDO has done to this economy.
Collateralized Debt Obligations - every word in the acronym screams credit. A CDO is an instrument that guarantees you a cash flow based on debt. A guarantee for you is an obligation for someone else. Chains of these guarantees and obligations is what enabled the housing bubble. The breaking of these chains caused the Great Recession.
As far as we know, the crypto bubble is not highly leveraged. One Bitcoin is worth one Bitcoin. It could trade for $1 or $1 million, but you are never obligated to take the offered price as a buyer or seller. Yes, it's complex. But it is technically complex, not relationships-obligations complex.
you're thinking leverage is only way to pose a system risk to economy. it is not. leverage amplifies the risk, but just because there is no leverage that does not mean risk is not exposed to the system. when consumption goes down, business gets affected.
Like student loans, bubble speculators will want government compensation, or need it via welfare/Medicaid/tax writeoff etc most likely the tax write offs
In addition to bitcoin’s swings of 20-30%, the premium with respect to USD also swings 10-20% in local South Korean exchanges. I really wonder what is going on in there sometimes. The premium is persistent and doesn’t seem to be arbed out. Is getting money in and out of South Korea so difficult that a 20% premium doesn’t yield an arbitrage opportunity?
Crypto is changing the world. I've made money off of bitcoin, but I've done so responsibly, like I suspect must people on HN have, by only betting what I could easily afford to lose.
By going mainstream that sort of reasonable/safe approach has ended, and people are now happily risking their entire savings. This will certainly be great for some people, but it also has the potential to be absolutely devastating.
In America you may not care about that, but in my part of the world, this means that we're sitting on a real risk of society having to clean up after a bunch of people lose everything.
The old world financial system is regulated to prevent regular people from losing everything on investments. I suspect that in time Crypto will be regulated similarly.
This isn't very libertarian, I know, but I'm old enough to have seen a few bubbles burst and the result isn't pretty.
Nothing of value is being created, at least not of the magnitude of the apparent “value” of the bubble, so making money off bitcoin is by definition getting money from someone else. Clearly it cannot work forever, and those who are left holding the bag won’t be happy.
Except stocks represent ownership in real companies making real products. If one person owns 100% of a company and there is zero trading, it's still an extremely valuable property. If one person owns 100% of a crypto, it is worthless.
> Except stocks represent ownership in real companies making real products.
But what does that mean in practical terms? Sure, if the company gets bought out you might get some cash, and some companies still pay dividends. Aside from those cases, though, shareholders have no direct claim on the company's assets, and only the largest shareholders have significant influence on the company's board. Most profits made by shareholders come from selling their shares to another investor, not from the company itself.
> If one person owns 100% of a company and there is zero trading, it's still an extremely valuable property.
Assuming the company is solvent... plenty are not, despite a positive stock price. They are trading on the expectation of future improvement, not present value.
> If one person owns 100% of a crypto, it is worthless.
Every cryptocurrency (every non-commodity currency, for that matter) starts out owned 100% by someone. That doesn't make them all worthless. Say I create a new currency with one million units, wholly owned by myself. If I stop there, no one else will value my currency. However, say I also arrange to sell widgets (standard market value $100) in exchange for 100 units of my new currency. Now my currency has value, and people who want widgets may well be willing to trade other goods or services for it—perhaps not 1:1, due to the lower marketability, but at some discounted ratio. This makes more goods available; people who have no need of my widgets may still transact business using my currency and accept it as payment. At this point I no longer possess 100% of my new currency and it has taken on a life (and market value) of its own. Even if I stopped producing widgets the currency may well remain in circulation as a marketable commodity.
There's this thing called the internet which lets you make transactions even when your bank is closed. Also, for most purposes it's safer to do credit card purchases than international wires.
Why do you need to send a wire transfer? A giro transfer clears within a few minutes, and a credit card charge is accepted within seconds. What's the use-case that is not acceptably covered by those options?
I'd never heard of a giro transfer. In the states we use ACH and it takes 2-5 days to clear. The ACH numbers are also reusable - your numbers never change, and they can be used for withdrawal as well as deposit.
Can you elaborate on "society having to clean up after a bunch of people losing everything."? Perhaps I'm reading too much into your post, but so far as I can tell you're suggesting you reside in a nation with stronger social systems than the US. And a number of people failing, who otherwise would not have, could pose a strain on such systems. Yet this is confusing to me since presumably we're speaking of older individuals. Young individuals are, generally, still earning money and so they are already sustaining their own livelihood regardless of their savings (or [sudden] lack thereof). But back to the older individuals, would these individuals not already be receiving social benefits - healthcare, social security, etc? It seems that their personal dependence on these would increase - but their burden on society would not change, at least not particularly meaningfully.
Like I said, probably reading way too much into your comment. Curious what you meant!
> Yet this is confusing to me since presumably we're speaking of older individuals. Young individuals are, generally, still earning money and so they are already sustaining their own livelihood regardless of their savings (or [sudden] lack thereof).
Plenty of young people are easily to dupe with get-rich-schemes too. And earning money is not that helpful, especially on the poorer end - I mean, imagine that right now all your savings went to 0. Somebody cleared out your savings account and all the spare cash you happen to store around the house. Are you comfortable with that situation because you still have your job? Now consider a person on a regular, shitty, low-paying high-demand job. A loss of all money buffer can, through small unexpected expenses, quickly push someone into poverty.
So now these people stop contributing to GDP, because they can't hold a job (had to sell a car to eat, etc.), and they get on welfare, and they are unhappy and spread that unhappiness around, and if there's enough of them, they'll make a stink in the media about government not doing enough to protect their people.
You have a contradiction in your logic. Poor people working "regular, shitty, low-paying high-demand jobs" do not have savings. The numbers may vary somewhat by country but here [1] they are for America. 85% have less than $10k. 50% have less than $1k. 34% have $0. And there's probably going to be a pretty good correlation with savings and income. The 15th percentile in household income is about $120,000. Interestingly enough indicating even relatively well off Americans are awful at saving!
Interesting! Those data are indeed specific to the US and I expected the numbers would vary by nation, but not radically so. I enjoy learning more about economics and the fact there is a nation where even the poor have substantial savings is quite bemusing to me! Do you have any sources available?
Relax. Looking across the sea, Japan has been positive on cryptocurrencies. Japan is always Korea's main rival and influencer when it comes to technology and everything else. This rivalry is deeply embedded in the Korean psyche. Most likely they will follow Japan's lead, they would not risk Japan taking any pieces of the crypto-currency pie from them.
Thats not a crackdown, that's just tax collectors looking for easy money. They have plenty to gain from cryptocurrencies. It's like government banning cigarettes, not going to happen. They make too much money from it.
Edit: ok not 100% sure of the solution, but I think that there should be a way for the government to stop people putting their life savings into Bitcoin.
Too much love for paternal government? Please let adults decide their own fate. Most people are smarter than you think. Ok, there are also idiots in tail of the curve but so what?
This, in fact, goes against what Cryptocurrencies represent and what scares me the most is that people, in this case governments, are trying to regulate the new with the old. Remember, innovation always win.
None of the proposed laws are unreasonable though. Anyone who thinks no regulation is coming to this space is delusional. Regulation is good. KYC and AML policies are good. That means regulators are taking proactive steps to keep these currencies in the system, rather than banning them.
Good regulations are good. Bad regulation is untested code, written to benefit lobbyists. Like the accredited investor regulation which is essentially codified class warfare.
All of those lost against better tech, because they were but gimmicks. Cheap and efficient flight is better than supersonic, exclusive flight. High resolution, high contrast, high colorspace TV is better than 3D TV (IMHO VR is also better than 3D TV). And advanced text messaging is more convenient than video calls.
It'd be annoying if restricting "investment" into cryptocurrency also restricted the ability to use a cryptocurrency as a medium of exchange. Sure, stop people from buying $10k of a coin and holding it. But hopefully don't restrict people from buying $5 of it to immediately send to someone. (Though I'm honestly not sure how you would be able to legally have one without the other.)
Is Bitcoin “legit?” Does it have any purpose or value? I think it does, and here are several lenses through which to see cryptocurrencies, that explain why:
As an investment: The world is already comfortable with “hot potato” investments that derive their value from the fact someone else will buy it later (ie non-dividend, non-voting stock). As long as a critical mass of investors continues to see it as legitimate, it will be.
As a way to avoid hyperinflation: Central banks can print money seemingly arbitrarily, diluting buying power. Cryptocurrencies present an alternative, where growth of money supply is constrained by known and predictable rules. What is inflation in the US, really? Is the stock market going up because real world wealth is increasing, or is it just printed money flooding into assets classes instead of “basket of goods” used to measure inflation?
As an alternative currency not tied to any particular central bank: The value of a currency is ultimately derived from the real-world value controlled by the individuals who believe in and use that currency. Most currencies have their basis in communities defined by countries and borders — with cryptocurrency, you introduce a new community, where the value of it is ultimately derived from the real-world value controlled by all the individuals who are willing to conduct business in that cryptocurrency.
As a check against authority in future with no cash: In a cashless future, there is great potential for abuse of power if all transactions must go through a central authority: 100% visibility and power to interfere with all private transactions of the population. Do you want to give someone power to see every little transaction you make, with power to stop it if they don’t like what you are doing? In this cashless future, trust-less peer to peer digital currency is essential.
As a way to diversify away from assets based in your own country’s currency: cryptocurrencies offer a relatively accessible and easy way to diversify away from holding all your wealth in one currency. To hold a certain currency is to bet in that country relative to world. For America, there’s a bet on how the USD will track against other currencies in decades to come. Is china gonna unpeg the yuan further and further and make a gun for the number 1 spot? Has America invested in the infrastructure, education, large scale coordination, and energy capabilities to stay on top not just in terms of dollars on paper, but real world value that underlies real wealth? Crypto is just one way to place a bet based on a thesis around this.
All this is based on the fundamental question: what is money?
Money can essentially be seen as a “share” of the entirety of the worlds resources. These “shares” give you authority to allocate resources, such as food, materials, and other people. We all need a base level of “shares” to allocate the food and shelter we need to survive. Most big businesses use their “shares” to pursue one thing: getting more “shares”. And, your “share’s” constantly get diluted. No matter how many shares exist, in the end they only act as a distribution mechanism for the actual resources that exist. In this light, crypto is just as real as anything else; its just another made-up concept we use to coordinate society, just like traditional money.
What worries me most about cryptocurrency right now, is the underlying cryptography, and how long that will last. Will there be fork to new method in time?
Bitcoin and cryptos ought to be banned for good. Cryptocurrencies are scam and outright bubble that will bring down the world economy. There is no currency without an authority to guarantee its value. Cryptos are pure bubble. If there is any good in this thing, it's ease of transaction, which is a question of underlying technology - it has nothing to do with lack of authority or decentralized scheme that cryptocurrencies tout as so important (and fail to deliver).
> Bitcoin and cryptos ought to be banned for good.
Strong statement but if you have a valid argument then I can be convinced.
> Cryptocurrencies are scam and outright bubble that will bring down the world economy.
And that's not an argument, that is purely speculation as well.
> There is no currency without an authority to guarantee its value.
There is now, they're called cryptocurrencies.
> Cryptos are pure bubble.
2 things:
1. What's the difference between a pure and impure bubble?
2. Why is it a bubble?
> If there is any good in this thing, it's ease of transaction, which is a question of underlying technology - it has nothing to do with lack of authority or decentralized scheme that cryptocurrencies tout as so important (and fail to deliver).
? This doesn't seem to mean anything. Please explain?
The good news for the rest of us is that it is very difficult to "ban" cryptocurrencies. That's a feature of them, of course. You can try to crack down on exchanges and methods for converting crypto to/from state-backed currencies, but that doesn't actually stop crypto.
you can make it illegal for a bank to do business with crypto exchanges like what SK is doing right now. If all G10 currency do this then it can kill the bubble in crypto. I actually think this is a better move for crypto's future.
I suspect we'll see other states angling to see what kind of tax revenue they can squeeze out of crypto, rather than banning it. The problem, of course, is how to set up such a system. They can enforce it with the exchanges (witness the recent IRS request that Coinbase faced) and banks. It will be hard to cover all crypto transactions.
I see you haven't answered giblaz's questions yet. Valid answers to his questions would clear up much of the confusion about your arguments. Please answer his questions, and continue. How would G10 nations kill the crypto bubble by banning Bitcoin business by banks? Why is this a better move for crypto's future?
Would you feel better if people stopped calling it a currency? Also do they really have to ban it, can’t they just seize it all? It might be really embarrassing if we ban it and all the capital flees to Russia.
any country that allows crypto as an asset will risk an enormous bubble in their economy. it will eventually suck up all capital from other asset class, because crypto can never lose value unless people stop believing in it. the only reason why people believe in crypto as an asset is because the price keeps rising, and it's because there is limited supply. it is exactly same as how art market works. if anyone fully understands what this means then they will know cryptos are extremely dangerous.
So bitcoin is like art-as-store-of-value, that makes sense, it could lose 100% of its value unlike national currencies which can only suffer 91% loss in case of a bank run and only 99.9% loss in case of hyperinflation.
the reason why crypto is dangerous is because it's very, very easy to get a piece of it. it is open to anyone and you can buy for just a dollar. this drives up price unlike anything out there. yes anything can be a store of value with enough people believing in it. bitcoin succeeded in generating large enough followers to drive up its price like crazy. if it continues, it will suck up capital from all other asset classes - which in turn create a huge global inflation. losing value is one problem and the global inflation crypto will bring, if left unregulated, is another problem.
I'm sorry, but the statement "crypto is dangerous [...] because it's very, very easy to get a piece of it" is just batshit. I can very, very easily get many, many things, and most of those things aren't really dangerous. There is no correlation between how easy a thing is to get and how dangerous it is.
You're being tolerated because most of the people here seem very nice and they allow that sort of thing, but I felt spouting insanity like you do over and over, well, that sort of thing should be called out. Apologies to the offended.
Bitcoin has many problems. That it's somehow bad because "you can buy for just a dollar" is not even close.
The argument could be made to say that statement isn't even realistic. Why would someone pay $1 for Bitcoin and then $10-20 in transaction fees? Pragmatically, this would be an immediate, minimum 80% loss of value. One would think that to be enough of a disincentive to "buy for just a dollar", no?
You make me glad the 2nd amendment exists! Did you study economics as your undergrad? I hope your prediction comes true and you refuse to put 10% of your money into btc until regret drives you to personally lead the revolution to seize the wealth from those dirty scheming bitcoiners
> Bitcoin and cryptos ought to be banned for good.
Serious question: how would you go about “banning” cryotocurrencies? The most you can do is close exchanges which would make crypto harder to acquire and liquidate.
_If_ I wanted do this (and was a government):
- Prohibit trading of cryptocurrencies, punishable by several years in prison if caught. Structure it so that you can personally go to prison even if you did it as part of a business. This should 'discourage' casual investors.
- Pass a law stating banks can lose their banking license if they allow transactions from/to crypto exchanges.
Basically, declare cryptocurrencies to be similar to hard drugs or something and follow the same playbook. Obviously the real hardcore crypto lovers will still keep using it, and it will also not deter criminals who were outside of the 'regular' system anyway. But if you have a functioning law enforcement system like most western countries, you could certainly keep cryptocurrencies from playing any large role in your economy.
Would it not be the case that declaring "cryptocurrencies to be similar to hard drugs or something and follow the same playbook" is a recipe for disaster? None of the drugs laws have really worked out all that well, as they've led to mass incarceration which has a high social cost.
Many people seem to want drugs. Banning them often increases the price, due to the supply going down or being more costly to obtain versus a constant demand. To follow the same playbook, there seems to be a non-zero chance that Bitcoin would become rarer, and therefore more valuable, and therefore more attractive than fiat, increasing demand even more. I think it's a crap-shoot what role cryptocurrencies would play after a large-scale ban.
But, yeah, _if_ I wanted to do that, and I was a government, that would probably be the way I'd do it.
Arrest and jail anyone known to buy or sell any amount of the currency, for cash of other other goods. Ban any comapny that trades in botcoin from doing an buisness in thr country. Sure, you can keep your wallet, but as soon as you try to exchange it for anything else, you are risking jail time... very few people would bother.
Until the end of 2013, Bitcoin was predominantly traded for US dollars. However, after the crash of 2013, miners consolidated in China and Bitcoin mostly traded for Chinese yuan[1]. At the start of 2017, regulators in China cracked down on digital currency exchanges[2] and trading quickly moved to Japanese yen and, more recently, South Korean won[3].
All of the early buyers are selling. This won't end well.
[1]: http://www.businessinsider.com/bitcoin-trading-china-yuan-re...
[2]: http://fortune.com/2017/01/05/bitcoin-plunge-china-currency/
[3]: https://www.bloomberg.com/graphics/2017-bitcoin-volume/