Is it too soon to talk about Crypto yet?

[MinnesotaEric]

This isn't strictly true, investor money is largely irrational. There are also semi-rational sections that go where it sees a potential for high returns (otherwise people would only buy blue chips which is clearly not the case). Investor money WILL flee from higher risk when things get dicy, and probably both later and earlier than it should.

I believe that the low interest rates directly drove a lot of the initial adoption of speculative assets like crypto because the more traditional investment vehicles had low gains. Plus you could leverage out effectively free money at near zero interest into potentially high roi but highly speculative stuff.

Now that interest rates are up a lot of the people who invested in that are looking for a exit so they're pumping the bags and trying to dump them, which is hard because there's low incoming liquidity. Some folks have ofc become or always were true believers (if you say something often enough it becomes true) and will hold to zero.

Again how long that will take .. no idea..



Ah yes, back to the "this is all so new that no one could have known things that are illegal in every other market might just be illegal here as well". I would caution that a lot of people have gone to jail believing that line.

The incoming admin is posting a lot of pro-crypto people(and I could speculate as to why but will forbear). I think that's likely to mean lowering interest rates again to enable more "easy money" which will give the bubble another large pump making the eventual pop even more spectacular. Sooo I wouldn't strictly bet against you in the four year timeline, but I also wouldn't put any money on that line either because it's a high risk market and I don't have the time to spend recovering.

As for the nominally egalitarian nature of crypto I would suggest folks look up "gini coefficient", you might be surprised (or not.. the rich do indeed get richer and the smaller and griftier the market the richer they get).

The irrational is the mo-mo crowd and the chartists that don't have discipline. The 2 and 20 hedge funds are all going away because AI and indexes do better performance (except for inverse Cramer--which is amusing because Cramer always suggests going long when he amassed his own $200M of wealth by shorting). I digress. The low interest rates flooded the world with money and all of it chased after yield (yours truly included) which built into the everything bubble. With rising interest rates, you'd think that velocity of money spending would slow and contract, but it didn't because (as I understand it) while private spending did contract our government continued to increasingly spend thereby masking the private side's spending contraction.

That said, as a nation we've got a tough road ahead of us. over 20-years of bad fiscal policy has led to the erosion of the petrol dollar, the velocity we're packing on debt isn't sustainable without further inflation through the printing press. Thus i agree with your assessment that things will likely continue to inflate asset prices. On the other hand France just passed a tax on hypothetical capital gains. Germany insanely want to rase carbon tax while their entire manufacturing industry is on the ropes, and so on. So were back to the days of "we're the least dirty shirt," and we're going to see increased inflows from foreign shores.

So turning back to crypto, unless the USA meaningfully reduces spending we're expected to hit $50T in debt by 2030 and given that rising devaluation of fiat, Bitcoin is looked not as a competitor to fiat, but as a way to stabilize fiat currency even as the "Mint" (since 95% of new money is made through loans in our banking system) prints more and more paper.

As Neel Kashkari, President of the Federal Reserve Bank of Minneapolis said it, "There is an infinite amount of cash at the Federal Reserve...."

 

[rumwrks]

Cramer always suggests going long but when he amassed his own $200M of wealth by shorting

Cramer is another 'do the opposite of what he says because he's already setup the table stakes in his favor and is dumping the bags" with a generous side helping of crazy fear mongering to keep the plebes fixed in their chairs. It's like Goldman in the day that was having their retail desk do exactly the opposite of what their back desk was doing and pocketing the rubes money along the way. The only reason basically any of these people give "investment advice" is because it's a way to fleece you.

Bitcoin is looked not as a competitor to fiat, but as a way to stabilize fiat currency

It seems odd to me that you would try to use something with even more volatility and less backing to try to stabilize fiat. Fiat is at least backed by the US military and the future productive capacity of the country vs .. not much of anything other than perceptions and price manipulation. You could call that "faith vs faith" but I would argue that one is a lot more concrete form of faith than the other.

This is from 2022 but still explains some (not all even) of the price manipulation going on

An Anatomy of Bitcoin Price Manipulation - SingleLunch

singlelunch.com

Not really btc related but this is an amazing paper well worth the read (the layers of fraud just keep getting deeper it's like they somehow figured out all of the ways to take peoples money and rolled it into one product, it starts out as a simple ponzi and then spirals into layers of madness I couldn't even have imagined): "Forsage: Anatomy of a Smart-Contract Pyramid Scheme" https://fc23.ifca.ai/preproceedings/31.pdf

I might also note that "what bitcoin is for" has changed dramatically over the years I've been following it (I have friends who dropped dozens of BTC for a pizza when that was first a thing.. and yes.. I thought it was a fools game then.. still do.. but I'm more aware that even fools can be bandits now than I was then haha). It was originally a "medium of exchange" (didn't work, to slow) then "bank the poors" (also lol), then "store of value" (if you don't need to cash out to quickly, don't get your wallet hacked, trust the dodgy exchanges, etc..), and so on.

Remember the people who sold you drugs for Bitcoin in 2012? Look how the rise in the price of BTC transformed them? Now they're selling you Bitcoins, except you can't even buy drugs with it anymore.

It's been a solution in search of a problem for a long time. The one consistency is that crypto in general has been a raft of crime and grift and true believers since the beginning. All of which made me wary hah.

As to the so called "smart contract" and "database" features of blockchain.. outside of some very VERY limited immediate global consensus algorithms (i.e. paxos although it's largely obsolete is sort of the canonical example) I have yet to see a functional example of anything that isn't slower, less secure, and overall crappier than non-blockchain alternatives although I had to suffer through some number of them failing at work for a while during the peak of the hype (most luckily never got past the conception phase).

 

[quicksandfarmer]

Bitcoin has a fundamental problem that keeps it from being useful for routine transactions, which is the cost of transactions. The way it works is every ten minutes or so a "block" is created with all the transactions since the last block. That is typically around 2000 transactions. When a block is created, it is essentially a mathematical puzzle. All of the bitcoin miners in the world compete to be the first to solve that puzzle, whoever wins gets 3.5 bitcoins.

At current prices, mining a block is worth about $350,000. With 2,000 transactions per block, that's about $175 per transaction. The inputs into mining are mostly computer power and electricity, and while mining seems to be profitable it's not enormously profitable, a big chunk of that $175 is spent on real costs, and the only way the per-transaction cost would be low enough to be practical for routine transactions would be for the price of bitcoin to drop significantly. But when the price of bitcoin is low there are fewer miners, resolving a block takes longer, and transactions start getting slow.

To get around this, most bitcoin transactions are done on bitcoin exchanges. But when you use a bitcoin exchange it's really no different from using a bank.

 

[drssg]

But if you don't believe MSTR is on the right track, buy puts and short the common.

You are missing the point. Just because someone doesn't believe that Bitcoin will be a legitimate long-term product, it doesn't mean that we feel clairvoyant enough to time the crash for profit.

If you are open to high-risk investments, where timing is everything, then rock on. Many people are more interested in buying and holding a lower-risk investment for the long haul.

 

[kenmbz]

I still remember when derivatives were considered the hot new investment.
The difference here is that bitcoin can be used (somewhat) to avoid prying eyes.
Wonder how many politicians know Bitcoin well (or at least their fin people)? Probably most of them at the DC level.

 

[paulsharvey]

"The difference here is that bitcoin can be used (somewhat) to avoid prying eyes."

I don't really think Bitcoin is as secretive or private as some people think. I'm sure the alphabet folks can and do track it's movements.

 

[kenmbz]

"The difference here is that bitcoin can be used (somewhat) to avoid prying eyes."

I don't really think Bitcoin is as secretive or private as some people think. I'm sure the alphabet folks can and do track it's movements.

Of course they do that, "anonymously"

 

[Snobdds]

https://twitter.com/x/status/1871337420450677108

 

[Snobdds]

I don't like what Michael Saylor has done to the bitcoin market.

He's turned it into a casino instead of a real functioning market.

 

[quicksandfarmer]

I don't like what Michael Saylor has done to the bitcoin market.

He's turned it into a casino instead of a real functioning market.

I hadn't heard his name since the 2000 dotcom crash. I'm surprised he stayed out of jail.