Is it too soon to talk about Crypto yet?

[MinnesotaEric]

Back in November of 2022, two fun crypto discussions got shut down for reasons that where not disclosed.

Now that on January 10th of 2024 eleven spot Bitcoin ETFs were launched on American exchanges and allowed to be held in retirement accounts, and those ETFs have become the most successful ETF launches in history,* is it too soon to again try to talk about crypto in this forum?

Right now Bitcoin has surpassed the value of all the silver in the world and more and more companies and countries are holding Bitcoin as a reserve currency. Moreover, the incomeing SEC Chair has suggested that Bitcoin ETF swaps may become permissible allowing Bitcoin ETF holders to swap their ETF shares for the actual underlying Bitcoin and move it to a private wallet reversing the disturbing trend that with institutional acceptance Bitcoin is increasing becoming more and more centralized, usurping Bitcoin's original bankless peer to peer foundations.

What say you about this brave new world?

The beginnings of the incoming predicted apocalypse that ushers in a one world government, or a good thing leading to crypto reward credit cards and crypto banking?

* it has typically taken the average successful ETF 5-7 years for inflows to slow to typical year over year growth expectations.

 

[Hay Dude]

I, for one, would like to understand it more. Would like to get on board before it’s too late, although I think it already is. It would be so great to see people have a new investment that could help lift them out of hopeless situations.
It sounds like a currency of “freedom” to me and that’s great.

So sick of the typical investment or currency paths.

 

[MinnesotaEric]

Back when our original crypto discussion was going on, Bitcoin's spot price in November 2022 ranged from $16-18,000. The current spot price as I type is $97,160, a 539% gain in 25 months, or an aggregated 21.56% gain per month since November of 2022. My original dollar cost averaging in the first month the Spot Bitcoin ETFs became available in January of 2024, those investments are up at least 120% in eleven months.

Why?

Because more and more companies and nation states are starting to hold Bitcoin as a reserve asset. For companies, Bitcoin is seen as a better way to increase shareholder value and wealth rather than holding depreciating fiat currencies, issuing dividends, or share buybacks. For nation states, as a way to bolster the value of their fiat currency. Pensions and global wealth funds have been buying the Bitcoin ETFs with both hands as a way to legally gain exposure to Bitcoin, while Blackrock is telling its institutional investors that Bitcoin is a new asset class and that they should allocate at least 2% of their portfolio to Bitcoin.

So think with me: global institutional assets under management are worth about $900 trillion dollars right now and while Blackrock only has about $17 trillion under its management, and the current market cap of Bitcoin is just under $2 trillion, if just 2% of managed assets eventually went into Bitcoin, then Bitcoin's market cap would rise to $18 trillion dollars and each Bitcoin would be worth around $857,000, or an 880% gain from the spot price I noted above. But that's just institutional investors.

But if more and more nation state central banks start to buy Bitcoin as a way to bolster their fiat currencies, then we can see a much more rapid rise in the value of Bitcoin.

This whole wave of increasing buying is called hyperbitcoinization, which defined "is when Bitcoin is fully mainstreamed by adoption from national governments, which many theorize would trigger an ‘arms race’ as central banks race to beat other countries and create Bitcoin reserves – fueling an aggressive Bitcoin price rally."

 

[Oaktree]

I, for one, would like to understand it more. Would like to get on board before it’s too late, although I think it already is. It would be so great to see people have a new investment that could help lift them out of hopeless situations.
It sounds like a currency of “freedom” to me and that’s great.

Not sure what you mean by "currency of freedom", but I don't understand it either. Any explanation I've read on how it works has just made my head explode, and if anything makes it even more obtuse sounding.
It just seems to be something totally speculative with no real value nor any entity backing it. I don't see what is sustaining its growth.

 

[MinnesotaEric]

"I don't see what is sustaining its growth." Very valid.

All currency systems are "faith based" and all currencies or what we think of as "money" are a store of value, as well as convenience. When faith is high in their value, then those currencies can purchase more goods and services, and conversely, when faith is low in those currencies, then they buy less good and services. If a currency is declared "fiat" as a national currency, then that currency becomes convenient because a person knows that another person must take it at face value as payment for goods and services.

Okay, set so the thoughts about what is money I shared above on a shelf, so to speak.

All modern fiat currencies issued by nation state treasuries use a system called "fractional reserve banking" wherein when a loan is taken out from a bank, the bank writes in their ledger as a debt in your account for the amount lent to you, and as a debit in their ledger. As you pay back the loan with interest, the debit in their ledger decreases and the interest you pay is their profit. The thing of it is, is the lent amount (the principle) was newly created money out of thin air, as as you pay that back, the newly created money decreases the bank's debit but the principle and interest, that money becomes permanently newly created money. In fact, 95% of the money scooting around the world right now was not printed or created by nation state Mints, but by banks. Money creation normally blows peoples' minds when they first learn about it, but an old cartoon remains the best simplied explanation of it that I'm aware of.

 

[OffgridTractor]

It has value because people say it has value. It's not producing any thing valueable, as far as I can see. Until that changes I'll stick to ETF's that produce things that people need or want. Those have done very well over the last couple of years, without all the speculation.

 

[MinnesotaEric]

It has value because people say it has value. It's not producing any thing valueable, as far as I can see. Until that changes I'll stick to ETF's that produce things that people need or want. Those have done very well over the last couple of years, without all the speculation.

Carry $100,000 in currency, metals, or diamonds through an airport.

While you could be robbed, you'll get caught with it and they will confiscate it because they assume you're up to "no good."

I can carry $100K in Bitcoin on a thumb drive and without the key phrase, even I cannot get at it.

Try to send me $100,000, immediately.

Your bank had better have a Medallion Bond.

There will be a waiting period.

I can send $100K of Bitcoin in ten minutes to anybody on the internet.

Store your wealth long term.

Real estate has maintenance and carrying costs and has depreciated against the value of Bitcoin.

Fiat currencies dilute themselves as sovereign debt accumulates. The last twenty years has halved the value of the US dollar. You've been collecting interest? well, your actual buying power has halved (minus 50%) over the last 20 years.

Invest in metals? Not as bad as holding cash, but the buying power of Gold is negative 5% a year because the value of gold has not kept up with inflation because as the price goes up, people are incentivized to go dig more of it up.

Since its inception, Bitcoin is up 149% per year with compounding interest and the total amount of Bitcoin is fixed.

 

[Tpondel]

“While you could be robbed, you'll get caught with it and they will confiscate it because they assume you're up to "no good."

Not true. If you cross borders cash has to be declared. Inside the US no such requirement.

 

[Fuddyduddy1952]

I'm not quite understanding the crypto advocacy except to get others to buy which in turn drives the price up. It's ether. Half of crypto currencies have gone belly up. Bitcoin started in 2009 by...whom? Started at about $0, my nephew did buy some on a whim when it hit $20.
I much prefer tangible assets and certainly ones paying dividends and capital gains...but whatever floats your boat, to each their own.
Per Elon Musk (FWIW): "I literally own zero cryptocurrency, apart from . 25 BTC that a friend sent me many years ago," Musk confessed.
Read about the largest Bitcoin owner ($65B):
"Changpeng Zhao (Chinese: 赵长鹏; pinyin: Zhào Chángpéng), commonly known as CZ, is a Chinese-born Canadian businessman. Zhao is the co-founder and former CEO of Binance, the world's largest cryptocurrency exchange by trading volume as of July 2024.[2] He resigned as the CEO in November 2023 after pleading guilty to a money laundering charge in the United States and was sentenced to four months in prison in April 2024.[3][4] Zhao was released from prison in September.[5]"

 

[BackRoad]

Not confrontational, interested in why it is not actually just a widely embraced ponzi scheme.