Most reliable / fastest / cheapest / most decentralised / etc.
But still no moat ... since no cryptocurrencies currently have a moat ... so it's momentum plays on early movers, rotation, and bleed outs on most things ... and possible all things until there's a technological solution that creates moats for cryptocurrencies ... the entire sector basically behaves like Top of the Pops :)
It is a rich area of study :
---
Summary of US fiscal and G(overnment) monetary policy direction as of 21 Jan 2025 :
1. Keep spending yearly more than what is earned yearly.
2. Issue treasuries, i.e. take out loans.
3.
a. Print money to buy treasuries, i.e. pay back loans. QE.
b. Lower base rate, i.e. make it cheaper to borrow.
... a/b, money supply increases, inflation increases, DXY weakens.
4.
a1. Sell treasuries, i.e. re/issue loans, burn money (sales proceeds). QT.
a2. Retire treasuries, without replacing them, burning money. QT?
b. Raise base rate, i.e. make it more expensive to borrow.
c. ... new thang ... do not outlaw new asset class, cryptocurrencies, essentially legitimising the issuance of NGO-money ; capitalise on USD-safe-haven status as the contemporary backbone of stablecoin pegs ; regulate the G-money-NGO-money exchange by requiring US-based stablecoins to be backed by treasuries, thereby diverting global demand for cryptocurrencies into an analogy of the global demand for US equities and fixed income securities .
... a1/a2/b/c, money supply decreases, inflation decreases, DXY strengthens ...
... but 4c. only works as long as cryptocurrency is not used commonly as legal tender ; so that too must be blocked for this strategy to work. (US equities and fixed income securities are not used as legal tender, which is why the USD-safe-haven status works in favour of the DXY.)
5.
Broadly, capital markets are used to trick the middleclass into parting with their money for assets whose real values are controlled by the upperclass. The upperclass controls/colludes-with the government to debase G-money in tandem with the varying rate of absorption of money from the middle- to the upperclass, such that purchasing power is consolidated in the upperclass.
4c. is just an extension of this 20th century pattern into an asset class unique to the 21st century. Cryptocurrency issuing entities are just new fangled IPOs. Crypto issuance in the US is likely to be regulated in favour of US oligarchs who benefit from those issuances.
The government breaks-even in the long-run via the debased value of past debt, being paid for by future taxes from a broader future monetary base.
The rich get richer, and the poor get poorer. And public policy will make all the difference between ... a future where NGO-money economies have broken free from G-money economies ... or, a future that is hardly different from the past century.
Banter :
mainly they are hedging against state interests. It is explicitly the hedge, so it is more accurate to say 'investing in anti-government technology' than 'investing in nothing'.
Further banter :
Value is what it's worth now, not what it's worth tomorrow. So not a predictable store. But if we want predictable stores, we buy low volatility, not high. Yet right now the market is buying volatility.
A long position on BTC is a bet that the future value (no specific time) is greater than the present. Pure momentum play. The only moat it has is market share, where the supply is constrained by validators, and demand by users.
The main near term risk to BTCUSD growth is states criminalising it (replaced with CBDC), or direct competition ( BTC.D shrinks massively from 65% ) which is a matter of losing brand equity.
One direct competition vector is tech disruption, the candidates are obvious (#1 ETH, #2 SOL, etc. ). The other vector is pure marketing, which is the common case. But so far no alt-coin marketing campaign has managed to kill BTC.D (share of asset class).
In the very longer term LTC.D, BCH.D, etc. have viable claim on BTC.D because in the long term BTC is not fancy anything. They might all lose to marketing.
XRP, ADA have brand equity based on being 'more' acceptable to states than BTC (ISO 20022).
I prefer to bet on the asset class as a whole. Generally I think the TOTAL ticker is the best benchmark for this.
Further banter :
Yes, I know, it's 'not an asset'
Before I got out of bed on Christmas morning ( or afternoon ), I wrote some reminders to my communities. One of those was about how the difference between learning and sophistry is like the difference between physical models, and LLMs.
Later in the day, it occurred to me that maybe, many people are fascinated by LLMs because these people have been educated to think like LLMs, in order to keep them from true learning, and therefore from political economic effectiveness.Perhaps it is a paradigm of slavery.
People often forget that the sole purpose of Bitcoin, as the first-mover in a new asset class, was to short the USD. And the main use of cryptocurrency to-date, as an emerging technology, is to disenfranchise state governments.
All conversations about their its legitimacy, viability, price, popularity, international political economic SWOT, etc. begin, and end there.
But in order to fully appreciate the breadth of the subject matter, one has to be thoroughly familiar with the legacy of American Exceptionalism, encompassing USD exceptionalism over the past 80 or so years.
What is money? The ontology of the thing, precedes the ethics of the thing.
10. The absence of a global ban on non-state-cryptocurrencies, is implicitly a policy of mutually assured enfeeblement, as states struggle to comprehend the new technology. Meanwhile, states aren't sure about how to handle NGO-cryptocurrencies, but they are tolerated as long as the Five Eyes appear to tolerate them.
1. My Story in the World of Currency Marketing
2. Critical Appreciation in Terms of International Political Economy
3. Five Important Dichotomies
1.
Back in the 80s/90s, when I was around 7 years old, I also issued my own currency. Tech at that time was not very developed, so I just wrote numbers, on orange manila hemp paper. I airdropped the money to my siblings (pitiful for them), and the orange money economy began. The value of the orange money collapsed not long after that, and the economy disappeared, due to the ingenuity of my siblings who mastered the concept of unlimited money supply controlled by radikyat.
For the next 30 years, I did not dare to invest in crypto assets before government regulators issued a strong policy on their use ... so I waited until various parties had caused a huge disaster, and finally after FTX collapsed, only then did I begin studying the crypto asset sector. This is based on the understanding that at any time, any nation that has the weapons to enforce its sovereignty, can ban the use of any foreign currency, including any crypto asset, in its territory in the blink of an eye.
Currently, I consider crypto assets to be an alternative asset class whose principles have not yet been firmly established by any nation. If the government determines that citizens can invest, invest ... with the warning that one day there is also a possibility that it can be banned.
2.
Summary of the current situation in international political economy / EPA / IPE: national currencies are agreements, that is, international tools that enable trade and the transfer of power between certain parties, to protect the security of that party. From this point of view, currency tools can be weaponized by their parties.
However, every nation in the world has not yet banned non-sovereign / non-national currencies, because the presence of non-sovereign currencies can weaken the economic administration of every other sovereign nation. This is called a strategy of mutually assured weakness. Crypto assets are weapons of mass weakness. This is the pattern of governance.
If the entire world could be federated under one government, then the use of crypto currency tools/weapons would disappear, and their value would decline. But we do not expect this to happen in the near future.
3.
**Currencies** can be classified in detail. The following dichotomies are separate, and do not overlap with each other:
**Transfers** of currencies must also be classified in detail.
(Although people consider national paper money to be 'physical' currency, paper money is actually 'fiat' currency, based on the understanding that paper money is an accounting symbol with no intrinsic value. )
How Does Currency Work in General?"3. Five Important Dichotomies"Between sharing this, and making my dinner ... it occurred to me that there may be a bit of work to be done here vis-a-vis an analytical philosophy of money, i.e. 'what does it mean, when we say, money? or a 'dollar/unit-of-other currency'?From what I gather from recent conversations, broadly there is an INFLUENTIAL narrative that the value of money lies in its repayment, and so far I have briefly argued that any promise of repayment depends on an IMPLICIT promise of limited supply. In more detail, any REAL repayment is CONTINGENT upon an implicit ASSURANCE of a specific VELOCITY of money supply.After revisiting the five dichotomies I jotted down in the note above, I found that my third and fourth dichotomies lack clarity, and may imply some confusion.Putting these two broad concerns together, it seems there is a need to articulate a Kuhnian paradigm of what money is.But I will only attempt this after dinner. ( It was in the microwave, and now I have to eat it. )
Cleaned-up summary of common dichotomy errors ( 2025-01-01 ) ( link ) :
I. Most crypto is fiat. Because most crypto is not backed by off-chain assets.
II. The incorrect usage of the term fiat to refer to state-issued-non-crypto money, is regretable.
III. The following orthogonal dichotomies should be considered properly.
Money :
- ... fiat, vs. non-fiat
- ... state, vs. non-state
Money transfers :
- ... physical, vs. representative
- ... digital, vs. non-digital
- ... crypto, vs. non-crypto
Well you say, 'if there is a rock, and rocks build houses, and people want houses, so rocks have present value, anything else is speculation', that's a valid lens.Symmetrically, I say, 'if there's a rock, and some clown in jersey wants to trade it for a wooden house, so rocks have value, anything else is speculation', that's a valid lens too.The only difference is you put faith in the imagery in your head, and I put faith in the imagery in mine. Digging down to the fundamentals of what people do in their heads, is probably beyond the scope of a comment thread on LinkedIn. :)
Further banter :
we could go into anthropic principles, and life goals, and the architecture of political influence begining with the grassroots and ending with the state. But, to what end? In a comment thread like this, there's little room for specifics. If people disagree and want to drill into fundamentals, those are long and deep conversations.
In my own life, I'm basically a hermit. I live on military rations, repair my clothes, and drive a 20-year-old car, and budget everything around a minimum wage job. But I keep tabs on fashion, food, cars, and macroeconomics because other people care about them.
So nearly nothing in life depends on what I value it as. Mostly economics is about other people's values. :)
So the value of X is whatever I can get paid for X right now. Everything ELSE is speculation. The intrinsic value NOW is what it is now. The intrinsic value in the FUTURE is speculation.
The proposed Federal Bitcoin Reserve would be a fundamental step in the global evolution towards Central Banked Digital Currencies. But it remains unclear if this threatens, or enforces, American Exceptionalism and USD hegemony.
Running the simulation :
There are many reasons why each of these options is a pro/con for each state. To be elucidated elsewhere. Modelling these would fun.
This note was originally titled, 'Bitcoin as a Global Reserve Currency : Price Stability, then Evolution, or Obsolescence?'
I am also starting to wonder if the US BTC Reserve enactment would throttle the price growth of Bitcoin, while boosting valuations for non reserve currencies like LTC. It's basically increasing correlation between USD and BTC. So simply by holding BTC in reserve, there's a fed-put on the BTCUSD.
These are just thought floating around in my head that I've been scribbling down. No proper research has been done about this and there's probably some critical flaws in my hypotheses.
thanks. I'm just here for free tuition.(1/2)- The intended purpose of a thing is irrelevant to the functions it actually fulfills. There are now 'newer technologies than bitcoin for ( all sorts of things related to decentralised immutable ledgers )'.- BTC's value at the present is (FWIW) due to its (admittedly outsized) role as the 'lingua franca' for the asset class ... at about 60% of capitalisation.- The 'intrinsic value' of any fiat ( USD, BTC, etc. ) is basically zero, and its extrinsic value is a bunch of trust in a promise of limited supply. (There's a commonly cited argument that the value of state fiat is down to the state's promise to repay state debt, but that's a flawed perspective as real repayment of state debt is contingent on the more fundamental promise of limited supply of state fiat.) State fiat, or currency in general, functions as a language for denominating obligations, and has no intrinsic value. (You may disagree, I'm just elaborating on my position.)- Back to the 'current' function of BTC. ( I have a word limit. Hah. ) Reports seem to glomp Fed and Tresury holdings https://www.federalreserve.gov/data/intlsumm/current.htm .
(2/2)- Regardless of whether the Fed or the Treasury holds it, the reserve asset would be 'on USGOV' from the point of non-US parties.- We're discussing the proposal that USGOV could add BTC to its reserve assets. There's no reason to to do so, EXCEPT, that the asset has been marketed to public as a hedge against USD M2 expansion, and every ex-USGOV is buying it as a potential replacement currency vs the USD. Of course you wouldn't be able to agree with this point if you disagreed with the 'intrinsic value of any fiat is zero' specified above; but assuming this is true, then by extension ...- The very act of USGOV holding a large quantity of BTC, should cause an increase in USD-BTC correlation ( which you seem to agree with ), which implicitly runs contrary to very 'current reason' that people hold BTC, regardless of its originally intended use. At some magnitude of USGOV holdings of BTC ( because we are examining the proposed strategy ) this tempers or outright reverses the rise of BTCUSD.- At that point, USGOV doesn't even need to sell BTCUSD, it just holds it as a reserve currency. And the THREAT of a BTCUSD sale, followed by a reduction of M2, would temper / reverse BTCUSD price growth even more.
Further banter :
Yours is a commonly cited valuation of currencies - I have argued elsewhere in this comment tree that 'the repayment reason' is a strawman, which fundamentally depends on 'the limited supply reason'. Briefly :
There are actually three parties involved in the use of a currency.
- - ( A : they who control its circulating supply )
- - ( B,C : they who use it to denominate obligations )
B and C can only use a currency if A sticks to a promise to reasonably limit supply. The unlimited supply of the currency by A would deflate the value of the currency over time, thus making it useless to B, and C as a denominator of value.
This is true of all fiat ( non-gold backed ) currencies, regardless of whether that fiat is issued by a state ( USD, EUR, etc. ) or a decentralised community bank ( BTC, BCH, etc. )
Further banter :
Facts : it's NOT unlimited, because when it IS unlimited, you get Zimbabwe. B and C can only have the faith to use A's currency, because there's an implicit understanding that the expected rate of inflation is low. If it were high, B and C would simply switch to another currency.
The technology of distributed immutable ledgers, simply lets anyone set up their own currency. It's just plain old NGO-issued currency, BUT WITH MUTUALLY ASSURED CONTROLS OVER SUPPLY.
Caveat : average cryptocurrency user has no idea how it works ... hence no actual control over its supply ... but for whatever reason they trust the NGO community bank more than states. So they go long one fiat, and short the other.
Nothing complicated. Just a plain old loss of trust, resulting in trades. But at scale, it becomes stupidly interesting lol. Now BlackRock ( you know the news )
Further banter :
Well, the problem is partly because US and USD exceptionalism is an offensive play to begin with. No one knew how to get around it because all the other roads (currencies) sucked.
The technological innovation was simply to create a road (currency) that any NGO with a communications network could use to set up a central bank with controls visible to the users.
With that in place, at this point, it is US/D exceptionalism which is under attack. The US has various levers for defense. It can, as you say, go deflationary and spike unemployment ... or it can do (one of the other funny/stupid things we're discussing).
Further banter :
the 'why haven't they just banned BTC yet?' Is one of the more interesting questions.
So far there are 2-3 angles I have on this :
- 1. It's a mutual assured enfeeblement strategy, to backdoor all state-fiat, since every state doesn't want too much strength in any other state's fiat.
- 2. It's a deer in headlights reaction to not knowing how states can efficiently use decentralised ledgers, blockchains, CDBCs, for defense or offensive purposes. So everyone just tolerates it while they look at testtubes like Tether, where TetherInc can remotely confiscate any USDT and remit the backing USD to TetherInc cooperates with.
- 3. States have some vested interest in the existing BTC network. No idea who the 64% of anon validators are right now. Right?
Further banter :
No, no, not quite.
"Bitcoin is simultaneous long-and-short position versus global carry" - I finally got to read the details on December 2024's latest jargon.
Bitcoin is not so 'short global carry', because BTC's price in other currency terms will deflate if those currencies are rebased ( monetary deflation ). This is also why the creation of a US Strategic Bitcoin Reserve is both a short-term booster, and a long-term dampener on the BTCUSD pair.
First of all, everyone is familiar with the concept that if the US has an SBR, then SBRs become mainstream, and 'every' country will have one too.
In the short-term, SBRs drive down Bitcoin supply, and thus drive up BTCUSD. But in the long-term, the very feature of Bitcoin which gives it value is eroded ... Bitcoin's value is mainly derived from decorrelation with the global M2, or the unhinged money printers which are the collective fiscal irresponsibility of the world's governents. So by the time every state has Bitcoin, Bitcoin's price appreciation will start to stabilise, implicitly becoming a low-tech CBDC.
At that point, it's rather likely that the UN either (a) builds a CDBC protocol around using Bitcoin, (b) forks Bitcoin or establishes an alternative which is more technologically sophisticated which becomes the UN-CDBC, or a protocol around a bunch of per-state CDBCs. The (b1, b2) contigencies are that Bitcoin continues to co-exist with UN-CDBC, or becomes outlawed/denigrated.
Further banter :
Update : I've started to jot down 'an articulation of money, from first principles'. Meanwhile i'm going to walk-back the hypothesis that 'states holding hard money, while issuing soft money, implicitly temper the appreciation of the hard money against their soft money', as I did a bit of modelling, and realised it's probably not true, however, more models are needed : what if at some point, the market for the soft money collapses by simple rejection from counterparties, who demand to be paid in the hard money?
Further banter :
( SBR impacts : still thinking aloud in conversations, prior to much clarity of modelling )
Not very deeply studied, but it seems like
(1) someone could buy most of the BTC in existence driving prices up but, they wouldn't be able to sell it in the long term, except by driving prices down again.
(2) The market would front run the sell any time it could, so there would be a perpetual discount on futures due to the threat of dumping.
(3) The magnitude of the perpetual discount increases, whenever buyers with an agenda to sell are seen buying.
(4) This dampens the price-impact of buying unless everyone agrees not to sell.
(5) In the evangelical phase of BTC, it is easy to persuade the majority of hodlrs that other hodlrs are not inclined to sell, because they are on the same side of the table, with the state M2 printers on the other side, however the more BTC is sold to states, the less BTC is held by non-states, and the more influence states have over the price of BTC.
(6) At this point, states can simply move the price of BTC any which way they prefer. States can threaten to dump BTC, and burn the proceeds, which subsequently keeps the price of BTC down by deflating M2, the denominator. The real price of BTC appears to be preserved in this case, though the nominal price of BTC would go down.
(7) At some point, states may or may not get tired of playing with rebels, and decide to migrate from a BTC SBR to a per-state or all-state CBDC. They may do this by forking BTC, if BTC is already well-adopted, or by outlawing BTC and booting up new networks. Subsequently the price of BTC would be depressed again due to mass withdrawal of retail participation, unless of course there is a concerted effort by retail participants to become subject to criminal prosecution (entirely possible, just probably not soon).
I don't have a crystal ball. So this stuff is a good thought experiment.
TIL :
( Yet another note, so matter of testing different ways of saying the same thing to different audiences. )
Recap of how blockchains work :
I don't know - the economic incentives are kinda trite. Be my guest, hazard a guess. Could be the US deep state, or BRICS, or someone else.
McAfee's interview is a nice example of shit served with ice cream :1. BTC is really, really, slow. Read up on TPS for other alternatives, there are many.2. Filling in forms is really, really, fast. If you have 1990s QR or other OCR infrastructure to begin with. (Mostly we don't, and that's a cheaper policy solution than deregulating cryptocurrency.)3. There are lots of enforcement mechanisms to keep sheep in the pen. The motivation for states to avoid those for now should give any reasonable analyst cause for concern : besides the mutually assured enfeeblement of state money, where does surveillance fit in? And after all, who runs the validators?4. You don't have to tax crypto users, if you can tax crypto validators. By extension in one, of many possible futures, where decentralised validation is the global monetary infrastructure, the tax on physical inputs would have skyrocketed, to control who can afford to run validators.
1. Cerita Saya dalam Dunia Pemasaran Mata Wang
2. Penghayatan Kritis dari segi Ekonomi Politik Antarabangsa
3. Lima Dikotomi Penting
The biggest threat to Bitcoin is another cryptocurrency. I don't know which one that would be, but you can take a guess.
1. Nearly all publicly accessible cryptocurrency operators ('validators") are fundamentally non-state-organisations, or NGOs, equivalent to unregistered religious societies. The industry lingo for this is DAO : decentralised autonomous organisation. Unless states outlaw such organisational activities, publicly available cryptocurrencies get to exist. States are incentivised to keep these around, as a form of mutually-assured financial vulnerability. No state wants another state's fiat to be the fiat franca, therefore nearly all states currently implicitly support non-state-fiat by virtue of not outlawing non-state-fiat.
2. Bitcoin however, has an overly concentrated share-of-mind. Currently it holds about 60% of the entire asset class's capitalisation, a fraction which represents what the investment community at large knows about cryptocurrencies in general. One might say the same of gold, among other metals, so maybe this isn't going away. However Bitcoin is becoming more complicated in ownership, financially leveraged in the economy, and intertwined with other asset classes. Moreover, unlike gold, Bitcoin is subject to catastrophic failure via cartelisation of validators and the 51-percent-attack case.
3. Under what circumstances might large holders of Bitcoin be forced to sell their holdings? (Looking at you, $MSTR.) Every professional asset manager's RMD should have this contingency documented clearly. Under what circumstances might nation-states collectively agree to outlaw non-state-fiat? Ditto RMD fiduciary duty. Under what circumstances might an ex-Bitcoin cryptocurrency gain more economic momentum than Bitcoin? The RMDs must have a plan.
4. Pro-tip. RMDs never have comprehensive plans.
5. I guess we'll just wait and see how things develop.
6. Everyone can go back to work now.
