Coinbase Onramp Now Supports Buying Crypto With Apple Pay

[Nugget]

Acquisitions are not remotely similar to how Bitcoin is bought/sold and traded.

This is precisely the point that you previously disagreed with. Stocks are not remotely similar to Bitcoin in this regard.

An argument is a connected series of statements intended to establish a definite proposition... A contradiction is just the automatic gainsaying of anything the other person says.

 

[flmmkr]

This is precisely the point that you previously disagreed with. Stocks are not remotely similar to Bitcoin in this regard.

An argument is a connected series of statements intended to establish a definite proposition... A contradiction is just the automatic gainsaying of anything the other person says.

No, it's not. He stated that crypto is a zero sum game. If that is true of crypto, then it is true of stocks.

If you want to use that example, then you can say the same thing about Bitcoin. Someone or a company can come along and buy up all the Bitcoin on the market, currently valued at $2T and everyone wins. That's the same thing as the scenario that was just presented. It's not realistic and does not apply to this discussion.

If a publicly-traded company goes out of business that is a zero sum game too.

I didn't contradict myself.

 

[Nugget]

If a publicly-traded company goes out of business that is a zero sum game too.

First, let's be clear, "publicly traded" is not a distinction that matters in this context. The financial mechanics are the same for any company irrespective of where you go to buy its shares. It's the same for companies listed on the NYSE as it is for privately-held companies that are only traded in private transactions.

A counterexample to your argument would be companies that are spun up for a limited period of time. This is common in many industries, filmmaking/entertainment being a prime example. Just about every studio movie that gets made is in the context of a transient business that is spun up for the duration of production and then effectively goes bankrupt when all the work is complete. These companies have shareholders who invest in them. That's how the movie gets funded.

If the movie attracts enough moviegoers such that profits from their spending exceeds the cost of production, then that successful movie yields profits for the company that created it. Those profits are then distributed to all the shareholders. They all take out more money than they put in, enjoying their proportional share of the profits as a reward for producing a movie that took in more money than it cost to make.

In the end that company goes out of business with $0 in the bank and no assets. The shareholders all made money.

 

[Analog Kid]

Bitcoin did not run in the opposite direction. At the start of 2020 Bitcoin was about $7,000. Today it's near $100,000. Did it see volatility in that period? Yes. But overall it did not run in the opposite direction.

It rose from 2020 to 2021 when inflation was particularly low during the pandemic. Then it fell from 2021 to 2023 when inflation rose during the supply chain crisis. Then it rose from late 2023 through 2024 as inflation started coming down. Is the correlation perfect? No. Is it correlated? Yes. Is it causal? Who knows.

I fully expect you to declare this nonsense and whatever, but I'm hoping your background reading various kinds of charts and graphs make this easier for you to understand. The blue line is essentially inflation based on CPI. The red line is the percent change in bitcoin prices from the previous year scaled and inverted on a semilog plot to show the correlation with a reasonable sense of scale and to avoid logs of negatives. Up on the graph means bitcoin growth is slowing, down means it's increasing. Above the cyan line means the bitcoin price is falling. Log(100 / (%chg(BTC) + 100))

The graph is here for the curious-- it clearly shows that the rate of increase in BTC prices slows and goes negative when inflation is higher and speeds up in periods of disinflation.

The U.S. gold strategic reserve is there to allow the government to still function among the global economy in case of emergency. If the dollar were to collapse, other nations would stop using the dollar, and would not accept it as a form of payment. In that case, the U.S. government could send gold instead of dollars. That's it.

We keep a strategic reserve so we can barter with gold in the end times? No... Did you come up with that yourself?

The Treasury holds the gold and has issued gold certificates to the Fed. The Fed holds those certificates as partial collateral for dollars in circulation. Fun fact: the certificates value the gold at about $42 dollars per troy ounce and that price does not change with the market. The market price for gold is currently over $2700 per troy ounce. The total market value of the gold is more than 50 times what the Fed is credited.

Let's see. The value of gold in 2010 was about $1,100. It's now about $2,700. That's 145% growth. Not bad.

Bitcoin in 2010 was worth about $0.01 (it was less than that actually). It's now $97,000. That's $9,699,999%.

If you want to take it from just the last 5 years, gold is up only 80%, and Bitcoin is up about 1,300%. If Bitcoin keeps doing what Bitcoin has been doing for the last 15 years, then yes, you could actually use Bitcoin to eliminate the national debt over a long period of time. Is that the best use of the Bitcoin? Probably not. Better to try to monetize the Bitcoin reserve than use it to actually pay off the debt.

Dear gods, the thought of the government playing the bitcoin market for profit is absolutely terrifying. I'm sure nobody would consider doing such a thing as it would be the height of fiscal irresponsibility.

The U.S. has many problems. Two of them are the debt AND the deficit. Even if they eliminate the deficit, there is still more than $36T of debt to deal with. That debt must be serviced. The cost of servicing that debt will wear on the economy even if the deficit is eliminated because many programs that promote economic growth will need to be cut to eliminate the deficit. It's already been analyzed and there's no way to cut enough spending to eliminate the deficit without causing many other problems. The expense of servicing the debt is too high. Of course, the deficit was the root of the problem and allowed the debt to get this high, but now it's more of an issue than just eliminating the deficit.

Funny how people always look at the expenditure side of the ledger and say "sorry, can't be done".

If the deficits were eliminated, growth in the economy would manage the debt. It's the risk of debt growing faster than the economy that is the concern. Would it be nice to not have to service a debt? Sure, but when we started running a surplus people freaked out just as much as they do when we run deficits. Putting taxpayer money on a dice roll to pay it off? No thank you.

 

[Analog Kid]

It is immutable because you can't append anything to the blocks once they are added to the blockchain. Appendable implies that you could add additional data to each block. Immutable refers to each block, not the entire chain.

Like I said, you don't understand blockchain and crypto.

Funny how when you're wrong, your goto is always to say someone else doesn't understand.

For the record, here's what you're saying is wrong:

If what you mean is that the historical record is immutable and you can only add new records to the end of the chain, then the way that is said is "append-only".

History, the blocks and their linkages, is immutable. The chain, the actual ledger is not. You can only append new blocks on the chain. It is append only.

It wouldn't be a ledger if you couldn't append new records.

 

[Analog Kid]

What are you talking about?

PayPal didn't go out of business and didn't cease to exist... EVER!

PayPal was not a publicly traded company when eBay acquired it. When eBay acquired PayPal, PayPal remained a separate company that was just owned by eBay. PayPal was still a separate corporation from eBay, just owned by eBay. And now PayPal is still a separate company no longer owned by eBay and is actually publicly traded.

Acquisitions are not remotely similar to how Bitcoin is bought/sold and traded.

You go on and on about what people don't understand and you can't make this simple leap of logic? Integrated, made a subsidiary, is it that much of a leap to take? Ebay is Person B in my story. A company was started, people invested, Ebay bought it, Ebay made more money from it than they spent to buy it. Everyone made money.

 

[wbeasley]

You go on and on about what people don't understand and you can't make this simple leap of logic? Integrated, made a subsidiary, is it that much of a leap to take? Ebay is Person B in my story. A company was started, people invested, Ebay bought it, Ebay made more money from it than they spent to buy it. Everyone made money.

1984: the ability to hold two opposing thoughts simultaneously and think both are correct

or something along those lines...

 

[Analog Kid]

There are cryptocurrencies that do generate income though, such as ETH if you stake it.

That income comes from the same investment funds. Corporate profits do not.

 

[flmmkr]

It rose from 2020 to 2021 when inflation was particularly low during the pandemic. Then it fell from 2021 to 2023 when inflation rose during the supply chain crisis. Then it rose from late 2023 through 2024 as inflation started coming down. Is the correlation perfect? No. Is it correlated? Yes. Is it causal? Who knows.

View attachment 2460894

A 3 year correlation doesn't mean what you're saying applies at all times. The entire investment market was correlated. Stocks, bonds, crypto, everything correlated to 1. It was a macro event.

And look at the chart a little closer and read it better. According to your chart:
As inflation started dropping in the first half of 2022, the price of Bitcoin was falling. (Not opposite)
As inflation started dropping at the end of 2022 and through the first half of 2023, the price of Bitcoin was still falling. (Not opposite).

The rest of your graph, which is a longer period of time shows the opposite of what you're stating.

Look even closer, and you see the chart shows the price of Bitcoin compared to the year prior. That's not the way to look at it. You need to see what the actual price movement was, not what it was compared to the year prior.

Here's a better graph to use that shows the value of Bitcoin with the CPI inflation rate. Note that this is log because the value changed so much from the beginning until now.

Here's a regular (non-log) view:

Yes, there's volatility, but the overall trend is up.

And here's gold against inflation (regular):

(and in log):

As inflation started rising in 2020 the price of Bitcoin overall increased, though there was a lot of volatility, especially between March and November. Inflation peaked in June 2022, and fell from 9.1 to 3.0 in June 2023. During that time of disinflation, Bitcoin fell in price 50% by November 2022, but then rose from there. See, there really isn't correlation that you're talking about.

The graph is here for the curious-- it clearly shows that the rate of increase in BTC prices slows and goes negative when inflation is higher and speeds up in periods of disinflation.

I will say there may be some credibility to this part of your statement, that there may be a change in the pace of growth or decline during periods of high inflation or dramatic changes to inflation. However, I don't think it makes much sense and there needs to be more data and a deeper study into the possibility to prove it.

Likely there is a better reason for the correlation. What else was happening during that time?

Interest rate changes. It was when the Fed started raising interest rates that the growth stopped and the price of Bitcoin fell. And it wasn't just Bitcoin and crypto, it was stocks and bonds too. Like I said before, it was a major macro event.

That said, Bitcoin/crypto started falling before interest rates were raised and started growing again before interest rates hikes were halted. There are other factors at play, and it's probably a combination of many things.

We keep a strategic reserve so we can barter with gold in the end times? No... Did you come up with that yourself?

The Treasury holds the gold and has issued gold certificates to the Fed. The Fed holds those certificates as partial collateral for dollars in circulation. Fun fact: the certificates value the gold at about $42 dollars per troy ounce and that price does not change with the market. The market price for gold is currently over $2700 per troy ounce. The total market value of the gold is more than 50 times what the Fed is credited.

Why Does U.S. Government Keep Gold Reserves? | U.S. Money Reserve

Wondering why the U.S. Government keeps physical gold reserves? Read why gold is central banker's asset-of-choice as an alternative to the dollar.

www.usmoneyreserve.com

https://www.cato.org/blog/digital-gold-fallacy-or-why-bitcoin-cant-save-us-dollar-1

From that second article:
"If the United States government has no need for foreign exchange, what, if any, need has it for gold? According to the Bitcoin Policy Institute, besides having “historically…been an important part of US global financial strategy, supporting confidence in the dollar and serving as a hedge against inflation or currency crises,” the US gold stockpile serves “as a last resort financial asset that can be quickly re-monetized in extreme circumstances, providing the US with a historically reliable source of liquidity to address severe financial or geopolitical challenges that disrupt the global monetary order.” Finally, gold reserves allow the government “to subtly influence precious metal markets, ensuring price stability during periods of significant monetary or geopolitical upheaval.”

It has nothing to do with "backing" the U.S. dollar. Also, I used $2,700 in my calculations, not $42, so yes, it's not that much gold, and certainly not enough to back the U.S. dollar.

Dear gods, the thought of the government playing the bitcoin market for profit is absolutely terrifying. I'm sure nobody would consider doing such a thing as it would be the height of fiscal irresponsibility.

There's a bill in Congress right now to do it. Trump has stated he wants to do it. Other countries have already started doing it. It's a very real possibility.

Funny how people always look at the expenditure side of the ledger and say "sorry, can't be done".

If the deficits were eliminated, growth in the economy would manage the debt. It's the risk of debt growing faster than the economy that is the concern. Would it be nice to not have to service a debt? Sure, but when we started running a surplus people freaked out just as much as they do when we run deficits. Putting taxpayer money on a dice roll to pay it off? No thank you.

I agree with what you're saying, in concept. Eliminate the deficit and grow the economy out of it. Sure, even though it would probably take many years. The reality though is that it's highly unlikely for the U.S. to balance the budget at this point. There aren't enough expenses that can be cut without hurting the economy, which would hurt the growth rate of the economy.

 

[flmmkr]

Funny how when you're wrong, your goto is always to say someone else doesn't understand.

For the record, here's what you're saying is wrong:


History, the blocks and their linkages, is immutable. The chain, the actual ledger is not. You can only append new blocks on the chain. It is append only.

It wouldn't be a ledger if you couldn't append new records.

I never said you couldn't append new records. I just said "immutable" in "immutable ledger" as used by the crypto industry refers to the blocks, not the blockchain. I'm just following terminology used by the industry.

We can say the blocks (or history) are immutable and the blockchain is append-only. It does make sense for clarity and I'm not arguing with that.

 

[flmmkr]

You go on and on about what people don't understand and you can't make this simple leap of logic? Integrated, made a subsidiary, is it that much of a leap to take? Ebay is Person B in my story. A company was started, people invested, Ebay bought it, Ebay made more money from it than they spent to buy it. Everyone made money.

An example of M&A doesn't apply to Bitcoin. No one company is going to come along and buy all the Bitcoin and make everyone profitable. That's like saying some company is going to come along and buy up all the U.S. dollars.

Your argument is that Bitcoin is a zero sum game because if someone profits then someone has to lose. That's not true because the person buying it can hold it until Bitcoin is worth more than they paid.

The only scenario where Bitcoin becomes a zero sum game is if the price of Bitcoin goes to zero. Possible? Sure. There is a non-zero chance of that happening, so yes it is possible.

What I'm saying is the same concept applies to stocks. If a publicly-traded company goes bankrupt then the stock price is going to zero and some of the stockholders are going to lose money. That also makes stocks a zero sum game if a company goes bankrupt.

(I'm saying "publicly-traded company" now because it's clear that you don't understand the similarities in how Bitcoin is traded and how stocks are traded.)

 

[flmmkr]

That income comes from the same investment funds. Corporate profits do not.

It comes from the transaction fees and block rewards. What is your point? Profit is profit.

 

[flmmkr]

First, let's be clear, "publicly traded" is not a distinction that matters in this context. The financial mechanics are the same for any company irrespective of where you go to buy its shares. It's the same for companies listed on the NYSE as it is for privately-held companies that are only traded in private transactions.

A counterexample to your argument would be companies that are spun up for a limited period of time. This is common in many industries, filmmaking/entertainment being a prime example. Just about every studio movie that gets made is in the context of a transient business that is spun up for the duration of production and then effectively goes bankrupt when all the work is complete. These companies have shareholders who invest in them. That's how the movie gets funded.

If the movie attracts enough moviegoers such that profits from their spending exceeds the cost of production, then that successful movie yields profits for the company that created it. Those profits are then distributed to all the shareholders. They all take out more money than they put in, enjoying their proportional share of the profits as a reward for producing a movie that took in more money than it cost to make.

In the end that company goes out of business with $0 in the bank and no assets. The shareholders all made money.

"Publicly-traded" is a distinction because the concept of M&A does not apply to how Bitcoin is bought/sold/traded.. See my previous post.

Corporate and subsidiary structures also does not apply to how Bitcoin is bought/sold/traded.

I'm not sure, but you may be misinformed about how movies are made.

If a studio is making a movie, they may or may not start an LLC for the production of the movie itself. Usually they do, but that's not guaranteed. A large part of the reason is for liability purposes, but there are other reasons as well, including financials.

The LLC that is created is not owned by shareholders. It's owned by the studio.

When the movie is finished, the LLC does not have to be closed, but many times it is. If the LLC is closed, the LLC does not go bankrupt. Any remaining assets are transferred back to the studio. That's not bankruptcy.

There are also independent productions that go into production with the use of financing and/or investors. Those productions complete the film and then try to sell it to a studio or release them independently. If the movie is sold to a studio, the production company (usually an LLC) may or may not continue operating. They could just sell the movie and then go make another movie, or they can sell the movie to the studio and then close the production company.

Again, these are not bankruptcy and are simply examples of M&A, and that is a concept that does not apply in any way to Bitcoin.

Also, a movie studio could receive profits from movies it releases, and not all those profits are distributed to the shareholders like you said. Some may, via dividends paid to shareholders, but much of the profits are held for future development, productions, and operations. In reality, a movie studio could be profitable and their stock price could still decline.

 

[Nugget]

The LLC that is created is not owned by shareholders.

This is flaty, unambiguously incorrect.

All corporations have shareholders and that is precisely the mechanism by which the studio owns all or a portion of that LLC. The studio and other potential investors are the shareholders. They hold shares in the LLC.

I'm unsurprised that you don't appear to understand this, but I continue to be amazed by the confidence you seem to hold in the incorrect views you've shared with the thread here.

 

[Analog Kid]

Look even closer, and you see the chart shows the price of Bitcoin compared to the year prior. That's not the way to look at it. You need to see what the actual price movement was, not what it was compared to the year prior.

Here's a better graph to use that shows the value of Bitcoin with the CPI inflation rate.

The graph you're showing compares price (price of a bitcoin) to rate of change in price (%change in the price of bread per year). The graph I presented compares two rates of change over the same 1 year time frame. The goal here is identify relationships between bitcoin and inflation. There's no doubt that bitcoin has grown incredibly quickly, but that's not the question at hand. The question at hand is whether bitcoin acts as an effective hedge against inflation so what is needed is to model the price of BTC as some larger trend plus some function of inflation and to leave aside the larger trend and isolate the inflation relationships. Looking at rates of change means the overall growth is basically a vertical offset and can be ignored by using different axes and we can then compare the dynamic behavior of each.

What the graph shows is that when the dollar is losing value relative to it's trend (the trend being pretty close to the Fed target of 2%) then bitcoin is also losing value at a faster rate relative to its trend and vice versa. To be an effective hedge, you'd want bitcoin to grow in value or hold value relative to trend.

Likely there is a better reason for the correlation. What else was happening during that time?

Interest rate changes.

As said earlier:

The definition of a hedge is that it tends to run counter to the variable you're trying to protect against-- bitcoin typically loses value during periods when inflation rises and gains value when inflation falls. More likely it's running counter to interest rates which go up when inflation rises.

Why Does U.S. Government Keep Gold Reserves? | U.S. Money Reserve

Wondering why the U.S. Government keeps physical gold reserves? Read why gold is central banker's asset-of-choice as an alternative to the dollar.

www.usmoneyreserve.com

https://www.cato.org/blog/digital-gold-fallacy-or-why-bitcoin-cant-save-us-dollar-1
From that second article:
"If the United States government has no need for foreign exchange, what, if any, need has it for gold? According to the Bitcoin Policy Institute, besides having “historically…been an important part of US global financial strategy, supporting confidence in the dollar and serving as a hedge against inflation or currency crises,” the US gold stockpile serves “as a last resort financial asset that can be quickly re-monetized in extreme circumstances, providing the US with a historically reliable source of liquidity to address severe financial or geopolitical challenges that disrupt the global monetary order.” Finally, gold reserves allow the government “to subtly influence precious metal markets, ensuring price stability during periods of significant monetary or geopolitical upheaval.”

It has nothing to do with "backing" the U.S. dollar. Also, I used $2,700 in my calculations, not $42, so yes, it's not that much gold, and certainly not enough to back the U.S. dollar.

So you could quote US Money Reserve ("America's Gold Authority"!) which sells gold and concludes their article with a sales pitch, and libertarian think tank laundering an unsourced assertion from the "Bitcoin Policy Institute", or you could just quote the Federal Reserve itself:

Chapter 5. Federal Reserve Notes

50.01 General
This chapter discusses special accounting and reporting procedures applicable to Federal Reserve notes. The Federal Reserve Act requires that Federal Reserve notes be issued to a Reserve Bank through the Federal Reserve Agent, or through an Assistant Federal Reserve Agent appointed by the Agent, upon pledge of adequate collateral security by the Bank. [...] The specified assets consist of the Bank's gold and SDR certificates, loans under Section 13 of the Federal Reserve Act, and assets acquired under the provisions of Section 14.

(emphasis mine)

It's collateral for the dollar.

There's a bill in Congress right now to do it. Trump has stated he wants to do it. Other countries have already started doing it. It's a very real possibility.

Yes, which is absolutely terrifying. The primary purpose of fiscal policy is stability, and there's nothing stable about a Bitcoin reserve.

With Nevada becoming a swing state, I wonder how long before we have a Strategic Casino Chip Reserve.

There aren't enough expenses that can be cut without hurting the economy, which would hurt the growth rate of the economy.

Funny how people only look at the expenditure side of the ledger and say "sorry, can't be done.".

 

[flmmkr]

This is flaty, unambiguously incorrect.

All corporations have shareholders and that is precisely the mechanism by which the studio owns all or a portion of that LLC. The studio and other potential investors are the shareholders. They hold shares in the LLC.

I'm unsurprised that you don't appear to understand this, but I continue to be amazed by the confidence you seem to hold in the incorrect views you've shared with the thread here.

Look at any LLC established by a movie studio and you will see the studio is the owner and employees of the studio are the managing members listed in the Articles of Organization, Statement of Information, and Operating Agreement. The shareholders of the studio are not listed as owners or managers of the LLC.

Now, there may be shareholders that have a significant portion of the shares and may be able to use that to influence what happens with the LLC, but they do not have control of the LLC. Profits from the LLC will not pass directly to the shareholders of the studio. Again, profits are shared with shareholders via dividends and those dividends are not equal to all the profits or revenue.

Here's an example: Disney is a corporation. It owns Lucasfilm LLC. The likely millions of shareholders of Disney stock do not own Lucasfilm LLC. Furthermore, Lucasfilm establishes different LLCs for various productions. Lucasfilm LLC owns and manages those production LLCs. The millions of Disney shareholders do not own Lucasfilm LLC or the various LLCs under Lucasfilm LLC. The Disney shareholders can benefit from them as Disney earns revenue from Lucasfilm LLC, but they do not own Lucasfilm LLC and do not receive profits directly from Lucasfilm LLC. It all goes through Disney.

It may be semantics, but that is technically how it works.

 

[Analog Kid]

An example of M&A doesn't apply to Bitcoin. No one company is going to come along and buy all the Bitcoin and make everyone profitable. That's like saying some company is going to come along and buy up all the U.S. dollars.

I keep getting confused, did you think Bitcoin was a currency or not. I feel like that keeps changing.

Truth is there's no reason anyone couldn't buy up all the bitcoin. It's unlikely for the simple reason that if you did you'd be left with nothing. When you buy up all the stock you are left with something of value: a company that you alone own. When you buy up all the bitcoin (or the dollars for that matter) you are left with nothing of value. The sole purpose of currency is to be a proxy in transactions and not to carry any value in itself. That is, in part, the point.

But that's not the whole point. It's entirely possible for everyone to make money through a stock without someone acquiring all the shares-- my story included that because it makes it easier to picture (or so I'd hoped...). @Nugget's film companies are an example where nobody buys all the stock and the company goes out of business and everyone still makes money.

Your argument is that Bitcoin is a zero sum game because if someone profits then someone has to lose. That's not true because the person buying it can hold it until Bitcoin is worth more than they paid.

Which only hands the problem to the next person and delays the inevitable. If someone profits, there will be a loss. The more profit that is taken the bigger the corresponding losses will be. Arithmetic.

More importantly, and I can't emphasize this strongly enough, you can't hold bitcoin until it's worth more than you paid you can only hold bitcoin and hope it becomes worth more than you paid. As I showed, that can't be true forever. Like any pyramid scheme, it will eventually run out of dupes and stop going up. It's lasted this long because it has a global pool to draw dupes from, but the dupe pool is not infinite.

The only scenario where Bitcoin becomes a zero sum game is if the price of Bitcoin goes to zero. Possible? Sure. There is a non-zero chance of that happening, so yes it is possible.

It is a zero sum game from the outset-- this isn't Calvinball, the game doesn't change midway through.

It doesn't have to go to zero, it is in the rules of the game.

What I'm saying is the same concept applies to stocks. If a publicly-traded company goes bankrupt then the stock price is going to zero and some of the stockholders are going to lose money. That also makes stocks a zero sum game if a company goes bankrupt.

I'll say this again-- the investment money isn't the only money in the stock market. The company is generating profits and distributing that to investors. There is outside money. It is not a closed system. It is not a zero sum game.

PayPal stock went away and everyone profited, even Ebay. In my scenario the whole company went away, and everyone profited. That's not a guaranteed outcome, but it is not even a possible outcome with bitcoin.

 

[Analog Kid]

It comes from the transaction fees and block rewards. What is your point? Profit is profit.

No. Corporate profits come from outside the circle of investors, they come from customers. It is new money coming in. With Etherium, gas fees are transferred from one investor to another. It is not new money coming in, it is the same money circulating. If one investor is winning by earning a fee, another investor is losing by paying it. When a company pays a dividend, all investors win, nobody loses.

 

[flmmkr]

The graph you're showing compares price (price of a bitcoin) to rate of change in price (%change in the price of bread per year). The graph I presented compares two rates of change over the same 1 year time frame. The goal here is identify relationships between bitcoin and inflation. There's no doubt that bitcoin has grown incredibly quickly, but that's not the question at hand. The question at hand is whether bitcoin acts as an effective hedge against inflation so what is needed is to model the price of BTC as some larger trend plus some function of inflation and to leave aside the larger trend and isolate the inflation relationships. Looking at rates of change means the overall growth is basically a vertical offset and can be ignored by using different axes and we can then compare the dynamic behavior of each.

I totally get what you're saying here, however, I pointed out the deficiencies in your analysis where Bitcoin was not moving in the opposite direction, which was most of the chart. Therefore, your theory doesn't hold up.

It would be interesting to find one single metric that tells us how and why Bitcoin price moves the way it does. However, it's probably not going to be that simple. It requires multiple metrics and analysis.

Bitcoin is going to react and correlate uniquely because it's a risk asset and inflation/debasement hedge.

What the graph shows is that when the dollar is losing value relative to it's trend (the trend being pretty close to the Fed target of 2%) then bitcoin is also losing value at a faster rate relative to its trend and vice versa. To be an effective hedge, you'd want bitcoin to grow in value or hold value relative to trend.

At times, does Bitcoin lose value? Yes. It's a volatile asset. Do you need a hedge against inflation for 1 year or for 10 years?

If you need it for 1 year, go buy TIPS.
If you need it for 10 years or more, go buy TIPS, gold, or Bitcoin. Simple as that.

I'll take the hedge that has the higher risk-adjusted return. You can take whatever you want.

And Bitcoin does hold its value relative to the trend. Look at any 3 year or more time period and you will see that Bitcoin worked as an excellent inflation hedge. Gold not so much.

As said earlier:

And as I said, your interpretation of the data in the chart you posted is flawed. I pointed out the periods where your theory didn't hold up and how Bitcoin's price over the longer trend increased with inflation there. Look at a gold chart. The price of gold decreased at the same time Bitcoin's price decreased, while inflation was rising and high. It was a total risk-off sell everything environment due to macro events.

So you could quote US Money Reserve ("America's Gold Authority"!) which sells gold and concludes their article with a sales pitch, and libertarian think tank laundering an unsourced assertion from the "Bitcoin Policy Institute", or you could just quote the Federal Reserve itself:

Chapter 5. Federal Reserve Notes
(emphasis mine)
It's collateral for the dollar.

Yes, the Federal Reserve holds gold and SDR notes. This is not news.

Does the Federal Reserve own or hold gold?

The Federal Reserve Board of Governors in Washington DC.

www.federalreserve.gov

Although the Federal Reserve does not own any gold, the Federal Reserve Bank of New York acts as the custodian of gold owned by account holders such as the U.S. government, foreign governments, other central banks, and official international organizations.

A small portion of the gold held by the U.S. Treasury (roughly $600 million in book value)--about five percent--is held in custody for the Treasury by the Federal Reserve Banks, as fiscal agents of the United States. The vast majority of this gold is located in the vault at the Federal Reserve Bank of New York, and a very small portion is on display in several Federal Reserve Banks. The remaining 95 percent of U.S. Treasury gold ($10.4 billion in book value) is held in custody for the Treasury by the U.S. Mint.

So the Federal Reserve and Reserve banks hold 5% of the U.S. gold strategic reserve, or about $35 billion. Again, not enough to back the U.S. dollar. And nowhere in what you posted does it say the gold is used to back the U.S. dollar. Does the Federal Reserve have it as collateral? Yes, but that's not the same as backing the U.S. dollar.


Yes, which is absolutely terrifying. The primary purpose of fiscal policy is stability, and there's nothing stable about a Bitcoin reserve.

With Nevada becoming a swing state, I wonder how long before we have a Strategic Casino Chip Reserve.

Do you realize that the U.S. government has strategic reserves of all kinds of assets, including commodities. Those fluctuate in price and value all the time. Having a strategic reserve of Bitcoin is not going to affect the government or the economy just because the value of Bitcoin is fluctuating. They aren't backing the U.S. dollar or the economy with it. It's a strategic reserve in case the asset is needed in an emergency situation.

Maybe look at it this way... the bill sets up the U.S. to establish a reserve of 1 million BTC over 5 years. They actually have close to 200,000 already. Another 800,000 at current prices is $80 billion. Do you think an $80 billion loss is going to send the U.S. government into some dire economic collapse? Of course not. The government wastes billions of dollars every month. But... what if that $80 billion investment turns in to $1 trillion (BTC price to $1 million). What if it goes up more? $80 billion over 5 years is 0.24% of the federal budget (at BTC prices and current spending).

Funny how people only look at the expenditure side of the ledger and say "sorry, can't be done.".

I'm all for cutting spending. There's a ton of waste in the U.S. government. However, let's be realistic:

1) You need to find at least $2 trillion to cut. That's a very tall order and is going to cause a lot economic problems.
2) You need to get both sides of the House and Senate to agree. They haven't been able to really agree on anything for 30 years now. What makes you think they are going to suddenly get the job done when they are currently at their most divisive?

 

[flmmkr]

I keep getting confused, did you think Bitcoin was a currency or not. I feel like that keeps changing.

I guess it could be depending on your definition of "currency." I think of it more as a form money and store of value, than a currency. Currency implies that it's generally accepted as a form of payment, which it is not if you go by the percentage of people who have adopted it or used it. But as money (a medium of exchange), yes.

Could it one day be a full-fledge currency? Maybe, but I don't think it works particularly well as a currency because of the transaction settlement time and the transaction fees. You're better off with a stablecoin or some other cryptocurrencies for that than Bitcoin.

Truth is there's no reason anyone couldn't buy up all the bitcoin. It's unlikely for the simple reason that if you did you'd be left with nothing. When you buy up all the stock you are left with something of value: a company that you alone own. When you buy up all the bitcoin (or the dollars for that matter) you are left with nothing of value.

Agreed, which is why I compared it to someone buying up all the U.S. dollars. Bitcoin's value, in part, comes from the use of the Bitcoin network. (see Metcalf's Law) If only one person owns all the BTC, then the network wouldn't get used and the BTC wouldn't have value. If Bitcoin becomes centralized in that very few people own all the BTC, then the network activity will decrease and the BTC will lose value.

The sole purpose of currency is to be a proxy in transactions and not to carry any value in itself. That is, in part, the point.

If you go buy groceries and are using U.S. dollars as the currency to make the purchase, what is the U.S. dollar a proxy for? Nothing.

Your statement was correct prior to 1971, when the dollar was a proxy for gold. It's no longer back by gold, and thus is no longer a proxy for gold or anything else.

But that's not the whole point. It's entirely possible for everyone to make money through a stock without someone acquiring all the shares-- my story included that because it makes it easier to picture (or so I'd hoped...). @Nugget's film companies are an example where nobody buys all the stock and the company goes out of business and everyone still makes money.

Which only hands the problem to the next person and delays the inevitable. If someone profits, there will be a loss. The more profit that is taken the bigger the corresponding losses will be. Arithmetic.

I showed how that example concept is flawed as it wasn't entirely correct or realistic for what we're discussing. You said crypto is a zero sum game. I said it is if the price goes to zero, but so are stocks if the company goes out of business or bankrupt. There's no situation where a company goes out of business or bankrupt where at least some shareholders don't lose. A merger/acquisition is not the same. A subsidiary being dissolved is not the same.

More importantly, and I can't emphasize this strongly enough, you can't hold bitcoin until it's worth more than you paid you can only hold bitcoin and hope it becomes worth more than you paid. As I showed, that can't be true forever. Like any pyramid scheme, it will eventually run out of dupes and stop going up. It's lasted this long because it has a global pool to draw dupes from, but the dupe pool is not infinite.

It is a zero sum game from the outset-- this isn't Calvinball, the game doesn't change midway through.

It doesn't have to go to zero, it is in the rules of the game.

Well there is population growth.

But could you be right that at some point the value of Bitcoin plateaus and the price no longer increases? Sure, that's possible. We will have to wait and see. One thing that works against the possibility is the decreasing inflation rate, eventual halt to inflation of the BTC supply (around the year 2140), and the potential and likelihood of lost BTC. It's estimated that 3.8 million BTC are already lost. As more are lost from poor private key management and the value of the Bitcoin network hypothetically no longer rises, if there is a confirmable decreasing available supply, then the value of each BTC could still rise ever so slightly.

That said, I can see the possibility of what you're saying, but that will likely happen many years from now since the user adoption is still incredibly small.

With any investment you need to monitor the investment and be ready to get out if necessary. Even with Bitcoin and I've been clear about the possibility of Bitcoin going to zero, just like any other investment.

I'll say this again-- the investment money isn't the only money in the stock market. The company is generating profits and distributing that to investors. There is outside money. It is not a closed system. It is not a zero sum game.

PayPal stock went away and everyone profited, even Ebay. In my scenario the whole company went away, and everyone profited. That's not a guaranteed outcome, but it is not even a possible outcome with bitcoin.

I'll say it again too... the concept doesn't apply to Bitcoin and is not realistic for what you're describing. If what you described above actually happens and the price of Bitcoin stops rising, then it's worth whatever it rose to. Nothing says the price has to fall at that point. Why would it need to for only that reason? It's a scarce asset with minimal (now) to zero (in 2140) inflation rate.

The only way your zero sum game theory comes to play with Bitcoin for sure is if Bitcoin goes to zero. That's similar to a company going bankrupt and out of business and the stock price going to zero. It's in no way similar to a merger/acquisition.

If you're looking for me to say "sure, there are scenarios where investors in a company can all come out in the money if the company is bought for more than the investors invested", then sure I can agree with that. I never disputed that. I just said that concept doesn't apply to this zero sum discussion. I specifically said tell me about a company that went out of business and bankrupt and no one lost. That is the most similar scenario between your zero sum crypto theory and companies/stock.

 

[wbeasley]

I keep getting confused, did you think Bitcoin was a currency or not. I feel like that keeps changing.

Truth is there's no reason anyone couldn't buy up all the bitcoin. It's unlikely for the simple reason that if you did you'd be left with nothing. When you buy up all the stock you are left with something of value: a company that you alone own. When you buy up all the bitcoin (or the dollars for that matter) you are left with nothing of value. The sole purpose of currency is to be a proxy in transactions and not to carry any value in itself. That is, in part, the point.

But that's not the whole point. It's entirely possible for everyone to make money through a stock without someone acquiring all the shares-- my story included that because it makes it easier to picture (or so I'd hoped...). @Nugget's film companies are an example where nobody buys all the stock and the company goes out of business and everyone still makes money.



Which only hands the problem to the next person and delays the inevitable. If someone profits, there will be a loss. The more profit that is taken the bigger the corresponding losses will be. Arithmetic.

More importantly, and I can't emphasize this strongly enough, you can't hold bitcoin until it's worth more than you paid you can only hold bitcoin and hope it becomes worth more than you paid. As I showed, that can't be true forever. Like any pyramid scheme, it will eventually run out of dupes and stop going up. It's lasted this long because it has a global pool to draw dupes from, but the dupe pool is not infinite.




It is a zero sum game from the outset-- this isn't Calvinball, the game doesn't change midway through.

It doesn't have to go to zero, it is in the rules of the game.



I'll say this again-- the investment money isn't the only money in the stock market. The company is generating profits and distributing that to investors. There is outside money. It is not a closed system. It is not a zero sum game.

PayPal stock went away and everyone profited, even Ebay. In my scenario the whole company went away, and everyone profited. That's not a guaranteed outcome, but it is not even a possible outcome with bitcoin.

Buyin all the BitCoin for yourself is like buying a banana taped on a canvas - and then eating.
Left with nothing.

Except a lot of fruit shops comparing $2 a kilo bananas as bargain investments

 

[flmmkr]

Buyin all the BitCoin for yourself is like buying a banana taped on a canvas - and then eating.
Left with nothing.

Except a lot of fruit shops comparing $2 a kilo bananas as bargain investments

No argument with that statement.

 

[Analog Kid]

It would be interesting to find one single metric that tells us how and why Bitcoin price moves the way it does. However, it's probably not going to be that simple. It requires multiple metrics and analysis.

Bitcoin is going to react and correlate uniquely because it's a risk asset and inflation/debasement hedge.

There's obviously no single metric. The point of a hedge though is to isolate certain correlated behaviors and bitcoin is not a hedge against inflation. Debasement isn't a thing, it's shibboleth among goldbugs.

At times, does Bitcoin lose value? Yes. It's a volatile asset. Do you need a hedge against inflation for 1 year or for 10 years?

If you need it for 1 year, go buy TIPS.
If you need it for 10 years or more, go buy TIPS, gold, or Bitcoin. Simple as that.

I'll take the hedge that has the higher risk-adjusted return. You can take whatever you want.

And Bitcoin does hold its value relative to the trend. Look at any 3 year or more time period and you will see that Bitcoin worked as an excellent inflation hedge. Gold not so much.

Nevermind, I don't think you understand the point I'm trying to illustrate and it's very likely because my illustration was a bit complicated. I knew that chart would be difficult for people to grok...

Does the Federal Reserve have it as collateral? Yes, but that's not the same as backing the U.S. dollar.

collateral | kəˈlat(ə)rəl |
noun
1 [mass noun] something pledged as security for repayment of a loan, to be forfeited in the event of a default


It's there as a pledge of security for the dollar, which is how I'd define backing. As that site shows, it's not the only thing backing the dollar, much of it is backed by US Treasuries and probably a shipping container of Reagan's Jelly Belly's.

The details don't matter-- the point is that the gold certificates are collateral for the dollar (actually it's for dollars, not the currency itself but the printed notes). It's not there to support a post apocalyptic economy despite the unsubstantiated claims of a crypto think tank trying to sell crypto as a reserve.

Maybe look at it this way... the bill sets up the U.S. to establish a reserve of 1 million BTC over 5 years. They actually have close to 200,000 already. Another 800,000 at current prices is $80 billion. Do you think an $80 billion loss is going to send the U.S. government into some dire economic collapse? Of course not. The government wastes billions of dollars every month. But... what if that $80 billion investment turns in to $1 trillion (BTC price to $1 million). What if it goes up more? $80 billion over 5 years is 0.24% of the federal budget (at BTC prices and current spending).

(Can you fix your post? You've made it look like I said this.)

So my Nevada Strategic Casino Chip Reserve is gaining traction already! With all the money the government wastes, why not? Come on lucky 17!

 

[flmmkr]

There's obviously no single metric. The point of a hedge though is to isolate certain correlated behaviors and bitcoin is not a hedge against inflation. Debasement isn't a thing, it's shibboleth among goldbugs.

It has been demonstrated as a hedge against inflation. You may not like it as a hedge against inflation for yourself, but it's well-known to be one.

As far as debasement, yes that is a thing. It has happened to other currencies before. It hasn't happened to the dollar, but that is a real possibility with where the national debt is going. Hopefully it doesn't happen, but it could.

Nevermind, I don't think you understand the point I'm trying to illustrate and it's very likely because my illustration was a bit complicated. I knew that chart would be difficult for people to grok...

I understood the chart just fine. I pointed out the issues with your theory based on the details of the chart.

collateral | kəˈlat(ə)rəl |
noun
1 [mass noun] something pledged as security for repayment of a loan, to be forfeited in the event of a default


It's there as a pledge of security for the dollar, which is how I'd define backing. As that site shows, it's not the only thing backing the dollar, much of it is backed by US Treasuries and probably a shipping container of Reagan's Jelly Belly's.

The details don't matter-- the point is that the gold certificates are collateral for the dollar (actually it's for dollars, not the currency itself but the printed notes). It's not there to support a post apocalyptic economy despite the unsubstantiated claims of a crypto think tank trying to sell crypto as a reserve.

Details do matter.

The U.S. gold strategic reserve is not collateral for the U.S. dollar, because the U.S. dollar is not a debt. The gold would be collateral against the national debt and other obligations the U.S. government may have for administration and operations, particularly internationally.

The U.S. dollar is also not backed by Treasuries (that is an absurd notion). Treasuries are debt instruments and future obligations of the U.S. government. The U.S. government would need to come up with dollars to satisfy its obligation of the Treasuries, not the other way around.

 

[wbeasley]

Why are we so off topic?

It matters not what real currencies or stocks are.
They exist. They have for a long time.

The pretend currency is different.
It's not based on real value. Just a pool of money.

Bit like when we had a horse race sweep at work. The finite pool of money gets divided into winners and losers.
Most lose.
But this is an ongoing sweep not relying on a single race event.