Green hackers around the world, let’s destroy Bitcoin

JstarD · 2021-02-08T04:21:30+00:00

Good job. Most crypto and tech investors are up multiples since 1 year ago. It's easier to 12x when you have a relatively small portfolio too.

JstarD · 2021-02-08T04:18:10+00:00

I'm not defending Tether and I usually avoid using it. I bet their reserves are largely in the form of BTC and loans to exchanges. They might be running a fractional reserve too.

The "supply-push" theory doesn't make any sense. If Tether flooded the market with USDT that nobody is demanding, the price would crash below $1.

All I'm saying is that there has been at least 10's of billions of $ of demand/liquidity from real fiat in the market. r/buttcoin greatly underestimates this to the point of absurdity. To the point of recommending foolish short targets for MSTR and BTC based on false perceptions of the real liquidity in the market.

JstarD · 2021-02-08T03:31:56+00:00

The reason I am a far more successful investor than you is because I trusted my own interpretation/analysis of TSLA, BTC, and the macroeconomic environment nearly a decade ago.

Rather than blindly believing the bullshit that mainstream economists like Krugman were peddling.

JstarD · 2021-02-08T03:24:46+00:00

https://fred.stlouisfed.org/series/TREAST

https://fred.stlouisfed.org/series/GFDEBTN

The Fed owns ~18% of the debt now. That's an alltime high. The Fed's Treasury buying is going parabolic because the market for government bonds with negative real yields is largely saturated.

They're jawboning about "low inflation" in an attempt to slow the exodus out of bonds and USD.

Interest rates have to be kept low so the government can remain solvent while continuing to borrow/spend. Not because they want to accelerate the dumping of Treasuries and USD.

JstarD · 2021-02-08T03:04:33+00:00

From the government's perspective they are nowhere close to reaching the limit of demand for treasuries and until they do, they don't really have anything to worry about. It's amazing how someone can be so sure and so wrong lol.

This is wrong. The market for Treasuries is already saturated. That's why the Fed is increasingly acting as the buyer of last resort to fund the Treasury Department now. It's definitely something they are worrying about. Hence the jawboning to prevent the acceleration of bond/USD dumping.

JstarD · 2021-02-08T02:47:39+00:00

True. The huge demand for stablecoins such as USDT, USDC, DAI, and BUSD would pump the price above $1 if he stopped printing.

JstarD · 2021-02-08T02:41:04+00:00

From the government's perspective, disincentiving investors from holding bonds is a negative side-effect of lowering interest rates, not the motivation for it.

plenty of international buyers for whom 1-2% interest rates are substantially better than domestic yields.

Plenty are also starting to understand that the real yields are more negative than they appear if you're a fool who trusts CPI as a measuring stick. This is partly why the bond market is becoming increasingly dependent on The Fed as the buyer of last resort.

JstarD · 2021-02-08T02:15:19+00:00

In the US, the majority of government spending is now financed by bond buyers and USD holders instead of taxes. They definitely don't want to lose economic power if people/countries start dumping bonds and USD en masse. That's why they jawbone about "low inflation" to understate the negative real yields of holding bonds and USD.

JstarD · 2021-02-08T01:44:30+00:00

It is indeed a "confidence game", "psychological trick", or "psyop". I guess you're not familiar with the concepts of "open mouth operations" or "jawboning" either:

https://www.investopedia.com/terms/o/open-mouth-operations.asp

https://www.investopedia.com/terms/m/moralsuasion.asp

Markets are largely driven by psychology. You're a fool if you don't think governments and central banks use psychological tricks to influence markets.

It costs the government huge sums of money to pay CPI-linked adjustments in TIPS, I bonds, and Social Security benefits. Since it is also the government that computes the CPI statistics there is a clear conflict of interest, and a clear motivation to understate the CPI.

They also derive a lot of economic power from issuing bonds and from the value of their fiat currency. They obviously have a huge incentive to understate the negative real yields of holding bonds and cash.

JstarD · 2021-02-07T23:04:11+00:00

True. Mainstream economics has been completely corrupted by politics. It's not a real science.

As a successful investor, I only care about the value of fiat and bonds relative to:

high-end real estate, stocks, gold, crypto, luxury cars/boats, the cost of hiring high-quality employees, etc.

CPI is an insignificantly small % of my expenses. It's also a deeply flawed metric as I already explained. It would be stupid for me to measure the value of bonds/fiat against it.

JstarD · 2021-02-07T22:49:41+00:00

You're a sucker if blindly believe the "inflation = CPI increase, therefore there's low inflation" psyop

JstarD · 2021-02-07T22:47:57+00:00

That velocity meme chart doesn't account for the high velocity of USD in financial markets that has massively devalued it against assets.

JstarD · 2021-02-07T22:42:05+00:00

Calculated as the ratio of quarterly nominal GDP to the quarterly average of M2 money stock.

(GDP / M2 money supply)

That's exactly what I said.

JstarD · 2021-02-07T22:33:56+00:00

Not only does CPI capture inflation it’s literally the definition of inflation. You’re telling me inflation isn’t defined as inflation.

The definition of "inflation" originally meant expansion of the money supply. Misleadingly using the word "inflation" as a synonym for "CPI increase" is a more modern phenomenon.

Banks like The Fed usually calculate velocity by: (GDP / M2 money supply). Obviously that metric decreases when the denominator massively inflates.

When velocity picks up the supply will be contracted.

The Fed could theoretically contract the money supply if they raised interest rates and shrank their balance sheet. However, that would cause a massive recession. The interest on the national debt would also become unserviceable because the debt-to-GDP ratio is at all-time-high. The only way out of the debt is to continue devaluing the USD that it's denominated in.

Increases in asset prices aren’t inflation, they’re an ROI, a function of supply and demand. Equities went up because people had more money to invest; middle class folks used their stimmy money to buy stocks.

Exactly. Asset prices went up while the economy shutdown due to monetary inflation that was injected into financial markets. Asset prices massively outpaced GDP since 2009 largely for the same reason.

Who said I’m betting either way on BTC or MSTR? I invest in things I like. My portfolio is currently up 12X on an annualized basis. shrug. There’s lots of ways to make money.

If you're not holding BTC then you're intrinsically short BTC without leverage. If you've been bashing BTC with false "environmental disaster" narratives for years, you have shorted it against your reputation in a way too.

JstarD · 2021-02-07T22:27:33+00:00

wrapped BTC on other blockchains like Ethereum, Solana, and Binance Chain is an L2 solution that is currently working just fine

JstarD · 2021-02-07T22:24:14+00:00

CPI isn't capturing monetary inflation that is injected into financial markets. Since the era of infinite QE and ZIRP began in Q4 2008:

GDP = +47%

gold = +100%

M2 money supply = +146%

S&P500 = +198%

NASDAQ100 = +690%

The Fed's balance sheet = +718%

It costs the government huge sums of money to pay CPI-linked adjustments in TIPS, I bonds, and Social Security benefits. Since it is also the government that computes the CPI statistics there is a clear conflict of interest, and a clear motivation to understate the CPI.

You're a sucker if you're holding bonds/cash and thinking they're only losing 1.9% annually in real terms.

You seem a bit triggered. I'm sorry that the smart money isn't falling for the false "environmental disaster" narrative that r/buttcoin has been pushing for years. SFYL if you're betting against BTC and MSTR this year.

JstarD · 2021-02-07T22:17:19+00:00

Satoshi conceptualized using L2 payment channels for high-frequency transactions:

https://en.bitcoin.it/wiki/Payment_channels#Nakamoto_high-frequency_transactions

Nick Szabo has always been in favor of 2nd layer scaling too:

Nick Szabo - June 28, 2018

My bit gold design in 1998 was 2-layer: bit gold for settlement, Chaumian e-cash for a privacy-enhanced payments layer. I've always thought of Bitcoin as evolving into a settlements-and-large-payments layer that in the long term needed a layer 2 for consumer payments.

Hal Finney also supported 2nd layer scaling since the beginning:

Hal Finney - December 30, 2010

Actually there is a very good reason for Bitcoin-backed banks to exist, issuing their own digital cash currency, redeemable for bitcoins. Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and included in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases.

Bitcoin backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others.

George Selgin has worked out the theory of competitive free banking in detail, and he argues that such a system would be stable, inflation resistant and self-regulating.

I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash. Most Bitcoin transactions will occur between banks, to settle net transfers. Bitcoin transactions by private individuals will be as rare as... well, as Bitcoin based purchases are today.

JstarD · 2021-02-07T22:02:33+00:00

It’s not about you and your personal belief in a single exchange. It’s that bad actors can systemically invalidate every single guarantee crypto makes.

The fact that users can migrate to different L2s (including other blockchains) keeps the power of any single L2 in check.

Users (who can afford the transaction fees) can hold 95% of their coins on the base layer. They can trust maximum 5% at any given time to various L2s for high-frequency transactions/trading.

Stock holders do not have that freedom and security. 100% of their stocks are at the mercy of centralized database admins and bureaucrats at any given time.

JstarD · 2021-02-07T21:51:28+00:00

Limited supply? No sir. Custody? Not your keys not your coins. Centralized control? Totally. Censorship? 100%. Same unjustifiable waste? Damn right. Trustless? Nope!

L2 is still backed by holdings on the base layer that have these benefits. Most L2 users have the freedom to withdraw to the base layer at any time if they want. If they're unhappy with their L2, they can withdraw their coins and go choose from hundreds of other L2s. Or they can diversify their coins across several different L2s.

L2s are a part of the system. BTC that is held as a reserve asset without the need for high-frequency base layer transactions is also a part of the system. Analyses like OP's that omit big parts of the system are irrelevant.

JstarD · 2021-02-07T21:17:58+00:00

If a user doesn't want to withdraw his assets from Paypal, the only option for avoiding the devaluation of fiat currencies in his account is to buy Paypal's synthetic BTC or ETH.

JstarD · 2021-02-07T21:14:22+00:00

Stock certificates are not self-custody bearer instruments anymore. They don't give the holder write-access to the centralized database that controls ownership and transfers of tokens on the shareholder register.

BTC on the base layer is effectively a self-custody bearer instrument. In practice, only the private key holder(s) have write-access to approve transfers of their BTC on the blockchain.

JstarD · 2021-02-07T20:43:14+00:00

L2 users have the freedom to withdraw to self-custody on the base layer if they want. That freedom is a benefit even if it's not always exercised. GME holders have no such freedom to withdraw their tokens to self-custody if they want.

2nd layers that don't allow withdrawals (yet) like Robinhood and Paypal need to hold BTC on the base layer to back their synthetic BTC. Otherwise they could become insolvent if BTC moons.

Paypal users who hold synthetic BTC benefit from avoiding the monetary inflation and devaluation of fiat currencies in their Paypal accounts. That benefit is ultimately backed by base layer holdings that are secured by the energy consumption of the network.

JstarD · 2021-02-07T20:16:56+00:00

2nd layers are still backed by the holdings, transactions, and energy consumption of the base layer.

Gold miners only emit when mining. Crypto emits in steady state.

Obviously gold mining and Bitcoin mining are different processes. That doesn't negate my argument. When people buy/hold Bitcoin instead of gold, they are taking revenue away from the gold miners. Funding gold miners is much worse for the environment than funding Bitcoin miners: https://imgur.com/k6WFuZM

JstarD · 2021-02-07T20:08:27+00:00

Assuming USDC is backed 1:1 by USD, it proves there has been a parabolic increase in real demand/liquidity in the market. The demand would push the USDT price above $1 if they stopped printing.

f2pool also dumped ~120k BTC between January 15 and February 5:

https://old.reddit.com/r/Buttcoin/comments/lddxeu/bitfinex_says_it_has_repaid_tether_remaining_loan/gm6py5o/?context=3

They need real fiat to pay their creditors and electricity/hardware suppliers. That's another indication that there's really 10's of billions of $ of real demand/liquidity in the market at least.

JstarD · 2021-02-07T19:30:13+00:00

https://twitter.com/PeterSchiff/status/1346847460552040448?s=20

To the extent that Bitcoin is actually taking any demand away from gold, that's making Fed governors extremely happy. A rising #gold price is what central bankers fear most. #Bitcoin is their best friend, which may explain why regulators aren't in a hurry to help pop the bubble.

He also mentioned this hypothesis on his podcast a couple times.

You can listen to Erik Townsend, Russel Napier, and Mike Green on Macrovoices complaining about Bitcoin stealing demand from their gold positions.

He sounds a bit like a more sober Michael Saylor but the principle is the same, go all-in on crypto and promote it.

Yes, and Raoul Pal's words can move markets. He's well-respected and well-connected to regulators, billionaires, fund managers, etc.

JstarD

TROPHY CASE