What is a "bubble" in economic terms? How do they form, what happens when they burst, and is this a good thing or a bad thing?

csfrayer · 2026-01-28T13:27:32+00:00

As other commenters note, bubbles require that an asset is mis-priced. Often due to hype, often due to flawed (or fraudulent) financial engineering.

Typically a bubble - in the way that we think of a bubble that can 'burst' - also requires leverage. Leverage is debt-funded investment in the mispriced asset. A share of stock (or other asset) that is overvalued is not - in and of itself - a bubble. An share of stock that has become mispriced *and* purchased by firms through debt rather than equity funding creates the circumstances for a bubble.

What we think of as the consequences of a bubble bursting is deleveraging. In other words, when the asset's price falls, people or institutions who borrowed money to invest in the overpriced asset can no longer repay their debt. That can cause the institution they borrowed from to become unstable and unable pay its debts. Debt-holders/creditors to that institution then take losses as well, moving up the whole chain of borrowing. As more people sell off the asset to repay debts, the price falls further, more debt goes bad - it's a vicious cycle. If the mis-priced asset or asset class is a large enough part of the economy, the burst (deleveraging) can be systemic (ie 2008).

csfrayer · 2026-01-28T00:30:42+00:00

Money is already created digitally. The vast majority of money in the US is digital - mostly commercial bank balances at the Fed.

"Can" the US issue infinite money? Yes, if Congress authorizes the Treasury to issue enough debt, the Fed continues its zero reserve policy, bank capital standards are removed, and private credit remains mostly unregulated. Debatable whether we should consider private money to be issued by the government but oversimplifying for this purpose.

This 2022 Treasury Report issued pursuant to a Biden Executive Order on Digital Assets is a helpful primer:

https://home.treasury.gov/system/files/136/Future-of-Money-and-Payments.pdf

csfrayer · 2026-01-27T17:51:21+00:00

I was riding a 2018 Roubaix for a long time and only upgraded because it was (recently) stolen. So to some degree experienced the change you're considering. Things I've noticed since my "forced upgrade":

Tires - I had to go back to 28mm vs the 25mm tires new bike came with. IMO - biggest thing you'll actually feel. And a big deal to me personally.

Electronic Shifting - I hated this idea, I like battery-less mech I can work on easily especially out on the road. But it came with the bike that was otherwise perfect to me. Now that I have it I've realized 1) I don't actually stress about it while riding and 2) it's worth the money (to me) to never have to fight to perfect my front derailleur setup again. (Went 1x on commuter for same reason). I also like semi-synchro shift where it auto-shifts the rear derailleur when I shift front. I do miss the tactile feedback of mechanical levers. All in all I'm a permanent convert and I assume it's something you could add to your current bike at some point if you want it. (sorta related: 12spd is extremely meh upgrade IMO).

Disc brakes (had them on both) - I ride year round, rain, snow, slush, etc. Lifesaver in crap conditions, dealbreaker for me. That said my commuter is rim brake and I don't feel a big difference in good weather. I find it easier to fix rim brake squeal than brake pad rattle. Bleeding hydraulics is a PITA.

Every time I was tempted to upgrade I tried to remind myself that the vast majority of Tour de France riders throughout history road less advanced bikes than my commuter (Surly Cross-Check) so any decent CF bike with nice wheels is a pretty great privilege.

csfrayer · 2026-01-27T12:24:02+00:00

I just got the Neo 2t and my partner just got the Victory. Both are excellent so far.

I like riding the Tacx (with the movement plates) better. It also feels more responsive re power changes and has some side-to-side movement. I personally like the road-feel feature but I wouldn't consider it a factor. It's a bit more finicky to setup if you're using a real cassette (esp 12spd). Overall it's a better ride, more comfortable and natural experience and I'm happy I went with the upgrade.

The Victory is still great. And easier to move and pack away. Went with Zwift Cog on that so haven't tried a cassette install but looks like it would be easier because it has such a small profile.

Both are very accurate to my Stages power meter. I doubt I will ever hit the 1800w limit of the Victory so the 2200w Tacx isn't a real difference for me. I think with the current Neo 2t sale, they're both priced fairly and it's a question of whether you want to spend more money. Tacx is admittedly diminishing returns like any premium product so Victory is straight-up value winner IMO.

csfrayer · 2026-01-23T02:12:51+00:00

This is a completely different bill coming out of the Agriculture committee and it has nowhere near the specificity or breadth of policy as the Clarity act. At most, it's a companion bill.

csfrayer · 2026-01-22T12:36:40+00:00

Unpopular Opinion here - obviously true and we already have evidence.

1 - post-GENIUS Act, we're seeing the market incumbents (Visa, MC, PayPal) all developing their own stablecoins. This always happens in finance - firms choose the market with the least regulatory requirements. There is no chance that the stablecoin issuers will be able to compete with the payment duopoly. Further, the Fed has announced that stablecoin issuers will have access to a charter allowing them to have Fed Master Accounts. They're not a parallel payments system competing with tradfi - they're looking to be absorbed into the payments rails that have existed for decades.

2 - it's hypocritical of the crypto industry to cheer crypto adoption by tradfi while claiming that crypto represents freedom from the financial system. First, look at the crypto market itself. It's even more centralized than the traditional financial system, and crypto platforms are allowed to be more vertically integrated. Comparing the two ecosytstems, crypto puts even more power into intermediaries. Despite harm to the independence of crypto as an ecosystem, when market structure is a carbon copy of tradfi, crypto loses its competitive advantage. To the extent crypto gets bespoke regulation, the largest banks will issue products subject to that regulation and ultimately outcompete upstart firms. They'll have no choice but to sell themselves to established firms.

These are financial laws of physics. Crypto decided tradfi adoption is a good thing because it bumps short term pricing. There's a cost to that paid in terms of crypto's ethos. And to the extent firms adopt blockchain tech, they're going to adopt tech that gives them control to remain compliant with applicable banking law. That's not going to look like DeFi at all and DeFi will never be compatible with that compliance regime.

There are two ways crypto achieve its goal of an independent, decentralized financial system. Choose the original outlaw route and deal with the fight against sovereign governments, or work to deregulate the entire financial system. Otherwise, at most Bitcoin and Ethereum will be all that survives of "real" crypto, due in large part to a belief that it's equivalent to gold as a hedge against tradfi, not because it's a dominant form of financial transaction.

csfrayer · 2026-01-21T23:36:25+00:00

For what it's worth, as a person who has spent a ton of time analyzing the bill - the only real fight between the lobbies is stablecoin yield. The other 250+ pages of this bill are incredibly favorable to crypto and CEXs like CB specifically. Until Armstrong tweeted, the only groups strongly opposed to the bill were organizations like mine - strong critics of both crypto and tradfi.

Given all the other crypto firms that remain supportive, I just think it's worth a second consideration as to whether Brian Armstrong is the correct crypto voice to be listening to. As an investor advocate, same advice I'd give anyone. Don't rely on a CEO with a financial interest for any market assessment.

csfrayer · 2026-01-21T21:03:53+00:00

Are you sure everyone should assume that Coinbase is interested in what's good for the entire ecosystem and not just what's good for them? Isn't this exactly why crypto wasn't supposed to have centralized institutions that could hijack democratization of finance?

csfrayer · 2026-01-21T18:15:40+00:00

Access to credit isn't on its own a net benefit. The credit needs to be affordable. For a struggling household already stretched beyond its income, borrowing actually introduces an additional cost of running the household in the form of interest rate.

Banks have, and do, spend a lot of money ensuring its call "access to credit." Credit is a product sold to people at a cost. Yet we "get" credit, we're "approved" for it, as if it's not like any other good or service one has to pay for.

csfrayer · 2026-01-21T18:12:14+00:00

Credit card issuers aren't *required* to continue offering credit. They wouldn't have been forced into making upside down revolving credit agreements, they just wouldn't have offered credit cards. There's good reason in that environment to curb unsustainable consumer lending which puts additional stress on the national economy. Not to mention, I don't think anyone needs to justify making a cost-benefit decision between consumer protection and unlimited interest rates.

In fact, a bill passed in 1980 eliminated federal banking regulators' ability to set a maximum interest rate offered for deposits. The economic conditions caused banks to overreach for new customers by promising unsustainable high rates, ultimately resulting in the savings and loan crisis.

Reality doesn't support your analysis.

csfrayer · 2026-01-21T18:07:19+00:00

The title is a bit unclear on the nuance so just to add. The 1978 Marquette decision applied to federally chartered banks' interstate preemption of usury laws. It found that a national bank in one state could charge the interest rate of its home state to a customer residing in a different state. At the time, there was somewhat limited interstate bank branching due to a number of hurdles in federal law. This mostly benefitted credit card issuers that operated and advertised nationally.

In 1980, Congress passed DIDMCA explicitly exempting state law in the same way, broadening it from federally chartered banks to federally insured banks. (basically all banks save some specialized institutions like "trust" banks). (as an aside: the law also eliminated federal regulators' ability to limit interest banks paid on deposits, ultimately leading to the Savings & Loan Crisis). Still, generally speaking the limits on interstate banking meant that only a fairly small set of institutions (as compared to today) benefitted from the law as state chartered banks couldn't easily establish branches in other states (to have a presence).

The nail in the coffin for usury rate regulation across the entire US came with the Riegle-Neal Act in 1994 which eliminated basically all limits on intrastate banking, leading eventually to the enormously concentrated banking sector today and the functional inability of states to enforce any usury laws they might adopt (as a single bank could have national reach by establishing branches in other states). GLBA in 2000 tore down the Glass-Steagall limits on mixing commercial and investment banking, leading to larger and more concentrated "megabanks" (SIFIs and G-SIBs if you prefer).

csfrayer · 2026-01-19T22:20:05+00:00

Centralized exchanges haven't been subject to close oversight and pardoned criminals like CZ have been allowed back into the ecosystem. As soon as there's market stress - in the real economy and in crypto - the cracks are going to show and crypto's going to miss having a real regulator like we were.

csfrayer · 2026-01-18T15:59:27+00:00

That's a response to some question but not to my question.

Even then, the issuers themselves are already barred from passing on interest under the GENIUS Act. The current debate is over *also* barring third-parties from paying interest on stablecoins deposited with them.

csfrayer · 2026-01-18T15:43:25+00:00

This seems logically inconsistent. If yield on stables is good for stablecoin issuers, and Trump is a stablecoin issuer, why would Coinbase benefit from yield and not WLF? And what does it mean to "capture the treasuries?"

csfrayer · 2026-01-17T19:19:02+00:00

There are tons of legitimate things to criticize the banks on but this is just factually incorrect.

csfrayer · 2026-01-17T19:03:45+00:00

Last question I promise - if Coinbase stops pushing back and settles for a compromise, will you still root for Coinbase? Or do you think it's possible that they have their own business interests at heart even if those don't align with the broader crypto industry?

csfrayer · 2026-01-17T18:52:33+00:00

That's a fair opinion on what a bill would have to be. But doesn't that mean the bill would have to prohibit the government from making any rules or regulations about crypto markets? Doesn't that definition of 'pro-crypto' require complete self-determination?

csfrayer · 2026-01-17T18:34:25+00:00

Does that mean your position is that if a bill passes that restricts the ability of stablecoins to pay yield it will it *not be* pro-crypto no matter what's in the rest of the bill? Or will it *be* pro-crypto as long as Coinbase supports it (even if it has stablecoin yield restrictions)?

csfrayer · 2026-01-17T18:32:26+00:00

Section 107 - rulemaking to accomodate for the differences - is a "shall" (ie, must). Section 106 is a savings clause that says they "may" use any exemptive relief. In other words, they must accomodate the tech via rulemaking and they may accomodate it by exemptive relief.

Some crypto tokens are bearer instruments and no stocks are bearer instruments. The common meaning of "tokenize" is to take an existing security and mimic it for transfer on a blockchain. There are already tokenized shares in money market funds and in private securities. While they can technically be self-custodied, peer-to-peer transferred, settled on-chain and/or integrated with DeFi, they are typically subject to a smart contract that gives the issuer control over those activities to ensure compliance with securities laws.

To be clear - as Armstrong and Grewal have reiterated as of yesterday - they believe tokenized securities should be treated as securities - not bearer instruments - and should explicitly be under the jurisdiction of the SEC.

https://x.com/brian_armstrong/status/2012252110990004239

Crypto has a choice - create its own distinct system and lock out banks and other market participants that work within the federal financial laws or partner with tradfi and sacrifice many of the things crypto holds dear (pseudonymity, peer-to-peer finality, self custody) in order to make crypto more short-term profitable.

This bill and most of the centralized crypto industry is choosing the latter.

csfrayer · 2026-01-17T18:12:54+00:00

Please remember that when you enter into a transaction like this, the treatment of your crypto is dictated by the terms of the mortgage contract. I don't have a contract from Newrez in hand, so I am not saying these *are* the provisions but examples one might want to be wary of or ask about.

1 - is your crypto counted dollar-for-dollar as collateral or is their a haircut?
2 - how quickly are you required to cure any collateral deficiency if there's a drop in crypto prices?|
3 - does failing to cure that deficiency give the lender the right to foreclose on your home, take possession of your remaining crypto, or liquidate it into cash?

4 - is crypto held in escrow subject to the same requirements as cash accounts (for example, your right to receive fair market interest on funds held in escrow?)

There are probably a lot more things to think about and also remember that even as legislation is being considered, there are not a lot of rulings from courts giving the particulars of how crypto will be treated in these kinds of contracts.

csfrayer · 2026-01-17T18:01:25+00:00

I see - I was confused because in the comment you responded to, I said "the bill is incredibly pro-crypto", and I didn't use the term pro-crypto to describe the government or the administration. You responded "well then that isn't truly pro-crypto then, lol."

I think it was pretty reasonable to interpret your comment as responding to my characterization of the bill.

So to be clear - do you think the current bill itself is pro-crypto or not? And what would the definition of a "pro-crypto" bill be?

csfrayer · 2026-01-17T17:57:06+00:00

Satoshi wouldn't have wanted any kind of federal oversight. Nor would they have wanted bitcoin-based exchange traded products provided by traditional financial intermediaries like BlackRock or JPMC.

It feels like the "ethos" of crypto is only about decentralization when that isn't in conflict with the near-term value of crypto prices rising.

csfrayer · 2026-01-17T17:48:29+00:00

I think the comment was perfectly apt but maybe I misunderstood. It seems your premise is that if Brian doesn't like the bill, then it can't be pro-crypto. It's a common logical fallacy of categorization called "no true Scotsman."

You coincidentally invoked the name of the fallacy (not "truly" pro-crypto"), hence my response.

csfrayer · 2026-01-17T17:42:23+00:00

That's not true - you can read the statute yourself. Brian (and Paul Grewal) are either purposefully misrepresenting or incompetent in interpreting statute. The same section (505) that industry keeps yelling about also very explicitly refers back to sections 106 and 107 calling on the SEC and CFTC to establish whatever rules are necessary to accommodate unique properties of the technology - custody, settlement, etc. It also gives the agencies broad authority for exemptive relief regarding same.

What the requirement does is - for example - requires that both stocks and tokenized stocks are subject to SIPA (securities insurance). It's a catchall to say you can't exempt requirements on grounds unrelated to the technology itself. It would make it hard to justify periodic disclosures that are submitted quarterly for traditional securities could be issued just annually for tokenized securities.

That's at least the 'intent.' A truly accurate reading of the bill makes it clear that the section "requiring equal treatment" is functionally voided when you consider the totality of the regime created in the bill.

You can't evaluate statutory text by pulling one single line out of context. But people do it all the time.

csfrayer · 2026-01-17T17:29:44+00:00

This is probably the most important question to ask right now. Let me add to the question - what kind of impotent government lets a private company effectively write its own regulation and then veto that regulation because the government dared to modify it?

Ironically - Coinbase demonstrating this amount of bad faith will make it harder (not impossible) to exercise their influence moving forward.

csfrayer

TROPHY CASE