The Cryptocurrency Thread

[MichaelB]

Interesting article here on the adoption of Bitcoin by the citizens of Turkey as the Lira continues to collapse. Even though not an "official currency", its fast becoming an unofficial currency.

https://news.yahoo.com/turkey-makes-case-bitcoin-erdogan-172755488.html

The writer of the article, David Z. Morris, concludes:

"Turkey is fast becoming a case study of bitcoin’s potential benefits for residents of countries with fragile currencies, or authoritarian leaders likely to pursue short-term political gain through inflationary policies."

To me, it was obvious BTC would start to be used like this. In many countries where the USD was the "informal currency" of the people, BTC has become the "new USD", for many reasons including obviously its electronic convenience, the ability to transact in any amount, and the ability to virtually send anywhere in the world (as opposed to face to face physical transfer).

The linked article does not support any of the conclusions in your post.

It does say “ Bitcoin trading volumes are rising in Turkey” and “ Some Turkish citizens decided to take their business elsewhere: BTCTurk, one of a handful of local exchanges offering lira/BTC trades, has seen a noticeable uptick in volume, according to public data”.

There is no data, however, to give even a hint of the volume, so we have no way of knowing the significance. A link in the Yahoo News article does point to another issue which you forgot to mention. Apparently two crypto exchanges have shut down, each held “hundreds of thousands of accounts”, all the crypto assets are missing, the owner of one exchange is in jail and the owner of the other is missing and accused of absconding with more that $2B. The numbers are unsubstantiated, but they certainly cast doubt on how just how closely the Turkish people are embracing crypto, if at all.

As for your assertion that BTC is replacing the US$ as the new “informal currency”, there is no data or evidence to support that. If one objective of this thread is to inform, the exaggeration and hyperbole get in the way and don’t help.

 

[Chuckanut]

The linked article does not support any of the conclusions in your post.

It does say “ Bitcoin trading volumes are rising in Turkey” and “ Some Turkish citizens decided to take their business elsewhere: BTCTurk, one of a handful of local exchanges offering lira/BTC trades, has seen a noticeable uptick in volume, according to public data”.

There is no data, however, to give even a hint of the volume, so we have no way of knowing the significance. A link in the Yahoo News article does point to another issue which you forgot to mention. Apparently two crypto exchanges have shut down, each held “hundreds of thousands of accounts”, all the crypto assets are missing, the owner of one exchange is in jail and the owner of the other is missing and accused of absconding with more that $2B. The numbers are unsubstantiated, but they certainly cast doubt on how just how closely the Turkish people are embracing crypto, if at all.

As for your assertion that BTC is replacing the US$ as the new “informal currency”, there is no data or evidence to support that. If one objective of this thread is to inform, the exaggeration and hyperbole get in the way and don’t help.

According to an article in the WSJ, Turks are exchanging their lira for US dollars.

https://www.wsj.com/articles/turks-...s-local-currency-collapses-11637859160?page=1

A currency crisis here is battering Turks’ confidence in their government’s ability to manage the economy, causing droves of people to buy U.S. dollars and sending crowds of people into the streets to oppose President Recep Tayyip Erdogan’s policies.

 

[SecondAttempt]

I have not seen mentioned that India is considering banning bitcoin.

https://www.bbc.com/news/technology-59402310

I know folks here don't think governments can ban crypto. But if China and India both effectively implement a ban that eliminates 36% of the world population. That can't be good for demand and price increase.

If I had to guess I would say China will make their ban effective by "disappearing" people with signficant crypto holdings for periods like they have done with other undesirables. They might even get to spend some time in financial reeducation camps.

India will probably enforce through confiscation.

I think there is some naivite at work here as to why governments would want to eliminate crypto. In the specific case of India I have some direct experience here. I once worked a a high level position in a company with a contract in India. The Reserve Bank of India (RBI) had to approve each payment we received. The contract was with a private institution but the ~$1M payments were enough to impact national issues for the RBI. I suspect, and one can infer by reading between the lines in the linked article, that the RBI is very concerned about being able to manage and control cash flows. So it may have nothing to do with crime and corruption. It also messes up management of cross-border financial flows.

 

[OverThinkMuch]

It's worse than 36% of the world's population. Before the ban, most Bitcoin was mined in China.

Earlier this year, China's energy shortage lead to blackouts. If the first rule of fight club is "you do not talk about fight club", then the first rule of China is "you do not make President Xi look bad". China had a majority of the world's Bitcoin mining before then, so energy usage was significant. I think that's why it was targeted this year.

An article claimed India has 4x more Bitcoin than America. Well, a quick search shows they have 4x more population. But I'm surprised India and the U.S. have such similar ownership. Sounds like a ban in India would be a significant hit to crypto overall.

 

[37andhappy]

... if China and India both effectively implement a ban that eliminates 36% of the world population. That can't be good for demand and price increase.

You cannot "ban" an immutable mathematical algorithm. (This has been explained here previously). To make it simple, imagine a "ban" on the mathematical truth that 1+1 = 2.

China has not banned Bitcoin. Indeed, Chinese citizens are permitted to hold Bitcoin, and do in ever increasing numbers (for many obvious reasons). What has been "banned" in China is the operation of crypto exchanges within China (even though the world's largest crypto exchange, Binance, is actually owned by a Chinese born person, now with Canadian citizenship). Mining has also been heavily discouraged in China, which was fantastic news for Bitcoin as there was a lingering concern that too much hash-power located in China could be a threat to Bitcoin if all harnessed by the CCP for nefarious purposes. This risk has now been removed, which is one reason why BTC rallied after the China mining ban.

It is more correct to say that India is actually looking at regulating crypto currencies (as opposed to "banning". I personally know legislators who are involved with this topic. They realize that BTC = freedom, and are far closer aligned as a country with US concepts of freedom, as opposed to Chinese concepts of state control. They also have many tech savvy Indians graduating each year, with the best and brightest getting exposure to US tech companies. What is more likely in India is a crackdown on crypto scams, and coins that function as securities (where a founder retains equity) and bypasses traditional listed company regulations. This is therefore very very positive for Bitcoin long term, once Indian's start adapting en-mass.

 

[37andhappy]

China had a majority of the world's Bitcoin mining before then, so energy usage was significant. I think that's why it was targeted this year.

The "energy shortage" was largely a red-herring "official reason" for the mining ban. The real reason was that it was a concern to the CCP that energy could be used locally to effectively generate wealth immediately accessible off-shore and globally by mining operators - effectively "sucking money out of China" and bypassing foreign exchange controls. China seeks to control any kind of capital outflow (especially if done using state-subsidized electricity).

 

[SecondAttempt]

You cannot "ban" an immutable mathematical algorithm. (This has been explained here previously). To make it simple, imagine a "ban" on the mathematical truth that 1+1 = 2.

You keep saying this but it is dead wrong. Every country is different but even in a very free country like the US it is illegal to own some things including, at various times, gold, drug paraphernalia, certain types and ages of firearms, and other humans. In a more authoritarian country like China, they can ban ownership of cybercurrencies under their laws. Sure, people can likely still own bitcoin. But those people will be criminals, furthering the association of bitcoin with criminal activity. So I don't see how your argument helps your case.

I could give you many examples where legislatures have banned "immutable mathematical facts." Here in the US the value of pi was almost commanded to be exactly 3 in Indiana. We have had plenty of examples in the US where politicians of all persuations have tried to legislate over laws of physics, proving nothing but their own stupidity. So mathematical immutability is no barrier to banning crypto. It's not something I foresee the US doing but if it becomes a significant factor in international currency flows I think most countries will regulate it into obscurity.

 

[jim584672]

The "energy shortage" was largely a red-herring "official reason" for the mining ban. The real reason was that it was a concern to the CCP that energy could be used locally to effectively generate wealth immediately accessible off-shore and globally by mining operators - effectively "sucking money out of China" and bypassing foreign exchange controls. China seeks to control any kind of capital outflow (especially if done using state-subsidized electricity).

Bitcoin is a tool to get around laws and launder money in this example. Furthering the case that it should be outlawed (from the view of the state). Also no central bank / political body is going to give up control of the currency without a huge fight.

 

[captain3d]

Governments can make the holding of crypto illegal by citizens. I think that is obvious.

Governments can not make crypto go away or not exist. That is some thing else.

Yes it is potentially a huge fight. Better to have some money backing both fighters in my opinion

 

[jim584672]

Governments can make the holding of crypto illegal by citizens. I think that is obvious.

Governments can not make crypto go away or not exist. That is some thing else.

Yes it is potentially a huge fight. Better to have some money backing both fighters in my opinion

Country X says no to Bitcoin, then how does it ever gain traction? Merchant Y places ads for services in Bitcoin. Country X says that is a crime. Merchant Y hangs upside down in canvas bag, no one will go near Bitcoin again.

 

[37andhappy]

I have not seen mentioned that India is considering banning bitcoin.

India will probably enforce through confiscation.

[mod edit]

"Indian Finance Minister Says Monitoring Crypto Ads; Not Weighing Ban"

https://finance.yahoo.com/news/indian-finance-minister-says-monitoring-095927592.html

"The Indian government is closely monitoring crypto advertisements, but is not weighting a ban on crypto at the moment, Finance Minister Nirmala Sitharaman said on Tuesday."

 

[37andhappy]

Governments can make the holding of crypto illegal by citizens. I think that is obvious.

Reminds me of the discussions from some politicians about "banning the internet" back in the 90's (due to concerns about it being used for "illegal activities". Fortunately freedoms, our constitution, and commonsense prevailed, and we now have most the world's leading internet companies all based and thriving here. How different it could have have been if that innovation instead was nurtured elsewhere.

I have faith in our leaders and in our system. We know that if we resist, Bitcoin innovation will go elsewhere. The Genie is "well out of the bottle" at this point. Hence we will see Sats increasingly accepted, adopted, fostered and embraced in the US. Bitcoin = the currency of global equality, opportunity, and freedom.

 

[OverThinkMuch]

The "energy shortage" was largely a red-herring "official reason" for the mining ban. The real reason was that it was a concern to the CCP that energy could be used locally to effectively generate wealth immediately accessible off-shore and globally by mining operators - effectively "sucking money out of China" and bypassing foreign exchange controls. China seeks to control any kind of capital outflow (especially if done using state-subsidized electricity).

One counterpoint is that China banned banks and exchanges from dealing with crypto before this (forgot the year), which was to target money flowing out of China. Crypto was 1% or less of that money flow - a very small target.

I believe the primary reason is simpler. While the first rule of fight club is not to talk about fight club, the first rule of China is you do not make President Xi look bad. Blackouts not only make the government look bad, they can cause unrest that China tackles very aggressively. I think the embarrassment and unrest are the primary targets, with slightly less external money flows being a bonus.

 

[OverThinkMuch]

I agree people were concerned with most Bitcoin mining being behind the Great Firewall of China. But there was also an environmental benefit to having a country that is "down to 57% coal in 2020" drop out of the energy mix of Bitcoin mining.https://thecoalhub.com/coal-in-chinas-energy-mix-drops-to-57-in-2020.html

India's coal usage is only slightly better. It's not clear what India is going to do with their pending Bitcoin legislation, but the fear is a ban of crypto in India.

 

[captain3d]

Country X says no to Bitcoin, then how does it ever gain traction? Merchant Y places ads for services in Bitcoin. Country X says that is a crime. Merchant Y hangs upside down in canvas bag, no one will go near Bitcoin again.

Well that depends on who is Country X.

 

[captain3d]

https://www.wired.co.uk/article/china-ban-bitcoin-cryptocurrencies

Every time Beijing announces a crackdown on their industry, the running joke among the crypterati is that China has already banned cryptocurrency 18 times. Chinese government agencies have issued a string of increasingly restrictive but never conclusive legal prohibitions of various aspects of crypto since 2013; all the while, China’s crypto industry has thrived. Turns out the nineteenth time might be the charm.

On September 24, China’s central bank and its National Development and Reform Commission issued two documents. One outlawed cryptocurrency mining following an earlier crackdown in May, the other declared all cryptocurrency transactions illegal and all companies providing cryptocurrency trading services to Chinese citizens as engaged in illicit financial activity. Some of the usual nonplussed aplomb was deployed on crypto-Twitter, but the general reaction to the ban is that this time China is serious.

 

[37andhappy]

And so there we have it. Even "its only transitory" Fed Chair Powell now indicates its not transitory afterall...

https://www.morningstar.com/news/ma...talking-about-inflationand-stock-markets-tank

Here is the reality. Housing (as one example of a traditional inflation hedge) has risen 25%pa for each of the last 4 years. Put another way, the value of our USD has halved in purchasing power relative to the cost of houses. (We can see similar trends in other asset classes such as equities).

Not every citizen has easy access to trade in and out of houses, or to save in micro amounts in a house (although a mortgage is not a bad way to do this). On the other hand, very citizen, from the largest corporation to a beggar on the street has access to Bitcoin. Bitcoin is the great equalizer. And so this is why BTC is becoming the single most efficient hedge against the USD. Not just a hedge, but due to its limited supply and increasing demand it should perform well over and above just being a pure hedge USD/BTC arbitrage. Hence, like it or not, we will very likely see BTC to continue to well outperform the relative decline of the USD (maintaining the same trend we have seen for each year since 2009).

The information is all out there. For those who are worried they are "too late", no you are not. Just like you were not "too late" buying Apple, or MS, or Google in 2016... (or indeed in any year thereafter!).

 

[SecondAttempt]

One counterpoint is that China banned banks and exchanges from dealing with crypto before this (forgot the year), which was to target money flowing out of China. Crypto was 1% or less of that money flow - a very small target.

I believe the primary reason is simpler. While the first rule of fight club is not to talk about fight club, the first rule of China is you do not make President Xi look bad. Blackouts not only make the government look bad, they can cause unrest that China tackles very aggressively. I think the embarrassment and unrest are the primary targets, with slightly less external money flows being a bonus.

What I heard on NPR...and yes I do consider the sources...is that th energy issues in China are because electric rates are regulated while coal prices are not. High electric demand means utilities have to pay inflated prices but do not get inflated rates. If thi is correct it has little to do with bitcoin mining. China could simply introduce progressive electric rates.

 

[SecondAttempt]

the relative decline of the USD (maintaining the same trend we have seen for each year since 2009).

You keep making these factually incorrect statements. My USD buys almost exactly as many AUD, yen, CAD and other major currencies as it did 25-30 years ago. There has been no significant relative decline.

I just calculated the relative decline of the USD against the AUD since 1996. It has declined at an annual rate of about 0.1%. It has appreciated against the yen in that time period.

Bitcoin has declined 12% against the USD in the last month for comparison.

 

[joesxm3]

Apparently Fidelity is starting up a bitcoin ETF in Canada.

Case-Schiller housing index showed that the USD dropped 28% relative to real estate up to September 2021.

 

[SecondAttempt]

Case-Schiller housing index showed that the USD dropped 28% relative to real estate up to September 2021.

In other words, house prices have gone up.

 

[joesxm3]

In other words, house prices have gone up.

Asset price inflation caused by debasement of fiat currency.

If you are long Medicare premiums, I think you will have a 15% gain next year.

 

[SecondAttempt]

Asset price inflation caused by debasement of fiat currency.

If you are long Medicare premiums, I think you will have a 15% gain next year.

But my argument is not that there has been no inflation, of course there has. But the USD has remained amazingly stable relative to other global currencies for at least 25 years.

There is another factor in house prices as well - interest rates. People can afford to pay a lot more for a house when they borrow at 3% than they can if they pay 8%. I found this interesting:

Data from https://dqydj.com/historical-home-prices/ and FreddieMac.
Calculations from Excel.

In 1996 the median home price was about $112,000 which, adjusted for inflation would be $194,983 today. Mortgage rates were about 8% then so a 30-year $112,000 mortgage had a payment (PI) of $821.82. That same payment today, at 3%, would buy a $194,926 house. I don't think it is a coincidence that the inflation-adjusted 1995 price is so close to what the same payment would buy today. Add in the fact that wages have gone up about 25% since 1996 and it is pretty easy to explain house price increases without using the word fiat. Macroeconomics is pretty good most of the time at keeping things in balance.

(By the way, I realize the word fiat is a dog whistle but it simply means "by government decree." So, now that El Salvador has made bitcoin legal tender by government decree, bitcoin is now, by definition, a fiat currency!)

 

[SecondAttempt]

Housing (as one example of a traditional inflation hedge) has risen 25%pa for each of the last 4 years.

No it has not. Here are the median home prices in the US (from https://dqydj.com/historical-home-prices/ which sourced from Robert Shiller and the FHFA)

August 2021 $342,844
August 2017 $240,234

I little math will reveal that the increase has been about 9.3%pa. Yes, that is still high but it is nowhere close to 25%. These things are so easy to check. If you are getting your information from your videos you may want to do some fact checking when you watch them.

 

[37andhappy]

(By the way, I realize the word fiat is a dog whistle but it simply means "by government decree." So, now that El Salvador has made bitcoin legal tender by government decree, bitcoin is now, by definition, a fiat currency!)

The decree is that it must be accepted as legal tender. The distinction between fiat currencies and BTC is that BTC's supply is entirely finite and immutable. It's value cannot be diluted via Government printing. In this regard it's entirely different with Government fiat currencies which can be printed and devalued into infinity.