What I Think of Bitcoin
bridgewater.comThis post should be mostly discounted because Ray doesn't really seem to be aware of the true risk of the Tether scam, the biggest component of and risk to Bitcoin's value.
For those not aware, Tether is a "stable coin" that issues tokens that supposedly represent dollars and can be used as a medium of exchange. However, it's widely suspected that Tether is unbacked and printing fake dollars and even Tether itself has admitted that at least 26% of their tokens have no backing [1]. Tether has never been audited so we have no clue how much of it is actually backed and how much of it is fake.
This is extremely problematic because Tether is currently printing around $500 million per day and is a source of a significant amount of buy pressure in the market. Tether is used on almost every exchange and is the vast majority of Bitcoin buy orders so Tether can be used to artificially pump the price of Bitcoin quite effectively.
Ray points out Tether as a risk to Bitcoin's value, but I don't think he does an adequate job explaining the risk. Tether isn't a small component of the Bitcoin ecosystem. It's at the heart of Bitcoin with it being the primary currency used to buy Bitcoin with at most exchanges. Most of the buy volume is with Tether and that $500 million per day is huge.
Regardless of what one thinks about the value of Bitcoin, it's irrational to invest while $500 million of fake dollars are being pumped in every day. Once that artificial $500 million buy pressure is removed, the market will face an existential risk. Who knows what the real price of Bitcoin would be without all that fake money?
https://davidgerard.co.uk/blockchain/2021/02/03/tether-print... is a good article for additional context on Tether.
1. https://www.coindesk.com/tether-lawyer-confirms-stablecoin-7...
Tether FUD always returns when there's an influx of a lot newcomers to Bitcoin. It's been debunked over and over. Here's one by Nic Carter that explains why these "takedowns" are completely wrong:
https://medium.com/@nic__carter/assessing-bitcoins-liquidity...
According to Tether's own transparency page [0], there's $30 billion of USD sitting in some random bank, somewhere. No, they haven't told anybody where it is, and they have never released an audit. Yes, they are still delaying the NY Attorney General's investigation [1]. We know that at least $850 million has been seized and lost for good [2]. No, they don't report that on the transparency page.
[0] https://wallet.tether.to/transparency [1] https://mobile.twitter.com/bitcoinlawyer/status/135164200602... [2] https://modernconsensus.com/cryptocurrencies/tether/feds-jus...
Tether is definitely very sketchy in their practices, but there is simply no good evidence that Tether issuance inflates the prices of BTC.
Here is a study arguing the opposite - https://voxeu.org/article/stable-coins-dont-inflate-crypto-m...
I present an alternate argument. First, Tether ToS says that their tokens are useless and nonredeemable, and their service is not available to US residents [0]. Second, the majority of BTC/XYZ trades on major exchanges are for Tether [1]. Third, as a stablecoin, the way it is supposed to work is that when USD is put into reserves, Tether creates USDT. When money is taken out of reserves, Tether will send the USDT to a bogus address to "burn" it. They have only burned a miniscule portion, much less than the $850m that we know has been seized [2]. My guess is that USDT is being pumped into high volume exchanges, and USD is coming out of low volume exchanges, and very little of USDT is backed by reserves.
> The right to have Tether Tokens redeemed or issued is a contractual right personal to you. Tether reserves the right to delay the redemption or withdrawal of Tether Tokens if such delay is necessitated by the illiquidity or unavailability or loss of any Reserves held by Tether to back the Tether Tokens, and Tether reserves the right to redeem Tether Tokens by in-kind redemptions of securities and other assets held in the Reserves. Tether makes no representations or warranties about whether Tether Tokens that may be traded on the Site may be traded on the Site at any point in the future, if at all.
> The following Persons are prohibited from depositing to, or withdrawing from, any Digital Tokens Wallet on the Site: > any Person that resides, is located, has a place of business, or conducts business in the State of New York; and > U.S. Persons.
[1] Volume charts and breakdowns are available in lots of places as the data is public, but the easiest chart is halfway down the right side of the page here. "Money flow from/to Bitcoin in the last 24 hours" https://coinlib.io/coin/BTC/Bitcoin
[2] there used to be a site called "omniexplorer" for navigating the Tether chain transactions, but it seems it went down. Now you have to piece it together using tools like blockchair, but it's far more difficult to read to find the coinbase transactions. https://blockchair.com/ethereum/erc-20/token/0xdac17f958d2ee...
By which means are the people paid who organize Tether? If they hand out tether effectively for nothing, who is paying for the infrastructure? If there is no payment, why would one not expect that they intend to run away with those $30 billion one day?
Additionally, if that bank goes bankrupt, the money is not secured.
Is it even legal for any bank to hold tether's money if it is in USDs?
Honest question,
If people are thinking of buying and selling BTC, should they start with another crypto currency until the Tether issue is resolved?
If Bitcoin goes down the altcoins go down too.
Tether fails bond pricing 101.
If you have an IOU from the US government for $100 it's worth about $99 on the open market.
If you have an IOU from a highly rated US company (e.g. Ford) for $100 you'd expect it to be worth about $94.
Yet we're somehow supposed to believe than an equivalent IOU from tether is worth more?!
Oh and the US Government and Ford will probably pay you some form of interest if you hold it long enough...
It simply doesn't add up!
This is the part that confuses me too.
If the market believes Tether is not backed by real currency, shouldn't it be trading at a discount to USD?
I think the premium is a "convenience fee" people are currently willing to pay.
>Tether FUD
What's the opposite of FUD, when people with a massive financial stake in something do nothing but tell everyone everything is great all the time, and never acknowledge any issues?
Pump and dump.
Great to see all of the problems, past, present and future have been solved.
But thanks for the link to a person who clearly has no financial stake in the success of Bitcoin, right?
Yeah, Bitcoin is great, I agree :)
It seems pretty natural to me that someone who believes in Bitcoin would also purchase it.
>Bitcoin is great, I agree :)
I think it's cool too, and have ~5% of my portfolio allocated to BTC, ETH and XRP.
But I don't go around pretending it solves all of the problems of the monetary system. It's better in some ways, and (much) worse in others. I also don't dedicate my life to pumping it on social media.
>It seems pretty natural to me that someone who believes in Bitcoin would also purchase it.
If only we'd have the same mentality with short sellers, but instead we label them FUD.
CDOing? Madoffing?
1/FUD
That doesn't deal with the fake $500 million per day that is being pushed in by Tether. That money has to be artificially inflating the price of Bitcoin. Unless you actually think $500 million per day of real dollars are being acquired by Tether, a company that has never been audited and is under investigation, when there are many legitimate stable coin alternatives such as USDC? You would have to assume that there is both a $500 million per day whale buying Bitcoin and that whale is unable to use more legal means.
Study finding no correlation between stablecoin issuance and BTC price - https://voxeu.org/article/stable-coins-dont-inflate-crypto-m...
You have no sources for any of your claims.
I provided links to my sources in the original post. I thought it was pointless to relink them every single time.
Isn't this just saying that the BTC buying volume generated by Tether is less than what was claimed?
That's important to note, but where does he argue that the central and most important claim - i.e., that Tether isn't fully backed and is therefore liable to collapse like a house of cards - is false?
All of this shows how the supposed transparency of Bitcoin is useless. The blockchain does not really tell you anything. Price goes up 500%. Nobody knows why. People speculate it is because of Tether or some cabal of Chinese BTC mining tycoons or exchanges faking volume;, or WallSt playing their voodoo with billions worth of BTC.
What other asset has this situation where the reason for the movement of its price is so obfuscated?
>All of this shows how the supposed transparency of Bitcoin is useless.
This seems like begging the question to me. Was bitcoin ever supposed to be some sort of asset where the pricing is transparent?
I don't quite remember from the original white paper if it was pushed as a feature or just a property of the system. But later proponents certainty try to say it is some revolutionary feature.
Now don't get me wrong. Transparency in the financial system is good. But a public blockchain as is, does not provide any transparency at all.
Now that I am thinking about it, they probably mean something else entirely by transparency. They probably mean, they know the total amount of BTC out there.
> Price goes up 500%. Nobody knows why.
welcome to currency trading
Everyone who invests in bitcoin is breaking the cardinal rule of investing: don't invest in something you don't understand.
If people realized that bitcoin's -average- transaction fee is around $25 USD because it is restricted (for no technical reason) to a few transactions per second (less throughput than 240p youtube videos) they would at least move on to other cryptocurrencies.
If people realized that a sudden drop in price will mean a sudden drop in mining power, which will mean a sudden drop in blocks being generated, which will mean a sudden drop in throughput, they might be even more eager to get out of it. Since transactions are already so extremely limited purely by choice of the people that took it over, sudden drops in price mean less utility while in practice sudden rises in price lead to lots of transactions for speculation, which also prices out any utility.
One transaction is now 4x the hard drive cost to store the entire chain (and users don't even need to store the chain at all).
Totally false. Reduced mining power doesn't reduce the number of blocks being generated. Block mining PoW difficulty increases or decreases based on a running average of past block times[1]. This, given the block size limit, is the very mechanism that caps transaction throughput.
Lower prices have always led to less transaction volume which has always made it cheaper and easier to get your own transaction confirmed.
"don't invest in something you don't understand", can I ask that you don't spread FUD about something you don't understand?
What I said is true, sudden drops in mining power mean the immediate effect is slower block creation:
> a sudden drop in price will mean a sudden drop in mining power, which will mean a sudden drop in blocks being generated, which will mean a sudden drop in throughput
Over time (and blocks) the proof of work difficulty adjusts, but that isn't what I was talking about, which is why I said "sudden" over and over.
It takes the generation of blocks to adjust the proof of work difficulty and if the price goes down, miners shut off and the blocks needed to adjust the proof of work will get generated more slowly. Less blocks on average means the adjustment skews into the future as the throughput goes down.
Two factors that go _against_ a death spiral is that transactions typically go down when the price goes down, and when the transaction throughput is low, people with actual balances on the chain can't get their btc off of it.
When the price goes up and mining power increases (sooner or later) this isn't a problem, because faster blocks aren't a problem - they just make calibrating back down to a 10 minute happen quicker.
> "don't invest in something you don't understand", can I ask that you don't spread FUD about something you don't understand?
Easy there, you can always ask questions instead of making bold assumptions like this.
> If people realized that a sudden drop in price will mean a sudden drop in mining power, which will mean a sudden drop in blocks being generated, which will mean a sudden drop in throughput, they might be even more eager to get out of it.
I agree with your overall argument but as I understand it, this is false. If the mining power of the whole network drops, the proof of work will become simpler so as to have a roughly constant block throughput. Or am I missing something here ?
At one point this was approximately true; I'm honestly not sure if it still is.
The problem was how the difficulty was decided -- it looked at the last N blocks that were successfully mined to decide whether it needed to up or down the difficulty. If you suddenly lost 90% of your mining capacity, it would only adjust the difficulty after several more blocks were mined, each of which would take ~100 minutes instead of the usual ~10. The system would eventually right itself, but it wasn't fast.
I can't recall if this ever became a problem in practice, or whether there was a code change to make it resolve faster.
The value of Bitcoin doesn't lie in how many transactions it can do per second, nor the cost per transaction.
I actually said utility, you said value.
It is also telling that you didn't say what the value actually is. If you do explain that, make sure to mention it relative to other cryptocurrencies that have all the same properties (except for name recognition) but don't have throughput problems because they did what everyone saw coming 8 years ago and allowed larger blocks, faster blocks, or both.
Ok, I'll bite. Bitcoin has a large, distributed network of miners and exchanges who support it, has extremely low inflation approaching zero, has a supply cap of 21 million, is infinitely divisible, has been in the wild for 10 years with zero hacks, can transfer unlimited value (billions/trillions) anywhere in the world for relatively low costs in relatively low time compared to traditional system, and does not require any third-party middle man to approve the transaction, is accessible to anyone in the world regardless of regional laws, and cannot be printed or inflated artificially. I'm sure there's more.
In regards to value relative to other crypto, this is a valid point but ultimately doesn't matter at all. Why does Craigslist still make 100s of millions of dollars every year when it is clearly an inferior product?
The actual cost per transaction in Bitcoin is ~$150 now once you include both the direct transaction fee and the miner reward (inflation cost). It's an incredibly inefficient technology.
>and the inflation costs
compared to the endless money printing done by the fed that still seems like a bargain.
https://www.federalreserve.gov/monetarypolicy/bst_recenttren...
Strawman argument since there are other ways to hedge inflation.
How is it a strawman argument? The point is that you're factoring in the inflation cost for BTC, but not the alternatives such as USD or even gold.
Ray isn't the only one, the market is pricing in zero risk of tether collapsing. It trades at no discount to real dollars, anybody with a Coinbase account could convert pretty high volumes of tether to real dollars.
I really have no idea why, it seems sketchy.
It looks like Coinbase doesn't support Tether: https://www.coinbase.com/price/tether
Should have specified, you'd need to convert tether to bitcoin on a different exchange, then sell the bitcoin on Coinbase (or any other real-dollar exchange).
The point is that 1 dollar buys the exact same amount of bitcoin as 1 tether.
but kraken does: https://trade.kraken.com/charts/KRAKEN:USDT-USD
You are correct; its USDC token is backed by audited USD$.
Tether drives the price of Bitcoin (and other cryptocurrencies), which they do support.
Tether is almost certainly holding on to a couple billion real dollars to maintain the peg. This is very similar to how the Bank of England maintained an artificial value for the pound that wasn't broken until George Soros came around.
I think it is much more likely that tether is backed by bitcoin and is a ponzi scheme.
Price rises seems to be driven heavily by more tether being created out of nothing, leading to another speculation and news frenzy, leading their btc being more valuable and safety from default despite creating more tether.
If bitcoin goes down rapidly or people start exchanging lots of tether for bitcoin (because you can't actually get USD from it) I think it will end up exposed, since as btc goes down their backing value goes down.
> If bitcoin goes down rapidly or people start exchanging lots of tether for bitcoin (because you can't actually get USD from it) I think it will end up exposed
To be fair, this already happened. Bitcoin crashed from $22k to $4k, and this was at the height of tether worry.
That happened over the course of a year and I don't think there was a massive (enough) run on tether while it was low, since it didn't stay at that price for very long. There just isn't as much activity when bitcoin is low which I think also works in tether's favor. I think they do have significant btc backing them, just no USD.
I actually wrote a comment about their dynamic two years ago when this happened.
It crashed from its peak to $6k in 2 months. The bear market lasted a long time, the initial crash was pretty fast when it first happened..
It stayed at $3k for 4 months in 2018.
> more tether being created out of nothing
How do you know that? Can you see Tether USD bank account, and can confirm that no USD is deposited there when Tether is created?
From the article that caused the panic-
https://crypto-anonymous-2021.medium.com/the-bit-short-insid...
The last nail in the coffin was when I found out about the lack of visible reserves. If Tether Ltd. really was taking in 1 USD for each Tether it issued, then it should have as many dollars in its bank account as there are issued Tethers. And it turns out we can check if that’s true! Tether Ltd.’s bank is Deltec bank in the Bahamas, and the Bahamas discloses how much foreign currency its domestic banks hold each month.
The answer was — at least up to the end of September 2020 — not nearly enough:
From January 2020 to September 2020, the amount of all foreign currencies held by all the domestic banks in the Bahamas increases by only $600 million — going from $4.7B to $5.3B. (The table is in Bahamian dollars, but the Bahamian dollar is pegged to the US dollar, so 1 BSD = 1 USD.)
But during the same period, total issued Tethers increased by almost $5.4 billion — going from $4.6B to $10B!
This is a great clue. I don’t have an opinion but there is enough noise around all this stuff to keep me on the sidelines. I will go back to my ETH staking ruminations.
This reply should be mostly discounted because the author doesn't really seem to be able to do basic research. Tether imploding would actually be good for Bitcoin.
Why wasn't Tether printing during the 2018-2019 bear market?
If there is one argument that convinces me that Tether is unlikely to present an existential risk to Bitcoin, it's that some of the largest companies are supporting Bitcoin, adding it to their balance sheet, etc. I've got to believe they are well aware of this risk and have looked into it, and have at least decided that it isn't a large enough issue to expose them significantly.
Enron and Lehman Brothers were both sizable enterprises
Ah, so when a central bank fiats, its sound economics. When crypto folks fiat, its a scam. I see.
First of all you didn't read the whole text, second you think you can discount the opinion of the mot successful hedge fund manager ever and the due diligence of his team! because you know better. Amazing dunning krugger effect at play. Go back and read the report and don't rush to make hate comments. He describes in the text those that are blinded.
30/870=3.4%
You know something special which others, who have much sophisticated investing mechanisms, don't know ehh? If you are so confident in asking someone like Ray Dalio to "discount" their post, then why don't you bet against Bitcoin and see where that lands you?
Stop presenting FUD if you don't yourself want to back it.
> Tether isn't a small component of the Bitcoin ecosystem. It's at the heart of Bitcoin with it being the primary currency used to buy Bitcoin with at most exchanges
So if you were a big company, let's say Tesla, which wanted to buy a lot of bitcoin, let's say 1.5 bil, would that mean that you first need to convert that 1.5 bil to Tether, since that's the most liquid denomination of BTC?
Could it be that some of those "fake" $500 mil daily Tethers were actually really backed by Tesla dollars?
Legitimate actors like Tesla have no need for Tether. They could directly wire in their cash or use an actually legit stablecoin like USDC.
But according to you there is no real liquidity in BTC/USDC, it's all in BTC/USDT.
When you do that kind of buying, you need to go to the most liquid exchange (Binance), and that uses Tether.
The volume at coinbase is more than enough to support a $1.5 billion buy.
Keep in mind that in relationship to tether, $1.5 billion is tiny. It's only 3 days of tether printing.
And yet we're lead to believe that Tether is at or very close to 1:1.
So Tether is depositing, USD, $6.5B A WEEK. Over the last year this would make them one of the richest entities in the world.
Oh wait, they haven't actually been audited, they won't tell anyone which institution/s actually hold this trove of funds, they've already lost more than a billion to people to who effectively said "yeah, we're not giving you back the money you gave us", and they're fighting and delaying multiple investigations and prosecutions of financial crimes.
Perhaps when Tether's USD holding exceed even Apple's (which, according to you, is less than a year away, at the absolute max), you'll realize that this is all a house of cards.
There is a big difference between two-way speculative volume and one way long term directional volume.
If AAPL trades $15 bil per day, that doesn't mean that you can easily buy $1 bil without huge market impact.
>Ray doesn't really seem to be aware of the true risk of the Tether scam
Every day that goes by it's becoming more clear that Dalio's "genius" was nothing more than a product of being in the right-place-right-time of an extraordinary 20+ year bond run and Chinese money connections.
60/40 portfolio with leverage
Excuse me, how is this different from banks, which have money to cover ~1% of their deposit liabilities?
Scratch that, US and UK banks, for example, now have 0% reserve requirements.
UK and US banks absolutely do have reserve requirements and they are neither 1% nor 0%. I have no idea where you're getting that from. The reserve requirements vary by type of bank and type and risk weighting of asset.
Here is the documentation that explains the capital requirements for a regulated entity (not just banks, but including banks) in the UK
https://www.handbook.fca.org.uk/handbook/glossary/G1567.html
Capital requirements, not reserve requirements.
Reserve requirements are capital requirements. "reserve" here is capital that you reserve to withstand losses in particular classes of assets.
There are also requirements for particular proportions of the capital base to be held in liquid assets (cash and near cash) in order to pay back deposits etc.
//edited to make the point about liquidity
Banks still have capitalization requirements that are required to supply money for withdrawals, and those have (for several decades, I believe) been far more stringent than the reserve requirements. Reserve requirements are the amount of cash they need to hold specifically in the central bank, whereas capital requirements are a more general notion of cash.
Banks still have assets to cover the liabilities, they're just not liquid.
Are you claiming Tether has other assets that are not being counted?
No, they don't. In the event of a bank run, a bank cannot cover their liabilities. This is the same thing that you point in tether as a fatal flaw and a "scam".
Timing difference, i.e. majority of assets are not held in cash (it is put to work), so if many people try to withdraw lots of money at the same time, it can trigger a downward spiral (“bank run”).
I’d you’re curious to understand more: https://en.wikipedia.org/wiki/Bank_run
I don't understand, what does that have to do with anything? The issue being discussed is Tether, and how it's totally a pyramid scam since it doesn't hold 100% in reserve.
I said neither thing about Tether, and there is a vast difference between illiquid and insolvent.
I think it's time to put Bitcoin on the ignore list.
You will never learn anything new about it, only the same stories:
1. It's a disastrous waste of energy resources.
2. HODLers like to compare it with gold and use it as a store of value. Because of this, they will constantly make a noise about it to raise its price.
3. No one will ever use it as an ordinary currency to buy simple things. Oh, you could buy Tesla with it, but you won't do that, because bitcoin holders think it will only grow.
1. You don't decide whats a waste of energy or not.
2. https://www.youtube.com/watch?v=xLYYh4aPXAM
3. Bitcoin Mining will make investments in renewable energy a lot less riskier as you can scale up as much as you want and always have a buyer. This drives out fossil fuel miners
4. Once bitcoins true price has been found, holders will spend to consume as much as they need/want to. Just like every other currency, except without the inherent need to spend(fixed issuance)
> 1. You don't decide whats a waste of energy or not.
Whether or not it's a "waste", it's certainly a massive amount. More than all of Argentina or Netherlands[0], as was posted here on HN recently. As of 2020, every single Bitcoin transaction uses the equivalent of 15 full charges of a Tesla car battery[1].
Also: You don't decide whether I (or others) decide what's a waste of energy or not.
[0]: https://cbeci.org/cbeci/comparisons [1]: https://news.ycombinator.com/item?id=26090317
The energy costs of a block are not in relation with the amount of transactions in it. Just because you have two numbers, doesn‘t mean you should divide them.
Short rant:
The current settlement system is layers up on layers of legacy systems. How do international settlements exactly work? How long do they take? Where does money come from? Why should flawed metrics and corruptable humans decide when to issue currency?
Bitcoin follows a simple set of rules that everyone can understand in days of intense learning. An average developer can audit the code and can verify these rules. It‘s a simple and beautiful system that HN just loves to hate, for whatever reason.
> The energy costs of a block are not in relation with the amount of transactions in it. Just because you have two numbers, doesn‘t mean you should divide them.
Right, they are unrelated. The energy costs are driven by how much Bitcoin is valued, so the more Bitcoin succeeds, the higher the energy costs go. The transaction rate does not increase, it stays around 400K/day, enough for everybody in Russia to make one transaction a year. Or for another example, for every business in the US to make 5 transactions a year. Is that a good thing or a bad thing?
The solution to Bitcoin's extremely low capacity for transactions is for it to be only actually traded on-chain by the largest institutions, like gold moving between vaults in the old days of metal-backed currencies. But in that world, most companies and certainly most individuals would trade using layers upon layers of complex systems built on top of Bitcoin, not Bitcoin itself. Very likely those layers will involve some form of centralization. So what's the point of all this elegance?
Also I might add that the probability that the layers that people will use will be open source is very high. This inherently makes it more accessible to everyone.
If we look at the Lightning Network (a 2nd layer solution), there are 3 mainstream solutions, all open source.
On top of that you can have something like chaumian ecash, which is even more privacy preserving and cheaper.
Yes, we will need layers on top of Bitcoin, but thats a good thing. The base layer needs to be expensive (small blocks) in order to keep the cost of running a node as low as it is now (<$100)
Because the base layer can be audited and not meddled with by third parties.
Everyone can build their own layers on top. There is no permission needed.
It's the peoples money.
> The amount of electricity consumed every year by always-on but inactive home devices in the USA alone could power the Bitcoin network for 1.7 years
I don't know about you, but I see people escaping tyranny in monetary policy as less wasteful than US standby devices.
Exactly!
Isn’t it awesome how secure the network is!
It's awesome, but it should get even more awesome as BTC gains mainstream acceptance. The energy usage should hopefully one day match that of the USA or at least India to be even more secure.
After all, if Bitcoin is going to become the global reserve currency a 51% attack should be absolutely impossible. Right now all the mining being done is rewarded with a measly ~$55 million per day. That's within the reach of some rich individuals to outspend, to say nothing of big businesses, hedge funds, or even nation states. I think spending about $1B a day on mining would be more appropriate in the long run.
Even at the current state you wouldn't be able to source all the asics needed for a 51% attack.
Why buy them yourself? Just pay the people who already have them to find hashes for you. Pay noticeably better than the existing pools and they would line up at your door.
Miners are motivated by profit. They won't necessarily even know that you're trying to do a 51%, just that you're buying hashrate and are willing to pay them more than they're getting elsewhere.
edit: In fact, you could run a legitimate mining pool at a small loss for a while to build trust. Participating in your loss leader mining pool would be attractive to miners since the other pools, that skim some profit for themselves to support their operations, can't compete on price with one willing to lose a little bit of money. If you want, break it out into 3 "different" pools that you control so that it even looks to the naive like there's no 51% control. Then spring your trap.
51%ing Bitcoin is well within the resources of a motivated hedge fund, major corporation, or country. The motivation just isn't there right now.
The motivation is extremely simple, as you can just short bitcoin, do your stunt and then cash in the rewards as you just crashed bitcoin.
However the game theory behind what you are saying is completely nonsense, which is why no one ever did nor will do your technically and economically impossible stunt.
I don't think you could ever find the "true price" of a pure store of value asset like Bitcoin. Gold has been around for thousands of years and is still volatile enough that no one would want to use it for daily transactions.
The characteristics of a great store of value are different than that of a great currency - it seems naive to me to think that Bitcoin would ever act like a fiat currency that way.
It's because the currency gold is priced in is going down year by year. Why should you spend your gold if your fiat is worth less tomorrow?
That's besides the point that gold is practically unusable as a currency for convenience reasons (divisibility, verification, storage, transportation).
A great currency is a currency that preserves your value over time, as currency is what you earn for spending your time and skill. You shouldn't be forced to take a risk to maintain your wealth. Today it's risky not to divest your fiat.
"Store of Value" and "medium of exchange" are 2 separate functions of currency that shouldn't be served by the same asset.
Care to elaborate?
I don't see why it shouldn't. I will always want the best SoV in exchange for my services, why would I want something else? If I need to exchange the currency for a SoV everytime, I might get the SoV from the get-go.
A good medium of exchange should have: - Little to no transaction fee - Near instantaneous transaction time - stable value
The characteristics of Bitcoin that make it such a good store of value make it really bad at these. Computation-heavy proof of work creates a secure and immutable network, but also makes it more expensive and slows down transaction times. It's scarcity makes it a speculative asset prone to booms and busts, but gives it the best chance of long term value growth.
But I guess what you're saying is that as a buyer, why would I not want my money to live as a strong store of value up until the point of transaction, which I think I agree with. It'd be nice if you could own Amazon stock and then pay at McDonalds with USD taken out of the value of those stocks (though tracking capital gains would be annoying). In that situation though, Amazon stock is the good store of value and United States Dollar is the good medium of exchange.
> - Little to no transaction fee - Near instantaneous transaction time
That can be done with Bitcoin today. Download a lightning capable wallet in the appstore of your choice and post an invoice, I can instantaneously pay that to your wallet with near zero fees.
> stable value
That is basically what I was saying earlier, we don't know the correct price yet. However bitcoin is only volatile upwards (if your time horizon is > 2 years)
Bitcoin is the perfect settlement base for layers built on top. The Lightning Network uses Bitcoin for its trustlessness and payments are also denominated in bitcoin.
I know that I sound like the typical Bitcoin-shill, but I really think that this is the one of the most important projects of our lifetime. It is the first shot at seperating money from power. Some of us just need to accept that we missed the early train and didn't get rich (we all would have sold at $200 if we bought at $0.30), but accept it for what it is. The first and only trustless, permissionless and decentralized monetary network.
Yes I 100% agree Lightning Network solves a lot of the medium of exchange issues and in a really cool way too.
I don't see the volatility stopping though. And being volatile upwards might be good for the spender who's been saving that money long term, but probably not for the seller who needs to count on that revenue to cover its monthly expenses.
Can you point me to some blog/video that really lays out how all this is supposed to work. I don't necessarily mean the technical side but how a bitcoin world would look like.
Have fun staying poor. Ignoring technology that is disrupting money, one of the primary tools driving human progress, is foolish at best.
If your serious take on this is "If you don't invest in Bitcoin, you deserve to be poor", then I honestly don't see a single reason to listen to what you think in regards to economics...
Looks like someone missed the train.
Nathan Robinson did a great piece[0] on Ray Dalio's principles and Bridgewater's culture, which looks extremely toxic:
> Make sure, of course, that you always make specific people feel bad about mistakes: “Instead of the passive generalization or the royal ‘we,’ attribute specific actions to specific people: ‘Harry didn’t handle this well.’” And make sure everyone knows it: “Use ‘public hangings’ to deter bad behavior,” he says, by which he means making sure to belittle (I’m sorry, accurately explain the failings of) employees in front of their coworkers so that the lesson is learned widely.
[0]: https://www.currentaffairs.org/2018/06/how-to-make-everyone-...
It's becoming politically incorrect to suggest someone could perform better in a workplace. Curious this doesn't apply on the basketball court, but does apply in the conference room. Is it so unacceptable to drive for the collective win at the "cost" of acknowledging individual gaps?
If your team and your coach aren't a safe space to accurately explore your gaps in pursuit of shoring them up, both with exercises for you and with adjustments to the team play, why train pro at all? Anything less is literal amateur hour.
No professional athlete can afford to think "accurately explore the failings of" equates to "belittle", and no serious player would expect the coach to only give post- or even mid-game feedback behind closed doors.
Without that team discussion you're going to have a really difficult time knowing what to work on in yourself to be better, and your team is going to have a hard time knowing the watch-out-fors to collaborate on guard-railing your play.
(Not incidentally, basketball and baseball are near real-time stats driven. So is BW performance culture. We understand this for improving software by running it under a debugger or tools like New Relic, why not instrument your own processes?)
If you don't feel like opting-in to acknowledging and working on gaps as a team owning the outcomes, don't sign up somewhere that does.
If you do feel like opting-in, seek out teams and managers that believe in reality-based root cause feedback loops -- great retros drive greater forward looking results, for the product, the team, and you.
I worked at Bridgewater, and while there are things I disliked about it, this piece is not at all fair and does not capture what it is actually like to work there. Nathan Robinson, who is a self described socialist, is not someone I would go to for an objective assessment of a hedge fund's working conditions.
> Nathan Robinson, who is a self described socialist, is not someone I would go to for an objective assessment of a hedge fund's working conditions.
I'm glad you didn't have a bad time working there. Yes, of course you can disagree with NR's conclusions, yet the article is mainly a review of Dalio's book alongside some quotes from employees. This "public hangings" statement is picked straight out of his Principles book. Is any of that source material being misrepresented or unfair in your opinion, having worked there?
I'm curious about the thing with the "overseers", "captains", "dots" and "baseball cards". Is that really a thing or not?
> Each day, employees are tested and graded on their knowledge of the Principles. They walk around with iPads loaded with the rules and an interactive rating system called “dots” to evaluate peers and supervisors. The ratings feed into each employee’s permanent record, called the “baseball card.”
I'm not the one you responded to, but I vastly prefer a work environment where issues are transparent rather than hidden, and while coding is usually that way through processes like pull requests and code reviews it's like pulling teeth to get people's honest assessment of other characteristics.
I'm reading through Principles right now and while you bring up valid points that make people uncomfortable, I think given their continued success it's apparent that Bridgewater has been better off for it. I've unconsciously used some of the basics in my career, like being forward about criticism to my superiors and direct reports, and after a short period of discomfort I've always found the relationship better.
The quoted material is accurate as far as I can tell, in that it really does say that stuff, but NR is interpreting it in an uncharitable way.
There was a test on the principles as part of the new hire orientation, but it didn't really matter how you did on it, and my manager didn't seem to place any weight on it, others might've been different. It is definitely not a daily thing that you're graded on. Dots is just an app you use to give feedback to people on how they are applying the principles, but it's mostly just used to rate if people did something well or poorly. Like if you shipped a feature on time or gave a good presentation on something you'd get a lot of positive dots and if you broke something in production you'd get a bunch of negative dots.
Other people at the company can see the feedback you got, that's part of what the baseball card is. It's really just a more transparent form of the evaluation system any company would have.
My criticism of the principles is that there are so many of them and some of them are contradictory (e.g. fight every battle vs choose your battles are two I remember) that people mostly just use them to justify what they were going to do anyways.
On the positive side, Ray and the other senior people really do care about the employees and Ray in particular is very generous towards them.
Bitcoin will be gold-like store of value because people think it is like gold and financialize it with ETFs and a futures market.
However should we change our mind and instead start thinking some other cryptocurrency or maybe just a registration in some more or less distributed database is gold. Then that can become gold.
Or something like that?
Or maybe only gold is gold because it has been like that for a thousand years and throughout multiple empires and wars.
Here Ray Dalio says he views Bitcoin as a gold-like asset.
This is the first time I have felt that Bitcoin has some value: as a commodity that wealthy people put their wealth into when they have nothing better to do with it. People are not buying gold because they ever plan to use the gold.
The only, and it is a major problem with unavoidable pitfalls that shouldn't - can't be in our systems - is that Bitcoin is an MLM scheme and thus it is aligning people through financial gain, creating a religion of "HODLers" who are already a mob of varying levels of self-control and critical thinking. And as Dalio says, those who speak a counter-narrative to Bitcoin are rightfully "a few scared souls cowering in a corner;" so he's in fact acknowledging this mob without actually directly stating it. He's being very careful with his words to avoid being a target.
I would agree, and this matches it to gold, also from Ray Dalio's perspective.
Ray Dalio invested heavily into gold, and has since repeatedly press released that he had done so. It's the same characteristics as an MLM scheme.
Apples to oranges comparison: gold actually has a use, and its value is kept in check by that - it's tied to the physical world, to reality, and gold also wasn't/isn't an attempt to replace a transactional layer. I'm sure there are more differences that make it incomparable - certainly that pro-Bitcoiners will simply dismiss the differences saying they're unimportant, irrelevant.
Edit to add: qualitative comments rebutting my argument points would be greatly appreciated.
>Apples to oranges comparison: gold actually has a use, and its value is kept in check by that
Is it? According to one source[1], the overwhelming majority of the gold use is for speculation (investment/central banks) or quasi-speculation (jewelry).
[1] https://www.statista.com/statistics/299609/gold-demand-by-in...
If gold was dirt and had no fallback value, would it . Interestingly the marketing that gold is so valuable, more so diamonds, to artificially inflate its price mimics Bitcoin well. Bitcoin's also called a Ponzi-like scheme because in the end, if everyone in society adopts Bitcoin, it actually has no additional value to the last one stuck holding the bag - you've just transferred all wealth through a system that unnecessarily, unreasonably, transfers wealth weighted towards earlier adopters from later adopters.
What is money? Commodity, a measure of value, or a record of a debt. Sometimes all three.
In this article, Dalia has the commodity view towards money, gold, and by extension bitcoin. In this paradigm, cryptocurrencies are collectibles.
One great use case is as an escrow.
I'm dubious of the store of value use case. Bitcoin is just a currency. Whereas gold bullion is minted into coins, electricity is minted into bitcoins. The cost of production is only loosely correlated to the market (strike) price.
What gives money its value? A MMT-like theory is that fiat currencies have their well defined value because government accepts them to pay taxes.
I'm a bit more cynical. I think money, fiat currencies like the USA dollar, has it's value established at the point of a gun. That dollar represents the military might of the USA and that government's insistence that you agree.
What backs the value of bitcoin? Anything tangible? Nope. Just everyone's shared belief. Per Random Walk Down Wall Street, it's just castles in the sky. And like all bubbles, that belief system pops in a panic.
For rich people like Dalio, collectibles like gold, art, and real estate are probably a good idea. After the crash, someone somewhere will probably accept those collectibles, those assets, for payment or collateral.
In any scenario where gold or art will be used as collateral, who's gonna accept bitcoin?
Yeah just like owners of real estate are "hodlers" right? Keep pooring it on
I agree, there was a nice article in the economist about this concept (bitcoin as a store of value) [0]. More specialized than gold, investors have realized that bitcoin acts as a great hedge on uncertainty. When the market is uncertain to it's future (initial lockdowns for example) bitcoin goes up. It also goes up for less direct reasons (at least that I'm aware of). This makes it a less than ideal traditional store of value, but as a slice of a portfolio it is a nice asset due to the potential upside.
[0] https://www.economist.com/leaders/2021/01/09/what-explains-b...
Another way of saying "gold-like asset" or "store of value" is that Bitcoin codifies wealth inequality in an algorithm with a rigidity similar to physical assets, creating mathematical obstacles to block democratic attempts at redistribution away from an elite class of early adopters. Thus "protecting wealth" from the rest of humanity.
However profitable, useful, or entertaining one might find that as a fringe commodity, it's an atrocious basis for an economic system that would ultimately lead to depression, then war, just as money tied to the gold standard did a hundred years ago.
Money was detached from the gold standard almost everywhere in the world for excellent reasons. Recreating money with properties similar to gold would be a step backwards.
This is one part that I feel doesn't get talked about enough. A future where people move to bitcoin does extremely weird things to wealth distribution, where wealth is basically a function of the point in time of a person's switching to bitcoin more than anything else. I don't see how such a dissociation between wealth and effort/value/productivity could ever do good things for a society.
I'm also confused about how people think and talk about the market cap. My sense is that the total economic value of bitcoin holders can't be much more than what they have collectively put in as dollars minus what was spent on mining, which is only a fraction of the market cap. If it's more you get a weird kind of inflation where it's not a central bank printing money, but where "value" seems to spring out of thin air just because the masses are attracted to bitcoin (with FOMO as the main reason).
I can't quite wrap my head around all of this. I've been interested in blockchain for quite a while and have been keeping up with what's going on, but many things about the cryptocurrency market just don't make fundamental sense to me. (Another example - Ether basically being the denomination for transaction prices on the Ethereum network, meaning the higher it's priced, the less useful the network is, which seems like a conflict.)
I'll keep paying attention and see if I can learn a thing or two about real world (irrational?) economics.
>wealth is basically a function of the point in time of a person's switching to bitcoin more than anything else
This isn't any different from other periods of great change in the past. A good chunk of the wealthy in the world are made up of those early to the industrial revolution, computer revolution, and internet revolution. This is just another step.
Eventually people will stop being early to Bitcoin and things will just be "normal" again until the next big change comes along.
The industrial revolution, computer revolution, and internet revolution brought real value to everyone's lives. Even people who didn't own Netscape or Google stock benefit from the Internet.
Who would benefit from a Bitcoin revolution, other than early adopters?
Ransomware authors, perhaps.
This comment feels eerily like what people said at the beginning of the internet. It's useless and hard and doesn't do anything we can't already do. "I already have a radio". https://www.youtube.com/watch?v=gipL_CEw-fk
If you can't understand the value of cryptocurrencies that doesn't mean they are valueless. It'll be easier and more obvious to notice as these systems mature.
Also what people said about every fad that disappeared.
You didn't provide any examples of why someone might use it. And from what I see, the only hype about Bitcoin is its price.
Edit: Thank you both for the examples below. Please note that I am specifically talking about Bitcoin here. I didn't say, nor mean, that blockchain was a technology without potential, and the fact that none of the examples (as of now) show value in Bitcoin only strengthens my case, I think.
I suspect there are many cryptocurrencies to which my criticisms of Bitcoin don't apply, but those aren't the currencies under discussion in a thread about "What I Think of Bitcoin".
Honestly Ethereum tech does get me quite interested. The idea of being able to create custom ledgers with tokens on the chain for bookkeeping that's maintained by an independent third party seems useful, as does the idea of smart contracts (dynamically & automatically executed transactions based on pre-defined conditions).
That would put the value of Ether at the value of being able to make transactions though - and at the moment transactions are clearly way too expensive for it to be particularly useful. The only value from these high transaction prices is extreme replication (many miners confirming the transaction) but I don't think anyone cares much about that level of security.
A heavily digitized financial system can also allow micro-transactions that can enable new things, e.g. to give a random example it would become much easier to pay $0.005 for every action you take on a website which could create entirely new business opportunities.
Edit to add - One way that I can imagine this developing is that "regular" currencies start moving their currencies onto a blockchain like Ethereum. I think that would make a lot of sense from a technology perspective and it would avoid the oddities I mentioned above (about wealth being mostly related to time of currency adoption). At that point the price of Ether would really just have to go to the value of making transactions and that doesn't make it look like a buy currently (at all).
I know this is a Bitcoin article as it involves people very new and ancillary to the space but most people in this ecosystem work on Ethereum as it's where most things are happening so I'll use this as my starting point. A good and respectable source is https://consensys.net/blockchain-use-cases/
Blockchains have lots of use cases that various groups find important. Most people only know about money (e.g. Bitcoin) and that's not super useful for first worlders like us but is actually a necessity for a large portion of the world from third world and oppressive countries like Venezuela, Iran, etc. Having the ability to trust mathematics rather than fallible human institutions is indeed useful for a large portion of the population.
The rest is basically realizing we are in about the 1997 era of blockchains where things are hard, the big use cases are still being built out and designed and it's generally just a playground for bleeding edge nerds. But it's growing fast and DeFi (decentralized finance) didn't even exist until summer of last year.
Some things possible today:
-Financial stuff: decentralized lending, borrowing, programmable assets, no loss lotteries, gambling, etc.
-Art stuff: NFTs (non-fungible tokens) allowing for artists to sell their artwork online (look up Beeple), games making their items digital and tradable and usable in other games (God's Unchained, Axie Infinity), sharing of real world assets (RealT, any kind of physical asset on chain such as a car or house)
-Organizations. These are called DAOs (decentralized autonomous organizations) which allow for an organization to exist and make decisions with fully secure digital voting which allows for employee owned corporations, gaming/interest groups, or even small cities or countries to run their bureaucracies in a provably neutral, safe, and transparent manner.
-Enterprise stuff. The Baseline Protocol by EY is fairly hyped among corporate types (which don't get excited easily) and allows for business workflows/ERP to scale beyond a single enterprise. Microsoft, Coca Cola, etc are building some neat stuff on top of this.
Most of this stuff is complex enough to have at least a few paragraphs each so there's no way I can do it justice or make it sound less crazy from the outside but there's a ton of innovation going on with many different possibly world changing protocols and services being developed so while it might not seem like much now it will likely be something people use without even thinking in a few decades, just like the internet itself.
I don’t understand why you are being downvoted because in my opinion you are right. Fiat money is the real trick that removes people from poverty and increases everyone's standard of living.
This is really easy to understand from first principles. If the total value of the world increases and there is only a fixed amount of either gold or bitcoin, or any finite thing to represent it, it's obvious that whoever has that asset today has to do nothing for it to grow. Just sit on it indefinitely and people will give you more value for the same amount.
On the other hand if the value of the world is represented in USD and the feds keep print more money, you can’t just sit on the money you have today and expect it to be worth more. You have to put it back in the value creation system for it to grow in value.
Bitcoin and gold suck at representing value. Fiat currency is much better because you can print more money to keep up with the world's total value.
> Fiat money is the real trick that removes people from poverty and increases everyone's standard of living.
This is actually completely backwards. Fiat money decreases standard of living by encouraging consumption and discouraging savings and investment.
> This is really easy to understand from first principles. If the total value of the world increases and there is only a fixed amount of either gold or bitcoin, or any finite thing to represent it, it's obvious that whoever has that asset today has to do nothing for it to grow. Just sit on it indefinitely and people will give you more value for the same amount.
Yes, as opposed to a depreciating currency where people continually give you less and less value for the same amount.
> On the other hand if the value of the world is represented in USD and the feds keep print more money, you can’t just sit on the money you have today and expect it to be worth more. You have to put it back in the value creation system for it to grow in value.
So people have to keep increasing their prices or they starve to death, how is this supposed to help the people with the least amount of money?
> Fiat currency is much better because you can print more money to keep up with the world's total value.
Thats why the poor stay poor and the rich keep getting richer. The rich own the assets, and the poor get these checks of decaying currency.
Wealthy people hold gold as a hedge against hyper inflation and currency risk. Ray wrote in his outlook that currency risk is the biggest risk at this time due to low interest rates and government spending.
For the wealthy, it's truly a hedge or an insurance policy. Even if America and the dollar collapses, bitcoin will keep the elites rich.
I don’t think it will, if things get like that. They will need to find a safe place to hide, which Bitcoin cannot provide
MacroVoices #255 with Mike Green discussed another regulatory threat not mentioned in the Bridgewater post. Governments don't have to ban BTC outright. They have other tools for making it wildly unattractive to hold. I can't remember the details but they discussed a scenario where the US government classifies BTC as a commodity and requires K-1 style taxation. That would mean that you would have to pay taxes on any gains in BTC even if you haven't sold your shares.
Absolutely. Governments have the power to make things unlawful or taxed even if you have ways to keep that activity secret. Sure, you can pay your builder cash to finish that deck, but it’s illegal. Making things illegal or taxed suppresses that activity.
How will they confiscate those BTC gains? They are literally relying on an honor system to report holdings today. Maybe this will change and they will come after those who are suspected to be holding BTC due to purchase records from KYC compliant services that IRS could get their hands on. Then what? Show up with their guns to coerce you or throw you in a cage until you fess up? The tax code mess becomes totally impossible post hyperbitcoinization. Bitcoin frees the tax slaves. You thought abolition was just for history books?
It's just an example and I'm not invested enough to defend it. The main idea is that governments have a lot of levers to add friction (as Consultant32452 said) and if you think that governments are just going to peacefully concede their ability to control something as fundamental as money to the crypto illuminati, you might be in for a surprise.
Another possible lever is government control over regulated financial institutions.
How much power do you think governments have over central banks? Bitcoin is definancializing money, so those levers lose efficacy with Bitcoin's adoption.
I agree with you 100%. The phrase I like to use is "friction". All the central banks/governments have to do is apply some friction and it will stop BTC from becoming a defacto currency. They have already started by calling BTC an asset. This means if you get some bitcoin and then spend it, you have to log that on your taxes as capital gains/loss. This is already going to be too troublesome for regular people. They killed BTC and the crypto community doesn't even know it.
Mike Green is one of the most interesting thinkers in the finance space. His work on passive indexation is fascinating.
> I should clarify what I said about its supply. Although Bitcoin is limited in supply, digital currencies are not limited in supply because new ones have come along and will continue to come along to compete so the supply of Bitcoin-like assets should, and competition will, play a role in determining Bitcoin and other cryptocurrency prices. In fact I assume that better ones will come along and displace this one because that is the way the evolution of everything works—i.e., new ways of doing things and new things always have and always will replace old ways of doing things and old things. Since the way Bitcoin works is fixed, it won’t be able to evolve and I presume that a better alternative will be invented and pass it by. I see that as a risk. For those reasons the “limited supply” argument isn’t as true as it might appear—e.g., if Blackberries were in limited supply they still wouldn’t be worth much because they were replaced by competitors that were more advanced. I still don’t know the answer to why that isn’t a risk, but I would welcome my naïveté being corrected.
It's taken decades for IPv6 to make inroads onto the internet. Network effects are extremely strong when it comes to protocols and it's not easy even after something better comes along.
Agreed. Double edged: as the new entrant network effects of incumbent(s) can be the wall you hit. Can also be your moat if you innovate the space into a new, different direction.
What I think about bitcoin and crypocurrencies in general that are based upon a "proof of work" with no tangible production of anything useful in society?
They are a giant waste of electricity.
Even renewably-sourced electricity is in finite supply, even near large hydro-electric dams or geo-thermal plants, and thus this deprives the world of metal smelting or other energy-intensive activities we urgently NEED to adapt to electrically-driven processes.
I should expect to see intelligent folk like those in tech to understand the multiple environmental crises we are in, and how bitcoin and it's ilk are not aiding resolution of this in any way, and indeed can be shown to be hampering efforts.
Wasted CPU cycles have environmental costs. Proof of work is a giant waste of electricity that could be better spent.
Introduce a cryptocurrency that actually incentivizes goodness through it's creation instead of further destruction and spare me the hypotheticals. As currently implemented= BAD FOR PLANET EARTH and a diversion of resources to literal waste.
Imaginary money burning real joules of energy
These people don’t care
<Ctrl-F> "environment"
2 hits, both "regulatory environment"
I went one step further and searched for "energy", which only appeared in the article's disclaimer in names of institutions.
I then proceeded to close the browser tab.
so you will only read content that confirms your belief that Bitcoin wastes energy? I see. Have fun staying poor.
coinward has a nuanced opinion
I think there is a huge tail risk that Ray Dalio missed about bitcoin.
It's incredibility energy intensive and as the world works towards reducing the our impact on the climate, it's possible energy can get too expensive to operate a bitcoin farm mining farm. Or governments decide that using precious electricity production on hashing blocks is the same as other forms of pollution and regulates it away.
In the free market people will mine bitcoin if it's profitable. That is, if bitcoin is valuable enough and if energy is cheap enough and if the overall network hash rate is low enough.
Any changes to network hash power, bitcoin prices and energy cost may cause miners to scale down operations and lower overall network hash. Then at a certain network hash rate it will become profitable again.
Miners are incentivized to use renewable energy because it's cheaper and impacts their profit margins considerably.
Is energy use a concern when you're primarily dealing with solar/hydro power?
- "Since the way Bitcoin works is fixed" Bitcoin's work is not fixed. Since it evolves depending on the wishes of the community You only need the 51% of the network has applied the changes in order to evolve.
- "limited supply they still wouldn’t be worth” I think limited supply is one of the most attractive things of Bitcoin :)
I am struggling to understand this comment.
90% of the time Ray Dalio has an interesting opinion and good analysis, and he does this here.
I did an analysis based on the same premise (Bitcoin competes with gold) and came to basically the same conclusion.
Dalio's writings about how the "All Weather" fund works are based on a premise a lot like the "Permanent Portfolio" advocated by Libertarian presidential candidate Harry Browne but Dalio took out the "gold" component and replaced it with "treasury inflation protected securities."
Circa 2000 I bought a lot of TIPS and they did very well despite there being little inflation. Dropping interest rates had something to do with it, but I still don't understand exactly why they did so well.
(My stockbroker fired me as a client because I went to a presentation and asked why I needed the product they were selling when I bonds were yielding so well and had all the tax benefits they had)
I don't know how TIPS will do now, but I am sure that getting into TIPS at the right time is part of why Dalio is a legend. Maybe these days he thinks gold is better than TIPS.
dropping interest rates had everything to do with it. the 10yr treasury was at 6% in 2010 and now it's at 1.15%. your TIPS did well because rates dropped. Also those are mostly paper gains unless you sell...
fyi the "all weather" portfolio's name is stupid given it's mostly backward looking and benefited from a commodities supercycle and rates dropping from QE. With the 10yr at 1% putting 30-40% of your portfolio in long dated treasuries is insane. Let's use the TLT etf as an example (20 yr treasury). It has a duration of 19 years. That means for every 1% increase increase in rates, the value of your bonds will go down 19%....yikes. Let's say you are going to buy individual bonds and hold to maturity. Ok, you are protected from that price drop assuming you don't sell, but you've also just made a 20 year bet you don't think interest rates will go higher from here.
> (My stockbroker fired me as a client because I went to a presentation and asked why I needed the product they were selling when I bonds were yielding so well and had all the tax benefits they had)
That's interesting the broker didn't want to sell any other products to you.
> I don't know how TIPS will do now, but I am sure that getting into TIPS at the right time is part of why Dalio is a legend. Maybe these days he thinks gold is better than TIPS.
I think Buffett has also recommended TIPS.
My guess is TIPS would outperform gold for low to moderate inflation and get absolutely crushed for high or hyper inflation.
they would only get clobbered if the fed is ahead of the curve. If the CPI is 4% a year and interest rate is 2%/year, then TIPS are very good cuz you are getting a 2% real return even with high inflation.
> Since the supply is known, one has to estimate the demand to estimate its price.
Is there any other asset we can make this statement about? That supply is 100% known and cannot change in future?
The supply isn't really known. As of this older 2020 article [0], something like half of the total number of (future) Bitcoins haven't moved in at least a year. I've seen figures like 2/3 from later in 2020. Some fraction of those probably represent lost keys, and hence will never move again absent a consensus change. Another fraction represent people who are just sitting on the coins waiting for a chance to sell. But we don't know what the fractions are! These are big uncertainties.
[0] https://www.coindesk.com/10m-bitcoins-havent-moved-in-more-t...
Lost and burned coins are included in the notion of circulating supply, which is simply the sum of all historical block subsidies.
It’s not 100%. If >= 50% of the network is in agreement we can make more bitcoins, right? The limit is set in code. But that code can be altered.
Let me know if I’m wrong
10%, 50%, 80% doesn't matter. Any node who wants to change Bitcoin's code and rules is free to do so.
It just creates an additional coin and it already has happened dozen of times (Bitcoin Gold, Bitcoin SV, Bitcoin ABC, Bitcoin Cash, ...). Some of them claim to be "the real Bitcoin" but market consensus seems to disagree: All of them are either dead or valued at <1/100 of Bitcoin.
As long as you run your own node you define for yourself what Bitcoin is.
You are wrong. > 50% of mining can only censor transaction.
Changing the fixed cap would break consensus, so it can only be done with an overwhelming majority not only of miners, but also users, exchanges and merchants. (otherwise miners would mine an empty chain).
Technically yes it is possible. Very, very unlikely though.
But who knows what we'll all be thinking when 2140 arrives?
Block reward is now 6.25 btc, and fees reward is about 1.5 btc.
Every 4 years block reward halves, so in the next two halving block reward will be much less than fee reward, making it more and more irrelevant.
The 2140 is the date where it reaches 0, but it will be completely irrelevant in 12 years (3 more halving cycles).
But doesn't the value of BTC go up as the reward halves? So "3 more halving cycles" should be counteracted by each coin being 8 times more valuable, no? I could very well be wrong, but that's what seems intuitive to me (I don't follow crypto very closely).
Will that stop you from making a small allocation into Bitcoin? Any and all risks to bitcoin can be mitigated by portfolio sizing.
I'm not sure, besides all the other cryptocurrencies that have the same property.
Maybe Helium?
> I know how much one needs to know in order to have a valuable opinion in the markets, so I wouldn’t bet on my own views.
Good to emulate.
I think Dalio used to be more against Bitcoin. His writing/books are definitely worth reading though.
I liked the first part of his book, that was a biography. The second part with the principles seemed strange. Meetings had realtime feedback dials so you tell the person listening you were bored? Every meeting is recorded and kept forever. I'm working from memory, but it seemed cultish and strange.
Store of value like gold & crypto currency is an idea that has a clear side effect. There will be inflation, it's how governments move the economy around. Yet, bankers and crypto fans keep talking how gold or bitcoin can help you evade it. Which it means, even more pressure will be put on people who don't have the ways of escaping inflation through such ways. It will be the poor that will pay the highest price while rich people will go around it.
For my money buffet > Dalio, this superficial framing of The Whole topic is a case in point.
Who challenges dalio on his submerged assumption that a gold-like store of value is really of any value to rank and file investors compared to the stock, bond and real estate markets?
He should be equally criticized for obsessing about gold as for being attracted to Bitcoin.
General AI will need a bearer asset.
I could not read this article because first I had to agree to this: "I am entering this website only to obtain general information regarding Bridgewater Associates, LP and not for any other purpose." but that was not at all why I was trying to enter the website. So I will probably never know what Ray Dalio thinks of Bitcoin.
Isn’t Ray Dalio’s opinion information regarding Bridgewater Associates?
This is likely a way to assert that the site is not intended to market Bridgewater’s investment products to non-accredited investors. I don’t know if the SEC explicitly requires a click-wrap warning but it’s generally an area that firms want to avoid toeing the line on.
Are you a robot?
....got me!
Bitcoin was good until around early-mid 2017, when it became over-regulated, too expensive to use, no privacy, too slow, etc. The fungibility is gone. Everything is taxed and tracked. Pretty much useless
The privacy / fungibility was never there. Not in 2009, not in 2017, not now.
I don’t get how Bitcoin can become a viable currency or store of value in the future. It’s almost exclusively owned by a small group of individuals. Are we gonna accept that level of centralisation? Of course not.
Bitcoin is permissionless and bootstrapped. It had to start with 0 users and $0 value. 10 years later it is now worth $50K and has 100M users (doubling every ~2 years).
We are currently living in a world in which the rich get richer (bailouts, stocks, real estate, efficiency gains) while the poor get poorer (cash only, inflation, wage stagnation). Every $1 that trickles down from the top 1% is returned to them as $2 freshly printed from the central banks. Wealth and income inequality continue to rise as a result.
Bitcoin has a fixed supply, and now you can't bailout the riches anymore while having the poor pay the bill in the future via inflation.
Do we accept that inflation causes wealth centralisation? Of course not, but until Bitcoin there wasn't anything we could do about it.
Do you think that centralization of Bitcoin is worse than centralization of USD?
Or gold, or stocks, or real estate or anything that can be used as a store of value today.
It is probably yeah.
I offer no commentary on the actual content, but this is a truly horrible piece of writing - almost every sentence is clunky, poorly phrased, ungrammatical, or repetitive. I guess you don't need to be able to write decent prose to make $18B!
What a boring comment. Unfortunately, this comment reveals more about you as a person than it does about Ray Dalio for putting out that article. Too bad writing pessimistic comments about others on HN doesn't earn you any money, otherwise you could have made some too!
I'd love it if your comment could raise the same point as you did, but also include examples of the poor sentences and how it could be better. Then at least we could have learned something. Instead you went for the shallow dismissal. Boring.
The fact that you chose to comment on a "negative comment" simply by stating that it is "boring" and "pessimistic" is pretty funny.
I understand and appreciate the irony for sure :) I have a small tick that I cannot downvote someone on HN without explaining why, even though the author won't actually know I was the one downvoting. But downvoting without explaining why, feels wasteful. At least now I get to explain why I feel that comment doesn't live up to the HN standard.
I wasn't originally planning on reading the article itself, but I had to skim it as a result of your comment just to see how bad it was for myself.
In fact, I saw none of your suggested horribleness. Okay, I immediately don't like its rhetoric (the first paragraph basically implies the only reason not to like Bitcoin is sour grapes), but that's not bad writing. The only bad habit I see is the tendency to put a comma-separated clause one or two words into the sentence instead of at the beginning, e.g.: "That, like creating the existing credit-based monetary system, is of course a type of alchemy," but even that isn't a particularly frequent occurrence.
Obviously my comment wasn't at all substantive (and thus richly deserves the downvotes it has received!), and clearly my opinion on this piece of writing isn't a popular one either, but surely it's hard to argue that...
"In fact I assume that better ones will come along and displace this one because that is the way the evolution of everything works—i.e., new ways of doing things and new things always have and always will replace old ways of doing things and old things."
...is not exactly vintage writing!
I mean, it can be argued his no nonsense style of writing is exactly why he's successful.
He didn't waste time and money sending this to some ivy league educated kid for a proofreading session. I've even heard one theory that the higher up in a company you get the shorter emails tend to be, simply because the folks writing those emails don't have time to waste.
In fact the coolest thing about English is just how much flexibility exist in the language, from my studies of Asian languages this just doesn't exist to nearly the same scale.
I don't downvote, so none of the downvotes are from me, however instead I'll try to learn: what examples would you consider as well-written in comparison?
So far from what I've read, it's extremely well-written; the repetition is to drill in specific points - just take it for that and not be annoyed by it, as it's not done in an annoying way - at least for how far I've read through so far.
Nor becoming president.
It seems humanity is on firesale this days.