Bitcoin Breaks $60k(seekingalpha.com)
seekingalpha.com
Bitcoin Breaks $60k
https://seekingalpha.com/news/3672429-bitcoin-tops-60k-amid-more-institutional-investment
58 comments
As much as I'm bullish on Bitcoin and cryptocurrency in general in the longer term, this feels like too much, too quickly. I don't really expect this bull run to last that much longer.
No economy survives a sudden injection of trillions of dollars. People are going to want their golden parachutes eventually and a mess will be left behind. Reminds me of government student loans.
I know all too well the consequences of injecting a whole bunch of "empty" money into an economy as a Venezuelan. I can't tell you if it's the right call on the short term or not in the case of US, but I'm sure the real consequences will be felt for years, if not decades after the pandemic is over.
In the old days, a balanced portfolio consisted of stocks, bonds and maybe some real estate.
Today, bonds yield very little, and as we've seen in recent weeks, they can decline in value rapidly with small increases in the interest rate. You can lose a lot of money buying bonds.
Stocks are at all-time highs even though the economy isn't doing so well and many are unemployed. Are stocks a safe store of value right now?
Companies are shifting to hybrid work-from-home models that require less office space. And not just tech companies, yesterday Target said they're not renewing the lease on an entire building in Minneapolis because of more flexible hybrid work. Is real estate a safe store of value?
As trillions of borrowed and printed dollars and euros were pumped into economies the last year, gold was the worst performing asset of them all. So is gold a safe store of value?
And inflation isn't the only enemy of wealth. Political disintegration destroys wealth much faster, just look what happened to the ruble after the collapse of the Soviet Union. The probability of that happening in a major western nation is low, but not zero, and higher now than 10 years ago.
So if you're a high net worth individual looking at the twin threats of inflation and political disintegration, exactly how do you protect your wealth?
It's easy to see how Bitcoin might be getting a 5% allocation from a lot of family offices right now.
Today, bonds yield very little, and as we've seen in recent weeks, they can decline in value rapidly with small increases in the interest rate. You can lose a lot of money buying bonds.
Stocks are at all-time highs even though the economy isn't doing so well and many are unemployed. Are stocks a safe store of value right now?
Companies are shifting to hybrid work-from-home models that require less office space. And not just tech companies, yesterday Target said they're not renewing the lease on an entire building in Minneapolis because of more flexible hybrid work. Is real estate a safe store of value?
As trillions of borrowed and printed dollars and euros were pumped into economies the last year, gold was the worst performing asset of them all. So is gold a safe store of value?
And inflation isn't the only enemy of wealth. Political disintegration destroys wealth much faster, just look what happened to the ruble after the collapse of the Soviet Union. The probability of that happening in a major western nation is low, but not zero, and higher now than 10 years ago.
So if you're a high net worth individual looking at the twin threats of inflation and political disintegration, exactly how do you protect your wealth?
It's easy to see how Bitcoin might be getting a 5% allocation from a lot of family offices right now.
Well there were the trillions injected since 2008, then the 2017 tax cuts which inject about a trillion a year, then there was the 2 trillions last year.
But this 1.7 trillion is surely the death knell.
But this 1.7 trillion is surely the death knell.
They're getting free money from the government? I think I'm gonna raise their rent in order to get some of that action!
No system will remain honest after you inject a trillion dollars into it. I'm sure all of those injections caused less-than-obvious consequences immediately afterwards.
No system will remain honest after you inject a trillion dollars into it. I'm sure all of those injections caused less-than-obvious consequences immediately afterwards.
> They're getting free money from the government? I think I'm gonna raise their rent in order to get some of that action!
Yes, after all these years landlords finally have their chance to raise the rent
Yes, after all these years landlords finally have their chance to raise the rent
Raise rent?
The “system” will suddenly become so massively dishonest that it will spell death for America?
The “system” will suddenly become so massively dishonest that it will spell death for America?
>No economy survives a sudden injection of trillions of dollars
Really? Why not? The current package and the last one amount to about 10% of the total economy. That seems survivable, especially when the alternative is a lot of people not surviving.
Really? Why not? The current package and the last one amount to about 10% of the total economy. That seems survivable, especially when the alternative is a lot of people not surviving.
Because if you inject trillions of dollars into the economy, people are going to notice and they will immediately move to capture as much of it as possible. No system remains honest when faced with such temptation.
Student loans are responsible for destroying academic integrity. Schools raise tuition because the government is paying for it. Students will be left with the debt after graduation but by that point they are no longer the school's problem. They also do everything possible to prevent students from dropping out, including interfering with the work of teachers. School administrators are getting rich off of the trilions of dollars being injected into the economy. Meanwhile privileges such as tenure are being abolished because they don't serve the administrator's interests.
Student loans are responsible for destroying academic integrity. Schools raise tuition because the government is paying for it. Students will be left with the debt after graduation but by that point they are no longer the school's problem. They also do everything possible to prevent students from dropping out, including interfering with the work of teachers. School administrators are getting rich off of the trilions of dollars being injected into the economy. Meanwhile privileges such as tenure are being abolished because they don't serve the administrator's interests.
I think the situation with grade inflation and loans, and the set of incentives in higher ed is a little more nuanced that you're portraying here. Universities have always had to compete for students, and the argument that the incentives pushing for student retention would disappear if student loans didn't exist seems speculative and unsupported.
That’s a long walk back from ‘won’t survive.’
$60k is nothing. Reckon it goes to $100k this run, or maybe even overshoots.
prepares for seething
prepares for seething
Have those US stimulus checks arrived already?
The government says direct deposits are set to start going out this weekend, so I guess if you're trying to front run now would be the time to do it.
I personally would love to see the Federal Reserve make the USD a more attractive store of wealth by bringing back some sort of gold standard. Once I bring up the gold standard people kinda react like I'm some nut. I really don't understand why people think having a gold standard is such a backwards idea. Bitcoin's rise is an example of what happens to an asset when there is a fixed supply.
Having a gold standard is backward because you tie the value of your currency to an arbitrary asset that changes in value for reasons other than the attractiveness of your currency.
It means for instance that the value of your currency goes down because people dig more gold bearing dirt out of the ground. Or maybe some better thing that replaces gold is discovered or made and your currency is suddenly worthless.
The reason people think gold is a good idea is because they think money should have some sort of absolute or immutable value (your 'fixed supply'), because they do so much real work to earn it, but money, like any other asset, is worth what people will pay (or give) for it, or in other words, what you can buy with it.
Like everything else money is subject to the laws of demand and supply. That's driven by the US economy (and others) and the Fed. You have to have faith that the Fed knows what they are doing, at least more so than a bunch of gold miners mostly in Australia and Canada.
It means for instance that the value of your currency goes down because people dig more gold bearing dirt out of the ground. Or maybe some better thing that replaces gold is discovered or made and your currency is suddenly worthless.
The reason people think gold is a good idea is because they think money should have some sort of absolute or immutable value (your 'fixed supply'), because they do so much real work to earn it, but money, like any other asset, is worth what people will pay (or give) for it, or in other words, what you can buy with it.
Like everything else money is subject to the laws of demand and supply. That's driven by the US economy (and others) and the Fed. You have to have faith that the Fed knows what they are doing, at least more so than a bunch of gold miners mostly in Australia and Canada.
Actually neither gold nor Bitcoin has a fixed supply. The gold supply increases by about 2.5% annually, and Bitcoin by 1.8%.
Bitcoin's inflation will gradually decrease and it has an ultimate limit that will be reached in 2140, and gold will reach some limit if we don't start mining asteroids for it, but I don't think either limit is economically relevant today.
Bitcoin's inflation will gradually decrease and it has an ultimate limit that will be reached in 2140, and gold will reach some limit if we don't start mining asteroids for it, but I don't think either limit is economically relevant today.
> Actually neither gold nor Bitcoin has a fixed supply.
It does. There's an upper limit to how many bitcoins can be mined. We haven't reached this limit yet but it will eventually happen.
It does. There's an upper limit to how many bitcoins can be mined. We haven't reached this limit yet but it will eventually happen.
Which was acknowledged, but it's not clear why that upper limit would be relevant to economic decisions today. Nobody's investing today based on predictions of exactly what the world will look like in 2140; they're making predictions over at most a couple decades, and over that period the Bitcoin supply will see a significant continual increase.
How significant is it really? There will be less than 15% change in the total supply and the majority of that actually will happen in the next few decades.
If you ask me personally, I'm not convinced the number of base units in existence is an important metric for any currency. (In the US dollar for example, this is called the "monetary base", and neither fans nor detractors of American monetary policy point to it very often.) It's just an illustration of the fact that the value of Bitcoin can't come deterministically from its restricted supply - if it did, that 15% supply increase would equate to a 13% loss for all holders.
I try to answer that in
https://john-tromp.medium.com/a-case-for-using-soft-total-su...
https://john-tromp.medium.com/a-case-for-using-soft-total-su...
By that time we either break SHA256 or burn the entire planet to fuel the virtual greed.
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Bitcoin's supply will be logarithmic where as gold will increase linearly. In the long run that makes a big difference. I'd take linear or logarithm supply over the exponential USD supply that we are currently seeing https://fred.stlouisfed.org/series/M1SL
As is noted under the graph, this big spike comes from a redefinition of the underlying metric, not an organic increase.
Just read that. This redefinition is so dumb. This metric is now worthless for statistic models.
Can't argue with you there.
The problem is that countries tend to lie about how much gold they actually have. In 1965 the French wanted their gold in exchange for the dollars they had and others followed but then in 1971 Nixon moved the US off the gold standard. It was supposed to be temporary but ended up permanent.
The amount of FOMO and The fear of 1.7T flooding the system is a big factor in the run up. Wouldn’t chase it
You wouldn't chase a store of value asset when money is being flooded into the system at record levels? Doesn't sound like very good advice. Indeed stocks, real estate etc. are being bought up for the same reason. Some people use Bitcoin for that purpose.
I don't buy in to this. People aren't buying due to the helicopter money fallout from the sky. If that was the case you'd also see gold going up. That's your classic value store and hedge against inflation.
This is more interest rates driving speculation. If I can borrow money at less than 3% it makes sense to borrow and lock it in to an asset for 20+ years. It's a good return on the investment for people who have an excess of wealth. Conversely the helicopter money is placing yet another squeeze on the poor and middle class. They're wanting to take advantage but not from their excess wealth so they can't ride out the shifts when it turns on them.
This is more interest rates driving speculation. If I can borrow money at less than 3% it makes sense to borrow and lock it in to an asset for 20+ years. It's a good return on the investment for people who have an excess of wealth. Conversely the helicopter money is placing yet another squeeze on the poor and middle class. They're wanting to take advantage but not from their excess wealth so they can't ride out the shifts when it turns on them.
You've got that the wrong away about. People buy stocks and assets because interest rates are low: the leverage of borrowing easily overcomes what people holding cash are doing.
Since the stimulus has passed the dollar has strengthened, and will probably continue to. People are assuming that interest rates will be going up due to increased spending and employment.
As interest rates start to bite the value of stocks and real estate will slow down or reverse since they become more expensive to buy (with leverage), so it's not a great bet going forward.
Since the stimulus has passed the dollar has strengthened, and will probably continue to. People are assuming that interest rates will be going up due to increased spending and employment.
As interest rates start to bite the value of stocks and real estate will slow down or reverse since they become more expensive to buy (with leverage), so it's not a great bet going forward.
Store of value? Lol. It’s a speculative investment. Stores of value don’t often change 100% within the span of a few weeks.
See also: "Bitcoin may consume as much energy as all data centers globally" [1] – BTC begins to become a real problem.
[1] https://digiconomist.net/bitcoin-may-consume-as-much-energy-...
[1] https://digiconomist.net/bitcoin-may-consume-as-much-energy-...
Indeed, and this is strongly determined by the price. As long as bitcoin doesn't influence the price of electricity, the relationship between its electricity consumption and price should be roughly linear. Meaning that if the price doubles, miners can afford to spend twice as much energy on proof-of-work in their competition to find blocks.
We're already at a price level where miners could afford to spend on the order of 2% of the world's electricity consumption (assuming an electricity cost of $0.05/kWh [1]). If the price rise continues, then bitcoin will start to push electricity prices up. Electricity grids may even become strained.
[1] https://www.wolframalpha.com/input/?i=%28%286.25+bitcoin+%2F...
We're already at a price level where miners could afford to spend on the order of 2% of the world's electricity consumption (assuming an electricity cost of $0.05/kWh [1]). If the price rise continues, then bitcoin will start to push electricity prices up. Electricity grids may even become strained.
[1] https://www.wolframalpha.com/input/?i=%28%286.25+bitcoin+%2F...
People have set oil fields on fire and killed millions of people to protect fiat currencies.
Bitcoin is a mere blip in my opinion. Prof of stake is coming and eventually bitcoin will not be able to keep up with others that have switched. So it will be fork or die.
Bitcoin is a mere blip in my opinion. Prof of stake is coming and eventually bitcoin will not be able to keep up with others that have switched. So it will be fork or die.
> People have set oil fields on fire and killed millions of people to protect fiat currencies. Bitcoin is a mere blip in my opinion.
Agree completely. I simply don't understand all this noise about bitcoin energy consumption. It doesn't add up to even 1% of the damage these entrenched organizations cause. The only explanation I can come up with is they are too powerful to be messed with while cryptocurrencies are a safe target.
> Prof of stake is coming and eventually bitcoin will not be able to keep up with others that have switched. So it will be fork or die.
Absolutely! Once they all switch to better proof systems, we'll enjoy lower transaction fees and even higher decentralization. Proof-of-stake is already threatening to fork Ethereum, hopefully the miners will lose in the long run.
Bitcoin is outdated tech by now. Only reason it's still around is its history as the first and most well-known cryptocurrency.
Agree completely. I simply don't understand all this noise about bitcoin energy consumption. It doesn't add up to even 1% of the damage these entrenched organizations cause. The only explanation I can come up with is they are too powerful to be messed with while cryptocurrencies are a safe target.
> Prof of stake is coming and eventually bitcoin will not be able to keep up with others that have switched. So it will be fork or die.
Absolutely! Once they all switch to better proof systems, we'll enjoy lower transaction fees and even higher decentralization. Proof-of-stake is already threatening to fork Ethereum, hopefully the miners will lose in the long run.
Bitcoin is outdated tech by now. Only reason it's still around is its history as the first and most well-known cryptocurrency.
Energy is the only physical thing you can put into the internet, and is the price to pay for having noone in control of this new permissionless fixed-supply global currency.
Think about how global resources are allocated on large scale, and how much control on this allocation have those who control the global money supply.
What would happen if there was a way to have a leveled playing field?
Think about how global resources are allocated on large scale, and how much control on this allocation have those who control the global money supply.
What would happen if there was a way to have a leveled playing field?
It's not even 1% of global energy consumption. There are much bigger problems out there that should be prioritized such as fossil fuels. By the time we've solved those, cryptocurrencies will hopefully have moved on to less expensive proof systems.
Cryptocurrencies besides Bitcoin are already moving on. By marketcap, the second through fourth-largest blockchains either don't use miners or are getting rid of them within a year.
Indeed. Honestly bitcoin is already outdated technology. It enjoys its current position by virtue of being the first and most well-known cryptocurrency. Ethereum and Monero are much more important technologies, I hope they'll one day be able to switch to cheaper proofs so that we can spend less energy as well as less money in fees.
Are you posting this to start a flame war? Has nothing to do with the topic at hand.
The nature of Bitcoin's power use does directly matter to the pricing. The availability of "cheap" power is directly related to the price floor due to mining costs. If you can't afford to mine coins at a profit the network will shut down. That means either higher transaction fees, more efficient mining hardware, or a change to the network design (proof of work). Power consumption is very central to the future of Bitcoins and how you should consider pricing it.
Edit: fixing some sentence wording :)
Edit: fixing some sentence wording :)
The difficulty can adjust downward. If the price goes below miner costs, then some miners quit, difficulty decreases, and remaining miners become profitable again. The network keeps going just fine, without needing any changes.
A 50% hashrate dump right after a difficulty adjustment would result in the next epoch running at half-speed for 4 weeks.
Network would keep going, but if would not be "just fine".
Network would keep going, but if would not be "just fine".
No, certainly not: the ramp-up in price directly corresponds to trade and the load on the mining network. Hence, we've seen quite a significant increase in energy consumption, recently. The problem isn't going away, as long as BTC is traded in volume (for which valuation is an indicator).
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