> He doesn't have an investment strategy, and probably never heard of portfolio re-balancing.
This is perhaps a reasonable inference to draw based only on the information in the article, but it is incorrect. Without going into too much detail, the missing context is that I have effective long exposure to certain markets through my ownership of founder stock in a startup that operates in those markets. And while I place a high expectation value on that stock, it's also illiquid and can't be easily hedged. For reasons I didn't go into in the piece, I believed Bitcoin would also serve as a partial hedge for that market exposure, which justified a higher allocation than one might naively expect.
(I'll also observe that portfolio rebalancing isn't the right decision in all situations. Startup founders rationally concentrate their net worths into their companies, which is justified by their overwhelming informational advantage.)
> He got in lucky and made some good returns. Now he thinks he is a genius because of that, and as a result can predict the next market move.
I agree with the first sentence. I would strongly dispute the second. It's precisely because I don't think I can predict what will happen next that I've zeroed my exposure to this entire ecosystem.
> He didn't do good market research. For example, most of the volume in USDT is faked by the exchanges. Coinbase, GBTC, and CME each one of these is are probably bigger than USDT in size and volume. Unregulated derivatives are an alternative to USDT for more sophisticated traders and they are also huge.
I'm aware of these claims — there are rumors of wash trading by the big unbanked exchanges that I consider quite credible. I didn't include those in the piece because I wasn't able to find confirmatory evidence in the time I'd allocated to research it. I would be extremely interested if you could share any evidence you may have collected about these claims.
Author here. I agree that past inflation has been minimal; what I was referring to was the expectation of future inflation after the pandemic has materially ended. It would have been rational (or so my thinking went at the time) for investors to buy into Bitcoin in anticipation of this shift.
Author here; I agree this is a valid objection and that one should be very cautious when extrapolating cause-effect relationships. Systems like these also often have multiple embedded feedback loops in them, which can make it impossible to identify a single cause once the flywheel gets going.
It's when you combine the USDT/BTC correlation with the available evidence for Tether's unbacked issuance that the problem becomes clearer, in my view. When issuance is unbacked, it can be decoupled from real demand — and that's a degree of freedom that allows Tethers to be injected arbitrarily into the system. Coinbase's stablecoin is backed by audited reserves, so USDC is constrained by demand — making it more plausible that USDT is the causal factor rather than USDC.
Author here; this is the correct answer. The larger number refers to all banks. Deltec is known to be a domestic bank, so we can use the smaller number to get tighter uncertainty bounds on its currency flows.
Author here. I really appreciate your kind words about the post - thank you!
I'm also broadly in agreement with your conclusions as to what this means for a crypto trader or holder. I've zeroed my net exposure to this ecosystem myself, both in anticipation for such an event, and out of recognition that I frankly understand it far less well than I originally thought.
> Money isn't created primarily because governments print it; whenever a bank creates a loan money is created, and when they call in loans money disappears.
Yes this is right, and I am in fact aware of this mechanism. As I say in the post: "[...] anticipated high levels of lending and consumer spending post-pandemic, seemed likely to fuel substantial USD inflation in real terms through the end of 2021."
Velocity-of-money and the M2 money supply weren't that relevant to the main story I wanted to tell, so I went into no more than superficial detail here.
> He doesn't have an investment strategy, and probably never heard of portfolio re-balancing.
This is perhaps a reasonable inference to draw based only on the information in the article, but it is incorrect. Without going into too much detail, the missing context is that I have effective long exposure to certain markets through my ownership of founder stock in a startup that operates in those markets. And while I place a high expectation value on that stock, it's also illiquid and can't be easily hedged. For reasons I didn't go into in the piece, I believed Bitcoin would also serve as a partial hedge for that market exposure, which justified a higher allocation than one might naively expect.
(I'll also observe that portfolio rebalancing isn't the right decision in all situations. Startup founders rationally concentrate their net worths into their companies, which is justified by their overwhelming informational advantage.)
> He got in lucky and made some good returns. Now he thinks he is a genius because of that, and as a result can predict the next market move.
I agree with the first sentence. I would strongly dispute the second. It's precisely because I don't think I can predict what will happen next that I've zeroed my exposure to this entire ecosystem.
> He didn't do good market research. For example, most of the volume in USDT is faked by the exchanges. Coinbase, GBTC, and CME each one of these is are probably bigger than USDT in size and volume. Unregulated derivatives are an alternative to USDT for more sophisticated traders and they are also huge.
I'm aware of these claims — there are rumors of wash trading by the big unbanked exchanges that I consider quite credible. I didn't include those in the piece because I wasn't able to find confirmatory evidence in the time I'd allocated to research it. I would be extremely interested if you could share any evidence you may have collected about these claims.