Speculations for cryptosceptics

[Grinkle]

You can Google the market capitalization of gold to be about 22T usd. You can Google BC to be around 800B usd. They are not really comparable imo and shouldn’t be expected to move in lock step.

 

[Greg Bernhardt]

Is this good advice or should one jump ship immediately

https://finance.yahoo.com/personal-finance/investing/article/how-to-navigate-a-crypto-crash-155317977.html

 

[Greg Bernhardt]

With bitcoin price at $66k, I've heard it take $84k to mine. How is this sustainable? Can Tether and co prop the coin price up indefinately?

 

[Grinkle]

With bitcoin price at $66k, I've heard it take $84k to mine

That matches more or less with what I am seeing on the Internet.

How is this sustainable?

I would say it is not.

Can Tether and co prop the coin price up indefinately?

According to what I read, and I am not a crypto investor so this is based on my reading only, Tether and other stable coins are used to provide liquidity for the BC market - that means that if you want to transact BitCoin you may be buying and selling from others who are themselves using Tether and maybe other stablecoins to buy and sell Bitcoin themselves so they can in turn buy and sell it to you. I don't know why they would do this instead of just using USD, I guess they can make more profit or potentially make more profit if they use Tether in their own exchanges. The up-shot is that Tether and other stable coins are not intended to affect the price of BC, and if they do so its indirectly, by enabling people to more easily trade BC when they want to trade BC (this is what is meant in general by 'liquidity', that you can easily buy and sell when you want to as long as you are ok with the current market price).

So a shorter answer to your question is imo no, Tether and other stablecoins cannot prop up the price of BC.

 

[Grinkle]

@Greg Bernhardt I learned something from ChatGPT. I won't post it directly here out of respect for forum rules, but Bitcoin mining difficulty will be lowered if mining activity drops in order to prop mining activity up. That is a better response to your question on sustainability.

I suggest you feed your questions to ChatGPT or similar as well - it provides a decent primer on how things work.

 

[Grinkle]

I educated myself on why Bitcoin market-makers might prefer Tether over USD to buy and sell BitCoin - its to avoid banking fees. I guess crypto exchanges are lower transaction cost if exchanging crypto for crypto than if exchanging fiat for crypto.

 

[Patxitxi]

Currently there are many crypto-deniers ("no-coiners") in the world, especially in authoritarian countries, and I like to argue with such people. Below I write some simple speculations, which explain why the cryptosceptics are wrong:
The inflation is in fact a hidden taxation, and this "tax" is mostly paid by poor people, not by the wealthy (because rich people store their wealth not in the form of money, but in the form of assets like real property). And this situation makes useful any things which can help people to store their savings:
1)
Let's assume that there is some completely useless and worthless product on the market, let's call it pipyruses; and everyone knows that the price of pipyruses will remain constant in the future (in a "right" currency, which is not constantly emited and thus does not have inflation). One pipirus costs ten dollars. Then people will quickly understand that they can use pipiruses as means of accumulation: a worker will buy 300 pipiruses every month, and after ten years, having accumulated thirty thousand pipiruses, he will sell them and buy an apartment with this money. And this option for accumulation is obviously more profitable than dealing with banks, loans and mortgages.
2)
Let's say 100 programmers have created a a cryptocurrency pipycoin for themselves and agreed to use it as an alternative money (to exchange it for real money). The price of one pipycoin is 10 dollars. And once a month, each of these programmers sells a part of his salary and buys 300 pipycoins from other programmers. Then, once every 10 years, each programmer sells 30 000 pipycoins to others and buys an apartment with this money.
It turns out that for these programmers, the pipycoin is a convenient means of lending money to each other; thus, an ordinary means of exchange, i.e. money, turns into a means of accumulation, which allows these programmers to save money relatively successfully. These programmers loan the money from each other more honestly, than the banks do.

Decades ago a professor of economics told us all: "Never invest in things you do not understand"
My sister (employee of Merrill Lynch) told me "not even us know what the f*** the market is going to do next".
I say: "if investment advisors were any good they would all become millionaires. Why help others invest their money instead of using your own?
You are analysis is, in my opinion, way too complicated and beyond proper dissection.
Simple Summary: investing in cryptocurrencies it's like pissing against the wind. You most likely end up with wet feet.

Mod edit - changed text color to make it readable. For some reason the last text in the post was black on black.

 

[Patxitxi]

Decades ago a professor of economics told us all: "Never invest in things you do not understand"
My sister (employee of Merrill Lynch) told me "not even us know what the f*** the market is going to do next".
I say: "if investment advisors were any good they would all become millionaires. Why help others invest their money instead of using your own?
You are analysis is, in my opinion, way too complicated and beyond proper dissection.
Simple Summary: investing in cryptocurrencies it's like pissing against the wind. You most likely end up with wet feet.

I guess that makes me a "beyond skeptic" investor?

 

[sbrothy]

Even printing the money is profitable. The term is "seigniorage" (Wiki). Although not neccessecarily, as mentioned by others here, a stable fungible asset; another term is, again as mentioned: "inflation", leading to things going down the drain.

Over half of Zimbabwe's government revenue in 2008 was reportedly seigniorage. The country has experienced hyperinflation ever since, with an annualized rate of about 24,000 percent in July 2008 (prices doubling every 46 days).

--- From above link.

EDIT: As a sidenote I think there's a film, or at least a book about Operation Bernhard from the perspective of a jew in a KZ-camp forced to make copies of UK bank-notes. Quite interesting, if horrific.

EDIT2:

The attention to detail is/was quite impressive:

To age the notes, between 40 and 50 prisoners stood in two columns and passed the notes among them to accumulate dirt, sweat and general wear and tear. Some of the prisoners would fold and refold the notes, others would pin the corners to replicate how a bank clerk would collect bundles of notes. British names and addresses were written on the reverse, as happened with some English notes, and numbers were written on the front – duplicating how a bank teller would mark the value of a bundle. Four grades of note quality were introduced: grade 1 was the highest quality, to be used in neutral countries and by Nazi spies; grade 2 was to be used to pay collaborators; grade 3 was for notes that were to be possibly dropped over Britain; grade 4 were too flawed to be of use and were destroyed.

---- https://en.wikipedia.org/wiki/Operation_Bernhard