FTX

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Bewildered
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Re: FTX

Post by Bewildered » Tue Nov 22, 2022 11:22 am

IvanV wrote:
Tue Nov 22, 2022 8:45 am
bjn wrote:
Mon Nov 21, 2022 6:54 pm
IvanV wrote:
Mon Nov 21, 2022 4:34 pm
Stablecoins claim to have backed by real assets, like a proper bank. But they aren't proper banks and regulated as such. So whose word are you taking that the assets are there? Some of them crashed and didn't seem to be telling the truth.
If that were true, don't vendors of 'stable coins' come under traditional financial institution legislation as they are trading in real financial assets?
Depending quite how they are set up, the trade in stablecoins can be subject to the some kind of regulatory oversights, as they are a bit like a tokenised form of corporate bonds. See the opening discussion in the
Treasury's consultation on cryptocurrencies, from last year, which concluded that they need a lot more regulation.
The one I read details on was Terra where the asset used to keep its value pegged was their own crypto token Luna. That worked out well of course...

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Re: FTX

Post by Woodchopper » Tue Nov 22, 2022 11:24 am

lpm wrote:
Tue Nov 22, 2022 10:48 am
Woodchopper wrote:
Tue Nov 22, 2022 10:26 am
We’ve discussed this before and Crypto does seem to have an intrinsic use as a means to move and store money...
This is what fools the gullible. They follow a faulty logic chain: a bitcoin can be useful, therefore people and businesses will want to use it as a product, therefore value will transfer to owners of the product.

But value does not flow from users of bitcoin to owners of bitcoin.

If you own a share of Visa Inc, you know people and businesses find Visa useful and will pay a fee of a penny per transaction and your share of those fees will work their way back to you as a share owner. If you own a share of High Security Bank Vaults Ltd then people will use your product to store money and a fraction of their fees will flow back to you. This is so commonplace it feels like the natural ordering of the financial world.

There's a presumption that the same applies to bitcoin, that the intrinsic value as a means to move and store money must somehow lead to that value flowing to bitcoin owners. It doesn't. There's no mechanism. There's only cost, with transaction costs of buying/selling and the risks of holding.
I was disagreeing with Ivan's statement that " With crypto, there is literally nothing there. And a lot of costly activity is being undertaken for which is essentially worthless."

You made a similar point to me in your post.

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Re: FTX

Post by IvanV » Tue Nov 22, 2022 11:28 am

lpm wrote:
Tue Nov 22, 2022 10:48 am
Woodchopper wrote:
Tue Nov 22, 2022 10:26 am
We’ve discussed this before and Crypto does seem to have an intrinsic use as a means to move and store money...
This is what fools the gullible. They follow a faulty logic chain: a bitcoin can be useful, therefore people and businesses will want to use it as a product, therefore value will transfer to owners of the product.
Reinforcing what lpm says, normal money is much better as a means to move and store money for most legitimate purposes. It's value is much more stable. The transactions costs are much lower. We have confidence in banks, which are heavily regulated and supported by governments, to hold it for us. It is accepted by almost everyone in exchange for valuable assets.

Bitcoin overcomes numerous disadvantages mainly because it is of such value for crime, money laundering and tax evasion. Once it is sensibly regulated, as it needs to be, so that it becomes much less useful as an instrument of crime, money laundering and tax evasion, is there much remaining point to it? The sensible person should reasonably expect that such regulation must come, and think about what that might mean for its value and utility in the future. Maybe you think it can't be regulated adequately and as such will long be of widespread value to criminals, etc.

China has already banned it, because that's how they deal with such threats in China. They understand it is more a threat to their state and their control of the financial power of that state, than an assistance to its powerful rulers to maintain their financial control. Though even with the Great Firewall of China, their ability to ban its use is probably limited as long as it is out there on the rest of the world's internet. So whilst the banning is doubtless an inconvenience to the Chinese black economy, I expect it hasn't completely prevented its use there, it is perhaps hard to find out what effect that has. But plainly action is needed on a more widespread international level to control it properly.

As with normal money, there will always be a few "tax havens" which will be happy to let it continue, unless some kind of international cooperative coercive action forces them to cooperate. And that hasn't really happened properly with tax havens, because so many of the world's rulers are kleptocrats who find them more useful than a threat. But maybe even kleptocrats will come to see crypto as a threat to their power rather than a support to it. Maybe tax havens mean that there is an unpluggable leak that means that it is very hard to regulate crypto as much as it needs to be regulated to really reduce the criminal activity. More research needed.

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Re: FTX

Post by lpm » Tue Nov 22, 2022 11:46 am

Woodchopper wrote:
Tue Nov 22, 2022 11:24 am
I was disagreeing with Ivan's statement that " With crypto, there is literally nothing there. And a lot of costly activity is being undertaken for which is essentially worthless."

You made a similar point to me in your post.
But what you say is not in disagreement with Ivan's statement.

There is literally nothing there. However this does not mean that the nothing cannot be utilised. There's literally nothing there when you say "cheers mate I owe you a pint" but it can be utilised as a mechanism.

The point is that these transactions, although useful for the transactees, are worthless for investors in crypto.

If you buy a bitcoin now for $15,693 you will not benefit in the slightest if somebody uses bitcoin as a blackmail pay off.
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Re: FTX

Post by bjn » Tue Nov 22, 2022 11:52 am

Meanwhile.....

https://web3isgoinggreat.com/

The underlying tech behind mainstream crypto tokens like ethereum and bitcoin is whatever it is. You can make yourself a wallet and buy/sell/trade directly. That in and of itself is not scammy. Useless techno utopian b.llsh.t and a net societal negative yes, but not really inherently scammy.

For most normies to use that stuff they go through exchanges, because doing all the management of your wallet, including backups, security etc... is just a right pain. Exchanges are effectively unregulated financial institutions dealing in crypto things. Many invent their own 'tokens' out of even thinner air than bitcoin. The equivalent of opening a shop that sells monopoly money that they printed themselves and getting people to speculate on it.

That is where the fraud is. Lots and lots of it.

Then you get into the finer detail of 'smart' contracts, NFTs, inbuilt deflation, 'code is law' except when it isn't and all the other crypto-babble and it is just a total horror show.

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Re: FTX

Post by Woodchopper » Tue Nov 22, 2022 12:18 pm

lpm wrote:
Tue Nov 22, 2022 11:46 am
Woodchopper wrote:
Tue Nov 22, 2022 11:24 am
I was disagreeing with Ivan's statement that " With crypto, there is literally nothing there. And a lot of costly activity is being undertaken for which is essentially worthless."

You made a similar point to me in your post.
But what you say is not in disagreement with Ivan's statement.

There is literally nothing there. However this does not mean that the nothing cannot be utilised. There's literally nothing there when you say "cheers mate I owe you a pint" but it can be utilised as a mechanism.

The point is that these transactions, although useful for the transactees, are worthless for investors in crypto.

If you buy a bitcoin now for $15,693 you will not benefit in the slightest if somebody uses bitcoin as a blackmail pay off.
That applies to buying anything except shares in companies.

If I were to by a tonne of copper then I don't benefit directly from anyone else buying copper. On aggregate I will though benefit indirectly if enough people buy copper and those purchases affect the price.

It does though seem strange to describe copper as being something about which "there is literally nothing there [...] a lot of costly activity is being undertaken for which is essentially worthless."

Ivan appeared to be arguing that crypto is different because it has no intrinsic use. But I don't agree, crypto has intrinsic uses.

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Re: FTX

Post by lpm » Tue Nov 22, 2022 12:41 pm

That doesn't work as an analogy. Copper is mined and then used up. If production of EVs is higher than forecast, the copper used in manufacture will mean less copper available for wind turbine manufacture, hence the price will rise. Speculating that copper usage will exceed copper supply in 2023, therefore investing in a tonne of copper, is a prediction based on supply vs demand.

But if someone uses bitcoin to money launder, that bitcoin doesn't get used up. Exactly the same amount of bitcoin still exists for all other uses. The price of bitcoin is completely independent of how much bitcoin gets used for criminal transactions.
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Re: FTX

Post by dyqik » Tue Nov 22, 2022 12:43 pm

Woodchopper wrote:
Tue Nov 22, 2022 12:18 pm
lpm wrote:
Tue Nov 22, 2022 11:46 am
Woodchopper wrote:
Tue Nov 22, 2022 11:24 am
I was disagreeing with Ivan's statement that " With crypto, there is literally nothing there. And a lot of costly activity is being undertaken for which is essentially worthless."

You made a similar point to me in your post.
But what you say is not in disagreement with Ivan's statement.

There is literally nothing there. However this does not mean that the nothing cannot be utilised. There's literally nothing there when you say "cheers mate I owe you a pint" but it can be utilised as a mechanism.

The point is that these transactions, although useful for the transactees, are worthless for investors in crypto.

If you buy a bitcoin now for $15,693 you will not benefit in the slightest if somebody uses bitcoin as a blackmail pay off.
That applies to buying anything except shares in companies.

If I were to by a tonne of copper then I don't benefit directly from anyone else buying copper. On aggregate I will though benefit indirectly if enough people buy copper and those purchases affect the price.

It does though seem strange to describe copper as being something about which "there is literally nothing there [...] a lot of costly activity is being undertaken for which is essentially worthless."

Ivan appeared to be arguing that crypto is different because it has no intrinsic use. But I don't agree, crypto has intrinsic uses.
With copper there is something there. It's a limited resource. By buying a ton of copper, you've removed a ton of copper from the market, and because people need copper as an input to their businesses, the market value goes up slightly.

Crypto coins are nearly all based around a limited resource, but it's a resource that is not useful for anything other than trading crypto. No one needs a Bitcoin in order to produce items for sale at a profit.

Legal tender currencies get around this by being sufficient for discharging debts. Fine art, crypto etc. are only "useful" in the sense that you can brag about owning them.

It's best to think of crypto coins as shares in a company with no turnover and no assets.

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Re: FTX

Post by IvanV » Tue Nov 22, 2022 1:03 pm

bjn wrote:
Tue Nov 22, 2022 11:52 am
Meanwhile.....

https://web3isgoinggreat.com/
I really shouldn't be laughing, but I can't stop myself. It is just the sheer extent of it as you go down and down the page. It's breath-taking. And amid all that, celebrities who promoted FTX are getting sued.

It's kind of hilarious because so far we have only seen an approx 25% drop in values with the FTX collapse. On a linear scale, over enough time, it is barely visible against the background of the huge volatility over the last 2 years. There is plainly a lot of sentiment around that a much bigger collapse is just around the corner, - JP Morgan have said so out loud - but despite that sentiment it hasn't happened yet. Something, hope perhaps, is keeping it up.

And what drove that huge peak in late 2021, and then the movement away from it? People talk vaguely about international trouble, inflation, Covid, the Ukraine war, energy price volatility. But why should that be driving such massive volatility in bitcoin? Is organised crime and kleptocracy doing badly because of these things? Not the kind of thing people talk about, but it seems a relevant question to me.

So, we have just seen an enormous price bubble, and really nothing to explain it aside from the kind of sentiment bubble that drives other price bubbles. And when something real and terrible happens, the FTX collapse, with large contagion effects, what happens is small in comparison - at least so far.

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Re: FTX

Post by IvanV » Tue Nov 22, 2022 1:24 pm

Woodchopper wrote:
Tue Nov 22, 2022 12:18 pm
Ivan appeared to be arguing that crypto is different because it has no intrinsic use. But I don't agree, crypto has intrinsic uses.
So when your bitcoin is only worth $0.00001, what are you going to do with it? You can't eat it. You can't hang it on the wall as a decoration. You can't make pipes out of it. That's what I mean when I say it has no intrinsic use.

You are saying it has intrinsic value as money. Central bank paper money has no intrinsic use either, by the way I meant it, but it has value as money. It is much better money than crypto, for legal purposes. It is legal tender, it is backed by the tax-raising power of the state, etc. Whereas crypto is is volatile, the transactions costs are high, and it is not widely accepted. In fact, it lacks any of the three properties that are desirable for something called money. It is probably better called an asset, rather than money. What it does have a use as is for criminal transactions, money laundering and tax evasion, as it has some advantages over methods used to do that.

Normally assets have either some intrinsic value (eg land, copper) or produce an income (eg corporate bonds). But crypto doesn't do that. So by comparison with normal assets, it is not very good at that.

If we take away its advantages to criminals, money launderers and tax evaders, as we must do, or at least try to, is it still useful enough to have any competitive advantage over normal money in any situations? Such that anyone would use it? If not, its value will fall to zero or near zero. My suspicion is has no value when you take that advantage not. But I don't know for sure. Maybe I haven't thought of why people would still have value for an asset that produces no income and money that is exceedingly inconvenient as money.

Currently there is this clever trick that the transactions costs are covered by miners, who get rewarded by being paid in the coin itself, which dilutes the value to everyone else, but that has generally been concealed by growth in value. It has been said there is a limit to that. Eventually the users will have to cover the cost, or the end to mining was a lie.

So, what is that intrinsic use as money, that is good enough for it to exist alongside much better assets and much better money, that can give crypto a value once we stop it being useful for crime, money laundering and tax evasion?

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Re: FTX

Post by dyqik » Tue Nov 22, 2022 1:43 pm

Complete aside on central bank money's uses: Pennies have some intrinsic value. You can drill a hole in them and use them as washers.

And with the price of a single washer, that's also a fairly cost effective use.

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Re: FTX

Post by Woodchopper » Tue Nov 22, 2022 1:45 pm

dyqik wrote:
Tue Nov 22, 2022 12:43 pm

Legal tender currencies get around this by being sufficient for discharging debts. Fine art, crypto etc. are only "useful" in the sense that you can brag about owning them.
My point is just that crypto (or fine art, gold bars, uncut diamonds, casino chips etc) have uses for some people that legal currency does not. That's because transfers of legal currencies are monitored by governments whereas transfers of crypto are not monitored as much.

This is relevant, because as Ivan described, during a speculative bubble the only motivation for buying a product is the expectation that the price will rise and the buyer can cashout and make money. Such a bubble if unchecked by regulators will see rapidly rising prices until they peak. As that point the expectation of future profit disappears, people try to cut their losses, and the price crashes to zero. If as claimed crypto has no intrinsic value and its price is based purely on expectations of future profit then it should already have crashed to zero.

However, Bitcoin, the most prominent crypto currency, has not involved such a boom and bust cycle. Prices have oscillated, and compared to just a few years ago they remain high. The price is still almost three times what it was three years ago.

One explanation is that there are other motivations for buying bitcoin than expectations that the price will rise, that is does have value to people.

This site estimates that illicit financial flows amount to 20% of trade between developing and developed economies. I haven't found a value for that figure but total trade by developed economies is $1.5 trillion.

The current total value of all bitcoin is $.3 trillion.

This suggests that illicit financial flows will be sufficient to affect the price of Bitcoin.

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Re: FTX

Post by dyqik » Tue Nov 22, 2022 1:47 pm

Woodchopper wrote:
Tue Nov 22, 2022 1:45 pm
dyqik wrote:
Tue Nov 22, 2022 12:43 pm

Legal tender currencies get around this by being sufficient for discharging debts. Fine art, crypto etc. are only "useful" in the sense that you can brag about owning them.
My point is just that crypto (or fine art, gold bars, uncut diamonds, casino chips etc) have uses for some people that legal currency does not. That's because transfers of legal currencies are monitored by governments whereas transfers of crypto are not monitored as much.
Transfers of crypto are just as easy to monitor as transfers of gold or stacks of cash. They just aren't routinely monitored yet.

In all cases, there's a step that involves converting them to numbers in a bank account. Although with cash that's less necessary.
Last edited by dyqik on Tue Nov 22, 2022 1:49 pm, edited 1 time in total.

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Re: FTX

Post by Woodchopper » Tue Nov 22, 2022 1:49 pm

IvanV wrote:
Tue Nov 22, 2022 1:24 pm
Woodchopper wrote:
Tue Nov 22, 2022 12:18 pm
Ivan appeared to be arguing that crypto is different because it has no intrinsic use. But I don't agree, crypto has intrinsic uses.
So when your bitcoin is only worth $0.00001, what are you going to do with it? You can't eat it. You can't hang it on the wall as a decoration. You can't make pipes out of it. That's what I mean when I say it has no intrinsic use.

You are saying it has intrinsic value as money. Central bank paper money has no intrinsic use either, by the way I meant it, but it has value as money. It is much better money than crypto, for legal purposes. It is legal tender, it is backed by the tax-raising power of the state, etc. Whereas crypto is is volatile, the transactions costs are high, and it is not widely accepted. In fact, it lacks any of the three properties that are desirable for something called money. It is probably better called an asset, rather than money. What it does have a use as is for criminal transactions, money laundering and tax evasion, as it has some advantages over methods used to do that.

Normally assets have either some intrinsic value (eg land, copper) or produce an income (eg corporate bonds). But crypto doesn't do that. So by comparison with normal assets, it is not very good at that.

If we take away its advantages to criminals, money launderers and tax evaders, as we must do, or at least try to, is it still useful enough to have any competitive advantage over normal money in any situations? Such that anyone would use it? If not, its value will fall to zero or near zero. My suspicion is has no value when you take that advantage not. But I don't know for sure. Maybe I haven't thought of why people would still have value for an asset that produces no income and money that is exceedingly inconvenient as money.

Currently there is this clever trick that the transactions costs are covered by miners, who get rewarded by being paid in the coin itself, which dilutes the value to everyone else, but that has generally been concealed by growth in value. It has been said there is a limit to that. Eventually the users will have to cover the cost, or the end to mining was a lie.

So, what is that intrinsic use as money, that is good enough for it to exist alongside much better assets and much better money, that can give crypto a value once we stop it being useful for crime, money laundering and tax evasion?
Ivan, I agree, if humanity were to eliminate bitcoin's use in illicit financial flows then its price would probably drop to zero. But until then it is useful to people who want to evade government oversight.

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Re: FTX

Post by Woodchopper » Tue Nov 22, 2022 1:50 pm

dyqik wrote:
Tue Nov 22, 2022 1:47 pm
Woodchopper wrote:
Tue Nov 22, 2022 1:45 pm
dyqik wrote:
Tue Nov 22, 2022 12:43 pm

Legal tender currencies get around this by being sufficient for discharging debts. Fine art, crypto etc. are only "useful" in the sense that you can brag about owning them.
My point is just that crypto (or fine art, gold bars, uncut diamonds, casino chips etc) have uses for some people that legal currency does not. That's because transfers of legal currencies are monitored by governments whereas transfers of crypto are not monitored as much.
Transfers of crypto are just as easy to monitor as transfers of gold or stacks of cash. They just aren't routinely monitored yet.
Yes, and when they are routinely monitored people will probably switch to using something else. When they all do we can expect to see the price of bitcoin drop to zero.

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Re: FTX

Post by Bewildered » Tue Nov 22, 2022 2:06 pm

By the way does anyone know whatever happened to gimpy’s bitcoin? Did he keep it or seek at some price?

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Re: FTX

Post by dyqik » Tue Nov 22, 2022 2:07 pm

I don't think the price of Bitcoin is driven by its utility, even for illegal transfers. It's much more about the "get rich quick" ideal and bubble.

The people making actual money from it are chip manufacturers and electricity suppliers, etc, as well as the scammers who manage to extract real money from it, whether that's from small investors or venture capitalists.

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Re: FTX

Post by Woodchopper » Tue Nov 22, 2022 2:16 pm

dyqik wrote:
Tue Nov 22, 2022 2:07 pm

The people making actual money from it are chip manufacturers and electricity suppliers, etc, as well as the scammers who manage to extract real money from it, whether that's from small investors or venture capitalists.
As with the old adage that the way to get rich in a gold rush is to sell picks and shovels.

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Re: FTX

Post by lpm » Tue Nov 22, 2022 2:22 pm

Bewildered wrote:
Tue Nov 22, 2022 2:06 pm
By the way does anyone know whatever happened to gimpy’s bitcoin? Did he keep it or seek at some price?
I believe he said he sold some, kept some and had some stolen. The part he kept made him a lot of money, I hope.
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Re: FTX

Post by IvanV » Tue Nov 22, 2022 3:20 pm

Woodchopper wrote:
Tue Nov 22, 2022 1:45 pm
However, Bitcoin, the most prominent crypto currency, has not involved such a boom and bust cycle. Prices have oscillated, and compared to just a few years ago they remain high. The price is still almost three times what it was three years ago.
Let's put the data out there and people can decide what feature of the recent price path they like to focus on, and what they call it.
Bitcoin price.png
Bitcoin price.png (32.33 KiB) Viewed 193 times

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Re: FTX

Post by lpm » Tue Nov 22, 2022 4:06 pm

Woodchopper wrote:
Tue Nov 22, 2022 1:49 pm
Ivan, I agree, if humanity were to eliminate bitcoin's use in illicit financial flows then its price would probably drop to zero. But until then it is useful to people who want to evade government oversight.
But that does not mean there is any need to hold an investment of bitcoin.

If I'm doing some legal importing from Egypt, buying cotton for example, I will buy Egyptian Pounds from the bank and transfer them to my supplier. I don't keep a big investment of Egyptian Pounds sitting around earning nothing, just because I need to transact in Egyptian Pounds.

If I'm doing some illegal importing from Egypt, acquiring endangered wild sphinxes say, I will buy Bitcoin from an exchange and transfer them to my supplier. I don't keep a big investment of Bitcoin sitting around earning nothing, just because I need to transact in Bitcoin.

The only reason why people are purchasing crypto and holding it for months and years is because of their speculation. The price simply has nothing to do with transactions or illicit financial flows.
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Re: FTX

Post by IvanV » Tue Nov 22, 2022 4:54 pm

lpm wrote:
Tue Nov 22, 2022 4:06 pm
Woodchopper wrote:
Tue Nov 22, 2022 1:49 pm
Ivan, I agree, if humanity were to eliminate bitcoin's use in illicit financial flows then its price would probably drop to zero. But until then it is useful to people who want to evade government oversight.
But that does not mean there is any need to hold an investment of bitcoin.

If I'm doing some legal importing from Egypt, buying cotton for example, I will buy Egyptian Pounds from the bank and transfer them to my supplier. I don't keep a big investment of Egyptian Pounds sitting around earning nothing, just because I need to transact in Egyptian Pounds.

If I'm doing some illegal importing from Egypt, acquiring endangered wild sphinxes say, I will buy Bitcoin from an exchange and transfer them to my supplier. I don't keep a big investment of Bitcoin sitting around earning nothing, just because I need to transact in Bitcoin.

The only reason why people are purchasing crypto and holding it for months and years is because of their speculation. The price simply has nothing to do with transactions or illicit financial flows.
To a degree, Lord Copper. A lot of holdings of money are about having enough ready cash on hand to pay out the transactions required, and a bit to spare for an instant emergency. For people who are paid monthly, and paying monthly bills, there is a monthly cycle in their individual money holdings, and an average held over the month. This has been a major driver of the demand for money over the centuries. In 19th century novels, we hear of many people being paid their wages at longer intervals than a month, so there were longer periods to smooth money holdings over. The volume of trade denominated in that currency will tend to drive the quantity held, and in the absence of quantity adjustment, there will be price adjustment instead.

But certainly I agree there has been a lot of speculation, and that is a lot of what is driving the volatility. People speculate in other kinds of money too, but they traditionally do that by buying interest-bearing instruments, because you can hold money holdings in such interest-bearing instruments. Though if you want to be a gambler, these days you can buy derivatives. The original purpose of derivatives was for insurance, ie risk reduction, not gambling which is increasing your risk. There's a tricky distinction between insurance and gambling, and people have often got confused and ended up with inappropriate derivatives holdings and suffered when a sharp price movement occurred - like when Kwarteng nearly pranged lots of pensions because of their derivative holdings which seemed like a clever insurance policy at the time.

But I think also think a rising price profile has been part of the business model to encourage mining, which such an important part of how this whole system has held itself together, to avoid placing the transactions costs on the users. So speculation was always inevitable. Speculation tends to speed up and exaggerate price movements. So far we haven't heard much about people shorting crypto currencies, in the way national treasuries squeal about speculators shorting their currencies, though apparently you can.

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Re: FTX

Post by Woodchopper » Tue Nov 22, 2022 6:51 pm

lpm wrote:
Tue Nov 22, 2022 4:06 pm
Woodchopper wrote:
Tue Nov 22, 2022 1:49 pm
Ivan, I agree, if humanity were to eliminate bitcoin's use in illicit financial flows then its price would probably drop to zero. But until then it is useful to people who want to evade government oversight.
But that does not mean there is any need to hold an investment of bitcoin.

If I'm doing some legal importing from Egypt, buying cotton for example, I will buy Egyptian Pounds from the bank and transfer them to my supplier. I don't keep a big investment of Egyptian Pounds sitting around earning nothing, just because I need to transact in Egyptian Pounds.

If I'm doing some illegal importing from Egypt, acquiring endangered wild sphinxes say, I will buy Bitcoin from an exchange and transfer them to my supplier. I don't keep a big investment of Bitcoin sitting around earning nothing, just because I need to transact in Bitcoin.

The only reason why people are purchasing crypto and holding it for months and years is because of their speculation. The price simply has nothing to do with transactions or illicit financial flows.
You’re ignoring the role of capital controls (which exist in Egypt but I’ll use a generic example) and corruption.

Let’s say that a business owner in some developing country has accrued a modest fortune worth about $US2 million. It’s squirrelled away in various accounts and investments. But there are two problems. Firstly our friend wants to make sure that no one gets their hands on it. That includes the tax authorities, but also more shady types who would just confiscate it. Secondly, our business owner wants to enjoy himself. A nice beach apartment in the south of France would be very nice, along with a fancy car and a stack of Euros to spend on shopping and restaurants.

His problem is that the government has capital controls and he isn’t allowed to just buy Dollars or Euros and wire them out of the country. He also doesn’t want anyone in the country to know that he’s sent millions abroad.

Let’s say that there is a mid-ranking government official who has similarly amassed $US2 million from bribery and skimming government contracts.

He’d like to be able to retire to a nice beach house in Florida with enough cash to keep him in the manner to which he’d like to become accustomed.

So they both need a way to get wealth out of the country and into the US or France. There are lots of methods. Smuggling gems, gold or art is one way. Just buy something very expensive at home and work out how to get it out the country without the customs authorities noticing. Another way is to use bitcoin. Pay some local miners for their coin and sell it abroad and send the proceeds to a bank account out of the country.

Or for a more specific example:
Over $50 billion of cryptocurrency moved from China-based digital wallets to other parts of the world in the last year, pointing to possibilities that Chinese investors are transferring more money than allowed out of the country, a new report claims.

Chinese citizens are only allowed to buy up to $50,000 of foreign currency a year at a financial institution. In the past, wealthy citizens have circumvented the limit through foreign investments in real estate and other assets. But the government has cracked down on these methods, according to a report by Chainalysis, a blockchain forensics firm.

[…]

"Obviously, not all of this is capital flight, but we can think of $50 billion as the absolute ceiling for capital flight via cryptocurrency from East Asia to other regions," the report added.
https://www.cnbc.com/2020/08/21/china-u ... light.html

Trillions of dollars of wealth is held illicitly: https://gfintegrity.org/press-release/n ... the-world/

You can read more here:
https://papers.ssrn.com/sol3/papers.cfm ... id=3956933
https://www.elibrary.imf.org/view/journ ... 001-en.xml
https://papers.ssrn.com/sol3/papers.cfm ... id=2714921
https://www2.hawaii.edu/~jiakai/files/l ... 220816.pdf
https://documents1.worldbank.org/curate ... -Flows.pdf

https://www.reuters.com/world/europe/ec ... 022-03-22/
https://bitcoinmagazine.com/markets/wit ... ns-supreme

User avatar
Woodchopper
Light of Blast
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Re: FTX

Post by Woodchopper » Tue Nov 22, 2022 6:53 pm

dyqik wrote:
Tue Nov 22, 2022 2:07 pm
I don't think the price of Bitcoin is driven by its utility, even for illegal transfers. It's much more about the "get rich quick" ideal and bubble.

The people making actual money from it are chip manufacturers and electricity suppliers, etc, as well as the scammers who manage to extract real money from it, whether that's from small investors or venture capitalists.
I think that’s correct in the US.

Millennie Al
Dorkwood
Posts: 1528
Joined: Mon Mar 16, 2020 4:02 am

Re: FTX

Post by Millennie Al » Wed Nov 23, 2022 1:42 am

IvanV wrote:
Tue Nov 22, 2022 1:24 pm
Normally assets have either some intrinsic value (eg land, copper) or produce an income (eg corporate bonds).
There's no such thing as an intrinsic value. All value is relative and almost all value in modern society is based on a thing's worth to people other than the holder of the asset. For example, copper is owned by people who have no personal use for it. They own it because it is useful to other people so the holders expect that they can profit from its value to those other people. This extends through chains of value to one person based on value to the next. So someone holding copper values it because someone will use it to make a saucepan, but the make of the saucepan has no use for it - they only value it as something that a chef is about to buy. But the chef has no use for it except to prepare food for other people to eat - food that would get thrown out if the intended consumers fail to eat it. And so on.

Land (and housing in general) is a partial exception in that people who own their own housing hold it for its value to them personally.

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