Coinbase: The Heart of the Bitcoin Frenzy

When you write a check, the signature is the authorization to withdraw funds, and the amount and recipient is specified.

I’m shocked that banks would permit a withdrawal without some kind of “anolog” to this authorization pattern.

It makes all these worries about passwords and online credentials seem quaint. These numbers are all over the place, online and off. Why aren’t halfway clever hackers draining accounts right now?

Who is transacting monetarily in bitcoin? Why do they find it superior to other options? Is this a growing cohort?

Also, that was gold so who is to say that couldn't happen to gold today if it can happen to cryptocurrencies, any hoarding would be a target in another depression that bad much like things like offshoring might be or are in some case.

Why it won't happen today you can base off the reaction during the Great Recession, we bailed out failing banks with TARP that got us into this mess by over-extending leverage instead of consumers. The FDR order helped the economy and all people at the time over the wealthy.

FDR, if he was in charge during the Great Recession, probably would have made new banks and let them fail if that happened under him, a people's president. The SEC was also created during his admin which is arguably the best thing to ever happen to investing in the US, solid markets since Securities Act of 1933 and SEC inception, cryptocurrency will eventually be more closely regulated as it grows.

That said, I don’t think the scenario of bitcoin sucking up the worlds wealth, in an out of control feedback loop is possible.

There are a bunch of aspects of Bitcoin that will make its price growth self limiting.

Mostly, these stem from the fact that any “return” from bitcoin “investment” is simply a transfer of tokens from one entity to another. If I have $14k and you have this valuable bitcoin, when we trade, the tokens just switch owners.

If 1 bitcoin reaches $1m , and price is stable, why would I buy it? Maybe it has utility as a way to move large sums, where it is converted back to fiat. Or a way to protect my wealth from inflation (which means its price is going up).

If price is going down, it would be crazy to invest large sums of real money in bitcoin, as it has little real utility. This will be the driving force of a collapse.

I’m not putting my finger on it, but there just doesn’t seem to be any reason that a large percentage of the population is going to hand their wealth over to another arbitrary portion of society. The reason people are doing that now is because they are speculating on the fiat price of a digital token, in the hopes of “making money”. This is only possible under the kind of parabolic price growth we see now, which can’t continue I definitely.

That said, there are huge sums of money looking for places to invest, so this could continue a while. There seems to be a quirk of human social psychology that makes participation in financial bubbles universally popular.

This has nothing to do with interest in bitcoin actually being turned into currency. It’s kind of the opposite, they are hoping bitcoin will turn into more of what they really value, which is the coin of their realm.

Edit: There is also a hugely vulnerable system to try and realize any gains. Reddit is starting to fill with users complaining of losses due to flash crashes, and exchange breakdowns. Neither the exchanges nor the blockchain networks will be able to handle a “rush to the exits”.

It’s not possible for most people to realize “paper gains” in zero sum system, and I predict there are going to be crazy stories of huge wins and losses, when a crash comes, due to forces outside of anyone’s control.