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The Bit Short: Inside Crypto’s Doomsday Machine

crypto-anonymous-2021.medium.com

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Re: The Bit Short: Inside Crypto’s Doomsday Machine

#181

Post by H8crilA »

cryptoanonymous wrote: post #155
H8crilA wrote: post #5

> For the rest of 2020, my inflationary thesis looked right Just to make it clear: there's absolutely no broad inflation almost everywhere in the world, certainly not in the United States. It may still come, but inflation is not why Bitcoin is on such a tear. Look at CPI or PPI of you don't believe me. Although this does remind me of the Green Lumber Trader story from Taleb. Congrats on the trade!

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.

There are explicit contracts for such things (based on TIPS, so it's not some small shady market). Inflation expectations are still low, though materially higher than even in May:

https://fred.stlouisfed.org/series/T5YIFR

In particular they do not go outside of the 3.0% range where we've been stuck for decades (the US CPI itself hasn't printed anything above 2.5% year-over-year since the 90s).

Inflation will come one day (one year? one decade?), but sure as hell isn't here yet.

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#183

Post by TacticalCoder »

Great article "cryptoanonymous" (welcome to HN btw): really lots of information in there but...

Aren't you writing this because now that you could get out and got the (real) USD on your bank account, you actually want the price to crash very badly to buy much more coins?

If the price were to crash back to, say, 3K USD, wouldn't you be tempted to put a few millions back in and ride to 15K and more again?

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#184

Post by mrDmrTmrJ »

atemerev wrote: post #38
dannyw wrote: post #24

Earlier quoted context omitted.

Tether is lovely for many people, because there are many entry points without AML/KYC. This allows you to trade while minimising your exposure to the taxman, something that many people in crypto value. Of course, there is the calculated risk of Tether being seized, but that's part of doing business. Bitcoin itself was born out of active rebellion with the existing financial system, and depending on who you ask, rebel…

“depending on who you ask, rebellion of the state itself” — as if it was a bad thing!

Environmental protection - check Public education - check Research spending - check Social security - check NASA - check

There’s a lot I like about the state! Yes, I admit it has many problems and frustrations.

But given we moved *away from the gold-standard, what is different now that makes it wise to accept a fixed money supply?

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#185

Post by SilasX »

dragonwriter wrote: post #174
SilasX wrote: post #170

Earlier quoted context omitted.

Depends on who the “we” is there. Certain agencies don’t care that new money is flowing into capital assets but probably should care.

> Depends on who the “we” is there. I would argue the statement is true for any significant government or private use of general inflation measures. But, sure, if you’ve got a case where the CPI is actually used for a purpose and you think a different measure of inflation that incorporated asset prices would be a better replacement for the CPI, please feel free to present (1) the existing use in question, (2) your pr…

That was the purpose of comparing to cows and milk. For all the same reasons you should worry about cows being expensive (even if milk is still cheap), you should worry about real estate being expensive (even if rents are low).

In the case of a household, those mean that you can't take some of your production, and save it for the future in capital goods -- the same kind of thing that happens when more of your income has to go to the same necessities.

In the case of a central bank, those mean that the injections of money aren't (currently) effective for stimulating economic activity, but are simply causing a wealth transfer and rallies in whatever stores of value remain. That is the same signal it needs to get back as when consumer goods become more expensive: you are not relaxing a limiting factor on economic growth.

Edit: toned down

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#186

Post by TacticalCoder »

DSingularity wrote: post #156
chomper wrote: post #146

I am afraid of Bitcoin because of Tether. However, there is one part of this argument that I don't quite understand: If we woke up tomorrow to find out that Tether caused a disruptive event overnight and BTC/USD fell from $30,000 to $10,000 or $3,000..... Wouldn't there be a gigantic line of people who have been experiencing FOMO for the last 6 months ready to jump in at the new attractive price level, driving the pr…

If tether crashed I would expect bitcoins price to go up not down. It would suck for people holding tether because nobody would want their tether.

What many people believe is that there's not anywhere near the demand to justify a 35 K USD price and that's it's tether printing which pumped the price of BTC to these levels.

So if the tether printing press stops, the price would crash back to 3K USD or something in a hurry.

Crypto investors/gamblers concerned about tether/USDT already own zero USDT. What they're concerned about is that it would take the entire crypto market down.

Now on the very short term it may cause a BTC price spike: should it be true and USDT going down a lot, people hodling them may desperately try to get out and buy any BTC they can, shortly raising BTC's price.

But if tether is the reason the BTC price is so high, it won't take long before "zero new issuance of USDT to pump the price" would totally crash the market.

In any case it's an interesting story to follow...

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#187

Post by ad31mar »

not2b wrote: post #110

It seems that this guy decided to go heavily into Bitcoin because of a mistaken belief that seems all too common: "At the time, I saw a market dislocation and the likelihood of significant dollar inflation due to the US Government’s likely response to the unfolding pandemic." He thought that government responses to severe crises that inject lots of money into the economy will cause "significant dollar inflation". In…

> In the real world, over the full year of 2020 inflation was 1.4% in the US (food costs went up a bit more, energy costs went down).

Are you sure about that? https://chapwoodindex.com

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#188

Post by [deleted] »

mlthoughts2018 wrote: post #135
not2b wrote: post #110

It seems that this guy decided to go heavily into Bitcoin because of a mistaken belief that seems all too common: "At the time, I saw a market dislocation and the likelihood of significant dollar inflation due to the US Government’s likely response to the unfolding pandemic." He thought that government responses to severe crises that inject lots of money into the economy will cause "significant dollar inflation". In…

Those inflation figures, much like unemployment figures, are not really representative. If you take a basket of good that includes consumer discretion items like cheap tech gadgets, subscription music, staple foods, then these “balance out” the much worse inflation in housing, college costs and medical care, things which have a much higher quality of life impact. I’n not making any claim on how this dichotomy relates…

[deleted]

Re: The Bit Short: Inside Crypto’s Doomsday Machine

#189

Post by Majromax »

> Now fast-forward one year. In March of 2020, I bought a large amount of Bitcoin. At the time, I saw a market dislocation and the likelihood of significant dollar inflation due to the US Government’s likely response to the unfolding pandemic.

I'm frustrated by this statement. If you predict inflation in the USD that is not currently priced into the market, then there are already plenty of conventional ways to make money on the prediction.

For example, go long on real-return (inflation-adjusted) bonds, and go short on nominal bonds. Or purchase call options on commodities (preferably ones like food or energy that would be directly part of the predicted inflation). Or just invest in less-speculative equities like utilities or transport.

There's no need to structure investments to also bring in the entire unhinged, speculative nature of cryptocurrencies just to place a bet on inflation. Bitcoin (vs the USD) has had tenfold increases (year-over-year) and larger than 50% drops, all against a USD that has not in fact experienced abrupt price-level swings (expressed in terms of consumer goods).

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