I love how crypto advocates celebrate this sort of news as if it's a great thing... when the reality is that Bitcoin's insane volatility is precisely why it's not taken seriously as a viable...
I love how crypto advocates celebrate this sort of news as if it's a great thing... when the reality is that Bitcoin's insane volatility is precisely why it's not taken seriously as a viable currency, and hopefully won't ever be. It's a pyramid scheme. Some people will get rich off investing in it, but most will lose. And due to the insane amounts of electrical energy and material resources being dedicated to mining it, we're ultimately all on the losing end because of it.
I wouldn’t say it’s a pyramid scheme, it just bears no resemblance. More of a pump and dump, although at this point I’d put it more as a speculative bubble with some parties trying to pump.
I wouldn’t say it’s a pyramid scheme, it just bears no resemblance. More of a pump and dump, although at this point I’d put it more as a speculative bubble with some parties trying to pump.
Yes, as we've learned from meme stocks, pump-and-dump is a gambling game that people can play with any financial asset. It doesn't necessarily mean there's anything unusual about the asset; it's...
Yes, as we've learned from meme stocks, pump-and-dump is a gambling game that people can play with any financial asset. It doesn't necessarily mean there's anything unusual about the asset; it's just the one the players implicitly agreed to use for their game. It could have been Dogecoin, and sometimes it is.
Some will go into it with their eyes open because they enjoy gambling and they think they can win. Unfortunately others might buy into the hype and not understand what kind of game they're playing.
And how many of those exist? AFAICT the vast majority of crypto advocates are either anti-government Libertarian/Gold Standard/FIAT currency conspiracy nuts, have already drank the get-rich-quick...
No sane advocate
And how many of those exist? AFAICT the vast majority of crypto advocates are either anti-government Libertarian/Gold Standard/FIAT currency conspiracy nuts, have already drank the get-rich-quick Kool-Aid, or are pump and dump scam artists.
I guess it depends on what you’re counting as an advocate; the loudest and most numerous generally fall into one or more of those buckets, but there are plenty of serious financial types gambling...
I guess it depends on what you’re counting as an advocate; the loudest and most numerous generally fall into one or more of those buckets, but there are plenty of serious financial types gambling on crypto just as they do on any other asset class.
I see it as interesting tech that could’ve found a niche, and instead became a microcosm of our insane financial system as a whole. The numbers are made up, but not substantially more so than the ones underlying some similarly volatile derivatives.
Hard to say. God knows that’s some significant portion of use case, but there’s a similar problem in stock markets. Assets and securities do not require informed owners to work. Merely that they...
Hard to say.
God knows that’s some significant portion of use case, but there’s a similar problem in stock markets. Assets and securities do not require informed owners to work. Merely that they exist.
If I had to guess, “retail” investors like that who are basing their decisions on some prediction of that nature are very unlikely to make up enough of the demand.
Black market and regulation dodging activity is probably a large %
There's a guy I went to high school with who became a financial planner and convinced his firm to emphasize cryptocurrency management. I think there's a lot of traditional or institutional folks...
There's a guy I went to high school with who became a financial planner and convinced his firm to emphasize cryptocurrency management. I think there's a lot of traditional or institutional folks like that who are indirectly profiting off of anyone wanting to participate. Thought that was another flavor worth mentioning.
In a sense, it kinda feels like it's going the gambling route. Which is to say it's become accepted as a risky thing that can be fun or community-building (in theory) or it can also consume you and ruin your life.
I mean even Fidelity is now recommending 1-3% crypto (their BTC ETF) in their portfolios: https://www.fidelity.ca/en/investments/solutions-portfolios/all-in-one/ Larry Fink (BlackRock CEO) is on...
The institutional infra is being built out and marketed now that the ETFs are available. Traditional asset managers and fund managers that would have lost their job buying bitcoin over the last decade can now just buy shares of one of the BTC ETFs because its just stock like anything else in the portfolio, particularly moreso when those ETFs have options available to provide embedded leverage and risk hedging.
You can still use it as a currency, just a pretty shitty one. You’d just want to limit your exposure as much as possible and you’ll definitely pay out the ass in fx rates. But out of the cryptos...
You can still use it as a currency, just a pretty shitty one. You’d just want to limit your exposure as much as possible and you’ll definitely pay out the ass in fx rates. But out of the cryptos bitcoin is still amongst the ones with the most liquidity and stability.
Mainly if you really need to avoid traditional financial systems, eg some transaction that is illegal or sanctioned.
Sure, but you can also use gold, bullion, or gems as shit currency as well, and they have their own problems which keep them from actually being a currency. I think an unrespected portion of the...
Sure, but you can also use gold, bullion, or gems as shit currency as well, and they have their own problems which keep them from actually being a currency.
I think an unrespected portion of the transactions isn't just straight up "gambling" with returns, but the fact that for smaller investors, there's not a ton of great places to park your money and get a return.
You can leave your money in a savings account for a .00001% (better now with rates up of course but still) or you can "stake it" in a coin for 6-8% (ignoring the 10%+ that's obviously scammy). Even then it's still not as secure and not as safe, but I think a lot of the movement in the crypto world is just people who have some spare funds that don't feel like the bank is giving them enough return, and other investment vehicles are not in consideration for them for whatever reason.
There's obviously a huge overlap with the people who think they'll invest at X and sell at Y and make a profit, which is even more on the gambling line, but especially before FTX blew up I know a lot of people got in because they saw attractive returns on staking which was exacerbated by the banks low rates (some of that because that's how economies work and some of that because banks can get away with not being competitive on it)
You have to physically move gold or jewels (unless you're buying like gold futures or something, but that's still under the same financial regulations). If you're okay moving physical things you...
You have to physically move gold or jewels (unless you're buying like gold futures or something, but that's still under the same financial regulations). If you're okay moving physical things you can just use greenbacks.
You can leave your money in a savings account for a .00001%
You can just use greenbacks if your countries currency is worth using. Egypt just recently started buying gold because their currency had become unstable. And yes it's 6% or better right now, but...
You can just use greenbacks if your countries currency is worth using. Egypt just recently started buying gold because their currency had become unstable.
And yes it's 6% or better right now, but before the FTX collapse the average savings rate was in the tanks and you'd routinely see crypto staking in the 4%+ range.
That's still a situation that's above ground, financially. The niche for bitcoin as a value exchange is when whatever you're doing is illegal. Let's say you got some dollary-doos somehow or...
That's still a situation that's above ground, financially. The niche for bitcoin as a value exchange is when whatever you're doing is illegal. Let's say you got some dollary-doos somehow or another, and you want to send that back to Iran so that the infidels may be vanquished.
Sure, you could buy a bunch of gold and smuggle that to Iran, but that's a lot of opportunities where the CIA can bash your head in a crowbar. Or you could use bitcoin.
You'll have to pay a lot for that in FX, but that's common for something like this.
In certain lending/borrowing protocols, the lending rate is just a function of the utilization of how much is borrowed (with some caps on deposits and borrows to maintain a risk policy.) For...
In certain lending/borrowing protocols, the lending rate is just a function of the utilization of how much is borrowed (with some caps on deposits and borrows to maintain a risk policy.)
For example, USDC is being heavily borrowed on MarginFi right now, so the rate you're getting as a lender is around 17%. If borrowers start paying this back, the lenders get a lower rate. If more people start lending, the borrowers pay a lower rate.
Staking of course is different and typically less dynamic than borrowing/lending, normally a staking rate is just whatever inflation issuance you'd collect for locking up your tokens for a duration (though liquid staking can significantly dial down the duration risk for most people.)
Yeah the dynamic lending protocols are interesting, but I wasn't bothering to mention them as I'm still suspicious of how "legit" the underlying concept is for something like a savings account...
Yeah the dynamic lending protocols are interesting, but I wasn't bothering to mention them as I'm still suspicious of how "legit" the underlying concept is for something like a savings account where you just want to park your money until you need it.
In theory throwing your money in some dynamic lending stablecoin should be a great way to get decent returns, but obviously people are getting 17% because, on some level, that's abstracting the risk to an appropriate gain. When FTX died we saw plenty of those types of platforms just wind up with a "oops you lost it all" stance.
The BRICS do use gold to settle trade imbalances, so while its not the currency of people, it is the currency of nations.
Sure, but you can also use gold, bullion, or gems as shit currency as well, and they have their own problems which keep them from actually being a currency.
The BRICS do use gold to settle trade imbalances, so while its not the currency of people, it is the currency of nations.
Yep. There's good and bad reasons to use alternative currencies. The dollar is the currency of trade for a reason as well, and that comes with tradeoffs.
Yep. There's good and bad reasons to use alternative currencies. The dollar is the currency of trade for a reason as well, and that comes with tradeoffs.
Gambling is fun for many people and I think it will always be a thing. But I do hope they pick a proof-of-stake coin next time, so at least it doesn't waste electricity.
Gambling is fun for many people and I think it will always be a thing. But I do hope they pick a proof-of-stake coin next time, so at least it doesn't waste electricity.
Unknowable - but something thats different this time compared to the past is that there are now BTC ETFs in the US - which grew to $55b AUM since launch two months ago. This is pre- ETF options...
Unknowable - but something thats different this time compared to the past is that there are now BTC ETFs in the US - which grew to $55b AUM since launch two months ago. This is pre- ETF options and structured products availability I believe.
I can definitely believe it’s a popular ETF. But some of that is due to Bitcoin’s price volatility. I’m convinced most of the blockchain volume is fake and thus increases in price are largely...
I can definitely believe it’s a popular ETF. But some of that is due to Bitcoin’s price volatility. I’m convinced most of the blockchain volume is fake and thus increases in price are largely manipulated through tacit collusion whenever enough suckers are added to the system.
The ETF’s value increase will match Bitcoin’s. So thus by the mere existence of a new Bitcoin ETF you’re providing the suckers with which to spin up the price manipulation machine, spiking the ETF and Bitcoin’s value.
This is where things get interesting and I wish I could find someone who both had the technical and economic knowledge to really deep dive it. Since the "value" of bitcoin is in the verification...
I’m convinced most of the blockchain volume is fake
This is where things get interesting and I wish I could find someone who both had the technical and economic knowledge to really deep dive it.
Since the "value" of bitcoin is in the verification of its transactions, there's a relationship of sorts between price and transactions. If i just shuffle 1 million between accounts, that's a transaction that needs to be verified, which needs to be processed, which is paid in mining and so on.
BUT there's lots of legit financial activity that is EXACTLY that. People talk about the "HUGE" moves of billions through crypto, and often it's just nonsense because it's a well known wallet for something like binance or crypto.com shifting funds for liquidity, which is totally normal activity for a financial entity of that size.
Still, the relationship is a strange one and something that feels oddly unique in terms of any market i know of. God knows there's all sorts of strange abstractions you can make a market of and the processing of financial transactions already is one (and one that's a mess), but I'm curious what studies have been done on something like this.
It could be faked, but I think there's a bit more to it. Moving Bitcoin around doesn't set the price; it's only half of a trade. The price in dollars (or a stablecoin) is set by trades between...
It could be faked, but I think there's a bit more to it. Moving Bitcoin around doesn't set the price; it's only half of a trade.
The price in dollars (or a stablecoin) is set by trades between Bitcoin and dollars. Stablecoins or traders they make loans to seem like the most likely suspects for the other half of the transaction?
Also, it seems like miners have to cash out which should put downward pressure on the price. But when Bitcoin is going up, they might decide to wait. Maybe that's enough to spike the price?
Oh i'm sure it could, and is, faked to some extent. And yeah it's very unclear to me how all the pressures work, but I also think that the whole USDT thing is going to be the next big collapse....
Oh i'm sure it could, and is, faked to some extent.
And yeah it's very unclear to me how all the pressures work, but I also think that the whole USDT thing is going to be the next big collapse. Granted people have thought that forever, but it feels like it has to come due eventually if there's even some substantiation to the rumors.
I thought so for a while, but then again, higher interest rates might be enough to bail them out? Borrowing at 0% and lending at 5% (buying something risk-free like treasuries) really ought to be...
I thought so for a while, but then again, higher interest rates might be enough to bail them out? Borrowing at 0% and lending at 5% (buying something risk-free like treasuries) really ought to be an easy way to make money. So they may get away with it?
But if they're greedy and buy Bitcoin instead, they could end up holding the bag.
Well yeah the BTC thing is the theory/my suspicion. If they're smart they might have used the recent turmoil to back out of it, but if they've been backing USDT with bitcoin, then minting new USDT...
Well yeah the BTC thing is the theory/my suspicion. If they're smart they might have used the recent turmoil to back out of it, but if they've been backing USDT with bitcoin, then minting new USDT when the value goes up, to buy more bitcoin.....well obviously that's a huge problem.
That is Tethers business model. Take users USD, buy T-Bills and short duration treasuries, give users USDT. Circle and PayPal also do this for USDC and PyUSD.
That is Tethers business model. Take users USD, buy T-Bills and short duration treasuries, give users USDT. Circle and PayPal also do this for USDC and PyUSD.
For me its in some ways yes but in some ways no (in terms of hoping its the business model.) This model itself is a money printer, and at a certain scale, these higher rates meant to tame...
For me its in some ways yes but in some ways no (in terms of hoping its the business model.) This model itself is a money printer, and at a certain scale, these higher rates meant to tame inflation become paradoxically inflationary themselves. If big companies are parking billions of excess reserves in short-duration treasuries, thats a lot of risk-free cash being generated and given right to them. And its not just stablecoin issuance companies doing this, but banks like JPM (they had like one or two trillion parked in RRP I think?), Berkshire, etc...
Inflation comes from actually spending money, bidding prices up. Parking the money is not spending, but it makes it possible to spend at some future date. Also, almost all savings is invested,...
Inflation comes from actually spending money, bidding prices up. Parking the money is not spending, but it makes it possible to spend at some future date. Also, almost all savings is invested, which allows someone else to spend in the meantime. In the case of buying Treasuries, that's the US government.
You could think of this as a matter of scheduling: who should spend money now, and who should wait? Republicans may be against government spending, but investors buying treasuries seem pretty okay with letting the government go first? "I don't need to spend yet. After you." They are paid for waiting. And if you pay someone whose revealed preference is to save (they already have lots of money saved), they'll probably reinvest? If they wanted to spend more, they would be already.
You might worry: when are these people going to spend their money? It varies. Sometimes the answer is never; people just like having investments and never liquidate. It ends up in their estates. For retirees, wealth funds their retirement spending. For Berkshire, since one of their businesses is reinsurance, arguably they are there to pay out after a big catastrophe. When that happens, they'll be enabling a lot of spending.
The thing to remember is that the amount of spending in any given year is crudely controlled by the Fed; if they wanted people to spend more, they'd lower interest rates. So at a crude, very zoomed-out level, the US is, overall, spending about as much as it should, and we know that because the economy is, overall, fairly okay.
But then you can ask, is the US spending money on the right things? And then there's a lot to disagree about. The zoomed-out perspective sweeps a lot under the rug. It doesn't say anything about inequality and isn't all that relevant for everyday concerns.
My guess for why Berkshire is sitting on $168B in cash is that they can clip 5% on a big chunk of that with little duration risk and use the yield to pay corporate expenses, while waiting for a...
My guess for why Berkshire is sitting on $168B in cash is that they can clip 5% on a big chunk of that with little duration risk and use the yield to pay corporate expenses, while waiting for a possible market drawdown so they can gobble up assets at a lower price (I’m speculating.)
Sure, that too. I think they've explicitly said (now and then) that they haven't bought much recently because prices are too high for them? There are all sorts of reasons for not spending. The...
Sure, that too. I think they've explicitly said (now and then) that they haven't bought much recently because prices are too high for them?
There are all sorts of reasons for not spending. The economy is driven by spending.
Wow and everyone you've ever met had a couple dozen Bitcoin on a thumb drive back when it was only 1¢/BTC! It's a wonder there are any available to be sold!
Wow and everyone you've ever met had a couple dozen Bitcoin on a thumb drive back when it was only 1¢/BTC! It's a wonder there are any available to be sold!
I love how crypto advocates celebrate this sort of news as if it's a great thing... when the reality is that Bitcoin's insane volatility is precisely why it's not taken seriously as a viable currency, and hopefully won't ever be. It's a pyramid scheme. Some people will get rich off investing in it, but most will lose. And due to the insane amounts of electrical energy and material resources being dedicated to mining it, we're ultimately all on the losing end because of it.
I wouldn’t say it’s a pyramid scheme, it just bears no resemblance. More of a pump and dump, although at this point I’d put it more as a speculative bubble with some parties trying to pump.
Yes, as we've learned from meme stocks, pump-and-dump is a gambling game that people can play with any financial asset. It doesn't necessarily mean there's anything unusual about the asset; it's just the one the players implicitly agreed to use for their game. It could have been Dogecoin, and sometimes it is.
Some will go into it with their eyes open because they enjoy gambling and they think they can win. Unfortunately others might buy into the hype and not understand what kind of game they're playing.
No sane advocate thinks that Bitcoin will ever be a currency. It is a high volatility asset.
And how many of those exist? AFAICT the vast majority of crypto advocates are either anti-government Libertarian/Gold Standard/FIAT currency conspiracy nuts, have already drank the get-rich-quick Kool-Aid, or are pump and dump scam artists.
I guess it depends on what you’re counting as an advocate; the loudest and most numerous generally fall into one or more of those buckets, but there are plenty of serious financial types gambling on crypto just as they do on any other asset class.
I see it as interesting tech that could’ve found a niche, and instead became a microcosm of our insane financial system as a whole. The numbers are made up, but not substantially more so than the ones underlying some similarly volatile derivatives.
Hard to say.
God knows that’s some significant portion of use case, but there’s a similar problem in stock markets. Assets and securities do not require informed owners to work. Merely that they exist.
If I had to guess, “retail” investors like that who are basing their decisions on some prediction of that nature are very unlikely to make up enough of the demand.
Black market and regulation dodging activity is probably a large %
There's a guy I went to high school with who became a financial planner and convinced his firm to emphasize cryptocurrency management. I think there's a lot of traditional or institutional folks like that who are indirectly profiting off of anyone wanting to participate. Thought that was another flavor worth mentioning.
In a sense, it kinda feels like it's going the gambling route. Which is to say it's become accepted as a risky thing that can be fun or community-building (in theory) or it can also consume you and ruin your life.
I mean even Fidelity is now recommending 1-3% crypto (their BTC ETF) in their portfolios:
https://www.fidelity.ca/en/investments/solutions-portfolios/all-in-one/
Larry Fink (BlackRock CEO) is on TV calling BTC digital gold:
https://twitter.com/screentimes/status/1766483035711488083
The institutional infra is being built out and marketed now that the ETFs are available. Traditional asset managers and fund managers that would have lost their job buying bitcoin over the last decade can now just buy shares of one of the BTC ETFs because its just stock like anything else in the portfolio, particularly moreso when those ETFs have options available to provide embedded leverage and risk hedging.
You can still use it as a currency, just a pretty shitty one. You’d just want to limit your exposure as much as possible and you’ll definitely pay out the ass in fx rates. But out of the cryptos bitcoin is still amongst the ones with the most liquidity and stability.
Mainly if you really need to avoid traditional financial systems, eg some transaction that is illegal or sanctioned.
Sure, but you can also use gold, bullion, or gems as shit currency as well, and they have their own problems which keep them from actually being a currency.
I think an unrespected portion of the transactions isn't just straight up "gambling" with returns, but the fact that for smaller investors, there's not a ton of great places to park your money and get a return.
You can leave your money in a savings account for a .00001% (better now with rates up of course but still) or you can "stake it" in a coin for 6-8% (ignoring the 10%+ that's obviously scammy). Even then it's still not as secure and not as safe, but I think a lot of the movement in the crypto world is just people who have some spare funds that don't feel like the bank is giving them enough return, and other investment vehicles are not in consideration for them for whatever reason.
There's obviously a huge overlap with the people who think they'll invest at X and sell at Y and make a profit, which is even more on the gambling line, but especially before FTX blew up I know a lot of people got in because they saw attractive returns on staking which was exacerbated by the banks low rates (some of that because that's how economies work and some of that because banks can get away with not being competitive on it)
You have to physically move gold or jewels (unless you're buying like gold futures or something, but that's still under the same financial regulations). If you're okay moving physical things you can just use greenbacks.
I mean it's like 6% now at some places.
You can just use greenbacks if your countries currency is worth using. Egypt just recently started buying gold because their currency had become unstable.
And yes it's 6% or better right now, but before the FTX collapse the average savings rate was in the tanks and you'd routinely see crypto staking in the 4%+ range.
That's still a situation that's above ground, financially. The niche for bitcoin as a value exchange is when whatever you're doing is illegal. Let's say you got some dollary-doos somehow or another, and you want to send that back to Iran so that the infidels may be vanquished.
Sure, you could buy a bunch of gold and smuggle that to Iran, but that's a lot of opportunities where the CIA can bash your head in a crowbar. Or you could use bitcoin.
You'll have to pay a lot for that in FX, but that's common for something like this.
In certain lending/borrowing protocols, the lending rate is just a function of the utilization of how much is borrowed (with some caps on deposits and borrows to maintain a risk policy.)
For example, USDC is being heavily borrowed on MarginFi right now, so the rate you're getting as a lender is around 17%. If borrowers start paying this back, the lenders get a lower rate. If more people start lending, the borrowers pay a lower rate.
Staking of course is different and typically less dynamic than borrowing/lending, normally a staking rate is just whatever inflation issuance you'd collect for locking up your tokens for a duration (though liquid staking can significantly dial down the duration risk for most people.)
Yeah the dynamic lending protocols are interesting, but I wasn't bothering to mention them as I'm still suspicious of how "legit" the underlying concept is for something like a savings account where you just want to park your money until you need it.
In theory throwing your money in some dynamic lending stablecoin should be a great way to get decent returns, but obviously people are getting 17% because, on some level, that's abstracting the risk to an appropriate gain. When FTX died we saw plenty of those types of platforms just wind up with a "oops you lost it all" stance.
The BRICS do use gold to settle trade imbalances, so while its not the currency of people, it is the currency of nations.
Yep. There's good and bad reasons to use alternative currencies. The dollar is the currency of trade for a reason as well, and that comes with tradeoffs.
Gambling is fun for many people and I think it will always be a thing. But I do hope they pick a proof-of-stake coin next time, so at least it doesn't waste electricity.
How high will it peak this time? Will this be another 2017/2021 or a smaller one?
Of course it will be. Bitcoin is a scam and you have to find more suckers to get your money out.
Unknowable - but something thats different this time compared to the past is that there are now BTC ETFs in the US - which grew to $55b AUM since launch two months ago. This is pre- ETF options and structured products availability I believe.
I can definitely believe it’s a popular ETF. But some of that is due to Bitcoin’s price volatility. I’m convinced most of the blockchain volume is fake and thus increases in price are largely manipulated through tacit collusion whenever enough suckers are added to the system.
The ETF’s value increase will match Bitcoin’s. So thus by the mere existence of a new Bitcoin ETF you’re providing the suckers with which to spin up the price manipulation machine, spiking the ETF and Bitcoin’s value.
This is where things get interesting and I wish I could find someone who both had the technical and economic knowledge to really deep dive it.
Since the "value" of bitcoin is in the verification of its transactions, there's a relationship of sorts between price and transactions. If i just shuffle 1 million between accounts, that's a transaction that needs to be verified, which needs to be processed, which is paid in mining and so on.
BUT there's lots of legit financial activity that is EXACTLY that. People talk about the "HUGE" moves of billions through crypto, and often it's just nonsense because it's a well known wallet for something like binance or crypto.com shifting funds for liquidity, which is totally normal activity for a financial entity of that size.
Still, the relationship is a strange one and something that feels oddly unique in terms of any market i know of. God knows there's all sorts of strange abstractions you can make a market of and the processing of financial transactions already is one (and one that's a mess), but I'm curious what studies have been done on something like this.
It could be faked, but I think there's a bit more to it. Moving Bitcoin around doesn't set the price; it's only half of a trade.
The price in dollars (or a stablecoin) is set by trades between Bitcoin and dollars. Stablecoins or traders they make loans to seem like the most likely suspects for the other half of the transaction?
Also, it seems like miners have to cash out which should put downward pressure on the price. But when Bitcoin is going up, they might decide to wait. Maybe that's enough to spike the price?
Oh i'm sure it could, and is, faked to some extent.
And yeah it's very unclear to me how all the pressures work, but I also think that the whole USDT thing is going to be the next big collapse. Granted people have thought that forever, but it feels like it has to come due eventually if there's even some substantiation to the rumors.
I thought so for a while, but then again, higher interest rates might be enough to bail them out? Borrowing at 0% and lending at 5% (buying something risk-free like treasuries) really ought to be an easy way to make money. So they may get away with it?
But if they're greedy and buy Bitcoin instead, they could end up holding the bag.
Well yeah the BTC thing is the theory/my suspicion. If they're smart they might have used the recent turmoil to back out of it, but if they've been backing USDT with bitcoin, then minting new USDT when the value goes up, to buy more bitcoin.....well obviously that's a huge problem.
That is Tethers business model. Take users USD, buy T-Bills and short duration treasuries, give users USDT. Circle and PayPal also do this for USDC and PyUSD.
It ought to be Tether's business model. We hope it's their business model. I believe it actually is for Circle and PayPal.
For me its in some ways yes but in some ways no (in terms of hoping its the business model.) This model itself is a money printer, and at a certain scale, these higher rates meant to tame inflation become paradoxically inflationary themselves. If big companies are parking billions of excess reserves in short-duration treasuries, thats a lot of risk-free cash being generated and given right to them. And its not just stablecoin issuance companies doing this, but banks like JPM (they had like one or two trillion parked in RRP I think?), Berkshire, etc...
Inflation comes from actually spending money, bidding prices up. Parking the money is not spending, but it makes it possible to spend at some future date. Also, almost all savings is invested, which allows someone else to spend in the meantime. In the case of buying Treasuries, that's the US government.
You could think of this as a matter of scheduling: who should spend money now, and who should wait? Republicans may be against government spending, but investors buying treasuries seem pretty okay with letting the government go first? "I don't need to spend yet. After you." They are paid for waiting. And if you pay someone whose revealed preference is to save (they already have lots of money saved), they'll probably reinvest? If they wanted to spend more, they would be already.
You might worry: when are these people going to spend their money? It varies. Sometimes the answer is never; people just like having investments and never liquidate. It ends up in their estates. For retirees, wealth funds their retirement spending. For Berkshire, since one of their businesses is reinsurance, arguably they are there to pay out after a big catastrophe. When that happens, they'll be enabling a lot of spending.
The thing to remember is that the amount of spending in any given year is crudely controlled by the Fed; if they wanted people to spend more, they'd lower interest rates. So at a crude, very zoomed-out level, the US is, overall, spending about as much as it should, and we know that because the economy is, overall, fairly okay.
But then you can ask, is the US spending money on the right things? And then there's a lot to disagree about. The zoomed-out perspective sweeps a lot under the rug. It doesn't say anything about inequality and isn't all that relevant for everyday concerns.
My guess for why Berkshire is sitting on $168B in cash is that they can clip 5% on a big chunk of that with little duration risk and use the yield to pay corporate expenses, while waiting for a possible market drawdown so they can gobble up assets at a lower price (I’m speculating.)
Sure, that too. I think they've explicitly said (now and then) that they haven't bought much recently because prices are too high for them?
There are all sorts of reasons for not spending. The economy is driven by spending.
Bloomberg today:
Bitcoin Tops $73,000 to Hit New Record On Insatiable ETF Demand
Wow and everyone you've ever met had a couple dozen Bitcoin on a thumb drive back when it was only 1¢/BTC! It's a wonder there are any available to be sold!
I just want to reiterate my prediction that this will crash back down hard in the near future.
What price are you thinking?