AggiEE said:

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Deluxe said:

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Did you actually watch it or are you just posting it here because someone on Twitter said it was a "scathing takedown"?

I just skimmed through it myself. The irony is that I agree with alot of what he's saying. I can get into some specific rebuttals of things I don't agree with/think are misleading, but I'd like for you to demonstrate that you at least watched it before engaging in a discussion. Be specific and technical.

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I watched the entire thing. He literally says in the opening statements he hopes the entire idea will die in a dumpster fire.

So...it is very scathing and he breaks down why it is not good as a store of value, as a technology it isn't even all that novel (in current form), how it's not ideal as a currency, how it's not efficient at all at transfers, how heavily manipulated and shilled the market is since it's highly unregulated, and that many of the problems it attempts to solve are already largely implemented in a superior and more secure form with traditional financial institutions.

What exactly did you disagree with and why did you think his assessment wasn't extremely harsh?

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It was definitely harsh, but I think certain aspects of the "crypto" space are worthy of harsh criticism and I agreed with some of what he had to say.

-Agree that there are concerns around stablecoins. Like I said in a previous post, there's a reason why priority #1 for "crypto" regulators right now is governing stablecoin reserves (and potentially subjecting them to FDIC chartership).

-His Tether critique has mostly been FUD at this point. They've been investigated and paid a fined, but didn't admit wrongdoing. Lots of FUD throwers thought Evergrande default would bring it down but that didn't happen. Terra would be a much better case study if he could redo the lecture and give it tomorrow. But even that "disaster" didn't really bring down the market (IMO the downturn is more due to macro sell off and cascading collateral liquidations from over levered folk... agree with you that there's too much leverage in "crypto" space).

-On slide 27, I think he's missing the point. The need for fully backed stablecoins is made evident by the increasing demand for overseas users. The stablecoins achieve a borderless nature when they travel via the Bitcoin network. He says PayPal, Venmo, etc are substitutes but they are not. They are domestic applications built on top of archaic legacy financial structures. For you and me transferring money to eachother in America, that's fine I guess. We press send and it shows up right away in our apps. But behind the scenes, IOUs are created, which trigger a multi-day, expensive settlement process between our banks.

You can't Venmo money to someone who banks overseas. You have to use Western Union and pay 20% fees. You can pay for coffee in Amsterdam with Visa, but check out the fees on your next bill (and ask the merchant what kind of fees they're paying).

-Like ac04 said, he misrepresents the "speed" issue. Bitcoin's cumbersome nature maximizes security. Making it faster sacrifices network security. Could be wrong but I don't think he even mentions the Lightning network.

-His commentary around Bitcoin energy use is misleading and mostly FUD. He also says 5 entities control Bitcoin with >50% of hashrate, which is wrong on a number of levels.

-Everything in the video from basically the 45 minute mark forward, I'm down with. Alot of "cryptos" are unregistered, fraudulent securities that will eventually be regulated just like any other business. They'll have to make public disclosures, issue reports, and compete in markets against incumbents. A few NFT communities may have some staying power but most do not. Exchanges peddling unregistered securities are going to get shut down until they prove they can comply. a16z = cancer.

Wish I could write more but too distracted by work and Jimbo/Saban-gate today.

Just kicking this back to the top.

Http://www.Bitcoin.page

Because price is meaningless, but education is exceptionally valuable.

Fair enough, today is certainly a busy day for me as well.

I don't worry about exceptionally convicted and sophisticated investors at all.

I do worry that 2020 covid induced "work from home" led to a swell of tiny retail investors new to the markets. And many of them weren't great at measuring risk.

Everybody wants to make a huge deal amount $$$ lost whenever Bitcoin goes down. CNBC reports "$200 billion lost over weekend in crypto."


Oooh! Now do the Nasdaq. How about $7 trillion in six months?

I bought BTC because of the idea of it and not to make USD on it later.

So, my bet is still in play regardless of it's current price. I also didn't spend enough that would destroy us financially if my bet ultimately fails.

#metoo.

FrioAg 00 said:

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Needs to be a well check for some of the true zealots that stake the majority or all of their financial bets on BTC.

Sure, if they got in 2020 or before they are still way "up" but even then 18 months is a long time. At some point you reset the expectation of where your economic situation is, so this will still feel like "loss"


And 63% "loss" in 8 months is jump of a bridge type risk

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What happens now to all the crypto "millionaires" who moved to Puerto Rico and Miami and retired?

and the endless millenials who were using leverage and government stimulus checks the last two years?!

Correct.

Sophisticated investors who crushed it with crypto likely understood how to measure and manage risk. I lot of them likely took some profits along the way into things not denominated in BTC.

However, the zealots for BTC do trend young and perhaps naive, meaning a whole lot of young people that turned $5k into $1m instead leveraged up and doubled down.

Today their rent is due on their sweet flat, their sports car payment too. And they are answering the question: what is a margin call?


Sometime later this week there is a sad call that starts with "Mom, do you think Dad is using my old bedroom right now?"

YouBet said:

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LMCane said:

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FrioAg 00 said:

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Needs to be a well check for some of the true zealots that stake the majority or all of their financial bets on BTC.

Sure, if they got in 2020 or before they are still way "up" but even then 18 months is a long time. At some point you reset the expectation of where your economic situation is, so this will still feel like "loss"


And 63% "loss" in 8 months is jump of a bridge type risk

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What happens now to all the crypto "millionaires" who moved to Puerto Rico and Miami and retired?

and the endless millenials who were using leverage and government stimulus checks the last two years?!

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Reality.

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they will do what they always do... beg for government bailouts forgiving their own stupidity. and believing the next D that says they'll make everyone else pay for their mistakes while having no such intention.

tysker said:

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Deluxe said:

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FrioAg 00 said:

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Needs to be a well check for some of the true zealots that stake the majority or all of their financial bets on BTC.

Sure, if they got in 2020 or before they are still way "up" but even then 18 months is a long time. At some point you reset the expectation of where your economic situation is, so this will still feel like "loss"

And 63% "loss" in 8 months is jump of a bridge type risk.

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I'm doing great. There's nothing to fear if you own unlevered Bitcoin. But if you bought Bitcoin on margin or own alts, I'd be concerned.

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Would you say "there's nothing to fear if you own unlevered" real estate?
'Hey man, I know you paid off your mortgage a while back so you're totally fine even even it has lost 50%+ of its value over the last 12-months! All you need is for it to double in value from here for you catch up.'

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That's not a good analogy because you shouldn't invest in Bitcoin with a 12-month time horizon.

If you own real estate with a 30 year time horizon, I'd say you have nothing to fear regardless of how far down you may be at any given time. Although real estate comes with other risks not inherent to Bitcoin (ie property tax rates, insurance rates, maintenance expenses, etc).

I disagree with your presuppositions

Deluxe said:

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I disagree with your presuppositions

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And those would be?
All assets have a price and that price can be less than 0
Time value of money matters
Opportunity costs and trade offs are complex, different for everyone, and change over time
This is not a zero-sum game we are playing

tysker said:

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Deluxe said:

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I disagree with your presuppositions

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And those would be?
All assets have a price and that price can be less than 0
Time value of money matters
Opportunity costs and trade offs are complex, different for everyone, and change over time
This is not a zero-sum game we are playing

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Haha you don't say

Deluxe said:

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Not sure if you're engaging because you're open to being persuaded or if you just want to score a point for team anti-Bitcoin. Just for fun, I'll assume the former and answer your questions. But first, can you please tell me how you define the intrinsic value of real estate? It'll help me cater my response better to how you think.

Is it just the replacement cost of the raw materials? Is it a PV of future projected rents less expenses? Do any other tangential factors matter? Is the analysis purely quantitative and formula-driven or do qualitative factors matter? How do you assign value to the land? It kinda seems to me like deriving a purely intrinsic value of real estate that strips away all market factors (mainly cost of land, but also cost of raw material) is difficult to achieve, but I can be persuaded otherwise.

For sake of this discussion, assume 50 year investment life.

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I'm always willing to engage and learn about alternative ways of approaching these issues. I believe we learn from honest debate had in good faith and it certainly makes me coalesce my thoughts; not with memes or tweets like some others tend to on these boards.

To define the intrinsic value of RE I would say yes to all the above but that is what makes a market; it can vary from person to person and over time. I would argue that 200 years the value of land and real estate will generally be > 0. Carrying costs may also be >0 so the real or market value may be negative. But the use case of land and real estate provides historical record of having intrinsic value (for farming, ranching, or other value adding improvements). Of course all land and real estate is not equal and not all actors have the same need, want, or demand for land or real estate.

The same cant be said for cryptos. I'm not certain cryptos have that same level of proof of concept and long term value or intrinsic value outside of their particular, singularly designed use case. There is only purpose for cryptos and BTC and if that purpose becomes unnecessary or unvalued doesn't the price become zero?

Even BTC usage is problematic when outside parties (exchanges, hot wallets, on/off ramps) are integrated into the system. If BTC cannot be improved upon, does it have any real value? It seems the intrinsic value is closer to 0 or has a <1 multiplier effect because adding value by outside parties only increases the risk and likelihood of failure (like exchanges blowing up).

But going back to the intention you said there was nothing to fear if you have unlevered BTC, Would you say the same thing to a real estate owner who has had their net worth cut in half? Considering, the biggest asset most people have is their home and if that value were cut in half in 12-18 months, people would be panicking regardless if they held a mortgage or not.

tysker said:

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I'm always willing to engage and learn about alternative ways of approaching these issues. I believe we learn from honest debate had in good faith and it certainly makes me coalesce my thoughts; not with memes or tweets like some others tend to on these boards.

To define the intrinsic value of RE I would say yes to all the above but that is what makes a market; it can vary from person to person and over time. I would argue that 200 years the value of land and real estate will generally be > 0. Carrying costs may also be >0 so the real or market value may be negative. But the use case of land and real estate provides historical record of having intrinsic value (for farming, ranching, or other value adding improvements). Of course all land and real estate is not equal and not all actors have the same need, want, or demand for land or real estate.

The same cant be said for cryptos. I'm not certain cryptos have that same level of proof of concept and long term value or intrinsic value outside of their particular, singularly designed use case. There is only purpose for cryptos and BTC and if that purpose becomes unnecessary or unvalued doesn't the price become zero?

Even BTC usage is problematic when outside parties (exchanges, hot wallets, on/off ramps) are integrated into the system. If BTC cannot be improved upon, does it have any real value? It seems the intrinsic value is closer to 0 or has a <1 multiplier effect because adding value by outside parties only increases the risk and likelihood of failure (like exchanges blowing up).

But going back to the intention you said there was nothing to fear if you have unlevered BTC, Would you say the same thing to a real estate owner who has had their net worth cut in half? Considering, the biggest asset most people have is their home and if that value were cut in half in 12-18 months, people would be panicking regardless if they held a mortgage or not.

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Good post. I don't find many Bitcoin critiques to be as well written and thoughtful as that.

Last question first. The irony is that it's possible that exact situation plays out sometime in the next year (ie people lose half the value on their homes). I think the economy broadly is going to get much much worse before it gets better.

Having been in Bitcoin for close to 6 years, I'm probably more hardened to dramatic market moves than the average person and I agree that the average person will be pretty upset. But I'd probably still offer the same advice... if you own your home and/or aren't in jeopardy of defaulting on your note, take the long term view. History suggests the value will return.

Gotta run but I'll come back to the rest.

What happens if BTC falls under 21K

we may be about to find out!

LMCane said:

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What happens if BTC falls under 21K

we may be about to find out!

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I'm not worried about Microstrategy.

1) As the CEO of a publicly traded company, Saylor's public words are subject to SEC scrutiny. If he's claiming that they're going to continue to post BTC collateral and aren't at risk of a call until $3500, you can feel reasonably confident that's the case. Otherwise he's in a heck of alot of trouble.

2) Microstrategy took their margin loan out from Silvergate, not some defi app. Silvergate is trying to become the top crypto bank and personal relationships exist between Saylor and their management. To the extent things start to get REALLY bad, I'm sure there will be mutual interest in refinancing. Both parties will be incentivized to do so.

3) IF I was Saylor, I'd at least consider selling Bitcoin to pay off the loan. He's got like 125k Bitcoin. He'd need to sell like 10k of them to pay off the loan. Then all his Bitcoin would be unlevered. It seems super super unlikely that things would get bad enough for there to be a liquidation, but I also think we're about to see some rough broader market headwinds and low probability downside cases are more feasible than they've been in 40 years. I'd almost rather just take the risk entirely off the table and know for certain I've got 115k Bitcoin.

Deluxe said:

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LMCane said:

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What happens if BTC falls under 21K

we may be about to find out!

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I'm not worried about Microstrategy.

1) As the CEO of a publicly traded company, Saylor's public words are subject to SEC scrutiny. If he's claiming that they're going to continue to post BTC collateral and aren't at risk of a call until $3500, you can feel reasonably confident that's the case. Otherwise he's in a heck of alot of trouble.

2) Microstrategy took their margin loan out from Silvergate, not some defi app. Silvergate is trying to become the top crypto bank and personal relationships exist between Saylor and their management. To the extent things start to get REALLY bad, I'm sure there will be mutual interest in refinancing. Both parties will be incentivized to do so.

3) IF I was Saylor, I'd at least consider selling Bitcoin to pay off the loan. He's got like 125k Bitcoin. He'd need to sell like 10k of them to pay off the loan. Then all his Bitcoin would be unlevered. It seems super super unlikely that things would get bad enough for there to be a liquidation, but I also think we're about to see some rough broader market headwinds and low probability downside cases are more feasible than they've been in 40 years. I'd almost rather just take the risk entirely off the table and know for certain I've got 115k Bitcoin.

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point being- if he is forced to sell for one reason or another-

won't that be driving down the price of BTC this week?

Why would he be forced to sell? He can either sell the prerequisite number of Bitcoin OR post more collateral. He's going to post more collateral.

Curious if this statement represents a 2-way street? "Not sure if you're engaging because you're open to being persuaded or if you just want to score a point for team anti-Bitcoin. "?

Deluxe said:

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Why would he be forced to sell? He can either sell the prerequisite number of Bitcoin OR post more collateral. He's going to post more collateral.

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What collateral? LUNA?

tysker said:

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Deluxe said:

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Why would he be forced to sell? He can either sell the prerequisite number of Bitcoin OR post more collateral. He's going to post more collateral.

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What collateral? LUNA?

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If that's a joke, I'm probably missing it. He has like 100k+ unencumbered BTC on his balance sheet that he can post.

(still working on replying to your other post)

Deluxe said:

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tysker said:

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Deluxe said:

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Why would he be forced to sell? He can either sell the prerequisite number of Bitcoin OR post more collateral. He's going to post more collateral.

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What collateral? LUNA?

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If that's a joke, I'm probably missing it. He has like 100k+ unencumbered BTC on his balance sheet that he can post.

(still working on replying to your other post)

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Selling your deflating hard assets to cover to cover expenses and debts specifically related to that deflating hard asset is rarely a great long term business strategy

Its a joke because LUNA is worthless. MSTR is down to $152 from almost $900 8 months ago, so a secondary offering stock isnt much of an option. Debt financing is getting expensive and I bet they couldnt justify the rates they'd have to pay. Saylor can service the margin calls and debt but at the expense of devaluing the underlying asset


eta: Per filings MSTR Stockholder equity is about $863MM as of 3/31/22. The 129k BTC is currently worth only $2.85 Billion (based on the 3/31/22 BTC closing price). Not a complete wipeout of equity for shareholders but we'll see what happens