Page 1 of 2

Investment in crypto currencies and the role of central banks

Posted: March 1st, 2021, 8:47 pm
by PeterGray
Crypto potentially create asset classes that are beyond the control of the central banks, acting like super currencies that can not be debased by money printing.

The same argument can be made about gold, which has a much better established track record than crypto.
Moderator Message:
Split off from here to keep that topic focused. - Chris

Re: Investment in crypto currencies and the role of central banks

Posted: March 1st, 2021, 9:16 pm
by odysseus2000
PeterGray wrote:Crypto potentially create asset classes that are beyond the control of the central banks, acting like super currencies that can not be debased by money printing.

The same argument can be made about gold, which has a much better established track record than crypto.


Yes & No.

Gold is not fixed by an algorithm to a finite amount. If some new technology emerges that can e.g. get gold from sea water, then gold could be debased.

Other big differences are in terms of convenience: With gold one has to have the metal & that involves storage, insurance & security. If your Krugerrand are taken you have nothing other than insurance as a recompense.

Crypto currencies are believed un-hackable (maybe true maybe not), but there is a clear transaction path that can be followed to in principle recover what has been taken and no matter where you are on the internet, you can access your bitcoin. So for example if you fall out with your politicians and manage to escape their clutch and claim asylum elsewhere, even if you leave in your birthday suit, your crypto wealth is available in your new country. Far more difficult with e.g. Krugerrand.

Regards,

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 1:11 am
by ursaminortaur
odysseus2000 wrote:
I guess that the Fed will sell bonds to raise finance for the package but will continue to buyback financial assets (QE) as they have (6 months back) signalled that they are happy with inflation at +2.0%

https://perspectives.group.pictet/powel ... licy-shift

Indeed US inflation was at 2.5% in Jan 2020
https://www.statista.com/statistics/273 ... in-the-us/

which was tolerated.

They will monitor employment rates and use that to dictate when to start taper off the QE and hence will earn the tax revenues to pay the higher yields should inflation rise over 2%.

Matt


The new input into all of this are the crypto currencies.

Before crypto there was nothing that anyone could do to avoid the drop in value of a currency if the central bank started printing like crazy.

Now there are potential stores of value that are fixed in amount, i.e. can not be subject to excessive supply.


Crypto currencies don't seem to need someone to have the ability to print new currency to exhibit much greater volatility than central bank controlled currencies. And just to correct one point crypto currencies like bitcoin are not currently "fixed in amount". Bitcoin miners are continually increasing the number of bitcoins and are likely to continue to do so for another century or so (though quantum computing could change that but then that would change a lot of other things as well) until the number reaches an eventual cap of 21 million bitcoins in circulation.

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 9:37 am
by TheMotorcycleBoy
ursaminortaur wrote:
odysseus2000 wrote:
I guess that the Fed will sell bonds to raise finance for the package but will continue to buyback financial assets (QE) as they have (6 months back) signalled that they are happy with inflation at +2.0%

https://perspectives.group.pictet/powel ... licy-shift

Indeed US inflation was at 2.5% in Jan 2020
https://www.statista.com/statistics/273 ... in-the-us/

which was tolerated.

They will monitor employment rates and use that to dictate when to start taper off the QE and hence will earn the tax revenues to pay the higher yields should inflation rise over 2%.

Matt


The new input into all of this are the crypto currencies.

Before crypto there was nothing that anyone could do to avoid the drop in value of a currency if the central bank started printing like crazy.

Now there are potential stores of value that are fixed in amount, i.e. can not be subject to excessive supply.


Crypto currencies don't seem to need someone to have the ability to print new currency to exhibit much greater volatility than central bank controlled currencies. And just to correct one point crypto currencies like bitcoin are not currently "fixed in amount". Bitcoin miners are continually increasing the number of bitcoins and are likely to continue to do so for another century or so (though quantum computing could change that but then that would change a lot of other things as well) until the number reaches an eventual cap of 21 million bitcoins in circulation.

But given that 21M is maximum, we now have about 18-19M BTCs, <i>and</i> it's predicted that it will take till 2140 before all the coins actually are mined, can we not agree that in our lifetimes the supply is effectively fixed?

Matt

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 10:06 am
by NotSure
Crypto potentially create asset classes that are beyond the control of the central banks, acting like super currencies that can not be debased by money printing.

The same argument can be made about gold, which has a much better established track record than crypto


While this is true, I suspect the same could have been said for gold when it first appeared. I bet there were farmers who refused to swap a lamb for a bit of shiny of metal (and lived to regret that decision).

Bitcoin is ridiculously volatile, but a fairly distinct trend is emerging. I don't want any, but nor would I want to be short. When people like Ruffer have successfully used it, and state they will continue to do so, it has to be possible that it will continue its path into 'the mainstream'?

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 10:58 am
by AleisterCrowley
Snorvey wrote:
PeterGray wrote:Crypto potentially create asset classes that are beyond the control of the central banks, acting like super currencies that can not be debased by money printing.

The same argument can be made about gold, which has a much better established track record than crypto.


Can be difficult to get across borders though.

Just for fun, what's the easiest way to get a large amount of value over a border with out the authorities finding out?

A valuable painting? Bottle of single malt? Cocaine? Bitcoin...?


Stamps...

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 11:01 am
by dealtn
AleisterCrowley wrote:
Snorvey wrote:
PeterGray wrote:Crypto potentially create asset classes that are beyond the control of the central banks, acting like super currencies that can not be debased by money printing.

The same argument can be made about gold, which has a much better established track record than crypto.


Can be difficult to get across borders though.

Just for fun, what's the easiest way to get a large amount of value over a border with out the authorities finding out?

A valuable painting? Bottle of single malt? Cocaine? Bitcoin...?


Stamps...


An aeroplane or boat?

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 11:53 am
by PeterGray
Just for fun, what's the easiest way to get a large amount of value over a border with out the authorities finding out?

A valuable painting? Bottle of single malt? Cocaine? Bitcoin...?


And that surely is one of the reasons why crypo currencies, in their present form, are not going to remain unregulated indefinitely by governments that have not lost control. No government is going to stand by if they start losing control of monetary flows in a big way or taxable revenue streams. That means regulation and control, making it hard to convert to useable currency, or to use for payments.

And since crypto has no inherent value, only that which people are willing to ascribe to it, anything that imposes limits on use is going make it less valuable.

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 12:17 pm
by AleisterCrowley
Snorvey wrote:Better not upset MCB too much here by wrecking his thread but, yes, stamps. Good one. Are they redeemable in another country though?

Rare/valuable ones are untraceable (if they are not exceedingly rare) and can be sold everywhere. The value is volatile though. From memory the rare stamp market collapsed in the 80s?

Luncheon Vouchers?!

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 12:21 pm
by scrumpyjack
'Gamble' might be a more appropriate word than 'Invest'.

I'm waiting for Greta to declare Bitcoin heretical because of the huge amounts of CO2 generated in its mining. Then it will be uninvestable (or ungambleable) as all the PC Americans have to dump it. :D :D

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 12:31 pm
by Urbandreamer
AleisterCrowley wrote:Rare/valuable ones are untraceable (if they are not exceedingly rare) and can be sold everywhere. The value is volatile though. From memory the rare stamp market collapsed in the 80s?

Luncheon Vouchers?!


Ooo-err.
http://news.bbc.co.uk/onthisday/hi/date ... 539565.stm

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 12:39 pm
by AleisterCrowley
oddly enough, I was thinking about that when I posted :shock:

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 1:11 pm
by JohnB
Countries could ban bitcoin ostensibly for environmental reasons, but with a not-so-secret agenda to reduce cash flight.

https://cryptonews.com/guides/countries ... -legal.htm

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 1:23 pm
by TheMotorcycleBoy
Snorvey wrote:
PeterGray wrote:Crypto potentially create asset classes that are beyond the control of the central banks, acting like super currencies that can not be debased by money printing.

The same argument can be made about gold, which has a much better established track record than crypto.


Can be difficult to get across borders though.

Just for fun, what's the easiest way to get a large amount of value over a border with out the authorities finding out?

A valuable painting? Bottle of single malt? Cocaine? Bitcoin...?

People seem to have joked around this. Indeed it's tempting to say it would be crypto currency. However read on.

As far as criminal activity, I’ll just reflect on a conversation that I had at a conference with an FBI agent, very early on in my understanding or learning about Bitcoin. He said, ‘This is the best thing that ever happened to us.’ What does the FBI do? It’s built with cryptographers who are able to break codes and figure out illicit activity… One of the reasons is that the Bitcoin blockchain is so transparent by IP address, so pattern recognition, cryptography, [it’s] an interesting way to think about it.”

https://dailyhodl.com/2021/03/01/cathie ... than-gold/

BTW I can't vouch for it's accuracy. Do BTC transactions lead to the IP addresses of the participants?

Matt

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 4:13 pm
by Lootman
Snorvey wrote:Just for fun, what's the easiest way to get a large amount of value over a border with out the authorities finding out?

A valuable painting? Bottle of single malt? Cocaine? Bitcoin...?

One choice would be Hawala, as in that case nothing has to cross borders at all. The two Hawala brokers in the two different countries simply offset this transaction with others between those two countries. Since there will be transactions moving in both directions, the net movement is just a small fraction of the gross movement.

Diamonds are a popular way of transporting a large amount of wealth physically across borders, due to the very high value to weight/volume ratio. There are dogs that can detect the smell of large amounts of banknotes, but as far as i know none can detect diamonds. Banknotes are too bulky to try and cross borders with, although the note of choice would be the 1,000 Swiss Franc note.

I don't know enough about crypto to assess. But there is something inherently appealing about the notion of a mobile store of value that governments cannot control or debase.

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 6:44 pm
by Bubblesofearth
odysseus2000 wrote:
Gold is not fixed by an algorithm to a finite amount. If some new technology emerges that can e.g. get gold from sea water, then gold could be debased.



Bitcoin supply might be fixed but the number of cryptocurrencies isn't.

BoE

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 8:44 pm
by TheMotorcycleBoy
Bubblesofearth wrote:
odysseus2000 wrote:
Gold is not fixed by an algorithm to a finite amount. If some new technology emerges that can e.g. get gold from sea water, then gold could be debased.



Bitcoin supply might be fixed but the number of cryptocurrencies isn't.

BoE

In that case presumably investors will move to those of which they consider the most valuable.

Isn't that why they've selected BTC, so far that is?

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 9:05 pm
by Urbandreamer
Bubblesofearth wrote:Bitcoin supply might be fixed but the number of cryptocurrencies isn't.

BoE


I see that MCB has responded, however possibly it's worth pointing out that nobody is required to use or accept bitcoin or other cryptocurrencies.
This is not the case with state fiat currencies, of which there do seem to be quite a few.

Those that choose to use cryptocurrencies can choose which they want to use. Or even to not use them.

Over on the crypto-bubble thread I mentioned Heyak's Denationalisation of money.
Always worth considering.
https://en.wikipedia.org/wiki/The_Denat ... n_of_Money

.... instead of a national government issuing a specific currency, use of which is imposed on all members of its economy by force...

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 10:51 pm
by absolutezero
If 'they' really wanted to shut Bitcoin etc down overnight then it's very easy.
All they need to do is close the exchanges like Coinbase etc. Legislate it out of existence. A 500% transaction tax. Whatever.
No new 'fiat'* money would be allowed in to the crypto systems and all money in there would be trapped.
The systems could still be used as a way of transferring money around but it couldn't get into general circulation.

*Anyone who calls proper currencies 'fiat' is usually a crank.

Re: Investment in crypto currencies and the role of central banks

Posted: March 2nd, 2021, 11:11 pm
by Lootman
absolutezero wrote:If 'they' really wanted to shut Bitcoin etc down overnight then it's very easy. All they need to do is close the exchanges like Coinbase etc. Legislate it out of existence. A 500% transaction tax. Whatever.

But surely that would only work if every nation on the planet enacted that. Otherwise the exchanges and activities would simply move to nations that had not attempted such suppression.

The point being that the crypto market doesn't really exist anywhere. It is in the ether. So attempts to regulate or tax it might simply drive it elsewhere, and then it definitely cannot be controlled. So better to leave it here and at least have some ability to monitor it.

It has in the past been illegal to own or sell gold, but that never really stopped anyone. People want these kind of assets precisely because governments always try and micromanage everything.