Bitcoin price vs Global Aggregate Negative Yielding Sovereign Debt
Interesting discussion between Neuron and Mike about investing in Bitcoin as an asset, future use-cases and what will keep miners securing the network once the last Bitcoin has been minted on our group chat, here is a summary.
Would you put your everything into something which can go Down and up ridiculously high and low?
Everything? of course not. It was never a good idea, but in modern world putting everything into one asset class is a stupid thing.
So what do you store value in? Cash that inflates 2% per year (officially, it’s actually higher than that)? Real estate that’s pumping right now thanks to QE and how tax codes work? Maybe stocks of Wall St companies that are loading up on cheap debt (thanks to QE in USA and EU and China’s weird debt flexes) and buying back their own stock from the market so it looks like everything is at least keeping its value?
There is no longer any safe asset since 1970s. Wake up and open your eyes.
Even if you think Bitcoin is useless, speculative shit invented by scammers and used by drug lords, if you want to be financially savvy you should allocate at least 1% of your savings into crypto.
Sure, crypto is volatile, but it is low-correlated with other financial instruments. And lately it is anti-correlated with amount of negative yielding government debt (Negative yielding = govt says “yo so shit is about to go down so if you give us $160 today we will give you $100 back in 100 years”, and there is plenty of investors buying that shit, to the tune of tens of billions of USD).
Due to these reasons adding the “risky bitcoin” to your portfolio actually REDUCES risk of your portfolio.
How it’s gonna work after 21 million mined?
Supposedly miners should get enough from fees. That’s why blockstream is keeping block size small - trying to make sure that fees stay high and miners want to keep mining.
Hard to say how it’s going to work out long-term though. Most likely BTC is seeing its last years as an asset that is available to every human on Earth. Soon (soon for civilization, not a single human life) I think BTC will become a global reserve asset for governments, corporations, funds and individuals. And they will use lightning to transact with each other (e.g. China gives out a loan of 100 BTC to Indonesia to build a new airport).
Actual human daily transactions do require cheap on-chain transactions. Lightning is great if you can easily open and close payment channels. On BTC I currently struggle to think how it will economically work out long term. I think ETH, ETC and ADA are better positioned to win the crypto wars.
If Bitcoin price is decided by supply and demand, why does it go up or down so much within minutes. Price of stocks does not fall this much within minutes?
Look at Chinese stock markets, looks a lot like crypto and in USA there are actually very few independent traders - most is traded by just a handful of large funds, and there is way more capital there (e.g. Apple has more cash in a bank account than crypto’s market cap). Just like it’s easier for a small coin to pump 100% than for BTC, same math applies to stocks. More capital = less intraday volatility.
And even in USA stocks can be wild, just look at what’s going on with $BYND or look at this chart (look at 1-2 years of trading) - looks almost like an ERC20 https://finance.yahoo.com/quote/SNAP/chart.