MicroStrategy Adopts Bitcoin as Primary Treasury Reserve Asset(ir.microstrategy.com) |
MicroStrategy Adopts Bitcoin as Primary Treasury Reserve Asset(ir.microstrategy.com) |
Wow.
So I can imagine that this will turn into a big profit for them but the arguments are hilariously weak.
Granted they will get a lot of PR out of it.
I don't know. I remember a few years ago when people on reddit would get excited when some cafe in Bratislava or wherever started accepting bitcoin, or when Steam started accepting bitcoin. Now cryptocurrencies seem... boring. I see lots of people talking about "store of value", but actual use of bitcoin for what it was intended seems to be decreasing. And now people who want to gamble can just buy NKLA or SPCE or options on zero-fee brokers, which weren't a thing when bitcoin hit all-time high.
This is just my impression as an outsider, of course.
Here's a primer from HN's very own patio11, from back in late 2019 when they had only printed $4B: https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/
They sure write like they do. But they act like gamblers hoping for the next big score.
I assume it's "Our advisors can push mutual funds, they will be able to push trusts with the same fee structures and incentives to sell that hold an asset that has 10Xed before."
That alone seems like enough.
Let's say you don't believe BitCoin. If you have worked in finance, or had a financial advisor come to your company, you probably believe in their ability to sell.
People still think financial "advisors" (Series 7/63, CFP) know something / have interests besides pushing mutual funds.
Short of a crystal ball I don’t see how
Unfortunately, my experience working with MSTR has been that the expectation of competence isn't really born out in actual competence at a technical level.
I suppose you can only hope that at a management level it's a different story. They certainly seem to sell their product very well.
We don't see shopping cart inflation because it's countered by the technological cheapening of the production. And the key fact that new money is not being given to people buying groceries.
People avoid holding money by buying stocks and housing, not because of natural P/E ratio but forced by the continuously devaluation of cash.
What "money" do you expect businesses want to hold in this situation?
The entire purpose of QE and similar schemes is to reduce the value of the fiat currency relative to other things, in order to encourage people to swap their dollars for things (increasing consumption) or financial assets (increasing investment, at least indirectly).
The problem is that the investment doesn't seem to be happening, partly because of expectations of a future crash. By this point I suspect this has more to do with real-world factors (climate change is a serious obstacle to long-term economic growth) than government policy.
If we look back half a century in the US, the commodity held was gold. Or rather, federal reserve notes redeemable for gold.
Gold makes a good currency as it has the properties of a commodity that makes a good currency. It is durable, divisible, uniform, and portable.
Federal reserve notes a half century ago were even more portable. You could mark the bills or write down serial numbers and make the bills difficult to use if stolen. If torn, the Federal Reserve would issue you new bills.
Money or currency historically has been a commodity that had the above mentioned properties (durable, divisible, uniform, portable), so that it is convenient for trade. Really any commodity could be held to store value, although some store value worse than others (perishable food is not exactly durable).
When you get into very large sums which you may want to transfer around the world in a split second, you run into more of a problem of course.
Look at Compound Finance - $2 billion+ in assets deposited and over $1 billion borrowed https://compound.finance/markets
This can't be stopped - and there is no government regulating it!
Does anyone have the wallet address? or pinpoint it?
MicroStrategy moves its cash into Bitcoin; shares up 9%
Oh go home 2020, you’re drunk.
Its block reward, which constitutes a subsidy for its security budget, halves every four years.
Unless the halving of the security subsidy is made up for by additional transaction fees, Bitcoin's security decreases.
Given that Bitcoin blocks are full - with only a little space left for further optimizations via SegWit adoption and Schnorr signatures - transaction volumes cannot appreciably increase, and thus the only mechanism by which total transaction fees can increase is by the average fee per transaction increasing.
I can't see any way for transaction fees to ever reach the fantastical sums (e.g. $2,000 per transaction) needed to keep Bitcoin secure when the block subsidy becomes insignificant.
This wasn't the case back in 2015 when Bitcoin still had the hope of undergoing a hard fork to raise the protocol limit on its block size, which would have enabled it to increase the volume of transactions it processes by orders of magnitude. But now its governance structure is firmly captured by anti-hard-fork parties, so I see no long term viability in its protocol.
I'm a believer on cryptocurrencies, but bitcoin being a first generation project, still has several pitfalls, such as transaction throughput, slowly trying to be addressed by other projects. What happens when people start flocking to ethereum, cardano, eos, or something else? Will it retain demand?
Maybe it will, considering that gold is almost as worthless, and it's still used as a major hedge against financial turbulence. But it's something to keep in mind.
might be an issue with it's completely unverified supply. Eth might work as currency of sorts but not as an asset to hold.
In a world where the governments can’t support their own currencies, nobody will give a shit about Bitcoin.
“I don’t trust the real hospitals because of medical negligence, better get my amputation done by that guy operating out of his garage just to be safe.”
Nobody has to trust anyone, that's the whole point of bitcoin.
It’s volatility would suggest otherwise. As many others have commented here an in other places, the fact that supply is predictable is not enough, demand is a factor too.
They may be genius Bitcoin traders, but clearly they are no longer Business Intelligence visionaries as they once were. A famous company that now admits it has no future. That's how I see it.
https://www.forbes.com/sites/michaeldelcastillo/2020/08/06/v...
Keep in mind that 250 mil, and 250 mil times 20 is a drop in the $214.4 billion bitcoin market cap and doesn't move anything. Just a sign of mild interest.
Furthermore, Grayscale just ran a crypto ad campaign on large TV networks such as Fox.
The daily trade volume is mostly people passing bitcoin to each other. If a whale like MicroStrategy is actually taking them out of an exchange, things will dry up quickly.
My guess the bitcoins were bought over a period of at least couple weeks, and probably using OTC trades as well.
So these orders are not hitting "the public market", it's coming from Grayscale inventory (not even that, since the companies aren't buying directly and taking custody).
Also, good point on BTC supply being less than the 21 mil cap / whatever was mined already.
https://news.ycombinator.com/item?id=18640755
Interesting to re-read this (and other) threads now that BTC is one of the best performing asset classes in 2020...
On the other hand, a treasurer that holds Euros because they have reasons to think the Euro will appreciate in value in the future is simply speculating. And using the company's balance sheet to do so.
This is looking like a bet. A well-reasoned bet, but a bet nonetheless.
The USD I think buys 15% less EUR than it did pre-COVID. Similar results even if you compare it to a basket of world currencies.
One US dollar can not fluctuate in value relative to itself. The "exchange rate" between USD and BitCoin fluctuates continuously.
USD is legal tender. You can buy a cup of coffee anywhere with USD. Not so with BitCoin.
USD does not have a bid/offer spread for transactions. BitCoin trades as two sided market.
USD can be deposited at bank, be protected by FDIC deposit insurance, and can earn an agreed rate of interest. Not so with BitCoin.
...stopping, though this could become a long list
BitCoin is an asset that can be bought or sold in exchange for USD. So is gold (as already noted), oil, company stock, lawn chairs, tracts of land, etc. A dollar-denominated asset is not the same as its market value in dollars.
Plus, Bitcoin is a valuable asset (for many people) and the reason it keeps its value is that it's safe. Energy is expended to keep it safe. That is a free market choice, and you can disagree with it, but many choose to pay for energy to protect Bitcoin.
The free market needs to be controlled when it destroys the environment. The people needs to be responsible for their actions.
Hard-forking to remove the block size limit would have profound consequences for the decentralized nature of bitcoin - arguably its most important characteristic.
The minimum transaction size is 166 bytes.
This gives us maximum 25266 transactions/block.
The current block reward is 6.25 https://blockchair.com/tools/halving-countdown
This is worth about $72,000 USD https://duckduckgo.com/?q=6.250+BTC+to+usd&t=canonical&ia=cu...
This means that, to match current security without block rewards, transaction fees would need to rise by at least $2.84/transaction.
I don't see any reasonable case for the prediction that Bitcoin's average transaction fee will reach those extreme highs.
>Hard-forking to remove the block size limit would have profound consequences for the decentralized nature of bitcoin - arguably its most important characteristic.
I didn't say "remove". I said "raise".
What you’re talking about is the money supply (I guess the Bitcoin equivalent of M2) which in Bitcoin is for some reason increased at a hard coded (decreasing) rate.
Sounds like wall street
I would agree that dollars have little downside but the purchasing power degradation of dollars feels like a irremediable tax on savings. And hard money like gold, silver, Bitcoin or Ethereum a quite decent hedge.
Two of these things are not like the others.
Even if you have no confidence in the dollar, doesn't mean Bitcoin or crypto currencies are a good alternative.
>And hard money like gold, silver, Bitcoin or Ethereum a quite decent hedge.
That is a strong statement. There is no evidence that crypto currencies are a 'decent hedge' for anything.
Needing to roughly double the status quo transaction fees to make up for lack of the block reward in order to provide equivalent security, doesn't seem ridiculous to me at all. And this is the worst case scenario (i.e. the reward will go from 6.25 to 0 slowly, but it can't go negative).
The average block size right now is 1.2 MB (the 0.2 MB because of SegWit). Assuming SegWit adoption increases to 100%, we get 1.6 MB.
The average fee on a transaction would need to rise $7.47 to match the post-halving's new, lower, security budget.
The average value of a transaction would need to double to make an average transaction fee of $14 (the current average fee of $6.50 + an increase of $7.50 to cover the loss of the security subsidy) economical.
But the doubling of value flows would make the current $security budget less adequate, so even less suitable for reserve currency usage.
And if the price increases, as Bitcoin investors hope it will, value flows would increase further, requiring an even larger security budget and average transaction fee.
At some point's further utilization and appreciation will be arrested by the diseconomies of scale caused by rising fees.
My calculation was looking at a lower bound for needed transaction cost.
Do you trust whoever happens to own xf2.org more than you trust a central bank? Do you trust the domain name registrar more than you trust a central bank? Why?
You decide what code you run, not developers well, sure you can run whatever code you like on your machine...the Bitcoin devs get to decide whether your software counts as a Bitcoin client or not. They are in a position of power and you must trust them.
Why not? At scale with current block sizes Bitcoin would probably be settling payments of institutional-level transfers, state money management, and 2nd-layer networks like Lightning. Individual transaction fees would be high but they would represent aggregated fees for millions of off-blockchain transactions.
The fees wouldn't likely be paid by everyday users at that point.
Visa does something like $11 trillion in volume per year. Why does anybody use that if visa takes 1-2%?
1% of 11 trillion is 110 billion. With that amount of fee revenue you'd be able to secure the Bitcoin network 12,000 times over.
So Bitcoin's security is able to grow by 1,000x and still cut prices relative to current popular providers by 12x.
That's cheap, not expensive, and that will lead to demand over time.
The federal government cannot go bankrupt. In theory the government can default on debts, but in reality there is never a situation where the government would be forced to do so (it is always due to political dysfunction) -- as others have stated the US government is able to issue more money whenever it needs to do so, and thus can always satisfy any monetary obligations (though there may be negative consequences to doing so). Even if the government does default on its debts, it would not truly be bankrupt, because bankruptcy means that some higher authority has stepped in to decide what will be repaid and how, but the federal government is the highest authority. Likewise for the states, which cannot issue money but which cannot actually go bankrupt (as they have the authority to decide what obligations to meet or to fail to meet), something which has become relevant due to the enormous cost of dealing with COVID.
I think creating political/fiscal crises is part of the point.
In contrast to Visa, which can process 3,000 transactions per second, Bitcoin can only process 3 per second.
Limited, even during peak demand, to 1/1000ths of Visa's average throughput, and 1/10,000ths of Visa's peak usage throughput, there is also no way Bitcoin can match Visa's $11 trillion volume.
2nd layers for Bitcoin can scale to many thousands of transactions per second.
Are you sure they threatened to default of _Treasury_ instruments?
And while the mainstream view is that Ryan/Boehner never really intended to go through with it because they knew the consequences, a sizable contingent of congresspeople & conservative pundits wanted to go through with it just to show that "they meant business".
https://en.wikipedia.org/wiki/United_States_debt-ceiling_cri...
My perspective, when people tell you what they'll do, believe them. It would be economic equivalent to setting off a nuclear bomb in the middle of the country, but :shrug:, it would own the libs.
If I own the mechanism of root node discovery, I can mount an effective Sybil attack against a new network participant.
The history of Bitcoin is full of hard and soft forks and changes to the rules. That’s why your original Bitcoin client wouldn’t even let you join the Bitcoin network now. The people in control of the network are in a position of immense power with minimal oversight. So on what basis should I trust them with my life savings? What recourse do I have if they ruin my life?
You can run whatever client you want.
> If I own the mechanism of root node discovery, I can mount an effective Sybil attack against a new network participant.
But you wouldn't be able to replicate a chain of blocks with the same order of magnitude of work behind them. And then, even if you could, all you'd be able to do is change history, with the depth of that history dependent upon how much mining power you had available. You wouldn't be able to spend other people's money or give yourself more.
you wouldn’t be able to replicate a chain of blocks with the same order of magnitude of work behind them...I grant you that, but does it matter? If the client can’t find the real network, how would they know what to expect? You and I would know, because we have a copy of (I hope) the real Bitcoin blockchain...but how do you acquire that knowledge without trusting an entity first?
all you’d be able to do is change history...wouldn’t that mean you could lay claim to whatever you wanted in the eyes of this poor client? Or just harness their hashing power.
It is easy to forget that the Fed's mission is to stabilize the value of money, not to conform to some concept of fairness. I would also point out that instability in the value of money disproportionately impacts the poor, who have the least savings available to deal with price shocks (if you are living paycheck to paycheck, then the price of bread suddenly doubling will leave you eating half as much bread).
The Fed's activity is what drives the government's ability to pay it's contractors.
If you want to increase the money supply, print some money and give it out.
If you want to fund highway construction, figure out how much it will cost and then raise that amount of tax revenue to pay the builders.
Without sarcasm, given the latest purchases of assets beyond Treasuries and MBS, why do you think the Federal Reserve has purchased assets at market rates?
Congress decides how the money is distributed when they're spending it.
Don't think you ever would? Opinions can change rapidly when you're struggling to buy food.The article's thesis isn't really that the utility of Bitcoin will increase, it's that the utility of the dollar (its primary competition) will decrease. If your dollars will be worth half tomorrow, it's a no-brainer to get rid of them ASAP and put your money in a currency that isn't being printed rapidly.
In the states, using crypto is a taxable event. Until that is changed, they can only be stores of value, not currency, as I have no interest in recording every transaction with the IRS. I don't see a differentiation within cryptos coming from USG, so the crypto ecosystem can only be one or the other?
Pension funds and other financial institutions. These were either locked out or didn't believe in bitcoin. If you were a Pension fund now you're probably keeping an eye on the space to help your returns.
Last bubble they didn't, this time, we will see.
Just to add here, the transaction fees you have to pay are highly variable, see chart fee chart for the last 30 days[1]. As of this posting the market clearing rate for a typical transaction is about 0.000325 BTC[2], or around $3.73. However, a few hours ago it was as low as 0.000005 BTC for a typical transaction, or around ($0.058).
[1] https://i.imgur.com/FYpGpES.png
[2] a random google search says a typical bitcoin transaction 250 bytes. this is a different unit than the one in the linked chart, which uses satoshis (0.00000001 BTC) per byte.
https://coinmetrics.io/charts/#assets=btc,eth_left=FeeTotUSD...
Look at the Ethereum space. That's where most of the action is these days. DeFi (Decentralized Finance) is the current hype. The ETH2 phase 0 is projected to go live later this year (this time for real :-). 60% of Tether is an ERC20 token now. etc.
Oh, and if you are interested in drama and have missed it, look up the Quadriga story. That story is so unbelievable whacky, no screen writer would have been able to come up with it.
Ethereum does have a lot of really interesting things going on that are super cool. But I wouldn't take this to mean that Bitcoin isn't developing or that it has somehow become stodgy or less relevant.
Bitcoin's developments are more the field of payments, decentralization, and privacy. These parts are not flashy, but are absolutely fundamental for its usability as money and store-of-value in the future.
The biggest differentiation though is that Bitcoin has an explicit inflation rate while Ethereum actually has no specific monetary policy at all. It is up to the devs and its scarcity could be undermined.
They're both extremely interesting for different reasons, but for those of us who got into crypto through economic reasoning about the gold standard, scarcity, government control of the money supply, etc. - the things many have seen for a really long time as the problems at hand - Bitcoin is by far more directly addressing them.
It's "boringness" at the moment means these objectives and economic motivations are becoming more agreeable.
No. Look at Bitcoin first.
If Bitcoin fails altcoins will most certainly fail too. There is a reason why Bitcoin does not change that much, it has to be safe and trusted for storing value. It is not a "move fast and break things" project.
> Look at the Ethereum space. That's where most of the action is these days. DeFi (Decentralized Finance) is the current hype.
Bitcoin is DeFi (Decentralized Finance), if anything.
"Finance" is much more than just payments or store of value. Bitcoin is way behind Ethereum in that regard.
Of course, that doesn't matter if you don't think that decentralized finance makes sense to have.
Proof-of-stake replaces this massive electricity waste with game theory. Every validator must put up a deposit (in ETH) to participate. If it cheats, it loses that deposit. The damage it can do to the network is limited to less than the deposit. Therefore, it's never profitable to cheat - and so they won't, or if they do, they will go bankrupt, remove themselves from the network, and self-limit the problem. And transaction validation can now be split among thousands of nodes (instead of having those thousands of nodes all validate the same PoW), which means the network can scale to tens or hundreds of thousands of transactions per second.
I'm pretty excited about Ethereum precisely because they're willing to experiment and rethink everything about their approach. I do suspect that soon after ETH2 is launched we will see a high-profile hack that steals everyone's ETH and requires a complete rollback of the network.
I'd see the problem if it worked how I've sometimes seen it described, where rich people and banks are just getting free gifts of cash, but that's not accurate.
Congress could give the Fed the power to, rather than just buy bonds (or whatever it is they do) introduce money to the economy simply by giving everyone money.
I understand that it is not exactly true that the rich are getting free money for nothing. But the whole reason we're talking about this here is that someone pointed out that all the new money supply from the Fed is finding its way straight to people and corporations that don't have anything better to do with it than buy assets, the prices of which continue to grow as a result, even while the GDP rate is plummeting.
Lastly, I'm totally open to the idea that someone will come along and explain to me why my idea for how the Fed should give everyone money is just not workable. If that happens, I'll be happy to have learned something useful. But it's definitely not clear to me, a priori, why it wouldn't work if it wouldn't.
Congress has this power, and can always use it. The fed doesn't have this power, and that's because a bunch of unelected bankers aren't supposed to be making political decisions about wealth distribution.
Read up on the difference between fiscal stimulus and monetary stimulus...it's impossible to have an intelligent discussion on this subject without knowing how those things differ.
The job of financing ventures should be done by private parties and the banking industry, not by government, but since they are too preoccupied chasing assets with cheap money they can't be bothered to.
If it gets to the point where people will be calling on their Bitcoin reserves, the IRS will no longer be a going concern, at least one that anyone will be paying attention to. It's insurance against the collapse of governments, and so any government regulation other than ones affecting its storage & ownership aren't relevant.
[1] https://www.bloomberg.com/news/articles/2020-07-06/for-zimba...
Monetary stimulus is when the central bank increases the supply of money in the economy to control the value of a unit of currency as measured relative to units of goods and services, which in theory can have similar effects on people's spending behavior.
Either can be done with any degree of fairness or unfairness. And neither necessarily has to be done by the mechanisms through which the world's governments have historically tended to do them.
I agree that I don't want a few unelected central bank officials making decisions about wealth distribution. That doesn't mean that congress can't specify a different mechanism for them to introduce money into the economy.
For things like stocks, if the increased value is driven by inflation, you get less for your money. So it takes more money to store the same amount of value there.
Isn't that basically what a REIT is? It's also possible to enter into joint ownership of a property. Roommates are also kind of like acquiring a fraction of a house.
Unless you rent, in which case you are acquiring a fraction of the liability without acquiring any house.
As for taxes being "precise," that is an interesting claim. The US tax code is not even remotely precise, in fact it is hard to know what you are supposed to pay in taxes for the first paycheck of the year (your bracket could change unexpectedly). Our income taxes are progressive, but the wealthiest Americans pay little in income tax because their "true" income comes from their investments. We have the AMT which is meant to take care of that, but the AMT has not been properly adjusted for inflation and so a bunch of middle class families are stuck paying it, even though those families also pay income tax at a higher bracket than the wealthiest households that AMT was supposed to target. Then there are the countless things a person can get credits for -- children, particular kinds of business income, charitable giving, state and local taxes, etc. -- that result in people with the same income level paying wildly different taxes from their peers. Investment income is taxed, but losses can be carried forward, and some investments are taxed in a totally different way, some can also be carried backward (see Section 1256), etc.
On some level it is "precise," but in practice it is a mess that gets more difficult to work the more "established" you are in life (bought/sold a house? got married? have a new child in your life? finally made enough to contribute to a retirement account? get ready to do a bunch of paperwork to figure out what you are supposed to pay).
As for what the Fed is supposed to do, in practice, the Fed does much more than simply control the amount of money. The responsibility of the Fed is to control monetary policy and to maintain the health of the economy by doing so. Which is why they have such an important role, right now, in preventing the complete collapse of the US economy.
