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I'm waiting patiently for the whole Tether printing scheme to fall and crush to finally purchase Bitcoin / Ether. However I'm not viewing them as inflation hedg

I'm waiting patiently for the whole Tether printing scheme to fall and crush to finally purchase Bitcoin / Ether. However I'm not viewing them as inflation hedges so long as Bitfinex / etc. are allowed to continue with their obvious money printing scheme. When most crypto trading volume is traded at trustworthy exchanges which actually hold dollars as much as they say they do, I'll trust $/BTC to be a fair market. It's dumb escaping from Powell's printing machine straight into Bitfinex tether printing machine. BTC isn't the hedge people think it is so long as it's traded against fictional dollars. Tether's volume exceeds Bitcoin, so that's the scale of fictional dollars supporting Bitcoin right now.

PragmaticPulp 6y ago
Cryptocurrency isn’t the only way to escape USD inflation. Investors have been investing to avoid inflation long before Bitcoin was invented. Investing in virtually any asset other than cash will, almost by definition, shield you from inflation. Inflation is an increase in asset prices, resulted in reduced buying power. You only need to invest in assets (stocks for example) and minimize holdings in cash if your goal is simply to avoid losing buying power of your cash. Cryptocurrency currently functions as a speculative instrument, not a stable store of value. Cryptocurrency in general is only deflationary if we pretend only a single cryptocurrency exists and ignore all of the increasingly brazen financial instruments offered by exchanges. As it stands, the ever expanding list of crypto currencies, NFTs, crypto lending products, and new crypto currencies represents a general inflation in the cryptocurrency space.
- api 6y ago
  > Investing in virtually any asset other than cash will, almost by definition, shield you from inflation. ... which is why virtually every nation on Earth adopted some kind of inflationary fiat currency. It pushes money to be invested, not held. Wealth is a verb, not a noun.
  - PragmaticPulp 6y ago
    The world would certainly be a strange and sad place if the best thing for everyone to do with their wealth was hoard it in currency. Not holding wealth in cash has been investing 101 material long before cryptocurrency. It is fascinating how crypto proponents took over that narrative to imply that crypto was the only investment that could escape inflation. They’ve also spread an idea that money printing is the singular source of inflation, which isn’t true at all. Bitcoin, for example, is an inflating asset due to hype-driven demand. It hasn’t spiked upward 100% of the time because USD became 50% less valuable overnight
    - CarelessExpert 6y ago
      > They’ve also spread an idea that money printing is the singular source of inflation, which isn’t true at all. Bitcoin, for example, is an inflating asset due to hype-driven demand. Uh, I'm very much of the opinion that your average BTC fan isn't exactly educated about macroeconomics, but this sentence makes absolutely no sense. Inflation isn't a thing that happens to a currency, it's a thing that happens to an economy. It's a systemic increase in prices across a basket of assets that demonstrates the devaluation of a currency, as a single unit of that currency effectively buys less. Bitcoin, if it had been a usable currency over the last decade, is very clearly deflationary, as its rise in value as a currency relative to USD has dramatically outpaced the rise in the price of goods and services as denominated in USD, meaning that had prices been denominated in BTC, they would have dropped.
      - jcranmer 6y ago
        Inflation can happen to assets, and PragmaticPulp is analyzing Bitcoin as an asset, not a currency. Given that even when you buy stuff with BTC, you're buying a product or service denominated in USD, their analysis is generally more correct than arguing that Bitcoin should be analyzed as a currency.
        CarelessExpert 6y ago
        > Inflation can happen to assets, and PragmaticPulp is analyzing Bitcoin as an asset, not a currency. Actually PragmaticPulp was doing both. In the comment I quoted, they stated: > They’ve also spread an idea that money printing is the singular source of inflation, which isn’t true at all. This is specifically referring to currency inflation. They then went on to say: > Bitcoin, for example, is an inflating asset due to hype-driven demand. As you say, this is asset inflation. These should not be compared like this, which is why I noted that "this sentence makes absolutely no sense." I stand by that statement.
- mumblemumble 6y ago
  Even if we assume only Bitcoin, it's not currently expected to stop printing money until (assuming Ray Kurzweil wasn't right all along) long after we're all dead. The Bitcoin inflation story is more political than simply economic. Right now, it's not really possible for it to be narrowly about whether printing money is OK. But one could easily mount an argument about whether humans should be able to twiddle with the money printing policy.
  - PragmaticPulp 6y ago
    It is supremely ironic that we’re supposed to believe that the best way to escape money printing is to buy a cryptocurrency that was invented out of thin air, which is continuously mined (during most of our lifetimes) out of thin air by doing useless calculations. Or even worse, a basket of multiple crypto currencies, where the number of available crypto currencies and crypto assets grows larger every day.
    - dasudasu 6y ago
      It’s not really surprising when anyone pushing crypto to you also happen to hold a lot of crypto. It’s self-serving advice 100% of the time. It’s pretty much a staple also to call every other crypto you don’t hold a fraud trying to steal the spotlight.
      - vidarh 6y ago
        While it may well be self-serving, this is also a near tautological statement, as you'd expect someone who pushes crypto to also hold a lot of crypto if they genuinely believe in it - whether for sound reasons or not. As such the fact they're holding crypto tells us nothing about whether they're pushing it because they're holding it or pushing it because they believe in it.
    - silexia 6y ago
      I saw a great comment earlier, "Buying bitcoin to hedge against inflation is like buying lotto tickets to hedge against Apple stock declines."
- bronzeage 6y ago
  Stocks might fall in inflationary circumstances, depending on many things such as how much of the companies revenue can inflate - and most times, the answer is worse than inflation. Bonds might not give you a yield exceeding the inflation, especially in inflation created for the sole purpose of buoying bonds. Speculative inflation hedges might also act erratically, like bitcoin and gold, getting ahead of themselves and the inflation sometimes.
- eigenvalue 6y ago
  It’s absolutely not true that investing in any assets besides cash will shield you from inflation. Inflation impacts companies very differently, and you want a preservation of real earnings power taking into account the need to replace plant and equipment over time. The best inflation protection would come from a company with a pure revenue royalty with fixed expenses. The worst would be a company with bad pricing power and lots of commodity inputs.
  - redblacktree 6y ago
    Is there an easy way to determine which companies are which? Do I need to be well-studied in business, or is there a chart or key statistic I can look at to tell one from the other?
    - eigenvalue 6y ago
      This article gives a lot of good criteria for finding companies that should thrive in an inflationary environment: https://horizonkinetics.com/app/uploads/Q1-2020-CVALUE-Review_FINAL.pdf https://horizonkinetics.com/app/uploads/Q1-2020-CVALUE-Revie...
  - deanmoriarty 6y ago
    What’s your recommendation for least-worse inflation hedge?
- orasis 6y ago
  Yes! Value producing assets produce value regardless of the nominal price of that value. It’s insane that people don’t understand this.
- devoutsalsa 6y ago
  Stocks prices get negatively impacted by rising interest rates. With interest rates at ~0%, there's little money to be made in bonds, savings accounts, or anything that pays interest income, so people put money into stocks w/ the hope the stocks will go up. When interest rates go up to fight inflation, there's more incentive to put money into bond markets, which means there's not as much money going into stocks, which means stock prices don't go up as much. Housing prices also tend to go down as interests go up, as rising borrowing costs mean fewer funds are available for buying a home.
  - deanmoriarty 6y ago
    What’s your recommendation for least-worse inflation hedge?
    - BenoitEssiambre 6y ago
      Buy all the non perishables, non obsoletables you're going to need for the next decade. Buy them in discounted bulk for and extra return. Bonus: capital gains tax free!
      - dec0dedab0de 6y ago
        So invest in toilet paper?
        gus_massa 6y ago
        Tuna cans. The $/volume ratio of toilet paper is horrible, and in case of a real big emergency the other end is more important.
        kijin 6y ago
        Spam has more calories and lasts just as long. If you want carbs as well, add canned fruits and vegetables. Any kind of dry bulk food will also work as long as you take proper measures to keep mold and insects out. Bonus points if you can also keep oxygen out. (Grains often contain a surprisingly large amount of lipids that can go rancid.) In the kind of emergency where you'd be seriously worried about the "other end", you could very well exchange a bag of rice or sugar for a handgun or a bottle of motor oil.
- ROARosen 6y ago
  While your point is correct, I live in NY and true, it's heartening to see that someone is looking out for obvs fraud. But it's really annoying that I can't (straightforwardly) open an account at most crypto exchanges, and I'm banned from investing according to my choosing and to my knowledge. If I decide to hedge inflation with some obscure or even mainstream "coin" that should be my choice why should gov be able to deny that right?
  - easymodex 6y ago
    So much for freedom right?
- BenoitEssiambre 6y ago
  On top of that, any asset for which demand comes mostly from being an "inflation hedge" is a bad inflation hedge since prices will rise when people want more inflation hedging and drop when they want less hedging, meaning the majority of people inflation hedging will buy high and sell low. Gold has had that dynamic for a long time, which is one reason it is not considered a good investment most of the time. Buy assets that are productive and you will be much less subject to that. Real inflation hedges look like stockpiles of goods, inventory or production capacity thereof.
  - kipchak 6y ago
    Could that make such inflation hedges a good pre-inflation hedge? For example buying gold with the expectation that people will soon want more hedging than they do now, though this relies on getting in earlier than others.
    - pas 6y ago
      This is how derivatives trading (and speculation, and investing itself ultimately) works. It's all about mentalizing how others will trade. The big question is to pick the optimal asset for hedging.
    - dkersten 6y ago
      So, just price speculation then?
    - vkou 6y ago
      Yes, but at that point, you should just borrow money, and do something useful with it, because being in debt is a simple, straightforward inflation hedge.
  - boredpandas777 6y ago
    This proven logic is drowned by people's instinct to follow the herd... and buy Bitcoin.
- antonios 6y ago
  Cryptocurrency "in general" obviously isn't deflationary, given that one can create a new cryptocurrency with a simple code fork. But Bitcoin is, no?
  - hiq 6y ago
    As commenters hinted at in a previous thread, the price is a measure of the combination of demand and supply. The mechanics of Bitcoin only address the supply side. OP hinted at the demand side: if a new cryptocurrency were to become more popular, then Bitcoin could lose value.
  - throwaway4good 6y ago
    Which Bitcoin?
- yabudemada 6y ago
  This is why I think the proper crypto currencies are backed by another functional use instead of "just coins." (e.g. Ethereum vs. Bitcoin)—one is a useful Turing-complete machine; the other only exists to send coins. Bitcoin will probably always outshine the other "just coins" because it was the first. Why get another coin if this one works fine for monetary transactions? Similarly with the functional ones: Ethereum will probably always outshine the other "Global Turing Machines" because it was the first. We don't really need another one—assuming it can adapt to changes in efficiency with hard-forks as needed. The rest of them really ought to provide another service underneath to become valuable.
  - ad31mar 6y ago
    > Ethereum will probably always outshine the other "Global Turing Machines" because it was the first. We don't really need another one—assuming it can adapt to changes in efficiency with hard-forks as needed. We didn't need the first one.
- maaaaattttt 6y ago
  I used to say "a house will always have the price of a house" (it has issues of course cough 2008 cough) to illustrate what you're saying here as I never managed to explain it properly like you did.
  - gph 6y ago
    But it also has property taxes and maintenance costs, which will likely be higher than inflation. So it's not a great passive investment unless you expect the value minus costs to gain faster than inflation. Otherwise you gotta live in it or rent it to make back your money, and that's no longer passive.
- RC_ITR 6y ago
  >Inflation is an increase in asset prices Inflation is an an interaction between the supply of any non-dollar "thing" and dollars. Sometimes that means certain assets like equities become more expensive in $, sometimes that means commodities like oil, sometimes it means labor. But to be clear, rising Consumer Goods Inflation (what people most commonly talk about when they mean inflation) can lead to significantly lower asset prices, depending on valuation methodologies.
ssakamoto 6y ago
Both are still printing machines. Dollars are backed by faith in the USA. Is there any difference ? Powell - "We print money digitally. As a central bank, we have the ability to create money." https://www.youtube.com/watch?v=ff6SDsaS7rI https://www.youtube.com/watch?v=ff6SDsaS7rI
- NovemberWhiskey 6y ago
  Sorry, is the question really "what is the difference between the US Government printing dollars and Tether printing dollars?"
- owenmarshall 6y ago
  One has a standing army and a history of successfully deploying it against countries that attempt to disrupt the geopolitical status quo by moving away from the dollar. The other does not.
- heterodoxxed 6y ago
  | Dollars are backed by faith in the USA. Is there any difference ? Jesus lord, yes, absolutely. The weight of the US Empire and all its combined military and economic might versus what... some shell corporations and the whisper of a promise?
  - christiansakai 6y ago
    You have no idea that a lot of people, including high profile analysts forgets this very crucial fact, and refuse to invalidate their analogy. You thought flat Earthers are ignorant enough, surprise surprise. Many people think that money is money. They think money is what makes a nation strong, not products and services. I don't know how even highly educated people missed this part. Money is a side effect of power, not the other way around.
- ncallaway 6y ago
  I mean, if you accept that Bitfinex is printing tether, then the difference would seem to be the fact that Bitfinex is lying about it while the US Government isn't lying about it? The ability of the US Government to create more dollars is a well understood aspect of the financial system. The US Government acknowledges is has the power to print money, and regularly tells us how much it is printing. Bitfinex claims they do not print USDT and that it is backed by USD. For a system that's based largely on trust (for both the USD and USDT), lying is a significant problem.
jkhdigital 6y ago
And what about all the cash-for-difference swaps and futures? BitMEX's XBTUSD swap is basically a synthetic dollar that can only be redeemed for Bitcoin within the walled garden of BitMEX. Tether is like a dollar swap contract that can be moved on-chain and, in theory, can be redeemed for the nominal currency. Of course Tether represents itself as a fully reserved stablecoin, which is likely a total fiction, but in the grand scheme of things I don't think it actually matters much.
rthomas6 6y ago
I've always championed DAI for a stablecoin. I don't know why it's not more popular. https://makerdao.com/en/ https://makerdao.com/en/ Instead of it being (supposedly) backed by a dollar reserve, it's collateralized by ETH and several ERC20 tokens in a smart contract. The smart contract does things to make DAI tend toward $1. It's been out for years and I think it has worked pretty well: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/ It works through collateralized loans.
- nipponese 6y ago
  Super interesting project and tech, but it’s competing with USDC (and similar USD-backed tokens). Adoption will just take longer for DAO-backed stablecoins.
- intotheabyss 6y ago
  DAI is very cool. If you want to really blow your mind, check out RAI: https://stats.reflexer.finance/ https://stats.reflexer.finance/
  - rthomas6 6y ago
    Very interesting. I wonder how stable it will be vs USD over the long run. I am interested in someone making a CPI coin, that tracks some value of a basket of goods instead of another currency. I think that would be sort of the ultimate inflation hedge because ideally the value would not change at all over the long run.
    - notahacker 6y ago
      The real question would be "how". A [crypto]asset backed by another currency is easy in principle: simply hold the currency to back it (and make sure you have some sort of transaction fee to cover your storage costs, and don't lie about it...). Same with a [crypto]asset backed by oil or metals. But CPI goods include many goods which are either perishable or lose value over time, and the composition of actual CPI baskets changes over time so you can't do that. In the absence of that backing you can create a purely synthetic asset that can only track CPI if you've got the ability to withdraw significant quantities from circulation every time the value starts to drop. (That's sort of what central banks do with targeting a fixed non-zero rate of CPI inflation. But they have an economy built on debt so the money supply can contract organically by debts being repaid faster than new debts are issued. This is less troubling for the future of a coin than alternative strategies like having to use VC/company funds to buy back coins, or making a percentage of coins disappear)
safog 6y ago
You'd need to do better than that. How exactly does printing USDT lead to BTC price inflation? I haven't heard anything convincing yet. Most of the vol doesn't come from the BTC USDT pair. Exchanges don't seem to be doing anything shady like manipulating the price upwards by themselves.
- CapmCrackaWaka 6y ago
  The story is that Tether has been printing tethers and buying Bitcoins. However, they haven't released any concrete holdings or submitted to an audit AFAIK, so there's a lot of speculation on how big of a problem this actually is.
  - safog 6y ago
    I don't think there are any claims that Tether the organization itself is doing anything like that. They just print USDT and send it to people who are interested in buying USDT like exchanges. The two problems as I see them are: - Is USDT actually backed 1:1 by USD / cash equivalents as Tether claims? w/o independent audits we have no idea. So technically, if you hold USDT on an exchange and use it to trade alts and evade the taxman, then if this whole thing falls apart your USDT might be worthless. - The owners of Bitfinex and the people who run tether are the same set of people. So theoretically it's possible that + Bitfinex generates artificial demand for USDT somehow + Finds a way to swap actual USD for USDT (customer deposits? 19bn worth of customer deposits? Unlikely) + In turn goes around and buys BTC with that USD for some reason + Does it w/ enough vol that all the arbitrage bots won't be able to arbitrage it away. These are a lot of ifs and I'm just not seeing the incentives here as best case Finex gets stuck with a bunch of BTC they inflated themselves which isn't in their interest. I'm not a finance guru, so I'd love it if someone more informed than me can comment on how someone can pull this off.
    - graeme 6y ago
      The settlement agreement shows that at multiple points Tether was not backed: https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen... I think the best case is tether printed usdt, used it to buy btc, inflated the btc price and is now fully backed by their btc holdings. This works as long as people want btc They were able to do it because people accepted usdt as dollars.
kenneth 6y ago
I have the same doubts you do about Tether's legitimacy, but there's a few conclusions I believe you're jumping to which I think don't quite hold: - Tether's volumes being greater than other crypto-currencies don't have much impact on the legitimacy of other crypto-currencies. The volume is so high because USDT is the other side of most crypto-currency trading pair. Given the liquidity of the market, you can trade almost anything (BTC, ETH, all alts, etc) against USDT without being exposed to any underlying USDT risk. - The market value of crypto-currencies minus any deposit-backed USD coins far exceeds those coins. Tether "printing" coins out of nothing cannot alone explain the market capitalization of cryptocurrencies. - Even if everything alleged were true, it really wouldn't be a drop in the bucket compared to the kind of shenanigans central banks have been pulling for centuries. If the crypto-currency market is illegitimate due to money printing by Tether, then so is the conventional financial system due to quantitive easing by the Federal Reserve and other central banks around the world.
- kaibee 6y ago
  > If the crypto-currency market is illegitimate due to money printing by Tether, then so is the conventional financial system due to quantitive easing by the Federal Reserve and other central banks around the world. The difference is that central banks aren't lying about whether they're printing money or not.
  - ericns 6y ago
    Instead, they control the methodologies that define the value of what they've printed as well as the flows. Differences...Distinctions...are there?
- rglullis 6y ago
  > If the crypto-currency market is illegitimate due to money printing by Tether, then so is the conventional financial system due to quantitive easing by the Federal Reserve and other central banks around the world. IOW, "Meet the new boss, same as the old boss"? No, there should be no moral relativism to get Tether out of the hook. It doesn't matter if they manipulated the market by one or one hundred billion dollars, they are a bad actor in the space that we must get rid of.
FireBeyond 6y ago
As recently as a couple of weeks ago, I've heard people claim that Tether is still "1:1 backed with USD". Oh, and: > Keep in mind that in relationship to tether, $1.5 billion is tiny. It's only 3 days of tether printing. apparently depositing $3.5B a WEEK into some bank (unnamed of course, because Tether won't disclose). While there is a large deal of potential, and some real value in crypto, there's definitely a non-negligible portion of True Believers, the crypto equivalent of Qanon.
- jcranmer 6y ago
  > As recently as a couple of weeks ago For more recent claims, just read the comments on this post in this site.
ketamine__ 6y ago
Bitcoin is going up because young people want to buy Bitcoin. Most young people are trading (i.e. WSB) and not investing in cryptocurrency. That has a lot to do with price fluctuations. Also taxes, vacations, etc are all funded by cashing out.

PragmaticPulp 6y ago

Cryptocurrency isn’t the only way to escape USD inflation. Investors have been investing to avoid inflation long before Bitcoin was invented. Investing in virtually any asset other than cash will, almost by definition, shield you from inflation. Inflation is an increase in asset prices, resulted in reduced buying power. You only need to invest in assets (stocks for example) and minimize holdings in cash if your goal is simply to avoid losing buying power of your cash. Cryptocurrency currently functions as a speculative instrument, not a stable store of value. Cryptocurrency in general is only deflationary if we pretend only a single cryptocurrency exists and ignore all of the increasingly brazen financial instruments offered by exchanges. As it stands, the ever expanding list of crypto currencies, NFTs, crypto lending products, and new crypto currencies represents a general inflation in the cryptocurrency space.

api 6y ago
> Investing in virtually any asset other than cash will, almost by definition, shield you from inflation. ... which is why virtually every nation on Earth adopted some kind of inflationary fiat currency. It pushes money to be invested, not held. Wealth is a verb, not a noun.
- PragmaticPulp 6y ago
  The world would certainly be a strange and sad place if the best thing for everyone to do with their wealth was hoard it in currency. Not holding wealth in cash has been investing 101 material long before cryptocurrency. It is fascinating how crypto proponents took over that narrative to imply that crypto was the only investment that could escape inflation. They’ve also spread an idea that money printing is the singular source of inflation, which isn’t true at all. Bitcoin, for example, is an inflating asset due to hype-driven demand. It hasn’t spiked upward 100% of the time because USD became 50% less valuable overnight
  - CarelessExpert 6y ago
    > They’ve also spread an idea that money printing is the singular source of inflation, which isn’t true at all. Bitcoin, for example, is an inflating asset due to hype-driven demand. Uh, I'm very much of the opinion that your average BTC fan isn't exactly educated about macroeconomics, but this sentence makes absolutely no sense. Inflation isn't a thing that happens to a currency, it's a thing that happens to an economy. It's a systemic increase in prices across a basket of assets that demonstrates the devaluation of a currency, as a single unit of that currency effectively buys less. Bitcoin, if it had been a usable currency over the last decade, is very clearly deflationary, as its rise in value as a currency relative to USD has dramatically outpaced the rise in the price of goods and services as denominated in USD, meaning that had prices been denominated in BTC, they would have dropped.
    - jcranmer 6y ago
      Inflation can happen to assets, and PragmaticPulp is analyzing Bitcoin as an asset, not a currency. Given that even when you buy stuff with BTC, you're buying a product or service denominated in USD, their analysis is generally more correct than arguing that Bitcoin should be analyzed as a currency.
      - CarelessExpert 6y ago
        > Inflation can happen to assets, and PragmaticPulp is analyzing Bitcoin as an asset, not a currency. Actually PragmaticPulp was doing both. In the comment I quoted, they stated: > They’ve also spread an idea that money printing is the singular source of inflation, which isn’t true at all. This is specifically referring to currency inflation. They then went on to say: > Bitcoin, for example, is an inflating asset due to hype-driven demand. As you say, this is asset inflation. These should not be compared like this, which is why I noted that "this sentence makes absolutely no sense." I stand by that statement.
mumblemumble 6y ago
Even if we assume only Bitcoin, it's not currently expected to stop printing money until (assuming Ray Kurzweil wasn't right all along) long after we're all dead. The Bitcoin inflation story is more political than simply economic. Right now, it's not really possible for it to be narrowly about whether printing money is OK. But one could easily mount an argument about whether humans should be able to twiddle with the money printing policy.
- PragmaticPulp 6y ago
  It is supremely ironic that we’re supposed to believe that the best way to escape money printing is to buy a cryptocurrency that was invented out of thin air, which is continuously mined (during most of our lifetimes) out of thin air by doing useless calculations. Or even worse, a basket of multiple crypto currencies, where the number of available crypto currencies and crypto assets grows larger every day.
  - dasudasu 6y ago
    It’s not really surprising when anyone pushing crypto to you also happen to hold a lot of crypto. It’s self-serving advice 100% of the time. It’s pretty much a staple also to call every other crypto you don’t hold a fraud trying to steal the spotlight.
    - vidarh 6y ago
      While it may well be self-serving, this is also a near tautological statement, as you'd expect someone who pushes crypto to also hold a lot of crypto if they genuinely believe in it - whether for sound reasons or not. As such the fact they're holding crypto tells us nothing about whether they're pushing it because they're holding it or pushing it because they believe in it.
  - silexia 6y ago
    I saw a great comment earlier, "Buying bitcoin to hedge against inflation is like buying lotto tickets to hedge against Apple stock declines."
bronzeage 6y ago
Stocks might fall in inflationary circumstances, depending on many things such as how much of the companies revenue can inflate - and most times, the answer is worse than inflation. Bonds might not give you a yield exceeding the inflation, especially in inflation created for the sole purpose of buoying bonds. Speculative inflation hedges might also act erratically, like bitcoin and gold, getting ahead of themselves and the inflation sometimes.
eigenvalue 6y ago
It’s absolutely not true that investing in any assets besides cash will shield you from inflation. Inflation impacts companies very differently, and you want a preservation of real earnings power taking into account the need to replace plant and equipment over time. The best inflation protection would come from a company with a pure revenue royalty with fixed expenses. The worst would be a company with bad pricing power and lots of commodity inputs.
- redblacktree 6y ago
  Is there an easy way to determine which companies are which? Do I need to be well-studied in business, or is there a chart or key statistic I can look at to tell one from the other?
  - eigenvalue 6y ago
    This article gives a lot of good criteria for finding companies that should thrive in an inflationary environment: https://horizonkinetics.com/app/uploads/Q1-2020-CVALUE-Review_FINAL.pdf https://horizonkinetics.com/app/uploads/Q1-2020-CVALUE-Revie...
- deanmoriarty 6y ago
  What’s your recommendation for least-worse inflation hedge?
orasis 6y ago
Yes! Value producing assets produce value regardless of the nominal price of that value. It’s insane that people don’t understand this.
devoutsalsa 6y ago
Stocks prices get negatively impacted by rising interest rates. With interest rates at ~0%, there's little money to be made in bonds, savings accounts, or anything that pays interest income, so people put money into stocks w/ the hope the stocks will go up. When interest rates go up to fight inflation, there's more incentive to put money into bond markets, which means there's not as much money going into stocks, which means stock prices don't go up as much. Housing prices also tend to go down as interests go up, as rising borrowing costs mean fewer funds are available for buying a home.
- deanmoriarty 6y ago
  What’s your recommendation for least-worse inflation hedge?
  - BenoitEssiambre 6y ago
    Buy all the non perishables, non obsoletables you're going to need for the next decade. Buy them in discounted bulk for and extra return. Bonus: capital gains tax free!
    - dec0dedab0de 6y ago
      So invest in toilet paper?
      - gus_massa 6y ago
        Tuna cans. The $/volume ratio of toilet paper is horrible, and in case of a real big emergency the other end is more important.
        kijin 6y ago
        Spam has more calories and lasts just as long. If you want carbs as well, add canned fruits and vegetables. Any kind of dry bulk food will also work as long as you take proper measures to keep mold and insects out. Bonus points if you can also keep oxygen out. (Grains often contain a surprisingly large amount of lipids that can go rancid.) In the kind of emergency where you'd be seriously worried about the "other end", you could very well exchange a bag of rice or sugar for a handgun or a bottle of motor oil.
ROARosen 6y ago
While your point is correct, I live in NY and true, it's heartening to see that someone is looking out for obvs fraud. But it's really annoying that I can't (straightforwardly) open an account at most crypto exchanges, and I'm banned from investing according to my choosing and to my knowledge. If I decide to hedge inflation with some obscure or even mainstream "coin" that should be my choice why should gov be able to deny that right?
- easymodex 6y ago
  So much for freedom right?
BenoitEssiambre 6y ago
On top of that, any asset for which demand comes mostly from being an "inflation hedge" is a bad inflation hedge since prices will rise when people want more inflation hedging and drop when they want less hedging, meaning the majority of people inflation hedging will buy high and sell low. Gold has had that dynamic for a long time, which is one reason it is not considered a good investment most of the time. Buy assets that are productive and you will be much less subject to that. Real inflation hedges look like stockpiles of goods, inventory or production capacity thereof.
- kipchak 6y ago
  Could that make such inflation hedges a good pre-inflation hedge? For example buying gold with the expectation that people will soon want more hedging than they do now, though this relies on getting in earlier than others.
  - pas 6y ago
    This is how derivatives trading (and speculation, and investing itself ultimately) works. It's all about mentalizing how others will trade. The big question is to pick the optimal asset for hedging.
  - dkersten 6y ago
    So, just price speculation then?
  - vkou 6y ago
    Yes, but at that point, you should just borrow money, and do something useful with it, because being in debt is a simple, straightforward inflation hedge.
- boredpandas777 6y ago
  This proven logic is drowned by people's instinct to follow the herd... and buy Bitcoin.
antonios 6y ago
Cryptocurrency "in general" obviously isn't deflationary, given that one can create a new cryptocurrency with a simple code fork. But Bitcoin is, no?
- hiq 6y ago
  As commenters hinted at in a previous thread, the price is a measure of the combination of demand and supply. The mechanics of Bitcoin only address the supply side. OP hinted at the demand side: if a new cryptocurrency were to become more popular, then Bitcoin could lose value.
- throwaway4good 6y ago
  Which Bitcoin?
yabudemada 6y ago
This is why I think the proper crypto currencies are backed by another functional use instead of "just coins." (e.g. Ethereum vs. Bitcoin)—one is a useful Turing-complete machine; the other only exists to send coins. Bitcoin will probably always outshine the other "just coins" because it was the first. Why get another coin if this one works fine for monetary transactions? Similarly with the functional ones: Ethereum will probably always outshine the other "Global Turing Machines" because it was the first. We don't really need another one—assuming it can adapt to changes in efficiency with hard-forks as needed. The rest of them really ought to provide another service underneath to become valuable.
- ad31mar 6y ago
  > Ethereum will probably always outshine the other "Global Turing Machines" because it was the first. We don't really need another one—assuming it can adapt to changes in efficiency with hard-forks as needed. We didn't need the first one.
maaaaattttt 6y ago
I used to say "a house will always have the price of a house" (it has issues of course cough 2008 cough) to illustrate what you're saying here as I never managed to explain it properly like you did.
- gph 6y ago
  But it also has property taxes and maintenance costs, which will likely be higher than inflation. So it's not a great passive investment unless you expect the value minus costs to gain faster than inflation. Otherwise you gotta live in it or rent it to make back your money, and that's no longer passive.
RC_ITR 6y ago
>Inflation is an increase in asset prices Inflation is an an interaction between the supply of any non-dollar "thing" and dollars. Sometimes that means certain assets like equities become more expensive in $, sometimes that means commodities like oil, sometimes it means labor. But to be clear, rising Consumer Goods Inflation (what people most commonly talk about when they mean inflation) can lead to significantly lower asset prices, depending on valuation methodologies.

ssakamoto 6y ago

Both are still printing machines. Dollars are backed by faith in the USA. Is there any difference ? Powell - "We print money digitally. As a central bank, we have the ability to create money." https://www.youtube.com/watch?v=ff6SDsaS7rI https://www.youtube.com/watch?v=ff6SDsaS7rI

NovemberWhiskey 6y ago
Sorry, is the question really "what is the difference between the US Government printing dollars and Tether printing dollars?"
owenmarshall 6y ago
One has a standing army and a history of successfully deploying it against countries that attempt to disrupt the geopolitical status quo by moving away from the dollar. The other does not.
heterodoxxed 6y ago
| Dollars are backed by faith in the USA. Is there any difference ? Jesus lord, yes, absolutely. The weight of the US Empire and all its combined military and economic might versus what... some shell corporations and the whisper of a promise?
- christiansakai 6y ago
  You have no idea that a lot of people, including high profile analysts forgets this very crucial fact, and refuse to invalidate their analogy. You thought flat Earthers are ignorant enough, surprise surprise. Many people think that money is money. They think money is what makes a nation strong, not products and services. I don't know how even highly educated people missed this part. Money is a side effect of power, not the other way around.
ncallaway 6y ago
I mean, if you accept that Bitfinex is printing tether, then the difference would seem to be the fact that Bitfinex is lying about it while the US Government isn't lying about it? The ability of the US Government to create more dollars is a well understood aspect of the financial system. The US Government acknowledges is has the power to print money, and regularly tells us how much it is printing. Bitfinex claims they do not print USDT and that it is backed by USD. For a system that's based largely on trust (for both the USD and USDT), lying is a significant problem.

jkhdigital 6y ago

And what about all the cash-for-difference swaps and futures? BitMEX's XBTUSD swap is basically a synthetic dollar that can only be redeemed for Bitcoin within the walled garden of BitMEX. Tether is like a dollar swap contract that can be moved on-chain and, in theory, can be redeemed for the nominal currency. Of course Tether represents itself as a fully reserved stablecoin, which is likely a total fiction, but in the grand scheme of things I don't think it actually matters much.

rthomas6 6y ago

I've always championed DAI for a stablecoin. I don't know why it's not more popular. https://makerdao.com/en/ https://makerdao.com/en/ Instead of it being (supposedly) backed by a dollar reserve, it's collateralized by ETH and several ERC20 tokens in a smart contract. The smart contract does things to make DAI tend toward $1. It's been out for years and I think it has worked pretty well: https://coinmarketcap.com/currencies/multi-collateral-dai/ https://coinmarketcap.com/currencies/multi-collateral-dai/ It works through collateralized loans.

nipponese 6y ago
Super interesting project and tech, but it’s competing with USDC (and similar USD-backed tokens). Adoption will just take longer for DAO-backed stablecoins.
intotheabyss 6y ago
DAI is very cool. If you want to really blow your mind, check out RAI: https://stats.reflexer.finance/ https://stats.reflexer.finance/
- rthomas6 6y ago
  Very interesting. I wonder how stable it will be vs USD over the long run. I am interested in someone making a CPI coin, that tracks some value of a basket of goods instead of another currency. I think that would be sort of the ultimate inflation hedge because ideally the value would not change at all over the long run.
  - notahacker 6y ago
    The real question would be "how". A [crypto]asset backed by another currency is easy in principle: simply hold the currency to back it (and make sure you have some sort of transaction fee to cover your storage costs, and don't lie about it...). Same with a [crypto]asset backed by oil or metals. But CPI goods include many goods which are either perishable or lose value over time, and the composition of actual CPI baskets changes over time so you can't do that. In the absence of that backing you can create a purely synthetic asset that can only track CPI if you've got the ability to withdraw significant quantities from circulation every time the value starts to drop. (That's sort of what central banks do with targeting a fixed non-zero rate of CPI inflation. But they have an economy built on debt so the money supply can contract organically by debts being repaid faster than new debts are issued. This is less troubling for the future of a coin than alternative strategies like having to use VC/company funds to buy back coins, or making a percentage of coins disappear)

safog 6y ago

You'd need to do better than that. How exactly does printing USDT lead to BTC price inflation? I haven't heard anything convincing yet. Most of the vol doesn't come from the BTC USDT pair. Exchanges don't seem to be doing anything shady like manipulating the price upwards by themselves.

CapmCrackaWaka 6y ago
The story is that Tether has been printing tethers and buying Bitcoins. However, they haven't released any concrete holdings or submitted to an audit AFAIK, so there's a lot of speculation on how big of a problem this actually is.
- safog 6y ago
  I don't think there are any claims that Tether the organization itself is doing anything like that. They just print USDT and send it to people who are interested in buying USDT like exchanges. The two problems as I see them are: - Is USDT actually backed 1:1 by USD / cash equivalents as Tether claims? w/o independent audits we have no idea. So technically, if you hold USDT on an exchange and use it to trade alts and evade the taxman, then if this whole thing falls apart your USDT might be worthless. - The owners of Bitfinex and the people who run tether are the same set of people. So theoretically it's possible that + Bitfinex generates artificial demand for USDT somehow + Finds a way to swap actual USD for USDT (customer deposits? 19bn worth of customer deposits? Unlikely) + In turn goes around and buys BTC with that USD for some reason + Does it w/ enough vol that all the arbitrage bots won't be able to arbitrage it away. These are a lot of ifs and I'm just not seeing the incentives here as best case Finex gets stuck with a bunch of BTC they inflated themselves which isn't in their interest. I'm not a finance guru, so I'd love it if someone more informed than me can comment on how someone can pull this off.
  - graeme 6y ago
    The settlement agreement shows that at multiple points Tether was not backed: https://ag.ny.gov/sites/default/files/2021.02.17_-_settlement_agreement_-_execution_version.b-t_signed-c2_oag_signed.pdf https://ag.ny.gov/sites/default/files/2021.02.17_-_settlemen... I think the best case is tether printed usdt, used it to buy btc, inflated the btc price and is now fully backed by their btc holdings. This works as long as people want btc They were able to do it because people accepted usdt as dollars.

kenneth 6y ago

I have the same doubts you do about Tether's legitimacy, but there's a few conclusions I believe you're jumping to which I think don't quite hold: - Tether's volumes being greater than other crypto-currencies don't have much impact on the legitimacy of other crypto-currencies. The volume is so high because USDT is the other side of most crypto-currency trading pair. Given the liquidity of the market, you can trade almost anything (BTC, ETH, all alts, etc) against USDT without being exposed to any underlying USDT risk. - The market value of crypto-currencies minus any deposit-backed USD coins far exceeds those coins. Tether "printing" coins out of nothing cannot alone explain the market capitalization of cryptocurrencies. - Even if everything alleged were true, it really wouldn't be a drop in the bucket compared to the kind of shenanigans central banks have been pulling for centuries. If the crypto-currency market is illegitimate due to money printing by Tether, then so is the conventional financial system due to quantitive easing by the Federal Reserve and other central banks around the world.

kaibee 6y ago
> If the crypto-currency market is illegitimate due to money printing by Tether, then so is the conventional financial system due to quantitive easing by the Federal Reserve and other central banks around the world. The difference is that central banks aren't lying about whether they're printing money or not.
- ericns 6y ago
  Instead, they control the methodologies that define the value of what they've printed as well as the flows. Differences...Distinctions...are there?
rglullis 6y ago
> If the crypto-currency market is illegitimate due to money printing by Tether, then so is the conventional financial system due to quantitive easing by the Federal Reserve and other central banks around the world. IOW, "Meet the new boss, same as the old boss"? No, there should be no moral relativism to get Tether out of the hook. It doesn't matter if they manipulated the market by one or one hundred billion dollars, they are a bad actor in the space that we must get rid of.

FireBeyond 6y ago

As recently as a couple of weeks ago, I've heard people claim that Tether is still "1:1 backed with USD". Oh, and: > Keep in mind that in relationship to tether, $1.5 billion is tiny. It's only 3 days of tether printing. apparently depositing $3.5B a WEEK into some bank (unnamed of course, because Tether won't disclose). While there is a large deal of potential, and some real value in crypto, there's definitely a non-negligible portion of True Believers, the crypto equivalent of Qanon.

jcranmer 6y ago
> As recently as a couple of weeks ago For more recent claims, just read the comments on this post in this site.

ketamine__ 6y ago

Bitcoin is going up because young people want to buy Bitcoin. Most young people are trading (i.e. WSB) and not investing in cryptocurrency. That has a lot to do with price fluctuations. Also taxes, vacations, etc are all funded by cashing out.