9 ms·

Money doesn't have to come from anywhere. Sometimes new value is created and the money is brand new. This is how GDP grows. In the case of BTC, it's pretty cle

Money doesn't have to come from anywhere. Sometimes new value is created and the money is brand new. This is how GDP grows. In the case of BTC, it's pretty clear that a huge portion of the market cap didn't come from anywhere. It's new capital. That doesn't mean it can't go to 0 and vanish overnight. But it does mean that play to earn games don't always need money coming in to pay out.

somewhereoutth 5y ago
Fiat is created by banks - by originating loans. A bank does not actually need to have that money to create the loan - it is not transferred from somewhere else, it is just that the bank's balance sheet expands. There are rules on how much a bank is allowed to create, as you might imagine. The BTC system does not create money - you can follow the creation of a coin system to its eventual destruction and discover that exactly the same amount of fiat went into it as came out (less mining). In fact, at any moment in time, the same also holds! If you buy $100 of BTC, somebody somewhere has just sold $100 BTC. No money is ever created or destroyed. Of course (if you were a lunatic), you could get a loan to buy BTC, and so money would be created, but by the banking system, not BTC, and it would go straight to whoever you bought BTC from. As soon as people decide they don't want to put money in, then no money can come out. You will know this because the 'price' of BTC will be zero.
- mgraczyk 5y ago
  Your description of banks is correct. Your description of BTC is wrong. You're missing an important fact. The price of BTC can, and does, change. When it changes, the market value of all BTC changes. If the value of all BTC goes up, new value (not money) has been created. Also, lots of people take loans to buy BTC. This is called "leverage".
  - somewhereoutth 5y ago
    Ah but a change in the price of BTC does not in fact create any value - it just means that that $100 now corresponds to less BTC. You can profit from that fluctuation, by being on the right side of the cash exchange at two separate points in time. Somebody else will be on the wrong side of that exchange (well, in aggregate anyway - there will be many somebodies on either side) and will suffer a corresponding loss. Since BTC is intrinsically worthless, any 'price' that might be ascribed to it is meaningless (aside from the profit/loss action described above).
    - mgraczyk 5y ago
      The same (incorrect) reasoning applies to literally anything you don't physically use including USD, equities, gold, land, etc.
      - imtringued 5y ago
        If I have all the ice cream in the world and it spoils in a week because I cannot eat all of it then it is not that wrong to say that its utility to me is zero. By the way his argument is that any absolute value ascribed to a currency is arbitrary or rather that there is no correct number.
        somewhereoutth 5y ago
        more that BTC is of course not a currency, because it is not backed by a state entity. I can't pay taxes with it.
      - somewhereoutth 5y ago
        USD is useful because you can pay taxes with it, equities represent an income stream as dividends from a (presumably) successful business, gold can make jewellery etc, land can be rented out. Even the supposed utility of BTC - as a money transfer mechanism - does not require the price to be anything other that not zero.
- syspec 5y ago
  I completely agree with you, but I’m wondering if you could help me debate the counter argument: “The same is true of stocks, if people decide to stop putting money in, no money comes out” It comes up whenever I make a point similar to yours above, and I haven’t had a good answer for it
  - ItsMonkk 5y ago
    Right. So exactly the same is true of stocks when it comes to trading existing stock. The key difference is the creation of stock - IPOs. The company uses that money they get from the IPO and invests it into the business, which results in profits, which they give out as dividends. There's no such mechanism in cryptocurrency. Unfortunately the other side has a good response to this - if the dollar value of buybacks+dividends exceeds the dollar value of IPO's, then you end up with the same problem that Bitcoin is in, where it's a net loss system. That seems to be the case[0]. This is not a well known fact. Ultimately this comes down to the fact that we don't have a stable velocity of dollars, and an unstable velocity that results in more dollars chasing less more goods produces speculative bubbles that must eventually crash and create recessions. All investments, including all currency, whether it be stocks or gold or bitcoin or dollars, is inherently valueless. The only time you can calculate the value is when you actually are extracting utility. You can then work back from that to determine who produced that value. [0, Figure 5/Figure 8]: https://www.yardeni.com/pub/buybackdiv.pdf https://www.yardeni.com/pub/buybackdiv.pdf
    - imtringued 5y ago
      Regarding stable velocity. If we had negative interest we would have it. Then all that monetary expansion nonsense could be over and we could get on with our lives without cursing some evil businessmen for being morally reprehensible so we have a scapegoat.
      - ItsMonkk 5y ago
        I don't know what the natural interest rate such as to get a stable velocity, and it would not be static but would change with changes in the economy, but I don't think it would be negative unless we were already deep within a recession. And do be so quick, there's always another issue to simplify! Can we get base 12? Can we get a carbon tax? A land value tax? Voting reform? I can go on all day here...
- oreally 5y ago
  > You will know this because the 'price' of BTC will be zero. To be exact in this scenario, the 'price' of BTC will still be the price of the last trade in cryto exchanges. The trading volume however, will be 0, and there will no demand on the bid/ask. Hence you're stuck with BTC you can't offload.
  - deleted 5y ago
    [deleted]

somewhereoutth 5y ago

Fiat is created by banks - by originating loans. A bank does not actually need to have that money to create the loan - it is not transferred from somewhere else, it is just that the bank's balance sheet expands. There are rules on how much a bank is allowed to create, as you might imagine. The BTC system does not create money - you can follow the creation of a coin system to its eventual destruction and discover that exactly the same amount of fiat went into it as came out (less mining). In fact, at any moment in time, the same also holds! If you buy $100 of BTC, somebody somewhere has just sold $100 BTC. No money is ever created or destroyed. Of course (if you were a lunatic), you could get a loan to buy BTC, and so money would be created, but by the banking system, not BTC, and it would go straight to whoever you bought BTC from. As soon as people decide they don't want to put money in, then no money can come out. You will know this because the 'price' of BTC will be zero.

mgraczyk 5y ago
Your description of banks is correct. Your description of BTC is wrong. You're missing an important fact. The price of BTC can, and does, change. When it changes, the market value of all BTC changes. If the value of all BTC goes up, new value (not money) has been created. Also, lots of people take loans to buy BTC. This is called "leverage".
- somewhereoutth 5y ago
  Ah but a change in the price of BTC does not in fact create any value - it just means that that $100 now corresponds to less BTC. You can profit from that fluctuation, by being on the right side of the cash exchange at two separate points in time. Somebody else will be on the wrong side of that exchange (well, in aggregate anyway - there will be many somebodies on either side) and will suffer a corresponding loss. Since BTC is intrinsically worthless, any 'price' that might be ascribed to it is meaningless (aside from the profit/loss action described above).
  - mgraczyk 5y ago
    The same (incorrect) reasoning applies to literally anything you don't physically use including USD, equities, gold, land, etc.
    - imtringued 5y ago
      If I have all the ice cream in the world and it spoils in a week because I cannot eat all of it then it is not that wrong to say that its utility to me is zero. By the way his argument is that any absolute value ascribed to a currency is arbitrary or rather that there is no correct number.
      - somewhereoutth 5y ago
        more that BTC is of course not a currency, because it is not backed by a state entity. I can't pay taxes with it.
    - somewhereoutth 5y ago
      USD is useful because you can pay taxes with it, equities represent an income stream as dividends from a (presumably) successful business, gold can make jewellery etc, land can be rented out. Even the supposed utility of BTC - as a money transfer mechanism - does not require the price to be anything other that not zero.
syspec 5y ago
I completely agree with you, but I’m wondering if you could help me debate the counter argument: “The same is true of stocks, if people decide to stop putting money in, no money comes out” It comes up whenever I make a point similar to yours above, and I haven’t had a good answer for it
- ItsMonkk 5y ago
  Right. So exactly the same is true of stocks when it comes to trading existing stock. The key difference is the creation of stock - IPOs. The company uses that money they get from the IPO and invests it into the business, which results in profits, which they give out as dividends. There's no such mechanism in cryptocurrency. Unfortunately the other side has a good response to this - if the dollar value of buybacks+dividends exceeds the dollar value of IPO's, then you end up with the same problem that Bitcoin is in, where it's a net loss system. That seems to be the case[0]. This is not a well known fact. Ultimately this comes down to the fact that we don't have a stable velocity of dollars, and an unstable velocity that results in more dollars chasing less more goods produces speculative bubbles that must eventually crash and create recessions. All investments, including all currency, whether it be stocks or gold or bitcoin or dollars, is inherently valueless. The only time you can calculate the value is when you actually are extracting utility. You can then work back from that to determine who produced that value. [0, Figure 5/Figure 8]: https://www.yardeni.com/pub/buybackdiv.pdf https://www.yardeni.com/pub/buybackdiv.pdf
  - imtringued 5y ago
    Regarding stable velocity. If we had negative interest we would have it. Then all that monetary expansion nonsense could be over and we could get on with our lives without cursing some evil businessmen for being morally reprehensible so we have a scapegoat.
    - ItsMonkk 5y ago
      I don't know what the natural interest rate such as to get a stable velocity, and it would not be static but would change with changes in the economy, but I don't think it would be negative unless we were already deep within a recession. And do be so quick, there's always another issue to simplify! Can we get base 12? Can we get a carbon tax? A land value tax? Voting reform? I can go on all day here...
oreally 5y ago
> You will know this because the 'price' of BTC will be zero. To be exact in this scenario, the 'price' of BTC will still be the price of the last trade in cryto exchanges. The trading volume however, will be 0, and there will no demand on the bid/ask. Hence you're stuck with BTC you can't offload.
- deleted 5y ago
  [deleted]