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> This time, the bull market lasted nearly one and a half years. People seemed to adjust into the mentality that the higher prices are a new normal. No mention

> This time, the bull market lasted nearly one and a half years. People seemed to adjust into the mentality that the higher prices are a new normal. No mention of the Fed balance sheet by Vitalik. How come? He's clearly too smart to be ignorant of the Fed's money printing and its dramatic effect on crypto prices.

wmf 4y ago
AFAIK QE was going on continuously during crypto's boom and bust cycles so maybe crypto people tuned it out.
ianai 4y ago
How does that statement not make people who bought at or near the high furious? It’d be like a housing developer being caught on tape laughing at the buyers of their properties at their peak (say 2006-2007) on a hot mic in 2009-2010. For the record, I still don’t have a good explanation for a persons willingness to pay currency for any crypto. The relationship to QE is thus impossible outside of general trends. Raising seas rise all boats stuff.
rr808 4y ago
Why worry about the Fed printing dollars when you can create magically create new cryptos and print those instead. Money supply measures should count crypto too.
- preseinger 4y ago
  Money is the exclusive right of sovereign nations. Crypto is not money.
  - dependsiguess 4y ago
  - throwawayQuwcy 4y ago
    Money is the exclusive right of sovereign nations! How else are Erdogan, Madura, et al going to fund their piggy banks & militaries?
  - majormajor 4y ago
    If you have anything for which banks will take the value seriously enough to borrow against - stocks, for instance, fit in this category - then the path of going from non-money -> money creation is pretty direct. I'm not sure if banks would let you point to 100k in bitcoin or such as assets that would help qualify you for a mortgage, but doesn't seem too out there. Or do the 2-step route and sell the crypto and use it as your downpayment to leverage up into that mortage from an initial investment of $100 or so in 2011. Still inflationary - you've turned your initial tiny investment into purchasing power for a house and all it took was someone else deciding to invest in the crypto you were selling instead of more traditional vehicles, so they also feel like they have the same amount of assets/wealth as they would've otherwise. EDIT: putting it another way. Money is one thing. Consumer behavior is another. People spend not just based on their "money" but based on their total assets and expected income as well, so things that pump up those on-paper asset values will lead to higher spending and inflationary pressure in the same way that "giving them money" would.
    - preseinger 4y ago
      Borrowing against a Ferrari 458 doesn't turn Italian supercars into ersatz currencies, in any meaningful sense. Money isn't just something you exchange for goods and services. It's directly linked to the sovereignty and economic soundness of its issuing authority. Imagine if a country started accepting tax payments denominated in something they have no influence over. Holding Bitcoin reserves necessarily means ceding economic power, and therefore autonomy, to a third party. For failed states without any economic autonomy to begin with, this bargain might be fine. But for everyone else on the international stage, this is a total nonstarter. Wars have been fought over monetary authority! We've had this discussion as a species already. What we have now isn't some pathological problem that needs to be disrupted. It's actually the outcome of a rational evolutionary process over thousands of years. Does it have problems that can be improved, yes. Should it be thrown away in favor of a new system built from first principles, absolutely not. That would be a new dark age, a dystopia.
      - majormajor 4y ago
        I am not pro-crypto, was simply agreeing with the poster two levels up that crypto is inflationary, despite it's proponents claims, because once you open that door you open it to any number of new supplies of "money." I'd wager the average car and average house both would be cheaper if you couldn't borrow against them. Property might even be a large enough asset class that that would impact other things.
  - imtringued 4y ago
    Kind of, if it is widely accepted as a medium of exchange I would count crypto as money. The irony is that the only crypto that is money is stablecoins. There is RAI but the Terra Luna incident made me sceptical of algorithmic stablecoins. If RAI survives the ETH crash, which it so far does, I am looking forward to the next generation of algorithmic stablecoins. Who knows, maybe it is actually possible to do what the central banks of the euro and dollar do in a smart contract and suddenly Milton Friedman's dream of replacing the central bank with a computer comes true. Yet at the same time it crushes the idea that Bitcoin or Ethereum will ever amount to anything more than a digital collectible. I personally am interested in a currency that does price level targeting but I have my doubts that it would work with a cryptocurrency because the oracle that collects the CPI is going to be centralised. I will admit getting the CPI right is easier than getting central bank policy right.
    - nuclearnice1 4y ago
      Are stablecoins “widely accepted as a medium of exchange?” I know some places accept Bitcoin. Tesla accepts Dogecoin for some products. What can you buy with stablecoins?
      - rglullis 4y ago
        You can pay your balance at https://communick.com https://communick.com with DAI. You can pay for work and fund developer grants with DAI via https://gitcoin.co https://gitcoin.co Aside from that, if you are interested in accepting payments with crypto, checkout https://hub20.io https://hub20.io, a self-hosted payment gateway.
    - rglullis 4y ago
      Bitcoin has already failed as a currency, and this is why it should be really seen as a digital collectible. Actually, it is worse than that: it can go away if the miners lose interest in keeping the chain around. ETH is not meant to be a currency. It is meant to be a scarce resource like oil and its value is in its requirement to power the crypto economy that is based on the Ethereum blockchain. With ethereum, there will be plenty of people who might be in accepting payments (with stabletokens or other ERC20), but no interest whatsoever in holding ETH.
  - djbebs 4y ago
    No, it is not.
  - aaaaaaaaata 4y ago
    What about the sovereign nations that accept it as legal currency and/or for taxes?
    - preseinger 4y ago
      Can you enumerate those nations? Are any of them not failed states?
- roenxi 4y ago
  I suspect you are making a snide comment, but it is an interesting idea to roll around. The big difference I see is that people aren't forced to measure things in crypto. Your local tax office will get antsy if you don't trade in your local currency. If the local tax office required things to be measured vs "crypto" then the rate of new cryptocurrencies being created would become a very important measure indeed (although they aren't going to do that - they'd pick a specific blockchain to reference). People already measure the amount of crypto that is registered in a block chain which effectively is counting the money supply. It is an interesting metric. As an aside, take note that the value of something like Bitcoin is actually proving quite stable so far. This last downward collapse hasn't even been a dire crash by its historic standards. Yet, anyway. We haven't seen any signs of an implosion that would be comparable to the hyperinflation death spirals in fiat.
  - rr808 4y ago
    It was semi-snide in that crypto fans often complain about money printing but pretend crypto doesn't count. Often the biggest money bubbles are when a new type of credit is invented that isn't recognized.
lcw 4y ago
I don't think the Fed dispersing money had anything to do with it. If anything more money with low interest rates would increase the crypto market. Oppositely I think the global fiat currency inflation and the Fed increasing interest rates sunk the Crypto market. Now you could argue that the Fed keeping interest rate so low for so long created more "money", which it absolutely did, but not directly. Banks created more inflation than the Fed printing money because loans became so lucrative at these interest rates and put more money in everyone's pockets. That allowed the stock and crypto market to grow though not crash. You increase interest rates the first thing to get squeezed is always going to be high yield high volatility investments like crypto followed by the stock market as banks and wealthy people divest to the stable now higher yielding bonds market, which should out pace inflation with a fraction of the risk.
imtringued 4y ago
The banking system is a pull based system. You go to a bank, the bank gives you a loan and creates the money as they deposit it on your account, they literally don't care what the fed does rather the fed has no choice but to create more reserves if the commercial bank requests them. The commercial bank does something like "You wouldn't risk the banking system to collapse if you refuse me reserves would you?" The central bank then goes "Eh, I guess I have no choice, we have to do whatever it takes after all". Meanwhile internet propaganda constantly tells people that it is a push based system, that somehow the Fed is telling the commercial banks to issue more loans and then for every dollar in created reserves the commercial bank calls and naggs you that you should borrow more and somehow the citizens just keep falling for it every single time.
- MrBuddyCasino 4y ago
  Don’t they control pull by setting interest rates?
  - konschubert 4y ago
    Exactly.
- drexlspivey 4y ago
  > Meanwhile internet propaganda constantly tells people that it is a push based system, that somehow the Fed is telling the commercial banks to issue more loans and then for every dollar in created reserves the commercial bank calls and naggs you that you should borrow more and somehow the citizens just keep falling for it every single time. GP is referring to Quantitative Easing which is a push based system, not sure how this is internet propaganda? The Fed actively creates new dollars and uses them to buy assets from the open market.
- meltyness 4y ago
  Open market operations constitute a push operation.

wmf 4y ago

AFAIK QE was going on continuously during crypto's boom and bust cycles so maybe crypto people tuned it out.

ianai 4y ago

How does that statement not make people who bought at or near the high furious? It’d be like a housing developer being caught on tape laughing at the buyers of their properties at their peak (say 2006-2007) on a hot mic in 2009-2010. For the record, I still don’t have a good explanation for a persons willingness to pay currency for any crypto. The relationship to QE is thus impossible outside of general trends. Raising seas rise all boats stuff.

rr808 4y ago

Why worry about the Fed printing dollars when you can create magically create new cryptos and print those instead. Money supply measures should count crypto too.

preseinger 4y ago
Money is the exclusive right of sovereign nations. Crypto is not money.
- dependsiguess 4y ago
- throwawayQuwcy 4y ago
  Money is the exclusive right of sovereign nations! How else are Erdogan, Madura, et al going to fund their piggy banks & militaries?
- majormajor 4y ago
  If you have anything for which banks will take the value seriously enough to borrow against - stocks, for instance, fit in this category - then the path of going from non-money -> money creation is pretty direct. I'm not sure if banks would let you point to 100k in bitcoin or such as assets that would help qualify you for a mortgage, but doesn't seem too out there. Or do the 2-step route and sell the crypto and use it as your downpayment to leverage up into that mortage from an initial investment of $100 or so in 2011. Still inflationary - you've turned your initial tiny investment into purchasing power for a house and all it took was someone else deciding to invest in the crypto you were selling instead of more traditional vehicles, so they also feel like they have the same amount of assets/wealth as they would've otherwise. EDIT: putting it another way. Money is one thing. Consumer behavior is another. People spend not just based on their "money" but based on their total assets and expected income as well, so things that pump up those on-paper asset values will lead to higher spending and inflationary pressure in the same way that "giving them money" would.
  - preseinger 4y ago
    Borrowing against a Ferrari 458 doesn't turn Italian supercars into ersatz currencies, in any meaningful sense. Money isn't just something you exchange for goods and services. It's directly linked to the sovereignty and economic soundness of its issuing authority. Imagine if a country started accepting tax payments denominated in something they have no influence over. Holding Bitcoin reserves necessarily means ceding economic power, and therefore autonomy, to a third party. For failed states without any economic autonomy to begin with, this bargain might be fine. But for everyone else on the international stage, this is a total nonstarter. Wars have been fought over monetary authority! We've had this discussion as a species already. What we have now isn't some pathological problem that needs to be disrupted. It's actually the outcome of a rational evolutionary process over thousands of years. Does it have problems that can be improved, yes. Should it be thrown away in favor of a new system built from first principles, absolutely not. That would be a new dark age, a dystopia.
    - majormajor 4y ago
      I am not pro-crypto, was simply agreeing with the poster two levels up that crypto is inflationary, despite it's proponents claims, because once you open that door you open it to any number of new supplies of "money." I'd wager the average car and average house both would be cheaper if you couldn't borrow against them. Property might even be a large enough asset class that that would impact other things.
- imtringued 4y ago
  Kind of, if it is widely accepted as a medium of exchange I would count crypto as money. The irony is that the only crypto that is money is stablecoins. There is RAI but the Terra Luna incident made me sceptical of algorithmic stablecoins. If RAI survives the ETH crash, which it so far does, I am looking forward to the next generation of algorithmic stablecoins. Who knows, maybe it is actually possible to do what the central banks of the euro and dollar do in a smart contract and suddenly Milton Friedman's dream of replacing the central bank with a computer comes true. Yet at the same time it crushes the idea that Bitcoin or Ethereum will ever amount to anything more than a digital collectible. I personally am interested in a currency that does price level targeting but I have my doubts that it would work with a cryptocurrency because the oracle that collects the CPI is going to be centralised. I will admit getting the CPI right is easier than getting central bank policy right.
  - nuclearnice1 4y ago
    Are stablecoins “widely accepted as a medium of exchange?” I know some places accept Bitcoin. Tesla accepts Dogecoin for some products. What can you buy with stablecoins?
    - rglullis 4y ago
      You can pay your balance at https://communick.com https://communick.com with DAI. You can pay for work and fund developer grants with DAI via https://gitcoin.co https://gitcoin.co Aside from that, if you are interested in accepting payments with crypto, checkout https://hub20.io https://hub20.io, a self-hosted payment gateway.
  - rglullis 4y ago
    Bitcoin has already failed as a currency, and this is why it should be really seen as a digital collectible. Actually, it is worse than that: it can go away if the miners lose interest in keeping the chain around. ETH is not meant to be a currency. It is meant to be a scarce resource like oil and its value is in its requirement to power the crypto economy that is based on the Ethereum blockchain. With ethereum, there will be plenty of people who might be in accepting payments (with stabletokens or other ERC20), but no interest whatsoever in holding ETH.
- djbebs 4y ago
  No, it is not.
- aaaaaaaaata 4y ago
  What about the sovereign nations that accept it as legal currency and/or for taxes?
  - preseinger 4y ago
    Can you enumerate those nations? Are any of them not failed states?
roenxi 4y ago
I suspect you are making a snide comment, but it is an interesting idea to roll around. The big difference I see is that people aren't forced to measure things in crypto. Your local tax office will get antsy if you don't trade in your local currency. If the local tax office required things to be measured vs "crypto" then the rate of new cryptocurrencies being created would become a very important measure indeed (although they aren't going to do that - they'd pick a specific blockchain to reference). People already measure the amount of crypto that is registered in a block chain which effectively is counting the money supply. It is an interesting metric. As an aside, take note that the value of something like Bitcoin is actually proving quite stable so far. This last downward collapse hasn't even been a dire crash by its historic standards. Yet, anyway. We haven't seen any signs of an implosion that would be comparable to the hyperinflation death spirals in fiat.
- rr808 4y ago
  It was semi-snide in that crypto fans often complain about money printing but pretend crypto doesn't count. Often the biggest money bubbles are when a new type of credit is invented that isn't recognized.

lcw 4y ago

I don't think the Fed dispersing money had anything to do with it. If anything more money with low interest rates would increase the crypto market. Oppositely I think the global fiat currency inflation and the Fed increasing interest rates sunk the Crypto market. Now you could argue that the Fed keeping interest rate so low for so long created more "money", which it absolutely did, but not directly. Banks created more inflation than the Fed printing money because loans became so lucrative at these interest rates and put more money in everyone's pockets. That allowed the stock and crypto market to grow though not crash. You increase interest rates the first thing to get squeezed is always going to be high yield high volatility investments like crypto followed by the stock market as banks and wealthy people divest to the stable now higher yielding bonds market, which should out pace inflation with a fraction of the risk.

imtringued 4y ago

The banking system is a pull based system. You go to a bank, the bank gives you a loan and creates the money as they deposit it on your account, they literally don't care what the fed does rather the fed has no choice but to create more reserves if the commercial bank requests them. The commercial bank does something like "You wouldn't risk the banking system to collapse if you refuse me reserves would you?" The central bank then goes "Eh, I guess I have no choice, we have to do whatever it takes after all". Meanwhile internet propaganda constantly tells people that it is a push based system, that somehow the Fed is telling the commercial banks to issue more loans and then for every dollar in created reserves the commercial bank calls and naggs you that you should borrow more and somehow the citizens just keep falling for it every single time.

MrBuddyCasino 4y ago
Don’t they control pull by setting interest rates?
- konschubert 4y ago
  Exactly.
drexlspivey 4y ago
> Meanwhile internet propaganda constantly tells people that it is a push based system, that somehow the Fed is telling the commercial banks to issue more loans and then for every dollar in created reserves the commercial bank calls and naggs you that you should borrow more and somehow the citizens just keep falling for it every single time. GP is referring to Quantitative Easing which is a push based system, not sure how this is internet propaganda? The Fed actively creates new dollars and uses them to buy assets from the open market.
meltyness 4y ago
Open market operations constitute a push operation.