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> illegal transactions, scams and gambling together make up less than 3% of volume > To me, 3% is an acceptable level. It's a lower percentage than the black m

> illegal transactions, scams and gambling together make up less than 3% of volume > To me, 3% is an acceptable level. It's a lower percentage than the black market in many countries even. Yeah, but that's because the vast majority of volume comes from speculation and wash trading lmao. What do you think the ratio of speculation and illegal activity to legitimate use cases is? I'd be willing to be it's greater than 10:1, maybe even 100:1

EscapeFromNY 3y ago
You don't have to bet, the data is in the paper I linked. 75% of bitcoin volume is speculation. Meanwhile in the traditional economy, 95% of global financial activity is speculation (see below). What level of speculation would you say is high enough to justify throwing away the remaining productive uses of an asset class? --- In 2019, forex volume was $6.6T per day[1], or $1716T per year. In 2019, global GDP was $87.3T[2]. That's less than 5% economically meaningful activity. [1]: https://www.financemagnates.com/institutional-forex/execution/bis-survey-daily-fx-volumes-jump-30-to-6-6-trillion-in-2019/ https://www.financemagnates.com/institutional-forex/executio... [2]: https://www.statista.com/statistics/268750/global-gross-domestic-product-gdp/ https://www.statista.com/statistics/268750/global-gross-dome...
- lordfrito 3y ago
  I should not have said speculation, the article makes it clear that 70% plus of unregulated exchange trades are wash trades. Speculation (short selling etc) is a necessary part of a healthy financial system. Wash trades on the other hand are simply market manipulation. GDP / production is what it's all about. The dollar is powerful in part because of US GDP. The financial sector exists to help put capital to work and extract more P (and to do so more efficiently). The financial sector cannot exist on it's own without meaningful production of value underneath it. The crypto exchanges are different from forex in that forex facilitates people from other countries doing business with each other helping convert the value of one country's productive output into the value of the other countries productive output. Exchange rates rise and fall relative to GDP from the two countries. I don't think comparing crypto exchange trading to forex makes sense, as that the crypto currencies don't have a meaningful connection to any nations GDP. I think the point I'm trying to address here is that there is no P with cryptocurrencies. So the "crypto financial sector" seems more about price manipulation and gambling than it is helping facilitate trade between two economies.
  - EscapeFromNY 3y ago
    Each of my links has examples of people exchanging goods and services in bitcoin for various reasons. Do you consider that productive economic activity (the "P")? If you don't: why is it productive when I buy a car using dollars, but not productive when I buy a car using bitcoin? If you do: why must a currency's worth be tied to one particular country's GDP? Why can't it instead be tied to the global production of everyone on earth, in any country, who has chosen to use that currency? I think it's actually a sign of strength when someone goes out of their way to adopt a global non-politcal currency, instead of succumbing to inertia and using the currency that was foisted on them by the geographical circumstances of their birth.
- greatwave1 3y ago
  The paper that you linked doesn't say that 75% of crypto activity is speculation, at least as far as I can tell. Are you referring to the line that says >Starting from 2015, 75% of the real bitcoin volume has been linked to exchanges or exchange-like entities such as on-line wallets, OTC desks, and large institutional traders. Because there is certainly plenty of speculation outside of those entities. And for the traditional financial system, when you said "see below", are you referring to the ratio of forex volume to global GDP? Because those metrics are terrible proxies for "global financial activity" or "speculation" I would recommend doing some reading on what GDP is, and how it's calculated. It's not the same thing as the total volume of transactions, or even in the same ballpark. The United States alone had more than $128T in just non-cash payments in 2021 (https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm https://www.federalreserve.gov/paymentsystems/fr-payments-st...) You should also understand that all forex activity is not speculation. I would think that global trade would fall under the bucket of "economically meaningful activity", no?
  - EscapeFromNY 3y ago
    > Because there is certainly plenty of speculation outside of those entities. Sure. And there's plenty of non-speculative activity outside of those entities as well. The paper explicitly looks at on-chain activity only. > Because those metrics are terrible proxies for "global financial activity" or "speculation" Maybe so. I put forward my sources, but there could be a better way of calculating it. My broader point was that speculation is the majority of activity, and I doubt that's any different whether you're talking about fiat, gold, oil, crypto, or any other widely used asset/asset class. If you had to calculate that same statistic, what methodology would you use? > You should also understand that all forex activity is not speculation. I would think that global trade would fall under the bucket of "economically meaningful activity", no? In one sense it is meaningful, in another sense it's just a middleman market maker taking their cut, due to the inefficiency of humans having multiple currencies. Either way I don't see how the meaningfulness of trade changes once you introduce crypto. Say I'm subscribed to a Australian musician's patreon. I send her USD, then a middleman sells that USD and gives her AUD. I also support a French musician. I send him BTC. He (or a middleman) sells that BTC for EUR. How can you say either of those situations is more or less economically meaningful?

EscapeFromNY 3y ago

You don't have to bet, the data is in the paper I linked. 75% of bitcoin volume is speculation. Meanwhile in the traditional economy, 95% of global financial activity is speculation (see below). What level of speculation would you say is high enough to justify throwing away the remaining productive uses of an asset class? --- In 2019, forex volume was $6.6T per day[1], or $1716T per year. In 2019, global GDP was $87.3T[2]. That's less than 5% economically meaningful activity. [1]: https://www.financemagnates.com/institutional-forex/execution/bis-survey-daily-fx-volumes-jump-30-to-6-6-trillion-in-2019/ https://www.financemagnates.com/institutional-forex/executio... [2]: https://www.statista.com/statistics/268750/global-gross-domestic-product-gdp/ https://www.statista.com/statistics/268750/global-gross-dome...

lordfrito 3y ago
I should not have said speculation, the article makes it clear that 70% plus of unregulated exchange trades are wash trades. Speculation (short selling etc) is a necessary part of a healthy financial system. Wash trades on the other hand are simply market manipulation. GDP / production is what it's all about. The dollar is powerful in part because of US GDP. The financial sector exists to help put capital to work and extract more P (and to do so more efficiently). The financial sector cannot exist on it's own without meaningful production of value underneath it. The crypto exchanges are different from forex in that forex facilitates people from other countries doing business with each other helping convert the value of one country's productive output into the value of the other countries productive output. Exchange rates rise and fall relative to GDP from the two countries. I don't think comparing crypto exchange trading to forex makes sense, as that the crypto currencies don't have a meaningful connection to any nations GDP. I think the point I'm trying to address here is that there is no P with cryptocurrencies. So the "crypto financial sector" seems more about price manipulation and gambling than it is helping facilitate trade between two economies.
- EscapeFromNY 3y ago
  Each of my links has examples of people exchanging goods and services in bitcoin for various reasons. Do you consider that productive economic activity (the "P")? If you don't: why is it productive when I buy a car using dollars, but not productive when I buy a car using bitcoin? If you do: why must a currency's worth be tied to one particular country's GDP? Why can't it instead be tied to the global production of everyone on earth, in any country, who has chosen to use that currency? I think it's actually a sign of strength when someone goes out of their way to adopt a global non-politcal currency, instead of succumbing to inertia and using the currency that was foisted on them by the geographical circumstances of their birth.
greatwave1 3y ago
The paper that you linked doesn't say that 75% of crypto activity is speculation, at least as far as I can tell. Are you referring to the line that says >Starting from 2015, 75% of the real bitcoin volume has been linked to exchanges or exchange-like entities such as on-line wallets, OTC desks, and large institutional traders. Because there is certainly plenty of speculation outside of those entities. And for the traditional financial system, when you said "see below", are you referring to the ratio of forex volume to global GDP? Because those metrics are terrible proxies for "global financial activity" or "speculation" I would recommend doing some reading on what GDP is, and how it's calculated. It's not the same thing as the total volume of transactions, or even in the same ballpark. The United States alone had more than $128T in just non-cash payments in 2021 (https://www.federalreserve.gov/paymentsystems/fr-payments-study.htm https://www.federalreserve.gov/paymentsystems/fr-payments-st...) You should also understand that all forex activity is not speculation. I would think that global trade would fall under the bucket of "economically meaningful activity", no?
- EscapeFromNY 3y ago
  > Because there is certainly plenty of speculation outside of those entities. Sure. And there's plenty of non-speculative activity outside of those entities as well. The paper explicitly looks at on-chain activity only. > Because those metrics are terrible proxies for "global financial activity" or "speculation" Maybe so. I put forward my sources, but there could be a better way of calculating it. My broader point was that speculation is the majority of activity, and I doubt that's any different whether you're talking about fiat, gold, oil, crypto, or any other widely used asset/asset class. If you had to calculate that same statistic, what methodology would you use? > You should also understand that all forex activity is not speculation. I would think that global trade would fall under the bucket of "economically meaningful activity", no? In one sense it is meaningful, in another sense it's just a middleman market maker taking their cut, due to the inefficiency of humans having multiple currencies. Either way I don't see how the meaningfulness of trade changes once you introduce crypto. Say I'm subscribed to a Australian musician's patreon. I send her USD, then a middleman sells that USD and gives her AUD. I also support a French musician. I send him BTC. He (or a middleman) sells that BTC for EUR. How can you say either of those situations is more or less economically meaningful?