Bitcoin & Cryptocurrencies

[Pokerface]

2018 has been a heck of a year for cryptocurrencies. A year ago they were at extreme highs.

What are the predictions for 2019, 2020? Which will see growth? Which will disappear? What could the values be in another year?

[Sherlock]

Whole cryptocurrency world depends on bitcoin 4-year cycle. And the 4-year cycle of bitcoin so far repeats almost flawlessly.
The 4 year cycle is defined by halving. In late May 2020 is another halving. Now we have 17.5M btc mined from 21M. The pace now is 1800/day. So for price to be stable, 1800*recent price must flow to bitcoin even now. It is 7.2M of fresh money each day. (And it was 36M per day at peak.) So 3.5 B must come to bitcoin until next halving just to keep price at 4000. 3.5B can be way too much or way too little. We can see another recession and what will bitcoin do? It can go down as highly speculative asset, but it can be also the digital gold and safe harbor, so it can go up then.

So by the next halving 18.5M will be mined. Only 2.5M to go. Pace will be 900/day after 2020. So less inflow fiat money needed for BTC to be at equilibrium. But market knows that and as before 2016 halving price already started to pick up.

What should be expected for 2019 is stabilizing the price at recent level. Maybe with few attempts to break higher but without much success. Then stable rise in the second half of 2019 with halving being priced in. However many factors can completely destroy this idea as suggested above.

What is in much shorter term more important is to see this chart: https://bitcoinwisdom.com/bitcoin/difficulty
If difficulty already bottomed, then the price will not drop further and has the only way: up. But if the difficulty will keep going down, we will see further drop of prices. Bottom in 2015 was also announced by difficulty bottoming.

In my life I did not sell more bitcoins in any month than I gained and I keep doing that. It is not that great entry now as it was 4 years ago, prices more than 10x up, but I believe now is a good time to jump in if anyone has 0 exposure.

[sweetbet]

I will make the following prediction, and I am 100% confident that this will happen.
XRP will overtake BTC in market cap in 2019.

Look at what the XRP market cap is now compared to BTC

https://finance.yahoo.com/cryptocurrencies/
https://forbescrypto.com/crypto

https://coinmarketcap.com/ is not showing the correct market cap.

[Sherlock]

It is apples and pears. XRP is a specific coin, project of a very smart team, who was able to persuade many people that it has value. Also that the coins that are not on the market should be used for overall valuation. In fact they locked away even more coins (like from Jed Mc Calleb), so the real valuation might be even smaller than at cmc.

Market caps do not mean a lot, in case of XRP it means even less.

Note: I deleted all offensive comments against XRP. Still 90% chance this thread will end as a flamewar.

[Sherlock]

What I see as hot topic for 2019 and quite a novelty are stablecoins. Another bullshit after ICO. The same people that were all doom about tether will now praise stablecoins that are not needed at all, just copying tether.

The border between something useful and innovative and between total nonsense will be narrower and narrower.

[ocreditor]

What I see as hot topic for 2019 and quite a novelty are stablecoins. ...

That's interesting.. so if I understand correctly, stablecoins are backed by a real currency (e.g: GUSD and PAX which backed by the United Stats Dollar) in a similar way as the real currency USD is backed by gold?

[TheGooner]

in a similar way as the real currency USD is backed by gold?

ha ha ha ha ha.

[ocreditor]

ha ha ha ha ha.

I guess that not anymore

[Sherlock]

That's interesting.. so if I understand correctly, stablecoins are backed by a real currency (e.g: GUSD and PAX which backed by the United Stats Dollar) in a similar way as the real currency USD is backed by gold?

Yeah something like that.
Fiat currency is not backed by anything, but generally pretends it is. Or at least central banks do not disrupt the popular opinion that their fiat money are backed by something. It is "just" the belief that is backing the currency. In fact people help to central banks to lie to themselves that fiat currencies are backed by something, because we can not imagine the world otherwise.

Money is a symbol. Something between an imaginary and real. That is definition of symbol. Centuries ago the widespread symbol was Jesus Christ for example. People believed in him, people believed in his miracles and so on. They could not imagine their life otherwise, so they literally believed that he walked on water and so on. (Some idiots still do; smart Christians of course understand what is symbolic and that the reason to believe in Jesus is different than the stupid approach as smart people who think about money understand that to believe in fiat also makes sense, but not because it is backed by something). Btw even when USD was backed by gold, it was just backed by 2 beliefs: 1. that USD will be backed by gold even in future 2. That gold has some inherent value [1. was wrong; 2. is questionable, gold had just some value for jewelry and now has some value for superconductors, but it really does not justify the 40k usd/kg]. Enough about symbols, if you find this interesting and /or if I think I am just coming with a random nonsense, the symbols in our life are explained here: https://www.goodreads.com/book/show/...ths_to_Live_By

Stablecoins, including tether, were never properly explained to me, because they can not be explained (1st thing is that makes zero sense to back the stablecoin 1:1 and gain nothing from that). I think that the tether doom&gloom guys might be right that the tether is not fully backed. But they are wrong if they think that the system must fail because of that. We see that the central banks that are not even partially backed work well. We saw that the private banks in 19th century who issued money worked as well (keep in mind that golden standard is generally far from 100% backing!). So stablecoin(s) might work as a private central cryptobank. But we do not need a lot of them and the only real value is to allow speculators to "go to fiat" and move money between exchanges and thus add liquidity into the system. This is important, because banks now make very hard to move bigger money especially when it is connected to crypto. But stablecoins, which are extremely centralized, are not safe enough for the transactions for real people. They will come and go and bust as did the banks in 19th century and it is not a product for real people. The sellers will not tell us how it will replace btc again, but that is just their marketing.

[TheGooner]

I guess that not anymore

The USD came off the gold standard domestically in 1933 during the great depression - but allowed foreign governments to continue to be able to exchange dollars for gold right up until 1971 when it was stopped as the US gold reserve could clearly no longer cover the USD debt.

This was why many international trade deals were denominated in USD from the 1930's to 1970s - it was perceived to be backed by gold.

But now the USD, as with all paper currencies, is not backed by anything of value - hence they are called "fiat" currencies.

There are only two things of value for a fiat currency are :
1/ The Government promises to take their currency to pay tax bills that you owe. (Gee - thanks !!)
2/ The Government issues bonds at a certain interest rate - and promises to pay interest and principal in full.

As the US Government has NEVER defaulted on these bonds yet the USD is considered a high status fiat currency.
(although Trump has suggested defaulting to Mexico / China as president - which would kill the dollar overnight)

Basically - all "fiat" currency works on a promise, and an illusion of stability. When you combine this with the fact that EVERY government is issuing more and more currency - and allowing banks to do the same - it becomes clear that INFLATION is little more than a slow realisation that the paper isn't worth anything.

$1 in 1970 is equivalent in purchasing power to $6.50 today

http://www.in2013dollars.com/us/inflation/1970?amount=1

-------------------------------------------

ASSETS like property, gold, commodities are not really rising in value, rather the purchasing power of paper money/fiat currency is dropping in value as it is continually printed. Today there are many, many millionaires

For many crypto enthusiasts this is one of the attractions of crypto-tokens. Their future values and future numbers are set in advance, mathematically defined, and they will not alter over the existence of the token.

[Sherlock]

When we are at it, since I am ahem an macroeconomist, I would like to point out once again something that is not so clear:
Fiat currencies are usually taken by more enlightened people as not backed by anything.
Gold standard currencies are considered to be backed by gold.

Both is sadly also false.

But let's start with history if I remember my lessons. In 13th century gold was the money in Europe. But rich merchants in Venice and somewhere around indeed had a security problem. They needed to store their riches. They needed vaults. The specialists for the vaults were allegedly goldsmiths. They were storing gold for fee like in lockers. They gave something like a paper confirmation for each piece of gold.

But then happened following:. the merchants realized that when they want to pay someone, they must go to vault, pick up the gold, then give gold to the counterparty and the other merchant will most likely go directly to deposit the gold to the goldsmith. So why not make the process simpler? They can exchange just the piece of paper, right. It is faster, cheaper and more safe. So this is how the first gold backed paper money started to exist.

Later the goldsmiths who were now the bankers realized, that all or most people just exchange the paper certificates and nearly nobody is exchanging the certificates back to gold. So they started to "cheat" and they gave to people more certificates than they had stored gold. So this is how the first gold backed paper money that are not fully backed started to exist.

And that is it! It is called fractional banking. It can exist with gold backed currency as well as with fiat currency. It is a giant scam that works for centuries. I am not ironic, it is the reality, really, but this scam helped our society to exist, because it allowed lending on massive scale and economic booms (and collapses) followed. Until then the human development was quite dull.

We have the same system even now with a modification:
The asset underneath is no more gold but generally the trust. Banks do not store gold now, but so called monetary base, which is a primary money released by state/central bank. Those central bank money are backed by trust. And those money are multiplied by lending of commercial banks and again the system stands on the trust that all the money that do not even exist will be returned.
Like in the famous Escher house, it does not make sense, but it somehow works, so in fact the nonsense makes sense:


People call this system a scam. It is not a scam, it is a miracle. Proven by centuries. Our civilization exists because of that (some contrarians say instead of that).

And stablecoins are just another way how to bring fractional banking into the (crypto)monetary system. Just I do not think system needs many of them and definitely the end user does not need them. In 2019 all those stablecoins sellers will try to persuade everybody that we need stablecoins, bitcoin is obsolete and so on...

Some people think bitcoin or cryptos are the end of the (evil) fractional system. I do not think so. Capitalism need credit for development and for exploitation of sources from majority of people who are stupid enough to borrow instead of hard work. Fractional system existed before fiat currencies and I believe it will exist even after fiat. Just the underlying asset will change from gold over fiat to bitcoin/crypto. That means that even when the maximum of bitcoins issued is 21M, there can be much more btc in circulation, once the credit comes to crypto. The big exchanges like Coinbase (or some better ones) will work like the Venice goldsmiths or the big commercial banks and will create from bitcoins even more bitcoins.

The cryptocurrencies/bitcoin has the only advantage over fiat: unlike by fiat, the monetary base can not be manipulated (raised). Even gold monetary base was not stable. The higher price of gold for example encourages more mining. In 16th century Portuguese and Spanish ships coming from Americas caused inflation in Europe. Neither fiat nor gold is perfect as monetary base. The higher value of bitcoins can never cause that more bitcoins will be mined or revealed. That is the major long term factor why cryptocurrencies have to be taken seriously. Even cryptos after all are just an evolution of current monetary system based on fractional banking.

[WBM]

Ive bought back into ripple again .. bought in last time at 0.12 and then cashed out at 1.92
so im stocking up again

[ocreditor]

Yeah something like that.
Fiat currency is not backed by anything, but generally pretends it is. Or at least central banks do not disrupt the popular opinion that their fiat money are backed by something. It is "just" the belief that is backing the currency. In fact people help to central banks to lie to themselves that fiat currencies are backed by something, because we can not imagine the world otherwise.

Money is a symbol. Something between an imaginary and real. That is definition of symbol. Centuries ago the widespread symbol was Jesus Christ for example. People believed in him, people believed in his miracles and so on. They could not imagine their life otherwise, so they literally believed that he walked on water and so on. (Some idiots still do; smart Christians of course understand what is symbolic and that the reason to believe in Jesus is different than the stupid approach as smart people who think about money understand that to believe in fiat also makes sense, but not because it is backed by something). Btw even when USD was backed by gold, it was just backed by 2 beliefs: 1. that USD will be backed by gold even in future 2. That gold has some inherent value [1. was wrong; 2. is questionable, gold had just some value for jewelry and now has some value for superconductors, but it really does not justify the 40k usd/kg]. Enough about symbols, if you find this interesting and /or if I think I am just coming with a random nonsense, the symbols in our life are explained here: https://www.goodreads.com/book/show/...ths_to_Live_By

Stablecoins, including tether, were never properly explained to me, because they can not be explained (1st thing is that makes zero sense to back the stablecoin 1:1 and gain nothing from that). I think that the tether doom&gloom guys might be right that the tether is not fully backed. But they are wrong if they think that the system must fail because of that. We see that the central banks that are not even partially backed work well. We saw that the private banks in 19th century who issued money worked as well (keep in mind that golden standard is generally far from 100% backing!). So stablecoin(s) might work as a private central cryptobank. But we do not need a lot of them and the only real value is to allow speculators to "go to fiat" and move money between exchanges and thus add liquidity into the system. This is important, because banks now make very hard to move bigger money especially when it is connected to crypto. But stablecoins, which are extremely centralized, are not safe enough for the transactions for real people. They will come and go and bust as did the banks in 19th century and it is not a product for real people. The sellers will not tell us how it will replace btc again, but that is just their marketing.

I really liked your analogy to religion and belief, it makes perfect sense now.
Also your perspective about the Stablecoins which from my understanding are still a pre-mature in general..
But when you say that they are not safe enough for the transactions for real people, do you mean that it's not safe for real people to hold this currency or actually to make a transaction.?... apologies in advance but maybe I'm missing something here

[ocreditor]

The USD came off the gold standard domestically in 1933 during the great depression - but allowed foreign governments to continue to be able to exchange dollars for gold right up until 1971 when it was stopped as the US gold reserve could clearly no longer cover the USD debt.

Well it was so long ago, now you can see why I couldn't remember lol

This was why many international trade deals were denominated in USD from the 1930's to 1970s - it was perceived to be backed by gold.

But now the USD, as with all paper currencies, is not backed by anything of value - hence they are called "fiat" currencies.

There are only two things of value for a fiat currency are :
1/ The Government promises to take their currency to pay tax bills that you owe. (Gee - thanks !!)
2/ The Government issues bonds at a certain interest rate - and promises to pay interest and principal in full.

As the US Government has NEVER defaulted on these bonds yet the USD is considered a high status fiat currency.
(although Trump has suggested defaulting to Mexico / China as president - which would kill the dollar overnight)

Basically - all "fiat" currency works on a promise, and an illusion of stability. When you combine this with the fact that EVERY government is issuing more and more currency - and allowing banks to do the same - it becomes clear that INFLATION is little more than a slow realisation that the paper isn't worth anything.


http://www.in2013dollars.com/us/inflation/1970?amount=1

-------------------------------------------

ASSETS like property, gold, commodities are not really rising in value, rather the purchasing power of paper money/fiat currency is dropping in value as it is continually printed. Today there are many, many millionaires

For many crypto enthusiasts this is one of the attractions of crypto-tokens. Their future values and future numbers are set in advance, mathematically defined, and they will not alter over the existence of the token.

Thanks so much for the detailed explanation, I must admit I didn't had most of this knowledge.. only parts and you connected everything in to a full picture.

When looking at the value the USD changed since 1970 it sounds to me a little actually.. I would have guessed much more if someone would ask me.. after all that's almost 50 years.. amazing!

[ocreditor]

...

And that is it! It is called fractional banking. It can exist with gold backed currency as well as with fiat currency. It is a giant scam that works for centuries. I am not ironic, it is the reality, really, but this scam helped our society to exist, because it allowed lending on massive scale and economic booms (and collapses) followed. Until then the human development was quite dull.

We have the same system even now with a modification:
The asset underneath is no more gold but generally the trust. Banks do not store gold now, but so called monetary base, which is a primary money released by state/central bank. Those central bank money are backed by trust. And those money are multiplied by lending of commercial banks and again the system stands on the trust that all the money that do not even exist will be returned.
Like in the famous Escher house, it does not make sense, but it somehow works, so in fact the nonsense makes sense:
People call this system a scam. It is not a scam, it is a miracle. Proven by centuries. Our civilization exists because of that (some contrarians say instead of that).

It makes perfect sense actually...

[Sherlock]

I really liked your analogy to religion and belief, it makes perfect sense now.
Also your perspective about the Stablecoins which from my understanding are still a pre-mature in general..
But when you say that they are not safe enough for the transactions for real people, do you mean that it's not safe for real people to hold this currency or actually to make a transaction.?... apologies in advance but maybe I'm missing something here

It is perfectly valid question. Safety means many things. In terms of safety of transactions it is the same as bitcoin, you need the private key to send them (ok it is worse since there are no HW wallets for stablecoins yet).

But I meant it in other way. Let's have the analogy with fiat currency. Fiat currency is as stable as the economy of the currency and the government of the issuing country. With stablecoins we are talking about business model of one company who is issuing the currency and their business decisions. If they do those decisions badly the company and currency will go down. Even if they do everything right, they do not steal, also bad things can happen from outside. Fintech startups are less stable than Venezuela. It happened in 19th centuries. There were many runs on deregulated private banks, it happens even now up and there and central banks then usually take action against runs on banks. Here we have no regulation. We saw tether dropping to 0.9 few weeks ago, it was a run on tether. Smaller stablecoins can go down if they are not 100% backed. And I believe there is little sense for issuing a stablecoin and have 100% backing. Maybe tether is after all 100% backed, we do not know, but beneath tether is Bitfinex a very wealthy company with limited access to USD banking. But they make money from the exchange. Why other stablecoins without big exchange creating them should exist makes no sense for me.

So the stablecoins/tether have some use I believe for speculators who need to sell btc worth of 1M at exchange A and the transfer it in few minutes/hours/days/weeks to exchange B and arbitrage it or speculate for price movement. This is the only reason for stablecoins to exist. Because you can hold the money at your wallet, you hold fiat value. But you are taking some risks. Stablecoins will be however always dependent on the company issuing them. Normal people just need an exchange that will exchange their crypto to fiat and back.

That said is just about centralized stablecoins. There exist also decentralized stablecoins, but they have no significant value yet and it is too early to evaluate them.

[ocreditor]

So if I understand correctly your perspective, this is a coin that all it's entire purpose is to keep/secure another coin value transaction while the coin itself is venerable and depends on the issuing company performance and decision making solely

[Sherlock]

IMO purpose of centralized stablecoins is that they are an alternative how to hedge cryptocurrencies.
They have higher risk of default than fiat, but offer more possibilities how to store and transact them than fiat.

In 2019 I think we will hear a lot of bs how stablecoins will replace bitcoin. Just be prepared.

[JCA]

Central bank stablecoins (or CBDC) would be backed by the support of the central banks, so they would not have higher risk of default.

Central bank of many countries are already interested in such coins, so we would possibly see more cases, not just Petro.

[Sherlock]

If they ever exist, it is just another fiat. Same "backing" as recent fiat. Zero need to exist as blockchain. Who will secure such blockchain? The central bank itself. For what purpose then? It will have the same security as current centralized computers where the transactions are being stored. Just the blockchain is more complex and more costly.

The core why blockchain cryptos make sense is POW or POS or similar. Independent and scattered entities confirm the transactions. Stablecoins created by central banks do not solve a single problem. It will not make transactions faster, it will not allow the grey and black economy to participate and it will not change the monetary policy. Central banks want always control over money supply. Blockchain like bitcoin will take that power out from them. "Blockchain" like central bank stablecoin will keep that power by them.

Central bank stablecoins are just a nonsense. But it is remarkable, because it just shows how everybody can tell anything and life goes on.