thank you for your very clear analysis, that makes sense to me. And then there's the enormous waste of power involved in bitcoin mining. As Mortazavi said in Jacobin (Jan 2022): "If cryptocurrency markets cannot keep luring in enough new money to cover the growing costs of mining, the scheme will become unworkable and financially insolvent."
This argument is based on a lack of understanding of how bitcoin mining works. There is no 'ever growing cost of mining'.
If the price of bitcoin were to drop, unprofitable miners (those with the highest electricity costs) will shut down their machines. This makes it more profitable for surviving miners to mine bitcoin, because the same amount of coins are mined by less miners. After a certain period, the difficulty of mining readjusts downward to bring the system back in equilibrium. This happens automatically and is backed into the protocol.
This is called the difficulty adjustment and is a fundamental aspect of bitcoin. Anybody who does not understand this is not qualified to opine in the economics of bitcoin mining.
I'm not trying to be rude, but writing about bitcoin mining and not mentioning the difficulty adjustment or claiming the the cost is forever increasing immediately disqualifies the author.
Firstly, waste is in the eye of the beholder. I personally love bitcoin so I don't think its a waste, but let's take a look at it from the perspective of somebody who doesn't care for it.
Bitcoin mining is a brutal, cutthroat business where 1 cent difference in the price of electricity per kWh can mean the difference between success and bankruptcy. Therefore, miners are always looking for the absolute cheapest source of power and this often happens to be wasted or stranded energy.
For example, landfills emit huge amounts of methane which is a greenhouse gas much more potent than CO2. If that methane can be captured and burned, you generate electricity and CO2. This is a win win, since you are getting cheap power and actually helping the climate. Now, it needs to be economically sustainable to build that infrastructure at the land fill, transport that power to where it can be consumed etc. Or you put some containers there with miners, a cell connection and you start mining.
Same with flared gas at oil and gas drilling, but some bitcoin miners there, make money and help the climate.
In China there used to be massive overcapacity at hydro power stations inland that wasn't being used because they hadn't build the infrastructure to transport it to the cities. Perfect for mining, those hydro stations earn money that they can use to build the transport infra, bitcoin miners get bitcoin and no impact on the climate.
Bitcoin miners are a unique business because 1) they run 24/7/365 and 2) they can shut down in seconds if that power is needed elsewhere. So they incentivice the build out of energy infrastructure since they are guaranteed buyer that can shut down when needed.
There is more than enough wastes and stranded energy to secure the bitcoin network without it being in competition with other power consumers.
Wasted or stranded energy is not 'cheap' though. I used to dabble in the carbon markets, where they'd do stuff like anaerobic digestion plants for landfill, subsidised by selling carbon credits, and the whole point is that it's not economically viable unless subsidised (which is part of the 'additionality' requirements to earn carbon credits)
So, what you seem to be saying is rather that Bitcoin miners are prepared to invest in building out more expensive energy due to the profits available
I think your strongest argument is something along the lines of 'Bitcoin miners can partner with grid operators to do demand response stuff to pick up or drop capacity when needed'.
All I can say for this is that, for the sake of the Bitcoin community, you better hope like hell that they only end up using energy that nobody else is using, because in the context of true energy competition, society will be forced to look more deeply into what the hell is being created with the energy, and looking too deeply into a Bitcoin token reveals the circularity
I think a distinction needs to be made between stranded and wasted energy. Hydro electricity that cannot be used for lake of infrastructure definitely is cheap, else bitcoin miners wouldn't use it. It is also temporary since once the power lines are built out society will probably choose other uses for it. But since electricity production is relatively local and bitcoin miners can easily move around I don't see an issue here.
Regarding wasted energy, like methane from landfills, your argument is that it's only economically viable to capture and burn it because of subsidies? Could it be that bitcoin mining with its 24/7 energy demand changes this? In any case, even if it takes subsidies it's still a win for the climate and the government subsidizes a ton of environmental tech that is otherwise not economically viable no?
Regarding, demand response this does seem to work well in Texas as was seen recently when they shut down in response to increased energy demand.
We should remember there is no fixed amount of electricity that needs to be consumed for the network to be operational. As long as a 51% attack is infeasible we're good and it could be argued bitcoin is oversecured right now. If necessary we go back to mining with GPUs good luck stopping that.
Finally, I think that the production of green *electricity* is a solved problem. Not energy as a whole of course, but electricity can be produced cleanly and abundantly using nukes with some hydro and sun thrown in. It is only our own superstition that is stopping this. Look at China which is run by engineers is building out nukes like crazy.
So much has been written about the "scam" of fiat money and the Federal Reserve. "The Creature from Jekyll Island" and all that. The people who get the newly created fiat money first see their net wealth increase, while those who get it later (the majority) wonder why they keep falling behind.
Bitcoin seems to be especially attractive to younger, entrepreneurial men. To me, it seems to work for them more often than not. But it is volatile. The gaming/gambling aspect of it, I think, gives them a big dopamine hit from time to time when they notch up a spectacular gain. Remembering that rush can stoke fantasies of experiencing that rush again.
The non-level playing field of fiat money and Fed money creation can produce dreams of beating those bastards and their "rigged game" with another "rigged game"?? Am I onto something or just an ignorant old bloke?
Hi Duncan, I think its very important to conceptually separate a critique of the US dollar system from assertions about Bitcoin. For example, I can describe a burning building (the US dollar system), but that doesn't mean a bucket of sand (Bitcoin) means anything.
The Bitcoin community heavily relies on, firstly, a straw-man account of the 'fiat system', drawing heavily on libertarian mythologies of commodity money. Then, secondly, they rely on a heavily romanticised account of their token, in which they imagine at as some kind of salvation that responds to their (flawed) critique of the dollar system.
Now it's very true that this combination can play into the imagination of those young men that you describe, but it's always a form of false consciousness, because - at some level - those young men know that they are just engaging in a form of game-like speculation rather than some profound political movement.
So yes, you are right that the crypto industry does exploit that imagination of beating the 'rigged game', but in many ways they are supportive of the status quo, because it's quite helpful to distract young men with speculative daydreams that to actually mobilise those same people to demand actual change
Interesting reply. I am a recently retired "baby boomer" who is not seduced by Bitcoin propaganda, mainly because I want to preserve my limited security into my retirement. But I do understand young men who are essentially choosing to speculate on Bitcoin. But my instinct is that it is a form of speculation rather than truly a form of investment. But hey, if I one day have to say "you were right, I was wrong" - like you had bigger balls than me and thus you made a lot of gains which I missed out on - I will gladly do so. At my age, it is no time to fantasise that you are "Big Balls". But hey, the world needs a certain number of younger men who see themselves as blokes with "Big Balls" - they are performing an important role in this current "4th Turning" (??) era! I wish them well.
Well, the point about 'big balls' is questionable. Bitcoin speculation is highly conventional now, and buying it out of FOMO is arguably a sign of a lack of critical or risk-taking impulse rather than the presence of one
Fair enough - my sample of known Bitcoin investors/speculators is admittedly small and probably out of date. Thanks for taking the time to respond to my comments.
Appreciate the long write up but I think there’s some conceptual mistakes.
1. You say BTC price is “random” but equities trade based on some hypothetical fair value — yet BTC has a high correlation to risk-on equities. They’re both just driven by liquidity.
2. If you think of BTC as a commodity, then demand-supply as drivers of price are sufficient. Does gold price only fluctuate when new mines are found or emptied out?
3. Choosing to apply certain frameworks for value (train tracks) are a subjective choice. Just because something doesn’t fit your chosen framework doesn’t mean it can’t have value. Value is always subjective, and if people value holding a censorship resistant asset they can move globally, you can’t make normative judgement that that doesn’t qualify as “value”.
I can go on and on.
I’m not hardcore BTCer — I’ve written 10k+ words and don’t multi podcasts explaining why the community is messed up and co-opted by tradfi and how their mishmash of pseudo-libertarianism and neoliberalism is idiotic.
But I still defend BTC against critiques that have been around for a long time without any substantiation.
Hey Taimur, thanks for your response. Here are some responses
1) I didn't say Bitcoin price is random. I said in the early days it was random. Secondly, I didn't say that equities trade based on fair value. I said equities are moderated and affected by fair value calculations. This is why there is a class of fundamental traders who will short markets etc, and also why, for example, share prices of individual companies are heavily affected by earnings reports. This is not to say that the market is 'rational', but in a stock market you can make claims about 'bubbles' precisely because there is some theoretical model to say that something is overpriced. That overpricing can very well be due to a factor like easy money, for example, which of course can affect bitcoin too
2) Gold prices are heavily influenced by fear and risk-aversion, due to a long-established belief that, when all goes to shit, humanity retreats to attractive, shiny metal. That is a fundamental factor, but it's taken thousands of years to develop, and is entrenched in religious ritual, culture etc. Hypothetically Bitcoin could achieve such a status in future, but it's got a long way to go (also, I don't think of Bitcoin as a commodity - it's a digital object)
3) I don't find this particularly compelling. I mean, it is a very interesting socio-cultural phenomenon that people have a belief that the movability of an object can grant it value - and that's worthy of study by an economic anthropologist, for example - but that's a weak belief that can quite easily buckle. One of the most interesting elements of the early Bitcoin community was their use of language to simply state without proof that the movable object was something beyond the tracks - i.e. they'd say it's a 'currency', or an 'asset', precisely because you needed some external justification for why the movable thing was valuable. Having got some basic cultural buy-in that could establish a price, they could then rely upon countertrade to give the illusion of it being 'moneylike', which in turn could be used to reinforce the narrative, but this is always a delicate balancing act that requires turning a blind-eye to some very obvious factors (i.e. Bitcoin's got no countertradability if it has no dollar price). This is why the Bitcoin community cannot face this stuff - the story relies on a series of circular justifications, and - to keep those going - you need to not look too closely at them.
The whole point of this article is that the job of a fundamental analyst is to ignore articles of faith and stare through the bullshit. Now, a good anthropological fundamental analysis will point out that bullshit can be culturally powerful, and I'd certainly agree that the Bitcoin community - of which I was once part - has been very good at that
Agreed, Fictitious, The Bitcoin community of 2025 is indeed big time messed up, partly driven by the greed of those with big stacks. This does not mean at all that it has no no valid value driver, one which Scott never mentions: the monetary premium commanded by a monetised commodity, even if it has no other use or value.
Great writing as always. You left out one word though: Gaming.
Many people want to make money and apparently don't want to be burdened by fundamentals or research of traditional markets. Bitcoin behaves like a stock -- buyers and sellers and fluctuating prices -- but bitcoin traders don't need to know anything else about it. It's just gaming.
Don't underestimate the underlying ability of gaming to be monetized.
Bitcoin trading is available twenty-four hours a day -- something stock markets don't offer -- and it's international in scope.
(Not to mention bitcoin is useful for anonymous criminal activity which will never go away.)
And as you mentioned, it is further underpinned and manipulated by whales swimming in money, whether corporations, sovereign entities, or individuals.
I'm a detractor, but I acknowledge these points and how they unfortunately support bitcoin sustainability. The hype surrounding it is disgusting, but that's not much different from the hype we face every day about everything.
If the crypto topic interests you, then I hope you already know about Molly White's newsletter which offers a well-written, comprehensive view of crypto shenanigans and crimes.
Brett, that is an exemplary analysis and clear explanation of the valuation processes in the financial markets, and the forces that shape price movements of Bitcoin and other similar virtual commodities.
In a way, the expected government manipulation of the Bitcoin market by means of massive purchases is analogous to the massive purchases of US government bonds and notes by central banks, commercial banks, and others who still have faith in them despite their lack of any solid backing in the real world. The fact is that all of that accumulated US government debt will never be repaid. That itself is a bubble that will eventually burst. God help us.
I would be interestsed for you to comment on the similarities between gold and bitcoin. Gold has recently acquired some limited industrial uses, and before that was useful in jewelry, but I think we can safely say thaf the price of gold is not determined by its usefullnes.
Regarding the self fulfilling prophecy you mentioned: I think you hit the nail on the head here. All that was needed was to have the first verifiably limited 'thing' and a community of *economically self interested* people who memed this thing into becoming a financial asset.
As long as some people buy this thing when the prices crashes their is a floor price. The 21M hard cap combined with an infinite amount of fiat money does the rest.
Hi Vincent, gold has thousands of years of history behind it and it is tactile, which makes a huge difference because we are biological creatures who like to touch and see things. This is why gold is deeply entrenched as a quasi-mystical status good. I think the most that Bitcoin can hope for is to achieve something culturally similar through mysticism, though I remain unconvinced that it can.
The biggest threat to the Bitcoin community is probably boredom. If you fail to create a deep culturally entrenched mysticism over the next, say, 20 years, you face widespread boredom over the tokens. People will begin to see it as something their parents used to be interested in, but will fail to share the cultural enthusiasm, having not experienced the political moment and sense of euphoria. After all, there are only so many millenarian waves that a movement can have before it has to start delivering on some of its promises
I agree lack of interest is the biggest challenge. Ultimately what interests most people is profit, so if bitcoin stops outperforming the S&P people will lose interest and only some cypherpunk nerds will remain and the price will reflect that. But then why even bother with bitcoin when things like monero function better for countertrade.
Great job pulling all that together, Brett. I was aware of many of the facts, but the context you provide was the key to understanding. I'd never thought about what the lack of fundamentals would do to a market.
I'll offer one note: there was an opportunity to debunk the very idea that the US needs to invest in crypto in the hope of acquiring more dollars.
This is a great article Brett! I hope the “fundamentals” prevail. I am equating Bitcoin to a beanie baby and the rage behind it - is that a fair comparison?
@brett - the Too Big Too Fail narrative. I also agree believe with this, unless there a massive black-swan event like a some sort of mega-bitcoin hack in which even investors like Michael Saylor get swindled.
My question is: How similiar is this sort of US-government backed manipulation-turned bailout to the financial crisis of 2008? The banks also seem to engage in sketchy behaviors for profit, that became so big - the US governemnt 'Had' to bail them out.
Also, is it just common business/government practice at this point for the government to prop up industries that are 'in demand' either by the populist or national security? I ask because it seems like there are dozens of other industries like this (yes less speculative in nature) that the US-government props up or has been forced to prop up
Hi Brian, the only similarity is the too-big-to-fail element, where the thing being traded threatens to cause instability if it fails and hence draws political support.
The mortgage backed securities market concerned credit instruments attached to real estate, but these instruments were subject to fundamental analysis. They could be heavily overpriced because of the way they were packaged, but if you actually dug deep enough you could study the underlying loans they were built from, which is the story told in Michael Lewis' The Big Short, for example.
But yes, it's always been common practice for states and big corporates to work together. I mean, that's kinda the core of all capitalist systems
Thank you! A very good and comprehensive view of the Bitcoin and crypto marketplace, and the inherent 'Emperor's new clothes' aspect of trading something that has no inherent worth, except perhaps for criminal gangs that want to shift money around! A kind of criminal religious faith?
I will add two comments, if I may:
I suspect Trump's crypto play has two purposes; the first has already happened, making him very rich in crypto terms, but as you point out, the moment he tries to sell, he scares everyone and the price plummets. So I think the second part for Trump will be to swap his crypto 'wealth' for gold, by the US government (i.e. Trump) deciding to hold a proportion of its national reserves in crypto instead of gold. So the government buys some chosen crypto assets (including Trump's) with the gold reserves, and leaves Trump with real wealth. Presumably the gold will be on the first flight to Zurich!
The second issue if the technical one of the fundamental security of 'unbreakable' blockchain encryption. The fast development of Quantum computing is likely to be able to unravel blockchain identifiers and so break into crypto accounts in the coming few months or years, and for obvious reasons no one involved wants to say when. At that point, all cryptos fall to their true worth, i.e. zero!
So sooner of later Bitcoin and cryptos will become valueless and the biggest bubble of nothingness will disappear, leaving the vast majority with nothing and a few people massively wealthy.
Isn't it strange how it always seems to end up that way? Almost as if........ 🤔
Because the absolute core of crypto is the blockchain code, the unique identifier for each account and each transaction that is universally held - every transaction is recorded everywhere on a 'universal ledger'.
The moment a quantum computer can unlock those codes, then any transaction can be tracked back to the owner, anonymity is gone and the entire legitimacy of the blockchain technology is compromised and made useless.
Mainstream money is completely different. The money issued has a single, central ledger operated by the government issuing the money, and the currency is like an IOU, guaranteed by that government based on its assets and tax income. The actual transactions between other parties are mostly third parties swapping money, and have no coding or anonymity that can be hacked.
Note that both rely upon public confidence to function as money. If the government becomes untrustworthy, then people stop using their currency and its value collapses. If the crypto coding is hacked just once, then all confidence is gone and the 'value' of all cryptos fall to their underlying asset value or guarantee value, which is zero. It would be instant - trillions of imaginary Dollars wiped out.
Thanks for expounding. Inserting code, falsifying identifiers, hijacking passwords sounds like trouble for all financial institutions and markets. I don't see them being immune to such threats. There are plenty of reasons I'm not interested in crypto holdings, but I am interested in and concerned about how it is affecting traditional financial institutions.
My take would be your both right and wrong at the same time . Yes there will be a huge pullback in btc as a result of micro stategy and it's competition, creating these expensive etfs. However the actual pull back in btc will be significantly less . The market for whatever reason is valuing these companies at 2x or more the actual price of btc (Matt Levine has written pretty exhaustively about this) . That is your bubble, not the actual price of BTC which will likely continue to do the what it has always done.
Basically act like an erratic/volatile stock. Why would it continue to do that? Why does anything ? Its not like our system is built entirely on value these days. Innertia, buyin from the existing financial structure, imo the fact that we now have btc etfs makes me pretty confident it won't go to 0. It may go to 5$ but not 0. Im more confident that btc will be above a 1000 in 10.yrs than nvidia tbh,
"Perhaps the most notable feature of the Bitcoin market since its inception has been the almost total absence of a class of true fundamental traders."
No : the fact that, after a sharp drop in bitcoin, each floor is higher than the previous one suggests that bitcoin buyers are increasingly long-term holders convinced of its intrinsic value, rather than traders relying on technical analysis.
Hey Olivier, thanks for your comment. I'd still say that HODLing is not fundamental analysis. Most of the justifications for the 'intrinsic vale' rely upon those circular articles of faith I describe in the piece. That's fine - you can build a faith out of circular principles, but I'd be very dubious about calling that a form of 'analysis'
That argument seems weak to me. If you read Lyn Alden's "Broken Money," you'll find a book with a clear analysis of what makes Bitcoin intrinsically valuable. The author may be wrong, but saying that her reasoning is circular is fallacious.
Excellent question. How would you answer it? And if you don’t know how to answer it, how can you claim that the author’s reasoning is circular or even false?
I don't see anywhere in the text where I claim that Lynn's reasoning is circular, and I'm still struggling to know why you don't want to give me the argument - surely if it's so compelling you'd be able to summarise it? I don't have time to read every book put out in defence of Bitcoin - that would takes years at this point. Come Olivier - I'm not expecting you to write me an essay, but you have to be able to at least give some basic account of the argument, rather than saying 'go read this long book'
Brett, most of your article is based on the idea that Bitcoiners' reasoning is circular, and that it's impossible to prove its intrinsic value.
All it takes is one argument that proves this intrinsic value to completely undermine most of your thesis.
I'm not telling you to read *all* the books on Bitcoin. Broken Money is easily in the top three most important books on Bitcoin.
Don't you think that in order to criticize a thesis in a meaningful way, you have to have studied it in depth—to, as Charlie Munger said, “understand it better than your opponent”? And that reading the top five books on the subject is a good way to understand it?
If you don't want to make the effort, ask an AI to give you the highlights. I'm not your personal LLM. But there's a lot of alpha to be gained from reading a text in its entirety.
While this criticism of a lot nonsense narratives in the cult part of Bitcoin is partly correct, this piece has not treated the argument which should matter for a serious economist: Bitcoin has a fighting chance to be the base money for a pretty much ideal future monetary system, replacing the highly problematic, fragile, and morally fraudulent fiat system.
The article does simply dismiss only a distorted conspiracy version of this future as: “destroy the US dollar and the financial sector”. In a Schumpeterian sense "creative destruction" might be applicable for the "Fiat USD", but the USD could always switch to a Bitcoin base to a "Hard USD", just as it once had a gold base. It is totally incorrect that Bitcoin would "destroy" the financial sector, it will still be needed and much more resilient than under the fragile, manipulated fiat system.
Scott’s greater fool argument indeed seems to play role in many bitcoiners’ minds, specially the financially illiterate ones, I can confirm. Irrespective of this fallacy, Bitcoin has a possible fundamental value as future base money (similar to gold’s fundamental $20/oz. around 1900). Therefore this future value must be weighted with the probability that a Bitcoin-based monetary system will in fact arise, if things go well.
Gold still has monetary demand premium from central banks buying it with their colourful paper scraps in supposedly limited supply, representing thin air. Silver doesn't and therefore is demonetised, hence no longer 1:16 to gold, just industrial demand value.
Privacy and censorship resistance are much more than just a special user group of the transfer use case. It is imperative for an ideal money which must be perfectly fungible. That's why the upcoming Credit Money layer for Bitcoin (M1 money) uses Chaumian mint technology, eCash. Unlimited scaling, near perfect privacy, not censorable, instant, free.
Any communication channel will be a rail for Bitcredit (which we are building). Perfectly secure claims to Bitcoin can be sent via any network:
- SMS, Whatsapp, Telegram, Nostr, X/Twitter
- Bluetooth, NFC, airdrop
- QR codes, morse code
- http headers, mesh networks, onion packages, space satellites
- audio spectrograms, image steganography
And, most fun:
- bank transfer subject fields
So no, Bitcoin will not "crash our economy" it will be the basis of our future monetary system and free our economy from the scourge of the communist central planners which hold the economy hostage today.
The first thing I'd say is that you haven't actually responded to any of the critique I put out. You have mostly just reasserted the standard Austrian econ line
Secondly, your description of our monetary system is not strong enough. The dollar system is far more sophisticated and powerful that you are describing (e.g. you use phrases like 'representing thin air', which is a straw man of the highest order)
Thirdly, you're very heavily invested in an 'ideal type' commodity theory of money based on libertarian assumptions of individualism, rather than an economic anthropology account of money based on interdependence and credit. I wrote a description of how your own thought system works here, and why it naturally leads to a fetishism for Bitcoin https://www.asomo.co/p/the-archipelago
So, I understand where you're coming from, but I think where you're coming from starts from fundamentally flawed assumptions
thanks for your reply but I am not sure you actually considered my comment.
1. I have directly responded to your critique of some silly bitcoiner narratives: I agree with most of your counterarguments. There is lots of nonsense, as most are not economists. Still, their chatter is totally irrelevant. The future of money is what matters and "Bitcoin does not care".
2. I never wrote that the dollar system is not "sophisticated". To the opposite: It takes a lot of sophistication of keep up such a massive fraud for more than a century.
3. "Thin air" is not a "straw man" but metaphor used by those economists who understand the fiat fraud. Hayek, Friedman, Mises, and – outspoken – Rothbard explain it in detail.
4. I am not at all "invested in" the commodity theory of money. Anyone who truly wants to understand monetary systems, also needs to consider the credit theory of money, just like we need the wave and particle duality to understand light.
Last, having shown that you do not understand "where I am coming from", I do understand where you are coming from: I still remember Graebner's fallacies, he was also an anthropologist without a degree in economics. Catchy stories, but with half-cooked understanding of monetary economics, tainted by the false lure of socialism and collectivism.
If you really believe that the US government is about to try to hard anchor the US dollar to a Bitcoin base, then fine, but you'll have to then give a political economy account of why on earth the US state would do that, and why that system wouldn't break within months. You'd also have to give an account of why on earth the crypto industry would support such a move, given that they clearly make all their profits in US dollars from people repeatedly buying and selling the tokens, rather than holding them in reserve to back some kind of Bitcoin IOU. You'd also have to explain why on earth anyone would want to price any form of debt in a speculative asset that can massively spike in price and thereby leave you in debt bondage
Ha ha, I find it quite funny how puritanical Austrian economics can be (the language always goes on about the massive fraud, the terrible deceit, the unnatural abomination, the unforgiveable deviation from natural law, the betrayal of the people etc etc).
Don't take me too seriously - I'm poking fun - but it really does appear to me as a thought-system emerging from disillusionment - "we were told money was one thing, but we've been deceived" - but I still always struggle to know why you begin with the romanticised vision of what money 'should be', which is what then makes you dismayed at what it really is
I also find that statement 'without a degree in economics' hilarious - it's almost like you believe economists are well positioned to understand the monetary system, after centuries of repeatedly showing that their models are paradigmatically unsuitable. But, let's not sit here and sling 'you don't understand money' at each other - it's not like we're going to convince each other
If you'd like to hear me discuss why I think that I'm not anti-Bitcoin, see the opening five minutes of this video I put out a couple days ago https://www.asomo.co/p/the-bitcoin-carnival
1. "If you really believe that the US government is about to try to hard anchor the US dollar to a Bitcoin base"
Where have I said so? First, Bitcoin itself must stabilise, the non-statist institutional setup be made available and ramp up.
The US dollar right now is a politically weaponised, inferior inflationary product which would be unable to persist in free competition of non-government monies. It will first have to live through "creative destruction" of free, unstoppable competition before – maybe finally – a (rare) wise politician will come to their senses and move to a hard standard.
2. "the crypto industry would support such a move"
Nobody needs the crapto industry to support the monetisation of Bitcoin. What a strange idea. The crapto lot (at least their 'customers') neither understand nor care about ideal money. They want lambos, no more.
3. Bitcoin "backed" token money has nothing to do with it at all. Proper backing for honest credit money is real goods, produced by the real economy, denominated in Bitcoin. No crapto, no fiat scam.
4. "a speculative asset that can massively spike in price"
Circular thinking. A circulating medium of exchange spontaneously stabilises. Always has, in history. There's no need for politicians, central planners, or MMT clowns.
5. Your video
I watched the first 5 minutes, as suggested. Reminder: I already said that I share some of your criticism of too much nonsense and shilling in the post-2015 Bitcoiner narrative. The fallacy in your position is that it (suddenly uncritically) accepts the mistaken Bitcoiner narrative of "natural" Store of Value only. This idea fails to recognise the difference between Bitcoin as a base money and Bitcoin-denominated credit money and their monetary interplay.
If you are interested in this interplay, feel free to listen into here, although I'd recommend the full video not just 5 minutes. https://www.youtube.com/watch?v=yG4Lmv_uScM
thank you for your very clear analysis, that makes sense to me. And then there's the enormous waste of power involved in bitcoin mining. As Mortazavi said in Jacobin (Jan 2022): "If cryptocurrency markets cannot keep luring in enough new money to cover the growing costs of mining, the scheme will become unworkable and financially insolvent."
Absolutely
This argument is based on a lack of understanding of how bitcoin mining works. There is no 'ever growing cost of mining'.
If the price of bitcoin were to drop, unprofitable miners (those with the highest electricity costs) will shut down their machines. This makes it more profitable for surviving miners to mine bitcoin, because the same amount of coins are mined by less miners. After a certain period, the difficulty of mining readjusts downward to bring the system back in equilibrium. This happens automatically and is backed into the protocol.
This is called the difficulty adjustment and is a fundamental aspect of bitcoin. Anybody who does not understand this is not qualified to opine in the economics of bitcoin mining.
I'm not trying to be rude, but writing about bitcoin mining and not mentioning the difficulty adjustment or claiming the the cost is forever increasing immediately disqualifies the author.
I mention this in footnote 2
I was referring to the Jacobin article not your article.
ah I see, I didn't understand the implications of footnote 2.
thanks for that information: interesting! but it's still a massive waste of power, yes?
Firstly, waste is in the eye of the beholder. I personally love bitcoin so I don't think its a waste, but let's take a look at it from the perspective of somebody who doesn't care for it.
Bitcoin mining is a brutal, cutthroat business where 1 cent difference in the price of electricity per kWh can mean the difference between success and bankruptcy. Therefore, miners are always looking for the absolute cheapest source of power and this often happens to be wasted or stranded energy.
For example, landfills emit huge amounts of methane which is a greenhouse gas much more potent than CO2. If that methane can be captured and burned, you generate electricity and CO2. This is a win win, since you are getting cheap power and actually helping the climate. Now, it needs to be economically sustainable to build that infrastructure at the land fill, transport that power to where it can be consumed etc. Or you put some containers there with miners, a cell connection and you start mining.
Same with flared gas at oil and gas drilling, but some bitcoin miners there, make money and help the climate.
In China there used to be massive overcapacity at hydro power stations inland that wasn't being used because they hadn't build the infrastructure to transport it to the cities. Perfect for mining, those hydro stations earn money that they can use to build the transport infra, bitcoin miners get bitcoin and no impact on the climate.
Bitcoin miners are a unique business because 1) they run 24/7/365 and 2) they can shut down in seconds if that power is needed elsewhere. So they incentivice the build out of energy infrastructure since they are guaranteed buyer that can shut down when needed.
There is more than enough wastes and stranded energy to secure the bitcoin network without it being in competition with other power consumers.
Wasted or stranded energy is not 'cheap' though. I used to dabble in the carbon markets, where they'd do stuff like anaerobic digestion plants for landfill, subsidised by selling carbon credits, and the whole point is that it's not economically viable unless subsidised (which is part of the 'additionality' requirements to earn carbon credits)
So, what you seem to be saying is rather that Bitcoin miners are prepared to invest in building out more expensive energy due to the profits available
I think your strongest argument is something along the lines of 'Bitcoin miners can partner with grid operators to do demand response stuff to pick up or drop capacity when needed'.
All I can say for this is that, for the sake of the Bitcoin community, you better hope like hell that they only end up using energy that nobody else is using, because in the context of true energy competition, society will be forced to look more deeply into what the hell is being created with the energy, and looking too deeply into a Bitcoin token reveals the circularity
I think a distinction needs to be made between stranded and wasted energy. Hydro electricity that cannot be used for lake of infrastructure definitely is cheap, else bitcoin miners wouldn't use it. It is also temporary since once the power lines are built out society will probably choose other uses for it. But since electricity production is relatively local and bitcoin miners can easily move around I don't see an issue here.
Regarding wasted energy, like methane from landfills, your argument is that it's only economically viable to capture and burn it because of subsidies? Could it be that bitcoin mining with its 24/7 energy demand changes this? In any case, even if it takes subsidies it's still a win for the climate and the government subsidizes a ton of environmental tech that is otherwise not economically viable no?
Regarding, demand response this does seem to work well in Texas as was seen recently when they shut down in response to increased energy demand.
We should remember there is no fixed amount of electricity that needs to be consumed for the network to be operational. As long as a 51% attack is infeasible we're good and it could be argued bitcoin is oversecured right now. If necessary we go back to mining with GPUs good luck stopping that.
Finally, I think that the production of green *electricity* is a solved problem. Not energy as a whole of course, but electricity can be produced cleanly and abundantly using nukes with some hydro and sun thrown in. It is only our own superstition that is stopping this. Look at China which is run by engineers is building out nukes like crazy.
Very (vibe) ponzi-scheme like
So much has been written about the "scam" of fiat money and the Federal Reserve. "The Creature from Jekyll Island" and all that. The people who get the newly created fiat money first see their net wealth increase, while those who get it later (the majority) wonder why they keep falling behind.
Bitcoin seems to be especially attractive to younger, entrepreneurial men. To me, it seems to work for them more often than not. But it is volatile. The gaming/gambling aspect of it, I think, gives them a big dopamine hit from time to time when they notch up a spectacular gain. Remembering that rush can stoke fantasies of experiencing that rush again.
The non-level playing field of fiat money and Fed money creation can produce dreams of beating those bastards and their "rigged game" with another "rigged game"?? Am I onto something or just an ignorant old bloke?
Hi Duncan, I think its very important to conceptually separate a critique of the US dollar system from assertions about Bitcoin. For example, I can describe a burning building (the US dollar system), but that doesn't mean a bucket of sand (Bitcoin) means anything.
The Bitcoin community heavily relies on, firstly, a straw-man account of the 'fiat system', drawing heavily on libertarian mythologies of commodity money. Then, secondly, they rely on a heavily romanticised account of their token, in which they imagine at as some kind of salvation that responds to their (flawed) critique of the dollar system.
Now it's very true that this combination can play into the imagination of those young men that you describe, but it's always a form of false consciousness, because - at some level - those young men know that they are just engaging in a form of game-like speculation rather than some profound political movement.
So yes, you are right that the crypto industry does exploit that imagination of beating the 'rigged game', but in many ways they are supportive of the status quo, because it's quite helpful to distract young men with speculative daydreams that to actually mobilise those same people to demand actual change
Interesting reply. I am a recently retired "baby boomer" who is not seduced by Bitcoin propaganda, mainly because I want to preserve my limited security into my retirement. But I do understand young men who are essentially choosing to speculate on Bitcoin. But my instinct is that it is a form of speculation rather than truly a form of investment. But hey, if I one day have to say "you were right, I was wrong" - like you had bigger balls than me and thus you made a lot of gains which I missed out on - I will gladly do so. At my age, it is no time to fantasise that you are "Big Balls". But hey, the world needs a certain number of younger men who see themselves as blokes with "Big Balls" - they are performing an important role in this current "4th Turning" (??) era! I wish them well.
Well, the point about 'big balls' is questionable. Bitcoin speculation is highly conventional now, and buying it out of FOMO is arguably a sign of a lack of critical or risk-taking impulse rather than the presence of one
Fair enough - my sample of known Bitcoin investors/speculators is admittedly small and probably out of date. Thanks for taking the time to respond to my comments.
Appreciate the long write up but I think there’s some conceptual mistakes.
1. You say BTC price is “random” but equities trade based on some hypothetical fair value — yet BTC has a high correlation to risk-on equities. They’re both just driven by liquidity.
2. If you think of BTC as a commodity, then demand-supply as drivers of price are sufficient. Does gold price only fluctuate when new mines are found or emptied out?
3. Choosing to apply certain frameworks for value (train tracks) are a subjective choice. Just because something doesn’t fit your chosen framework doesn’t mean it can’t have value. Value is always subjective, and if people value holding a censorship resistant asset they can move globally, you can’t make normative judgement that that doesn’t qualify as “value”.
I can go on and on.
I’m not hardcore BTCer — I’ve written 10k+ words and don’t multi podcasts explaining why the community is messed up and co-opted by tradfi and how their mishmash of pseudo-libertarianism and neoliberalism is idiotic.
But I still defend BTC against critiques that have been around for a long time without any substantiation.
Hey Taimur, thanks for your response. Here are some responses
1) I didn't say Bitcoin price is random. I said in the early days it was random. Secondly, I didn't say that equities trade based on fair value. I said equities are moderated and affected by fair value calculations. This is why there is a class of fundamental traders who will short markets etc, and also why, for example, share prices of individual companies are heavily affected by earnings reports. This is not to say that the market is 'rational', but in a stock market you can make claims about 'bubbles' precisely because there is some theoretical model to say that something is overpriced. That overpricing can very well be due to a factor like easy money, for example, which of course can affect bitcoin too
2) Gold prices are heavily influenced by fear and risk-aversion, due to a long-established belief that, when all goes to shit, humanity retreats to attractive, shiny metal. That is a fundamental factor, but it's taken thousands of years to develop, and is entrenched in religious ritual, culture etc. Hypothetically Bitcoin could achieve such a status in future, but it's got a long way to go (also, I don't think of Bitcoin as a commodity - it's a digital object)
3) I don't find this particularly compelling. I mean, it is a very interesting socio-cultural phenomenon that people have a belief that the movability of an object can grant it value - and that's worthy of study by an economic anthropologist, for example - but that's a weak belief that can quite easily buckle. One of the most interesting elements of the early Bitcoin community was their use of language to simply state without proof that the movable object was something beyond the tracks - i.e. they'd say it's a 'currency', or an 'asset', precisely because you needed some external justification for why the movable thing was valuable. Having got some basic cultural buy-in that could establish a price, they could then rely upon countertrade to give the illusion of it being 'moneylike', which in turn could be used to reinforce the narrative, but this is always a delicate balancing act that requires turning a blind-eye to some very obvious factors (i.e. Bitcoin's got no countertradability if it has no dollar price). This is why the Bitcoin community cannot face this stuff - the story relies on a series of circular justifications, and - to keep those going - you need to not look too closely at them.
The whole point of this article is that the job of a fundamental analyst is to ignore articles of faith and stare through the bullshit. Now, a good anthropological fundamental analysis will point out that bullshit can be culturally powerful, and I'd certainly agree that the Bitcoin community - of which I was once part - has been very good at that
Agreed, Fictitious, The Bitcoin community of 2025 is indeed big time messed up, partly driven by the greed of those with big stacks. This does not mean at all that it has no no valid value driver, one which Scott never mentions: the monetary premium commanded by a monetised commodity, even if it has no other use or value.
Great writing as always. You left out one word though: Gaming.
Many people want to make money and apparently don't want to be burdened by fundamentals or research of traditional markets. Bitcoin behaves like a stock -- buyers and sellers and fluctuating prices -- but bitcoin traders don't need to know anything else about it. It's just gaming.
Don't underestimate the underlying ability of gaming to be monetized.
Bitcoin trading is available twenty-four hours a day -- something stock markets don't offer -- and it's international in scope.
(Not to mention bitcoin is useful for anonymous criminal activity which will never go away.)
And as you mentioned, it is further underpinned and manipulated by whales swimming in money, whether corporations, sovereign entities, or individuals.
I'm a detractor, but I acknowledge these points and how they unfortunately support bitcoin sustainability. The hype surrounding it is disgusting, but that's not much different from the hype we face every day about everything.
If the crypto topic interests you, then I hope you already know about Molly White's newsletter which offers a well-written, comprehensive view of crypto shenanigans and crimes.
Here's a sample: https://www.citationneeded.news/justin-sun-bloomberg-lawsuit/
Brett: You an Molly are the best.
Excellent analysis! I had a middling (at best) understanding of the crypto phenomenon and this was elucidating.
Glad you're found it useful Lauren
Brett, that is an exemplary analysis and clear explanation of the valuation processes in the financial markets, and the forces that shape price movements of Bitcoin and other similar virtual commodities.
In a way, the expected government manipulation of the Bitcoin market by means of massive purchases is analogous to the massive purchases of US government bonds and notes by central banks, commercial banks, and others who still have faith in them despite their lack of any solid backing in the real world. The fact is that all of that accumulated US government debt will never be repaid. That itself is a bubble that will eventually burst. God help us.
I agree.
Money is virtual. It has no meaning to nature. Government debt is double fiction, if you get my drift.
Hi Brett great article as usual.
I would be interestsed for you to comment on the similarities between gold and bitcoin. Gold has recently acquired some limited industrial uses, and before that was useful in jewelry, but I think we can safely say thaf the price of gold is not determined by its usefullnes.
Regarding the self fulfilling prophecy you mentioned: I think you hit the nail on the head here. All that was needed was to have the first verifiably limited 'thing' and a community of *economically self interested* people who memed this thing into becoming a financial asset.
As long as some people buy this thing when the prices crashes their is a floor price. The 21M hard cap combined with an infinite amount of fiat money does the rest.
We are very aware if this.
Hi Vincent, gold has thousands of years of history behind it and it is tactile, which makes a huge difference because we are biological creatures who like to touch and see things. This is why gold is deeply entrenched as a quasi-mystical status good. I think the most that Bitcoin can hope for is to achieve something culturally similar through mysticism, though I remain unconvinced that it can.
The biggest threat to the Bitcoin community is probably boredom. If you fail to create a deep culturally entrenched mysticism over the next, say, 20 years, you face widespread boredom over the tokens. People will begin to see it as something their parents used to be interested in, but will fail to share the cultural enthusiasm, having not experienced the political moment and sense of euphoria. After all, there are only so many millenarian waves that a movement can have before it has to start delivering on some of its promises
I agree lack of interest is the biggest challenge. Ultimately what interests most people is profit, so if bitcoin stops outperforming the S&P people will lose interest and only some cypherpunk nerds will remain and the price will reflect that. But then why even bother with bitcoin when things like monero function better for countertrade.
Great job pulling all that together, Brett. I was aware of many of the facts, but the context you provide was the key to understanding. I'd never thought about what the lack of fundamentals would do to a market.
I'll offer one note: there was an opportunity to debunk the very idea that the US needs to invest in crypto in the hope of acquiring more dollars.
This is a great article Brett! I hope the “fundamentals” prevail. I am equating Bitcoin to a beanie baby and the rage behind it - is that a fair comparison?
@brett - the Too Big Too Fail narrative. I also agree believe with this, unless there a massive black-swan event like a some sort of mega-bitcoin hack in which even investors like Michael Saylor get swindled.
My question is: How similiar is this sort of US-government backed manipulation-turned bailout to the financial crisis of 2008? The banks also seem to engage in sketchy behaviors for profit, that became so big - the US governemnt 'Had' to bail them out.
Also, is it just common business/government practice at this point for the government to prop up industries that are 'in demand' either by the populist or national security? I ask because it seems like there are dozens of other industries like this (yes less speculative in nature) that the US-government props up or has been forced to prop up
Hi Brian, the only similarity is the too-big-to-fail element, where the thing being traded threatens to cause instability if it fails and hence draws political support.
The mortgage backed securities market concerned credit instruments attached to real estate, but these instruments were subject to fundamental analysis. They could be heavily overpriced because of the way they were packaged, but if you actually dug deep enough you could study the underlying loans they were built from, which is the story told in Michael Lewis' The Big Short, for example.
But yes, it's always been common practice for states and big corporates to work together. I mean, that's kinda the core of all capitalist systems
Thank you! A very good and comprehensive view of the Bitcoin and crypto marketplace, and the inherent 'Emperor's new clothes' aspect of trading something that has no inherent worth, except perhaps for criminal gangs that want to shift money around! A kind of criminal religious faith?
I will add two comments, if I may:
I suspect Trump's crypto play has two purposes; the first has already happened, making him very rich in crypto terms, but as you point out, the moment he tries to sell, he scares everyone and the price plummets. So I think the second part for Trump will be to swap his crypto 'wealth' for gold, by the US government (i.e. Trump) deciding to hold a proportion of its national reserves in crypto instead of gold. So the government buys some chosen crypto assets (including Trump's) with the gold reserves, and leaves Trump with real wealth. Presumably the gold will be on the first flight to Zurich!
The second issue if the technical one of the fundamental security of 'unbreakable' blockchain encryption. The fast development of Quantum computing is likely to be able to unravel blockchain identifiers and so break into crypto accounts in the coming few months or years, and for obvious reasons no one involved wants to say when. At that point, all cryptos fall to their true worth, i.e. zero!
I talk about it here:
https://substack.com/@az12763157/note/c-145607169?r=44ehru&utm_medium=ios&utm_source=notes-share-action
So sooner of later Bitcoin and cryptos will become valueless and the biggest bubble of nothingness will disappear, leaving the vast majority with nothing and a few people massively wealthy.
Isn't it strange how it always seems to end up that way? Almost as if........ 🤔
Why do you think crypto would be more vulnerable to quantum computer hacking than every other currency and stock exchange?
Because the absolute core of crypto is the blockchain code, the unique identifier for each account and each transaction that is universally held - every transaction is recorded everywhere on a 'universal ledger'.
The moment a quantum computer can unlock those codes, then any transaction can be tracked back to the owner, anonymity is gone and the entire legitimacy of the blockchain technology is compromised and made useless.
Mainstream money is completely different. The money issued has a single, central ledger operated by the government issuing the money, and the currency is like an IOU, guaranteed by that government based on its assets and tax income. The actual transactions between other parties are mostly third parties swapping money, and have no coding or anonymity that can be hacked.
Note that both rely upon public confidence to function as money. If the government becomes untrustworthy, then people stop using their currency and its value collapses. If the crypto coding is hacked just once, then all confidence is gone and the 'value' of all cryptos fall to their underlying asset value or guarantee value, which is zero. It would be instant - trillions of imaginary Dollars wiped out.
Thanks for expounding. Inserting code, falsifying identifiers, hijacking passwords sounds like trouble for all financial institutions and markets. I don't see them being immune to such threats. There are plenty of reasons I'm not interested in crypto holdings, but I am interested in and concerned about how it is affecting traditional financial institutions.
My take would be your both right and wrong at the same time . Yes there will be a huge pullback in btc as a result of micro stategy and it's competition, creating these expensive etfs. However the actual pull back in btc will be significantly less . The market for whatever reason is valuing these companies at 2x or more the actual price of btc (Matt Levine has written pretty exhaustively about this) . That is your bubble, not the actual price of BTC which will likely continue to do the what it has always done.
I'd be interested to know, firstly, what you think the BTC price has 'always done', and secondly, why it would continue to do that?
Basically act like an erratic/volatile stock. Why would it continue to do that? Why does anything ? Its not like our system is built entirely on value these days. Innertia, buyin from the existing financial structure, imo the fact that we now have btc etfs makes me pretty confident it won't go to 0. It may go to 5$ but not 0. Im more confident that btc will be above a 1000 in 10.yrs than nvidia tbh,
Should have said Nvidia over 100 in 10yrs vs btc above 100k
"Perhaps the most notable feature of the Bitcoin market since its inception has been the almost total absence of a class of true fundamental traders."
No : the fact that, after a sharp drop in bitcoin, each floor is higher than the previous one suggests that bitcoin buyers are increasingly long-term holders convinced of its intrinsic value, rather than traders relying on technical analysis.
Hey Olivier, thanks for your comment. I'd still say that HODLing is not fundamental analysis. Most of the justifications for the 'intrinsic vale' rely upon those circular articles of faith I describe in the piece. That's fine - you can build a faith out of circular principles, but I'd be very dubious about calling that a form of 'analysis'
That argument seems weak to me. If you read Lyn Alden's "Broken Money," you'll find a book with a clear analysis of what makes Bitcoin intrinsically valuable. The author may be wrong, but saying that her reasoning is circular is fallacious.
If you had to summarise her argument, how would you do it?
Excellent question. How would you answer it? And if you don’t know how to answer it, how can you claim that the author’s reasoning is circular or even false?
I don't see anywhere in the text where I claim that Lynn's reasoning is circular, and I'm still struggling to know why you don't want to give me the argument - surely if it's so compelling you'd be able to summarise it? I don't have time to read every book put out in defence of Bitcoin - that would takes years at this point. Come Olivier - I'm not expecting you to write me an essay, but you have to be able to at least give some basic account of the argument, rather than saying 'go read this long book'
Brett, most of your article is based on the idea that Bitcoiners' reasoning is circular, and that it's impossible to prove its intrinsic value.
All it takes is one argument that proves this intrinsic value to completely undermine most of your thesis.
I'm not telling you to read *all* the books on Bitcoin. Broken Money is easily in the top three most important books on Bitcoin.
Don't you think that in order to criticize a thesis in a meaningful way, you have to have studied it in depth—to, as Charlie Munger said, “understand it better than your opponent”? And that reading the top five books on the subject is a good way to understand it?
If you don't want to make the effort, ask an AI to give you the highlights. I'm not your personal LLM. But there's a lot of alpha to be gained from reading a text in its entirety.
I recently wrote about this same phenomenon but from a societal, not purely markets perspective. I must admit that I did not think directly about the lack of fundamental traders (seems obvious now you said it, isn't that always the way!) https://open.substack.com/pub/theliminallens/p/crypto-decentralization-belief-engine?r=dvftt&utm_campaign=post&utm_medium=web&showWelcomeOnShare=false
On "The Whale of Mass Destruction"
While this criticism of a lot nonsense narratives in the cult part of Bitcoin is partly correct, this piece has not treated the argument which should matter for a serious economist: Bitcoin has a fighting chance to be the base money for a pretty much ideal future monetary system, replacing the highly problematic, fragile, and morally fraudulent fiat system.
The article does simply dismiss only a distorted conspiracy version of this future as: “destroy the US dollar and the financial sector”. In a Schumpeterian sense "creative destruction" might be applicable for the "Fiat USD", but the USD could always switch to a Bitcoin base to a "Hard USD", just as it once had a gold base. It is totally incorrect that Bitcoin would "destroy" the financial sector, it will still be needed and much more resilient than under the fragile, manipulated fiat system.
Scott’s greater fool argument indeed seems to play role in many bitcoiners’ minds, specially the financially illiterate ones, I can confirm. Irrespective of this fallacy, Bitcoin has a possible fundamental value as future base money (similar to gold’s fundamental $20/oz. around 1900). Therefore this future value must be weighted with the probability that a Bitcoin-based monetary system will in fact arise, if things go well.
Gold still has monetary demand premium from central banks buying it with their colourful paper scraps in supposedly limited supply, representing thin air. Silver doesn't and therefore is demonetised, hence no longer 1:16 to gold, just industrial demand value.
Privacy and censorship resistance are much more than just a special user group of the transfer use case. It is imperative for an ideal money which must be perfectly fungible. That's why the upcoming Credit Money layer for Bitcoin (M1 money) uses Chaumian mint technology, eCash. Unlimited scaling, near perfect privacy, not censorable, instant, free.
Any communication channel will be a rail for Bitcredit (which we are building). Perfectly secure claims to Bitcoin can be sent via any network:
- SMS, Whatsapp, Telegram, Nostr, X/Twitter
- Bluetooth, NFC, airdrop
- QR codes, morse code
- http headers, mesh networks, onion packages, space satellites
- audio spectrograms, image steganography
And, most fun:
- bank transfer subject fields
So no, Bitcoin will not "crash our economy" it will be the basis of our future monetary system and free our economy from the scourge of the communist central planners which hold the economy hostage today.
Hi Hubertus, thanks for your comment.
The first thing I'd say is that you haven't actually responded to any of the critique I put out. You have mostly just reasserted the standard Austrian econ line
Secondly, your description of our monetary system is not strong enough. The dollar system is far more sophisticated and powerful that you are describing (e.g. you use phrases like 'representing thin air', which is a straw man of the highest order)
Thirdly, you're very heavily invested in an 'ideal type' commodity theory of money based on libertarian assumptions of individualism, rather than an economic anthropology account of money based on interdependence and credit. I wrote a description of how your own thought system works here, and why it naturally leads to a fetishism for Bitcoin https://www.asomo.co/p/the-archipelago
So, I understand where you're coming from, but I think where you're coming from starts from fundamentally flawed assumptions
My friend,
thanks for your reply but I am not sure you actually considered my comment.
1. I have directly responded to your critique of some silly bitcoiner narratives: I agree with most of your counterarguments. There is lots of nonsense, as most are not economists. Still, their chatter is totally irrelevant. The future of money is what matters and "Bitcoin does not care".
2. I never wrote that the dollar system is not "sophisticated". To the opposite: It takes a lot of sophistication of keep up such a massive fraud for more than a century.
3. "Thin air" is not a "straw man" but metaphor used by those economists who understand the fiat fraud. Hayek, Friedman, Mises, and – outspoken – Rothbard explain it in detail.
4. I am not at all "invested in" the commodity theory of money. Anyone who truly wants to understand monetary systems, also needs to consider the credit theory of money, just like we need the wave and particle duality to understand light.
Last, having shown that you do not understand "where I am coming from", I do understand where you are coming from: I still remember Graebner's fallacies, he was also an anthropologist without a degree in economics. Catchy stories, but with half-cooked understanding of monetary economics, tainted by the false lure of socialism and collectivism.
If you really believe that the US government is about to try to hard anchor the US dollar to a Bitcoin base, then fine, but you'll have to then give a political economy account of why on earth the US state would do that, and why that system wouldn't break within months. You'd also have to give an account of why on earth the crypto industry would support such a move, given that they clearly make all their profits in US dollars from people repeatedly buying and selling the tokens, rather than holding them in reserve to back some kind of Bitcoin IOU. You'd also have to explain why on earth anyone would want to price any form of debt in a speculative asset that can massively spike in price and thereby leave you in debt bondage
Ha ha, I find it quite funny how puritanical Austrian economics can be (the language always goes on about the massive fraud, the terrible deceit, the unnatural abomination, the unforgiveable deviation from natural law, the betrayal of the people etc etc).
Don't take me too seriously - I'm poking fun - but it really does appear to me as a thought-system emerging from disillusionment - "we were told money was one thing, but we've been deceived" - but I still always struggle to know why you begin with the romanticised vision of what money 'should be', which is what then makes you dismayed at what it really is
I also find that statement 'without a degree in economics' hilarious - it's almost like you believe economists are well positioned to understand the monetary system, after centuries of repeatedly showing that their models are paradigmatically unsuitable. But, let's not sit here and sling 'you don't understand money' at each other - it's not like we're going to convince each other
If you'd like to hear me discuss why I think that I'm not anti-Bitcoin, see the opening five minutes of this video I put out a couple days ago https://www.asomo.co/p/the-bitcoin-carnival
1. "If you really believe that the US government is about to try to hard anchor the US dollar to a Bitcoin base"
Where have I said so? First, Bitcoin itself must stabilise, the non-statist institutional setup be made available and ramp up.
The US dollar right now is a politically weaponised, inferior inflationary product which would be unable to persist in free competition of non-government monies. It will first have to live through "creative destruction" of free, unstoppable competition before – maybe finally – a (rare) wise politician will come to their senses and move to a hard standard.
2. "the crypto industry would support such a move"
Nobody needs the crapto industry to support the monetisation of Bitcoin. What a strange idea. The crapto lot (at least their 'customers') neither understand nor care about ideal money. They want lambos, no more.
3. Bitcoin "backed" token money has nothing to do with it at all. Proper backing for honest credit money is real goods, produced by the real economy, denominated in Bitcoin. No crapto, no fiat scam.
4. "a speculative asset that can massively spike in price"
Circular thinking. A circulating medium of exchange spontaneously stabilises. Always has, in history. There's no need for politicians, central planners, or MMT clowns.
5. Your video
I watched the first 5 minutes, as suggested. Reminder: I already said that I share some of your criticism of too much nonsense and shilling in the post-2015 Bitcoiner narrative. The fallacy in your position is that it (suddenly uncritically) accepts the mistaken Bitcoiner narrative of "natural" Store of Value only. This idea fails to recognise the difference between Bitcoin as a base money and Bitcoin-denominated credit money and their monetary interplay.
If you are interested in this interplay, feel free to listen into here, although I'd recommend the full video not just 5 minutes. https://www.youtube.com/watch?v=yG4Lmv_uScM