
What Bitcoin Reveals About Financial Markets - Bitcoin_McPonzi
https://www.nytimes.com/2018/02/08/opinion/bitcoin-financial-markets.html
======
jsjohns2
> For a while, Bitcoin was used for transactions that people wanted to keep
> secret from government authorities, like drug deals. It soon became
> apparent, however, that if authorities wanted to track these transactions,
> they could. For instance, Silk Road, the first major online drug market,
> which made use of Bitcoin, was shut down by the F.B.I. in 2013.

This is pretty weak reasoning from one of the "top 5% economists in the
world". The Silk Road shutdown was (reportedly) the result of poor OPSEC on
the part of Ulbricht and has nothing to do with the anonymity characteristics
of Bitcoin.

~~~
thebokehwokeh2
What are the anonymity characteristics of bitcoin?

Can't I simply traverse the blockchain (which is essentially a linked list) to
see which address transacted with which?

~~~
joshontheweb
You can ‘tumble’ bitcoins to obfuscate the true source and destination walets

~~~
dogma1138
The only thing that tumbling does is prevent a direct link between 2 possibly
illicit transactions.

Unless the tumblers are use for mostly legitimate transactions they are
useless and being linked to to one will raise a flag if you are under
investigation.

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AlexCoventry
This article seems very poorly thought out to me. I'd be interested to hear
from people upvoting it what they appreciate about it.

~~~
panarky
Let me see if I'm following his logic.

1) He thinks Bitcoin should be worth zero

2) People keep paying more than zero for Bitcoin

3) This discrepancy destroys the Efficient Market Hypothesis

4) If the EMH is bullshit then markets for other assets are bullshit since
they also rely on the EMH

5) Therefore now the valuation of other assets is also bullshit

6) Regulators should curtail trading in Bitcoin futures since it shows the EMH
is bullshit and that undermines all markets

Brilliant analysis.

~~~
SAI_Peregrinus
My favorite bit about the EMH is that there's a proof that it implies that P =
NP. Since that's incredibly unlikely to be the case it's really quite silly to
assume the EMH.

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thebokehwokeh2
Bitcoin trading has, and will forever be a sham, which is sad, because its
original purpose would have been world changing.

~~~
civilian
I don't think you understand currencies? There will always be some level of
currency-to-currency trading, but the hope is that it will be minor compared
to the major purpose of a currency--- using it as a easy way to exchange
value. (Which I imagine is what you were referencing when you said "original
purpose".)

~~~
thebokehwokeh2
> using it as a easy way to exchange value

This is what I was referencing. Nobody will ever use bitcoin as a means of
exchange if the price of a car today is 30% less than it is tomorrow.

The most important thing with a means of transaction is the stability of its
value. Bitcoin will never be stable so long as it is used as a vehicle for
investment (aka a commodity).

~~~
lrns_
"Nobody will ever use bitcoin as a means of exchange if the price of a car
today is 30% less than it is tomorrow."

Yeah, that's not how it works. Most holders just spend and replenish with
fiat.

"The most important thing with a means of transaction is the stability of its
value. Bitcoin will never be stable so long as it is used as a vehicle for
investment (aka a commodity)."

Volatility is expected to decrease over time.
[https://bitvol.info/index.html](https://bitvol.info/index.html)

------
lnino
It show mostly that people writing about finance can be total economics and
technology ignoramuses.

~~~
dang
Maybe so, but that's no reason to make HN threads worse. Please don't post
unsubstantive comments or call names in comments here.

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

------
mrb
« _A financial product with a purely arbitrary value has been successfully
introduced in the world’s most sophisticated financial markets_ »

The author, an economist to top it all, completely glosses over _fiat_
currencies (eg. currencies no longer convertible to gold.) "Fiat" literally
means "currency without intrinsic value", ie. "arbitrary value."

~~~
thebokehwokeh2
I always find it hilarious when I see comments like these popping up on
threads about bitcoin/crypto. The libertarian conspiracy theorist's first
straw to grasp is this bizarre idea that "fiat" is inherently valueless. I'll
grant that this idea is extremely attractive to laypersons because fiat is
indeed made of paper, which grows on trees, which is not naturally scarce,
which can be printed (or to use the libertarian nomenclature, manipulated) by
the federal reserve.

Sorry to burst your bubble, but the intrinsic value of a currency is not based
solely on naturally occurring scarcity, but on a marketplace's faith in its
stability as a means of transaction.

Gold was, once upon a time, THE standard, this is true. But the problem with
gold is that its supply bears no relation to the needs of the economy. The
supply of gold depends on what can be mined.

In the 16th Century, the discovery of South America and its vast gold deposits
led to an enormous fall in the value of gold - and therefore an enormous
increase in the price of everything else.

Since then, the problem has typically been the opposite - the supply of gold
has been too rigid. For example, many countries escaped the Great Depression
in the 1930s by unhitching their currencies from the Gold Standard. Doing so
freed them up to print more money and reflate their economies.

The demand for gold can vary wildly - and with a fixed supply, that can lead
to equally wild swings in its price.

Most recently for example, the price has gone from $260 per troy ounce in
2001, to peak at $1,921.15 in September 2011, before falling back to $1,230
currently.

This is hardly the behaviour of a stable store of value.

~~~
gbacon
Nation-states still maintain gold reserves and transact in bars of the
barbarous relic stored in the basement[0] of the New York Fed. An unwashed
layperson might see this and suspect that they know better than to trust each
other’s digits in computers and pieces of paper.

Physics-envyists engage in _scientism_ , having the superficial appearance of
science by way of high-minded terms liquidity, velocity, circular flow, price
level, and quantity _needing_ to grow with the economy, but it is utterly
hollow. If supply is not rooted in genuine demand, pouring on more and more
money (“reflating”) _will not_ fix the root problem.

Consider that if currency inflation (printing more money) produced an instant
uniform increase in all prices, then the effects on purchasing power and
prices would cancel each other out — leading to no net effect. The market does
adjust to changes in the supply of money as you noted, but these changes take
time and cause prices in some sectors to rise more than others. Here again the
easily swayed layperson might make these observations and wonder why bother
about it.

[0]:
[https://www.newyorkfed.org/aboutthefed/goldvault.html](https://www.newyorkfed.org/aboutthefed/goldvault.html)

