
Bitcoin's Rally Masks Uncomfortable Fact: Almost Nobody Uses It - chadmeister
https://www.bloomberg.com/news/articles/2019-05-31/bitcoin-s-rally-masks-uncomfortable-fact-almost-nobody-uses-it
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cal5k
I find it amusing that media doesn't give a crap about Bitcoin until there's
price action. This was the exact same type of article that was dominating
headlines back in the 2017 run-up.

Bitcoin has proved remarkably resilient over the last 10 years. It's clear (to
me, anyway) that this asset class/set of technologies is here to stay, it's
really just a question of what comes of it.

It's actually quite useful to be able to send large quantities of money
anywhere in the world without needing a series of intermediaries. For that
purpose alone I could see supply limitations leading to increased prices in
the long haul. There are also some interesting "layer 2" projects that have
been percolating for several years now with a lot of potential to make Bitcoin
useful for smaller transactions.

The insane hype of the last cycle understandably turned a lot of people off
from crypto, but I think it would be a mistake to ignore the progress that's
being made.

~~~
LiquidSky
>Bitcoin has proved remarkably resilient over the last 10 years.

What does that even mean? Resilient in what way? As this article notes, it
hasn't been adopted for use in any meaningful or significant way. It's a
speculation vehicle. I guess in the sense that it didn't literally disappear
it's resilient, but beyond that the idea from its early days that it would
fundamentally change the world and be widely adopted is gone. It's not the
glorious dagger that will pierce the heart of the statist beast its
libertarian boosters imagined. The governments, banks, and people of the world
have mostly shrugged at it. Ironically, some banks and governments even
started adopting the technology for their own uses.

It's just a vehicle for speculation and a toy that doesn't seem to have any
actually useful applications that couldn't have already been done better.

>I think it would be a mistake to ignore the progress that's being made.

What progress? It made some speculators rich but is otherwise useless.

~~~
cal5k
Resilient as in despite 10 years of continuous doomsday prognostications,
Bitcoin continues to be traded and used around the world. And 1 BTC, this
thing that didn't exist 10 years ago, is now worth $8,422.40 USD.

As for utility: I've used it to pay contractors in Europe, for example,
without having to figure out which money transmittal service is going to rip
me off the least. Tons of expats living in North America and Europe use it to
send money back to family in their home countries. People use it to hedge
against runaway inflation caused by poor monetary policy.

It could all fall apart in a few years, sure, but it's damn interesting. Being
cynical just means if you're right you get to gloat about it, but if you're
wrong you're missing something that could be really important.

~~~
Frondo
The problem I think a lot of people have with Bitcoin, at least that ends up
producing articles like this, is that there's always a tremendous amount of
goalpost-shifting in the Bitcoin/adjacent community.

At times it's been talked about as a replacement for cash in the sense of
using it for lots of low-value transactions (it won't work), as a value store
(it fluctuates a LOT for that), for sending money across borders (absolutely
dwarfed by Western Union), for replacing Paypal/Venmo/Google Wallet/any other
electronic payment system (absolutely dwarfed any of those), and so on.

It's not dead, of course, but the Bitcoin community has made a LOT of strong
claims about widespread public adoption, yet still remains very much in the
hands of speculators and hobbyists.

That's what, I think, a lot of the objections come from. Bitcoin's like the
Segway in a sense; did it change the world? in some small way, yes. Are we
building cities (or large-scale financial infrastructures) around it? Well,
show me.

~~~
cal5k
Well, I think nobody knows exactly what it _is_ yet. It's an emerging
technology, so even if there's a great deal of utility it's not surprising
that predictions will be off the mark/downright wrong, and that opportunities
will be missed that eventually seem obvious in retrospect.

And there is no cohesive "community" that's making predictions and measuring
against them. It's just people speculating out loud, and then other people
writing about the speculation.

It's a bit unusual because it started out as a cool technological curiosity
vs. a product with a defined product/market fit. Sort of like desktop
computing in the 70s.

~~~
Balgair
> Resilient as in despite 10 years of continuous doomsday prognostications,

> It's an emerging technology,

What are the timelines like here? If 10 years is too short to suss out what
BTC is going to be useful for, will another 10 years help? Is this a 100 year
long thing then?

~~~
cal5k
It's useful now. It could be _more_ useful in the future, or it could be
supplanted by something else. All I'm saying is that big changes don't happen
as fast as people expect, and it's hard to determine where they'll go while
they're happening. See: the internet, cell phones, desktop computers, space
travel, etc.

~~~
johnpowell
Internet was expensive when it came out. Remember when it used to be pay by
the hour and tied up your landline? I had internet through the University and
had to kick people out of my apartment because they would sit at my computer
forever.

Everyone I knew in high school wanted a cellphone but couldn't afford it. Same
with desktop computers. Same with space travel. Everyone wanted that that
stuff but it was expensive.

Bitcoin isn't hard or expensive to get. But still nobody wants it.

~~~
cal5k
Bitcoin trades on open markets. If it was worth nothing and nobody wanted it,
it would trade at $0. Instead, 1 Bitcoin is currently trading at $8,400 USD.
Tens of billions of dollars are tied up in it, and it's impossible to
trivially create new Bitcoin.

So... pretty much exactly the opposite of what you're arguing.

------
raesene9
Even a quick look at CoinMarketCap shows you that there's something a little
odd about the current rally.

Look at the volume column and you'll see that Tether has more volume than
bitcoin and has had for a little while.

Tether has recently

a) Admitted that they don't have 1:1 backing in USD

b) They use customer funds for investment rather than just storing them and

c) They're currently under investigation by the New York Attorney General.

Against that backdrop they've increased the number of Tethers in circulation
by $400 million in the last month...

Now it's possible that they've got a load of companies who really believe in
them to the point that they're eager to invest in Tether (even when there are
other 1:1 backed stablecoins available)

A different interpretation could be that Tether have worked out they can
effectively just print money as much as they want and are using this to buy
bitcoins, driving up the price...

~~~
nathanasmith
>Even a quick look at CoinMarketCap shows you that there's something a little
odd about the current rally.

>Look at the volume column

The really odd thing is getting your volume numbers from CoinMarketCap in the
first place when according to this well argued deck[0], 95% of those numbers
are fake.

What you're looking at there is completely distorted as unregulated exchanges
have a huge vested interest in inflating the numbers to dupe projects into
paying higher listing fees and since most of the time, the fake volume doesn't
track the waning and waxing of the real volume of legitimate exchanges, not
only is that fake volume wrong quantitatively but it's also wrong relatively
making it worthless and CMC practically worthless by extension though they do
claim to be addressing the issue.

[0][https://www.sec.gov/comments/sr-
nysearca-2019-01/srnysearca2...](https://www.sec.gov/comments/sr-
nysearca-2019-01/srnysearca201901-5164833-183434.pdf)

~~~
raesene9
It makes the point about relative volume, even if absolute levels are crap :)
The volume point was around a stablecoin with issues having a higher relative
volume than bitcoin itself.

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seibelj
HN is full of bitter commenters who have been predicting the death of
cryptocurrency for a decade, and it hasn’t come true. A community that learned
of Bitcoin right as it was invented, dismissed it, and missed out on huge
fortunes.

Well, some people here thought for themselves and analyzed the technology and
ideas on its merits. Just not the people who comment on these posts.

~~~
rawrmaan
You analyzed Bitcoin on its technologies and merits and concluded that it’s a
useful currency? Yikes.

~~~
bdcravens
I don’t think that was the crux of the comment. “.... missed out on huge
fortunes” tells you where the focus is.

------
eof
I'd just like to go on record saying I use it as a payment method for
developer services for developers locked out of the western world's banking
system.

Of course most of these devs will take any of the top N cryptos.

As a very early bitcoin adopter who made and lost and made and lost a fortune;
I can say that bitcoin and crypto is still "ahead of schedule" for realistic-
optimistic timelines of adoption.

I still believe cryptocurrency will continue to grow and eventually eat gold;
but I am less convinced that it will eat fiat.

------
jraedisch
There is a lot of work done in analyzing holding patterns. Would probably be
interesting to see comparison to usage and price of gold as a store of value.

For me, buying and holding seems to be legitimate usage. I guess that would
count as "speculating". What else should you do with a store of value that you
expect to appreciate in price because it has inflation going to 0?

~~~
Nursie
> What else should you do with a store of value that you expect to appreciate
> in price because it has inflation going to 0?

Do you expect to increase in price solely because there are a limited amount?
There are many things which have that property, but are not good stores of
value. Your ability to sell it later for more money is based on continuing
demand. Unless there's some other use case, where is that demand going to come
from? Isn't some of the value it is allegedly storing based on future
expectations of utility?

~~~
ohaideredevs
This is beating a dead horse and the typical argument, but the same can be
said for gold. Its "intrinsic value" in terms of practical application is far
lower than the market cost given the plentiful substitutes for high current /
low heat transmission applications.

I really do wonder why Bloomberg hates Bitcoing. If you read through a history
of their articles, they REALLY hate it.

~~~
village-idiot
Gold’s special place in the western canon is really just a cultural artifact.
Not only are there a variety of metals that could take its place as an
investment vehicle (silver, platinum, and rhodium among others), but
historically a variety of metals were used for currencies and transactions.
Bronze, brass, lead, and salt were all once used as currency, but have long
since just become “base” metals.

On the opposite end of the spectrum you’ve got South American cultures that
loved Gold for purely decorative purposes, but basically never considered it
money. These cultures largely traded using barter or using a specific
agricultural product as the unit of account, such as cacao beans.

~~~
Theodores
The Chinese were first to print money and the first to get into difficulties
by printing too much. After this silver became the store of value and the
currency.

Hence the Opium Wars, the only way for UK/USA to get silver out of the Chinese
economy. China had no interest in sub-standard Western goods and only wanted
silver in exchange for their fine porcelain, silk and other goodies. Getting
the whole nation on drugs and defending that trade with gunboats was a way of
getting silver, silver being needed in the West for paying
soldiers/mercenaries.

Such proud history we have, enslaving India to get the opium, selling it in
China and getting silver back to buy legit goods from China.

------
berberous
I think part of the reason for the dearth of merchant transactions is the lack
of a tax safe harbor to treat it like currency, at least for transactions
under a certain size. So long as buying a cup of coffee requires one to keep
detailed records and report it as a capital gains, it is really not worth the
trouble to use Bitcoin as a currency.

------
sprash
The instability and the high fees make it useless for generic payment. The
lighting network was supposed to fix latter problem.

As soon as the bitcoin price becomes stable it will be useful. As soon as it
is useful it will swiftly rise in value and become unstable again. We have
already seen several iterations of this cycle. Who knows when this will end.

~~~
gwbas1c
Which brings up another important point: Typically, when someone wants someone
to adopt their currency, they actively work to ensure that the currency has a
stable value.

Think of historical examples of governments buying and selling each others'
gold and silver coins; or more recently governments actively buying and
selling gold and silver in their currency; or even more recently governments
holding reserves of other countries currency.

The historical purpose is to ensure that a currency has a stable value, and is
readily available for anyone who wants to use it.

No one does this with Bitcoin. The incentives are to use the currency as a
speculative bubble, instead of as a means of commerce.

Drawing an analogy, in order for Bitcoin to work, there would need to be a
"Bitcoin authority" that basically holds a huge reserve of Bitcoin or another
commodity, and buys and sells to keep the value stable. Bitcoin goes up in
value: Sell Bitcoin for some commodity, Bitcoin goes down in value, sell the
commodity for Bitcoin.

(Of course, a Bitcoin authority goes against the general anti-government
promise of Bitcoin.)

------
TrAnn3l
I would like to see a comparison to the USD, and how much of the money flow is
actually used for merchant transactions.

------
onychomys
Can we talk for a minute about that first graph in the article? "Bitcoin
Activity By Category" supposedly lists percentages on the Y axis, but they
included the percent sign on the label, making the range go from 0% to 1%
instead of from 0 to 1 like they intended. Bloomberg should know better!

------
jraedisch
The reason why I think Bitcoin's success (read increasing in wealth infinitely
against fiat, albeit slowing down over time) is more probable than its demise
is not that it is some kind of replacement religion for me. It is just that I
have so far not heard any good arguments why it would not succeed.

Of course opponents might say: why should it succeed if they see no reason for
it to succeed.

That position is completely acceptable to me, but the risk of losing out seems
too high for me, so I invest a little bit, just to hedge.

And because many people might do that, it could succeed. As long as there are
no good arguments against holding a little bit. Which there aren't.

Except maybe the ecological footprint. As soon as someone finds a solution to
that without sacrificing the other qualities, a hardfork will surely succeed.

~~~
nosuchthing
There's no point in a hard fork when you can just start fresh, and mint a new
network of cryptocurrency.

Especially due to the fact that the early cryptocoins like Bitcoin, Ethereum,
and Monereo each designed their supplies to dump into a plutocratic
distribution.

~~~
jraedisch
I think there is big value in continuity of store of value. People will be
easier to convince if they do not lose stake when forking. One would not be
buying BTC if one would fear that it can be replaced easily while destroying
one's savings.

------
village-idiot
I’m not sure why anyone in their right minds thought bitcoin was going to be
used by random civilians for their everyday transactions. Customers want the
protections that banks and credit cards provide, and vendors don’t want to
expose themselves to exchange rate risk when selling goods and services.

Oh, and 4 transactions a second is far too low a limit for any currency.

~~~
gwbas1c
For what it's worth, the Bitcoin paper points out that it's an experiment.
Most people seem to gloss over and forget this critical point.

(I've always been in shock at how many people don't realize that it's a poor
currency, but a useful experiment overall.)

------
mhuffman
This is literally being pumped up by algorithmic traders and no oversight.

This rally is designed, as will the next downcycle and the next rally.

------
vpmpaul
Media is clueless as usual. Are people spending gold bullion/coins? Nope. The
government independent value store is the value of bitcoin.

------
netwanderer3
I have little doubt BTC price is being manipulated.

Its price was kept very low for the longest time so some very powerful
organizations such as Bakkt (backed by the same people behind NYSE) could
accumulate most of its market supply. At the moment the price is being
artificially pumped up to build momentum until enough people from the public
buy into it, then its price will once again start dropping faster than
gravity.

You often can attribute the exact reasons why a stock price went up, but for
BTC it seems to be a complete mystery black box that even the most well-versed
traders couldn't tell you the exact reasons why it went up.

For stock price for example, you just knew in advanced even from last year
that Beyond Meat's stock was going to be a hit. "What The Health", an anti
meat industry and pro vegans documentary film, was a HUGE success last year
and you could see from miles away everything was set up for this trend to
become mainstream in 2019 as public sentiments were beginning to swing very
positively towards it. For BTC however, everything just seems like a wild
guess as no one could pin point exactly what drives its price.

~~~
jraedisch
Could you elaborate on how one would keep an asset artificially low?

~~~
sprash
You can't. What is more likely is that central banks that can print infinite
amounts of their own money are buying up bitcoin in order to make it useless.
Bitcoin is seen as competitor by central banks.

The same happened to gold. As soon as one entity controlled the vast majority
of gold the price ceased to be stable. Central banks already essentially
destroyed gold as payment method. If central banks only sell 1% of their gold
assets they increase the supply on the actual tradeable market so much that
the price can be vastly manipulated. It would be smart if they do the same
with bitcoin.

~~~
Nursie
> Bitcoin is seen as competitor by central banks.

Some 'coiners actually believe this. Wow.

Most assessments of Bitcoin's potential impact on the economy come out saying
it's negligible.

~~~
sprash
Oh really. Just wait until the police and military demands to be paid with
bitcoin.

~~~
Nursie
Wow, it gets better! The police and the army are coiners now too?

This is comedy gold.

~~~
tromp
Better than comedy gold.

Comedy bitcoin.

------
ykevinator
Bitcoin is now a religion.

------
vasilipupkin
People trading something back and forth is a form of usage. they are using it.
The author just doesn't like what they are using it for.

~~~
mindfulplay
Like Pokemon cards? It's fun. But does not carry any value.

You can't buy a car or toilet paper with your precious Pokemon cards.

~~~
marliechiller
If you paid for the cards they inherently have value else they would be
free... Despite what many people choose to ignore, bitcoin has value - at the
very minimum for illicit transactions online - its just not an as widely
accepted value. Whether that acceptance will increase remains to be seen but
to write it off as worthless is disingenuous

~~~
vasilipupkin
forget pokemon cards. Magic the Gathering cards are pretty valuable and you
can definitely sell them for a bunch of money and buy a car or whatever. Ok,
they have a use case because people play the game. But why do they play the
game? because they feel like it - there is no "inherent value" to those cards
either. Tomorrow, the game goes out of style for whatever reason and the cards
are worthless. But today, while people like to play the game, they are
valuable. Today, people shop on Amazon. Tomorrow, something changes and they
stop shopping on Amazon and Amazon stock falls a lot. There is obviously a
difference, but it's not as fundamental as people think.

