Bitcoin heads for infinity

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Macro Morning

Bitcoin continues to outperform gold in recent price action:

However, it still hasn’t broken its recent range:

Will it? Today’s BofA fundie survey shows some rising acceptance of BTC:

Anything is possible at this juncture. There is no reason why BTC is yoked to gold that I can see. It isn’t a safe haven. It isn’t a medium of exchange. It isn’t a store of value. It’s not a commodity or a currency. It’s a sort of smuggling uncurrency.

So, why would it be attached to gold, as it has been? If it is as entirely worthless as it appears then it is also worth infinity.

The only observation I can make with any authority is that there is a relationship between BTC at infinity and functional capitalism at zero.

David Llewellyn-Smith
Latest posts by David Llewellyn-Smith (see all)

Comments

  1. I can see proliferation of blockchain, but I can’t see BTC replacing gold. But anything’s possible.
    Some crypto platforms will become very important and have potential to grow in market capitalisation beyond everyone’s imagination but many cryptos will just go down to zero.

    • Some of the Gold Miners share price have been punished 10 to 20% off recent highs, Gold still above AUD 2,500. Are you getting back in?
      Thanks in advance for any opinions, I’m long anyway as it’s my thoughts the money creation, debasement (etc) cannot stop over medium term.

      • I topped up yesterday and bought few more ALK today. I am maxed now. Have to have some cash in case price of gold falls more before goes up again. Or in case I am wrong.

  2. I tend to think it will have some kind of correction around 20K, although I’m far from an expert in this.

    I don’t see any reason why it won’t run to 100K in the next year or so.

    I also don’t see why cryptocurrency won’t be huge. More and more I am thinking it is going to take over as the world goes more and more digital as it will provide ways to solve the current problems on the net. The current system of cash and centralized bank balance sheets just isn’t going to work for the web as it’s going forward.

    It will also help facilitate a transfer of wealth (and power) from the old to the young. Don’t get stuck in boomer-think.

    • Can’t see BTC et. al. being allowed to remain legal once CB’s introduce their own crypto-based currencies (starts June 2021 according to Lagarde) The license to print money has always been the perogative and privilege of monarchies, governments, and CB’s.

        • Stewie GriffinMEMBER

          Yet both BTC and CBDC require the blockchain as a technology, because no other solution has yet been found to overcome the problem of the ‘double spend’, that must be solved for trust-less digital cash or internet money to exist or function.

          • Pretty sure a few people have developed electronic money transfer systems that have solved the double spend problem without blockchain.

          • Stewie GriffinMEMBER

            Serious request: If there are please let me know, I’d be really interested in how they work. I just haven’t come across any, other than a blockchain (or like variation).
            I would hazzard to guess that they would require some form of Trust based dependencies within the payment chain.

          • Central banks don’t require trustless transactions. They are by definition a trusted authority.
            Why do these need to be trustless transactions?

            Edit: Although ultimately even blockchain is dependent on trust that someone has not spent the processing power required to create an alternate fake blockchain, which is technically possible and merely depends on having the amount of processing power spent on creating the actual blockchain.

          • My question was also serious. Why does a CB require a trustless transaction mechanism? How much computing power are they going to throw at generating their blockchain?
            Given that it is unlikely to be a massive amount how do you know you have the actual cb generated blockchain and not a fake someone with equal computing power generated *cough* china *cough* russian hackers*cough*.
            I guess you just go query the CB to find out, but at that point a blockchain has no reason to exist and is a much worse solution than a database. But please inform me of this dire need for trustless.

          • Stewie GriffinMEMBER

            It would be pointless for a CB to run its own blockchain – the whole purpose of a blockchain is to effect trust-less transactions. They could do it all on a standard DB if the point was simply electronic transactions.

            There are a number of concepts that you probably need to catch up on before there would be much point discussing them. I’ve written about it all at length previously:

            Blockchain
            https://www.macrobusiness.com.au/2020/02/weekend-reading-15-16-february-2020/#comment-3671070

            CBDC
            https://www.macrobusiness.com.au/2020/10/sunday-supplement-11-october-2020/#comment-4003151

            There are, imho, a huge number of flaws and legal threats with BTC (and many other ‘cryptos’) that I agree with DLS on… I just disagree that there are no valid use cases for a public blockchain, especially one capable of delivering micro-transactions and that has a stable protocol to enable other creative minds to build on it.

          • Stewie, a mere 7 transactions a second with no data is creating an unmanageably large blockchain. How do you expect a blockchain supporting many orders of magnitude more transactions as well as data to be at all practical?
            And I will again ask, other than black market transactions, what benefit does a trustless system actually give?

          • Stewie GriffinMEMBER

            Sigh – BTC is based around a UTXO technology, this is essentially a small world system, whereby in order to ensure a transaction is valid it is only necessary to check that the transaction from which it was spent has previously been validated. There is no theoretical scaling limit to such a system, it is only bounded by current computers and processing power.

            Mining is the use of computers to solve complex algorithms that are completely pointless other than saying, “Yes I have spent energy solving this puzzle.” It is part of the game theory that lies behind mining and which I am pretty sure I explained in one of those above links.

            The reason why BTC only processes 7 transactions per second is that Blockstream, which is the Developer controlled organisation that took over control of BTC (and which was funded by Mastercard and AXA) has deliberately throttled the amount of transactions that can be processed:

            https://twitter.com/GinoLeod/status/1328308567846240257

            So users compete for limited carriage space on the BTC blockchain, rather than Miners compete with each other to see who can process the most transactions at the least price.

            There are blockchains that can process transactions many orders of magnitude greater than BTC or even Mastercard – otherwise microtransactions, like those that will be generated with the IoT would not be possible.

          • “Mining is the use of computers to solve complex algorithms that are completely pointless other than saying, “Yes I have spent energy solving this puzzle.” It is part of the game theory that lies behind mining and which I am pretty sure I explained in one of those above links.”
            You seem to have missed the point though. Solving those algorithms is not completely pointless. It is the very thing that secures the blockchain and assures it is genuine.
            Say you receive multiple different versions of the blockchain from different people, how can you possibly know which one is genuine with no central authority to ask? Well, the actual answer is you can’t in any completely infallible way, but the chain that has had the most computing power expended on those completely pointless transactions has a very high probability of being the genuine chain, at least for something as widely adopted as bitcoin.

          • So please explain what makes a blockchain trusted without a central authority then? How does it work? Without copy pasting the spruilk from whoever convinced you to invest in their scheme. You have spewed a ton of words on the topic, so a simple explanation should be easy.

      • hence why I don’t get how people think BTC has any value. On the other side blockchain will be adopted by all banks and governments. Also most corporations will adopt blockchain from security and scalability point of view. IoT will be really big in the future but for it to grow it needs secure and super cheap platform over which it can send data.

        • Blockchains only use is to provide an authoritative record without a central authority. Why would a bank, government or corporation be remotely interested in it? They are all by definition the central authority for whatever they would want to put on a blockchain.

          • did some research for ya stewie
            https://www.google.com/search?q=bitcoin+blockchain+current+size
            currently 1/3 terrabyte for a blockchain supporting very limited transactions in blockchain, with quite a lot of current bitcoin transactions being conducted of chain within exchanges.
            So how big do you think a public ledger blockchain supporting microtransactions like IOT things talking to each other or printing a single page on a photocopier will be? It won;t be Terabytes, it’ll be bigger, so how are you expecting it to happen? I really can’t see everything wanting to do microtransactions storing petabytes of ledger data. So they will have to transact through a trusted intermediary, so why bother with the blockchain at all?

          • Stewie GriffinMEMBER

            If you are interested in a serious convo then happy to answer your questions – 1/3 of a Terabyte is nothing, my PC has about 2TB. With uncapped data limits you could effectively load the entire BTC blockchain for all time onto a couple BSV blocks.

            In terms of maintaining the blockchain for verification purposes miners only need to maintain a Merkel tree of unspent transactions. As transactions are ‘spent’ they can then be pruned from the chain that they need to check, equivalent to RAM (bad analogy but it will do). Over time you well get specialist miners who specialise and compete to mine specialised transactions – data added to the chain by the OP_RETURN function can also be warehoused by specialist miners – this is already starting to occur.

            There are multiple use cases for micro transactions, the cost of storing in terms of bytes per transaction is miniscule to near non-existent, virtually nothing more than a couple bytes of memory, assuming there’s is no additional data via the OP_RETURN. Eventually only a few specialised data farms will host the entire blockchain, most nodes will specialise and only have part of the chain.

          • “Eventually only a few specialised data farms will host the entire blockchain, most nodes will specialise and only have part of the chain.”
            Do you actually understand how ridiculous this statement is.
            To operate our trustless system we will eventually create a few trusted nodes to store the information.
            lolololololololololoolololol

          • you really don’t seem to actually understand the fundamentals here. If the data is only stored in a handful of places then they are by definition trusted and the whole blockchain infrastructure is pointless and these people could just run a db far more efficiently. you really should consider statements from people with something to sell more critically.

          • Stewie GriffinMEMBER

            Sure bjw I’ll just listen to your ‘experts’. I’ve been in crypto since 2012 and first bought BTC at $5 and I bought ETH for $11…. I’m at the point where I can consider retiring and I’m only in my 40s, not that I actually want to – I’m actively looking for work in the Crypto space because I am Interested in it, and can see the massive potential that exists there and want to be a part of it.

            Everything you’ve said tonight has been complete garbage – nothing more than a load of uninformed rhetoric. You don’t understand the technology, you don’t understand mining… you don’t even understand how cheap memory is, making a fuss over 1/3 of a TB of data ffs.

            It is pointless trying to discuss concepts like trust-less systems, Merkel trees, The Red Queens game, microtransaction use cases or the game theory theory behind mining to someone as dumb as yourself.

            Honestly, the only mistake I have made tonight was entering into a conversation with you in good faith.

          • Stewie,
            since I am clearly misinformed and you are an expert, can you please explain in simple terms how a trustless system like bitcoin works?
            How do I know which of the two possible data sets I have been presented with is the genuine one. Without asking anyone else. And everyone else needs to come to the same conclusion when presented with the same 2 data sets, also without asking anyone else. This is the fundamentals of a trustless system which you seem to be an expert upon, and I know nothing, so small words only would help.

          • Stewie GriffinMEMBER

            As I mentioned previously a blockchain like BTC is based around UTXO transactions (ETH is account based which feeds into its scaling problem). In order to validate a transaction a miner only has to check that the transaction from which the current BTC originated is valid, ie it has been previously validated. It does this by checking the hash signature of each transaction to ensure that it agree’s with the current child generated hash value, it can continue checking further back up the merkel tree as needed. While it is true that someone could theoretically purchase a lot of hashing power in order to perform a 51% attack, blockchains don’t exist isolated or in separation from the law and miners can either ignore the subsequent longest chain, or be required to isolate and freeze the crypto currency.

            To date the main victims of 51% attachs have been minor chains and individual exchanges, however, the incentive atm is for these exchanges to absorb such losses rather than exercise their rights to have the coins frozen or miners return back to the shorter legitimate chain…. there is huge value to the crypto exchange industry (which is little more developed than online gambling sites) in maintaining the fallacy that blockchains are immutable and not subject to law.

            These regulatory changes are coming down the pipeline – Govts want to regulate crypto because its use case as a payment system for trust-less transactions on the internet works. But they want the advantages and productivity savings they facilitate, not the crime and lawlessness that has to date gone with it.

            If you are interested in the space then I recommend you start by reading some of Craig Wrights blog, where he runs through many of these topics in an accessible fashion:

            https://craigwright.net/blog/

            Topics I have touched on, like “Bitcoin & Blockchain Tech, Alternative Coins & Systems, Law & Regulation, etc” are all header and are all very relevant if you want to build a deeper knowledge around blockchains and crypto currencies.

            e.g. What Proof-of-Work is used for
            https://craigwright.net/blog/law-regulation/what-proof-of-work-is-used-for/

            The security of nodes and hashing
            https://craigwright.net/blog/economics/nodes-hash-rate-signalling/

            Cryptography and consensus mining is an incredibly complex topic, I can’t really explain it further in terms of how it works for you other than how I have already done so, all I can say further is that “It works”. If you want more info, then you will have to DYOR and I can only suggest starting with Craig’s blog.

            Cheers

          • I can’t help but again seem to think you kind of miss the point of trustless. At the point of relying on rule of law there are FAR MORE EFFICIENT ways to do things, both in cost and complexity. All of the solutions seem to rely on some sort of trusted entity at some point.

          • https://en.bitcoin.it/wiki/Proof_of_work
            You should read that, it’s short. You should read it a few times. Really understand it.
            Especially the following
            “For a block to be valid it must hash to a value less than the current target; this means that each block indicates that work has been done generating it. Each block contains the hash of the preceding block, thus each block has a chain of blocks that together contain a large amount of work. Changing a block (which can only be done by making a new block containing the same predecessor) requires regenerating all successors and redoing the work they contain. This protects the block chain from tampering.”
            This explains why the proof of work is not completely useless, or a peacocks tail or whatever craig wright is going on about, in really simple terms.

          • Stewie GriffinMEMBER

            Hi – I fully understand the purpose of hashing, and explained it in the very first link I referred you to:

            The purpose of hashing is simply to keep bad actors from participating in the mining process and mining illegal transactions. If there were no barriers to entry or verifying a transaction, then bad actors would move in. By hasing [proof of work] the miner proves that they’ve expended effort in order to verify the transaction, this discourages bad actors by building a wall of hash power.

            For BTC this energy expended on hashing is incredibly wasteful, as it only protects 7 transactions per second. There is no theoretical limit to the number of transactions Bitcoin, as described in the original white paper, can process per second. Technically the only limit atm should be the processing speeds of the computers. Consequently in such a system, the hashing becomes economic when spread across millions, and eventually billions of tranactions per day.

            https://www.macrobusiness.com.au/2020/02/weekend-reading-15-16-february-2020/#comment-3671070

            POW is driven by the Red Queens game, there are many economic principals tied up in how BitCoin, as defined in the original white paper, works.

            As I said, if you can point me to another mechanism that delivers trust-less transactions, without relying on a single CB database I would be genuinely interested in hearing. The only mechanism by which I am aware of that has solved the ‘double spend’ problem in a trust-less system is blockchain technology.

            There is a vast amount of dis-information sprayed around in the Crypto space, mainly as a result of a few key actors introducing inefficiencies into the system based around fallacies such as the 1MB block cap, and then providing expensive solutions to the problems that they created.

            https://coingeek.com/crypto-crime-cartel-blockstream-needs-bitcoin-to-fail/

            Explore what Craig has to say on various topics and compare them to what other informed commentators have to say. The truth probably lies somewhere in between (although closer to Craig’s end imho).

            Cheers

          • Craig is not an informed commentator. I could not see anything other than completely unsubstantiated assertions in his article on proof of work, not even a simple this is this because of that, just a whole lot of this is this because I say so.
            You really don’t understand the chain of proof of work and what it means in terms of being able to trust that a blockchain is valid. This is either ignorance or because it is hard to convince someone of something that their livelihood depends on them not believing.

            That quote continues to show you really don’t know what you are talking about. Number of transactions feeds directly into the SIZE of the block, not the amount of hashing power required. Block size was limited because the block chain will become too large to be practical if supporting too many transactions. This is why transactions will always be limited in any public blockchain that must be stored “everywhere”.
            Can you please explain how hashing is keeping bad actors out with some sort of logical argument not just baseless assertions.

          • Stewie GriffinMEMBER

            BTW – the wiki link does agree with what I’ve already said, it is a verifiable sequence of signatures based around hash values of the parent transaction. To check that a transaction is valid all that is required is for a miner to check that the prior transaction feeding into it was valid. With P2P payments you have a string of parent/child hashes, and if a miner can’t validate the parent transaction, because it was spent in a P2P payment, then all it needs to do is keep going back until it finds one that has been validated, at which point all the hashed spent transactions along that entire branch of the Merkel tree can effectively be pruned.

            P2P payments are the sort of payments that occur in the IoT thus it is possible to build up long strings of low value P2P transactions (which is the nature of the IoT transaction type) upwards of 50, before they necessarily need to be validated by a miner. Double spend attacks are not worth the effort on the low value transaction class generated by the IoT activity.

          • Stewie GriffinMEMBER

            Look – this conversation is going no where. I’ve made a fortune many times over from crypto currency, I know what I am talking about because I have actively researched virtually each an every aspect of the blockchain that we have so far spoken about…. including reading and studying the original white paper – I don’t get my information from Twitter accounts or Crypto ‘media’ most of which are controlled by the Blockstream cartel.

            The BTC blockchain was limited to 1MB because Blockstream wanted users to pay FEES to bid for limited space on the blockchain. BitCoin was designed for the reverse of this – miners to compete with each other to see who could process the most transactions for the least price.

            Hashing protects the network from bad actors and has nothing to do with block size – I certainly never suggested anything else, and if I did please point out exactly where I said it. Block size is purely transaction information, or in the case of BSV transactional data plus any additional data returned to the blockchain via the OP_RETURN function. The fact that BSV operates with blocks many times the size of BTC and records transactions for a tiny slither of the price of BTC proves this:

            https://coin.dance/

            You are seriously misinformed, but I wish you will on your journey.

            Regards

      • What specifically will be used to make crypto’s illegal while not also making monopoly money illegal? At this point the ATO is sending out letters telling people to pay their capital gains tax on the transactions.

      • BarratuesdaiMEMBER

        ..”..The license to print money has always been the perogative and privilege of monarchies, governments, and CB’s.”.
        I wonder if those three you mention, also have a significant hand in the so called radical alternative… ie BTC.

  3. Its an amazing way to transfer a worthless currency out of your despot country that was made from shady businesses and then go overseas and get access to it in another currency. The fact that we still don’t know who created it and for what purpose is suspect enough and the fact that we let this happen at all says a lot about our world and the sad state we are in.

    • “The fact that we still don’t know who created it and for what purpose is suspect enough and the fact that we let this happen at all says a lot about our world and the sad state we are in.”
      The fact we let governments and banks print huge amounts of fiat devaluing all our current holdings of it is a much sadder state than some sort of electronic token being traded. Not sure who created it, but the why is in reaction to the previous statement. They clearly put some serious thought into it as well because every decision made seems to have been the right one to ensure it’s success.

  4. And yet it keeps on rising despite all of its “problems”. When someone first explained it to me I couldn’t understand why anyone would buy it. It took me a while to figure it out. The history of it is fascinating and bathed in the right amount of mystery. Who is Satoshi Nakamoto?

    I’m sure there will be a lot of future volatility but over time it is becoming more accepted, widespread and stable. And more expensive.

  5. Knuckles McGintyMEMBER

    From Shane Oliver on the BBC interweb:
    https://www.bbc.com/news/business-54982604
    Shane Oliver, head of investment strategy and chief economist at AMP Capital, warned about jumping into Bitcoin.

    “Its huge volatility hardly makes it a safe haven as a store of value. I have far more confidence in the $50 note in my wallet retaining its value over time than Bitcoin, which seems to bounce around like a yo-yo.”

    He has full confidence in the $50 note in his wallet retaining its value over time – yeah, right!

      • Knuckles McGintyMEMBER

        interesting, yes. I’ve not really considered the face value of the note to be of any import, rather what that note will buy, but I take your point. Oliver was questioning the ability of Bitcoin to act as a store of value, i.e. what it will buy in the future.

        • The entire “science” of economics seems to be about sleight of hand tricks to convince the populace of what the elites want, see RBA and co. So are you really sure that’s what he truly believes.

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