[cs702]

"[We] spent months deliberating to determine our capital allocation strategy. Our decision to invest in Bitcoin at this time was driven in part by a confluence of macro factors affecting the economic and business landscape that we believe is creating long-term risks for our corporate treasury program ― risks that should be addressed proactively. Those macro factors include, among other things, the economic and public health crisis precipitated by COVID-19, unprecedented government financial stimulus measures including quantitative easing adopted around the world, and global political and economic uncertainty. We believe that, together, these and other factors may well have a significant depreciating effect on the long-term real value of fiat currencies and many other conventional asset types, including many of the assets traditionally held as part of corporate treasury operations."

Wow.

[bhaak]

I can totally believe how Bitcoin, Ethereum and the rest of the cryptocurrency space could go through another bubble (the last one was quite small if you compare it to the DotCom bubble and consider how much money is floating around nowadays).

So I can imagine that this will turn into a big profit for them but the arguments are hilariously weak.

Granted they will get a lot of PR out of it.

[lifty]

Hilariously weak? I think they lay out a reasonable argument considering the amount of debt around the world and the fragility of the economy. The big question is: will we have deflation or inflation? I am not sure, but I doubt the USG will let itself go bankrupt.

[betterunix2]

"I doubt the USG will let itself go bankrupt."

The federal government cannot go bankrupt. In theory the government can default on debts, but in reality there is never a situation where the government would be forced to do so (it is always due to political dysfunction) -- as others have stated the US government is able to issue more money whenever it needs to do so, and thus can always satisfy any monetary obligations (though there may be negative consequences to doing so). Even if the government does default on its debts, it would not truly be bankrupt, because bankruptcy means that some higher authority has stepped in to decide what will be repaid and how, but the federal government is the highest authority. Likewise for the states, which cannot issue money but which cannot actually go bankrupt (as they have the authority to decide what obligations to meet or to fail to meet), something which has become relevant due to the enormous cost of dealing with COVID.

[nostrademons]

I think that was the grandparent's point. The USG can always issue more currency and inflate away the value of its debt. Doing so is preferable to default (and the fiscal & political crisis that would bring), and so they will. Thus, we're going to get more inflation.

[betterunix2]

There was nearly a technical default just last year, and the US has actually defaulted on its debt in the past. Politicians do not always behave rationally.

[parasubvert]

We watched one of the US political parties threaten default at least three times in the past 12 years.

I think creating political/fiscal crises is part of the point.

[frank2]

I had no idea. Where can I learn more about this?

Are you sure they threatened to default of _Treasury_ instruments?

[lifty]

Defaulting is a much better word, I shouldn't have used 'bankrupt'. And I agree with you, I think it's a nearly impossible for the USG to default on its debt, even temporarily. The only situation in which that can happen is through insane administrative fuckup, but that's not likely.

[DSingularity]

Correction: the world won’t let the USG go bankrupt. American generals won’t just stand down, disband their forces, and turn in their boots. If the USG goes bankrupt a massive war will breakout. In the business world things have been going pretty well so if more taxes become necessary to prop up the USG they will happily oblige.

[lifty]

I agree with what you are saying, but even before that point, the USG which is sovereign over its money supply, will be able cover any liabilities it has by creating the necessary money. This is what I was alluding to when I mentioned that the USG won’t let itself go bankrupt. They will destroy the USD before going bankrupt, because the repercussions of going bankrupt are much worse than a lower valued USD. Also, the whole debt ceiling is a charade; the FED can and has monetized treasury debt without any fuss.

[martinko]

Inflating the debt away would actually be the opposite of bankruptcy.

[f00zz]

> go through another bubble

I don't know. I remember a few years ago when people on reddit would get excited when some cafe in Bratislava or wherever started accepting bitcoin, or when Steam started accepting bitcoin. Now cryptocurrencies seem... boring. I see lots of people talking about "store of value", but actual use of bitcoin for what it was intended seems to be decreasing. And now people who want to gamble can just buy NKLA or SPCE or options on zero-fee brokers, which weren't a thing when bitcoin hit all-time high.

This is just my impression as an outsider, of course.

[this_user]

All of the previous Bitcoin bubbles were driven by by new, larger group of people discovering it, and driving prices higher. Hence, any new bubble would require such a new group of buyers to appear. The question is whether that group even exists. Because in 2017 Bitcoin, arguably, went as mainstream as it could go with full-on regular MSM coverage, and most people seem to have heard about it by now. So, who is there to buy, and drive prices even higher as long as its utility stays the same?

[nostrademons]

Do you use Bitcoin? No? Then you're part of the group of new buyers.

Don't think you ever would? Opinions can change rapidly when you're struggling to buy food.The article's thesis isn't really that the utility of Bitcoin will increase, it's that the utility of the dollar (its primary competition) will decrease. If your dollars will be worth half tomorrow, it's a no-brainer to get rid of them ASAP and put your money in a currency that isn't being printed rapidly.

[verdverm]

Were you a Bitcoin user? Yes, then you won't be a buyer this time around. I will not be putting money in, but I will happily make the bags of others lighter. Of another hype bubble materializes, I will be extracting more of the free money Bitcoin Network printed.

In the states, using crypto is a taxable event. Until that is changed, they can only be stores of value, not currency, as I have no interest in recording every transaction with the IRS. I don't see a differentiation within cryptos coming from USG, so the crypto ecosystem can only be one or the other?

[nostrademons]

I think a store of value is exactly what MicroStrategy (and other large institutional buyers of crypto) are looking for right now.

If it gets to the point where people will be calling on their Bitcoin reserves, the IRS will no longer be a going concern, at least one that anyone will be paying attention to. It's insurance against the collapse of governments, and so any government regulation other than ones affecting its storage & ownership aren't relevant.

[nextweek2]

> who is there to buy

Pension funds and other financial institutions. These were either locked out or didn't believe in bitcoin. If you were a Pension fund now you're probably keeping an eye on the space to help your returns.

[bhaak]

That belief is summarized in the crypto scene as "the herd is coming".

Last bubble they didn't, this time, we will see.

[drcode]

The counterargument to this is that IF people are willing to pay for something, they must care about it. For both Bitcoin and Ethereum, the amount of money people are willing to pay in fees to propagate on the network are extremely high at the moment... so in theory at least, somebody thinks these networks are "worth" using, or they wouldn't spend this money.

[gruez]

>For both Bitcoin and Ethereum, the amount of money people are willing to pay in fees to propagate on the network are extremely high at the moment

Just to add here, the transaction fees you have to pay are highly variable, see chart fee chart for the last 30 days[1]. As of this posting the market clearing rate for a typical transaction is about 0.000325 BTC[2], or around $3.73. However, a few hours ago it was as low as 0.000005 BTC for a typical transaction, or around ($0.058).

[1] https://i.imgur.com/FYpGpES.png

[2] a random google search says a typical bitcoin transaction 250 bytes. this is a different unit than the one in the linked chart, which uses satoshis (0.00000001 BTC) per byte.

[cdiddy2]

Ethereum is the one that is generating more fees right now. 3.6M just in fees yesterday

https://coinmetrics.io/charts/#assets=btc,eth_left=FeeTotUSD...

[cortesoft]

That isn’t necessarily true... people also buy things if they think OTHER people care about it.... they think someone else will buy it from them later for a higher price.

https://en.wikipedia.org/wiki/Greater_fool_theory

[bhaak]

Don't look at Bitcoin. That hasn't changed much and not much interesting stuff (besides some drama) goes on there.

Look at the Ethereum space. That's where most of the action is these days. DeFi (Decentralized Finance) is the current hype. The ETH2 phase 0 is projected to go live later this year (this time for real :-). 60% of Tether is an ERC20 token now. etc.

Oh, and if you are interested in drama and have missed it, look up the Quadriga story. That story is so unbelievable whacky, no screen writer would have been able to come up with it.

[beaner]

IMO, "boring" is exactly what Bitcoin should be right now. It's becoming normal.

Ethereum does have a lot of really interesting things going on that are super cool. But I wouldn't take this to mean that Bitcoin isn't developing or that it has somehow become stodgy or less relevant.

Bitcoin's developments are more the field of payments, decentralization, and privacy. These parts are not flashy, but are absolutely fundamental for its usability as money and store-of-value in the future.

The biggest differentiation though is that Bitcoin has an explicit inflation rate while Ethereum actually has no specific monetary policy at all. It is up to the devs and its scarcity could be undermined.

They're both extremely interesting for different reasons, but for those of us who got into crypto through economic reasoning about the gold standard, scarcity, government control of the money supply, etc. - the things many have seen for a really long time as the problems at hand - Bitcoin is by far more directly addressing them.

It's "boringness" at the moment means these objectives and economic motivations are becoming more agreeable.

[tomputer]

> Don't look at Bitcoin. That hasn't changed much and not much interesting stuff (besides some drama) goes on there.

No. Look at Bitcoin first.

If Bitcoin fails altcoins will most certainly fail too. There is a reason why Bitcoin does not change that much, it has to be safe and trusted for storing value. It is not a "move fast and break things" project.

> Look at the Ethereum space. That's where most of the action is these days. DeFi (Decentralized Finance) is the current hype.

Bitcoin is DeFi (Decentralized Finance), if anything.

[bhaak]

OP already looked at Bitcoin but as that is moving slowly, I pointed them in another direction where more stuff is happening.

"Finance" is much more than just payments or store of value. Bitcoin is way behind Ethereum in that regard.

Of course, that doesn't matter if you don't think that decentralized finance makes sense to have.

[maps7]

What is ETH2 and why should I care about it?

[nostrademons]

Ethereum + proof of stake + sharding. Right now every node on the Ethereum network validates every transaction using a similar proof of work system as Bitcoin. This creates a transaction bottleneck; I believe Bitcoin can do something like 7 TPS, Ethereum about 11, which is woefully inadequate for a global financial system (for comparison, I believe Visa does something like 20,000).

Proof-of-stake replaces this massive electricity waste with game theory. Every validator must put up a deposit (in ETH) to participate. If it cheats, it loses that deposit. The damage it can do to the network is limited to less than the deposit. Therefore, it's never profitable to cheat - and so they won't, or if they do, they will go bankrupt, remove themselves from the network, and self-limit the problem. And transaction validation can now be split among thousands of nodes (instead of having those thousands of nodes all validate the same PoW), which means the network can scale to tens or hundreds of thousands of transactions per second.

[maps7]

Sounds like a better approach. Do you think Bitcoin (BTC) will go down this path too?

[nickbauman]

The bitcoin network is much too slow for real economic behavior. I don't understand this, but then I've been ignoring bitcoin for a couple of years. Did they change the proof-of-work requirements? (If they did, they're just competing with other fiat currency)

[9nGQluzmnq3M]

"Could"? We're already in a bubble. Most notably, the Bitcoin price rally coincides with Tether printing out $10B of their "stablecoin", fully backed with what very much appears to be nothing at all.

Here's a primer from HN's very own patio11, from back in late 2019 when they had only printed $4B: https://www.kalzumeus.com/2019/10/28/tether-and-bitfinex/

[martinko]

This has been debunked time and time again, at this point you are just shitposting.

[caiobegotti]

It seems to be a common sentiment but the general business people can't completely back it with macro data so everyone just brace for impact... I assume these folks have actual intel to take this big decision.

[macspoofing]

>I assume these folks have actual intel to take this big decision.

They sure write like they do. But they act like gamblers hoping for the next big score.

[kneel]

>They sure write like they do. But they act like gamblers hoping for the next big score.

Sounds like wall street

[diegocerdan]

What if sentiment is blue-pilled and holding dollars is actually the gamble? You would be holding the wrong side of the stick.

I would agree that dollars have little downside but the purchasing power degradation of dollars feels like a irremediable tax on savings. And hard money like gold, silver, Bitcoin or Ethereum a quite decent hedge.

[take_a_breath]

==And hard money like gold, silver, Bitcoin or Ethereum a quite decent hedge.==

Two of these things are not like the others.

[macspoofing]

>What if sentiment is blue-pilled and holding dollars is actually the gamble?

Even if you have no confidence in the dollar, doesn't mean Bitcoin or crypto currencies are a good alternative.

>And hard money like gold, silver, Bitcoin or Ethereum a quite decent hedge.

That is a strong statement. There is no evidence that crypto currencies are a 'decent hedge' for anything.

[throw1234651234]

>I assume these folks have actual intel to take this big decision

I assume it's "Our advisors can push mutual funds, they will be able to push trusts with the same fee structures and incentives to sell that hold an asset that has 10Xed before."

That alone seems like enough.

Let's say you don't believe BitCoin. If you have worked in finance, or had a financial advisor come to your company, you probably believe in their ability to sell.

People still think financial "advisors" (Series 7/63, CFP) know something / have interests besides pushing mutual funds.

[Havoc]

>I assume these folks have actual intel to take this big decision.

Short of a crystal ball I don’t see how

[wokwokwok]

> I assume these folks have actual intel to take this big decision.

Unfortunately, my experience working with MSTR has been that the expectation of competence isn't really born out in actual competence at a technical level.

I suppose you can only hope that at a management level it's a different story. They certainly seem to sell their product very well.

[ausbah]

wasn't quanatative easing done for like a decade after tbe recession with no inflation? why is there any reason to think this time around will be different? scale?

[diegocerdan]

No inflation? Look what new money has bought and you will clearly see huge inflation: stocks and housing.

We don't see shopping cart inflation because it's countered by the technological cheapening of the production. And the key fact that new money is not being given to people buying groceries.

[mac01021]

I never understood how anyone can find it remotely fair for the Fed to introduce new money into the economy by any means other than equal division between all citizens.

[betterunix2]

The flip side is somewhat problematic: if the Fed needed to remove money from the economy (e.g. because inflation exceeded the target rate), they would have to take money away from everyone equally.

It is easy to forget that the Fed's mission is to stabilize the value of money, not to conform to some concept of fairness. I would also point out that instability in the value of money disproportionately impacts the poor, who have the least savings available to deal with price shocks (if you are living paycheck to paycheck, then the price of bread suddenly doubling will leave you eating half as much bread).

[sudosysgen]

Thing is, we already have a mechanism for removing money from the economy that isn't controlled by the Fed - taxation. If there's too much money, you can always increase taxes.

[betterunix2]

The difference is that taxation is subject to political forces, and politicians may not be able to pursue an unpopular policy that stabilizes the value of money. The Fed is mostly immune to short-term political needs and often pursues unpopular actions to meet its objectives.

[dnautics]

What about government contracting? Is it a fair process to decide who builds a highway?

The Fed's activity is what drives the government's ability to pay it's contractors.

[mac01021]

Why conflate regulation of the money supply with the ability to hire contractors?

If you want to increase the money supply, print some money and give it out.

If you want to fund highway construction, figure out how much it will cost and then raise that amount of tax revenue to pay the builders.

[dnautics]

That is a very naive view of how things work. (Though I agree that that is how things should work)

[SpicyLemonZest]

The Fed introduces new money into the economy through two major mechanisms: setting a target interest rate on overnight loans, and buying assets at market rates. It's not clear how either of those would be extended to an equal division between all citizens, the vast majority of whom don't want overnight loans and don't have financial assets they want to sell.

[irln]

> "and buying assets at market rates."

Without sarcasm, given the latest purchases of assets beyond Treasuries and MBS, why do you think the Federal Reserve has purchased assets at market rates?

[SpicyLemonZest]

It's my understanding that their asset purchase programs involve just buying things normally on the open market. It's of course a bit more complicated than "market rate", since large purchases marginally affect the price, but as far as I know nobody gets a special deal where the Federal Reserve pays 1.5x what the bonds are worth.

[baconandeggs]

Hence why they shouldn't do it.

[SpicyLemonZest]

It seems unfortunate to give up a useful tool for managing the economy just because it can't be structured to provide everyone an equal amount of benefit. Should we end small business programs because not everyone's wealthy enough to own a small business?

I'd see the problem if it worked how I've sometimes seen it described, where rich people and banks are just getting free gifts of cash, but that's not accurate.

[ihm]

This is just another way of saying “the Fed currently only introduces new money by ways that benefit certain corporations and wealthy people”. Just because they only do those two things doesn’t mean they couldn’t do other different things like just sending people more checks.

[mrfredward]

The Fed just buys debt...the closest thing to giving away money they can do is nudge someone's interest rates lower or make a loan easier to get.

Congress decides how the money is distributed when they're spending it.

[mac01021]

Congress created the Fed and gave it what powers it has. They (assuming a consensus among legislators) could totally have given it a different mechanism for controlling the money supply. Even one that culminated in a check being mailed to every citizen.

[SpicyLemonZest]

But if there's special kind of inflation that doesn't hurt people's ability to buy goods and services, does that really matter?

[take_a_breath]

If it hurts their ability to invest in assets, then yes. Assets tend to appreciate over time and represent an excellent store of value. Taking that option away from people matters very much.

[SpicyLemonZest]

I'm not sure I see how an increase in the value of assets hurts people's ability to invest in them.

[bradstewart]

Some assets are indivisible, so increasing value makes it unaffordable. You can't buy a fraction of a house.

For things like stocks, if the increased value is driven by inflation, you get less for your money. So it takes more money to store the same amount of value there.

[baconandeggs]

Because oddly enough, you can't buy classic cars as investment if you don't have the money.

[take_a_breath]

If assets appreciate faster than wages rise, it creates price-points that are too high for people to invest.

[colinmhayes]

CPI includes housing. Most Americans have seen minimal inflation over the last decade.

[ak217]

I'm not an expert, but it seems to me the way CPI imputes the cost of housing and several other things is broken. It looks like most Americans have seen much more inflation in the cost of housing, healthcare and education than the CPI would have you believe.

[gruez]

It includes housing in the form of rent (imputed rent in case you own the house). OP was talking about housing as an investment (like stocks), which is not covered under CPI.

[PanosJee]

Inflation has moved from product prices to asset prices. Just look at the stock market.

[xiphias2]

No, if you look at shadowstats, the house/rental prices, or the Big Mac index, you can see that there was significant inflation in the past 50 years. Governments are changing the measurement of the inflation to try to hide it.

[microtherion]

My favorite ShadowStats statistic is that their own annual subscription price has remained unchanged at $175 since at least 2006, during 14 years of supposedly rampant inflation: https://www.pragcap.com/update-theres-still-deflation-in-hyp...

[bravo22]

It caused inflation in assets, not in goods.

[solotronics]

Also look at art prices. The money was going to certain places without ending up in the hands of the every day people.

[rapsey]

Because now money is given directly to people due to covid. Before money just went to wall street.

[ta17711771]

Scale indeed.