[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?

[parasubvert]

Yes.

And while the mainstream view is that Ryan/Boehner never really intended to go through with it because they knew the consequences, a sizable contingent of congresspeople & conservative pundits wanted to go through with it just to show that "they meant business".

https://en.wikipedia.org/wiki/United_States_debt-ceiling_cri...

My perspective, when people tell you what they'll do, believe them. It would be economic equivalent to setting off a nuclear bomb in the middle of the country, but :shrug:, it would own the libs.

[betterunix2]

Basically it came down to a refusal to raise the debt ceiling, which forces the Treasury to take "extraordinary" measures to meet debt obligations. In several cases the Treasury was warning that they were running out of such measures and that if the debt ceiling was not raised there would be a default.

[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.

[f00zz]

Note that places where the local currency is actually collapsing aren't seeing much cryptocurrency adoption. In Argentina people just buy USD. In Zimbabwe people were using equities in the local stock market as hedge against inflation [1].

[1] https://www.bloomberg.com/news/articles/2020-07-06/for-zimba...

[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?

[nostrademons]

Bitcoin has a cultural bias to being conservative. Their selling point is that they were the first cryptocurrency, the Bitcoin network has never been hacked (even if individual exchanges or wallets have), and so they are a much more stable and dependable store of value. In the past they've been quite resistant to fundamental changes in how the blockchain works.

I'm pretty excited about Ethereum precisely because they're willing to experiment and rethink everything about their approach. I do suspect that soon after ETH2 is launched we will see a high-profile hack that steals everyone's ETH and requires a complete rollback of the network.

[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.