Ray Dalio Has a Point About Bitcoin at $18,000 | Hacker News Reader

Ray Dalio Has a Point About Bitcoin at $18,000

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To ask a very amateur question, why do people think Bitcoin specifically will succeed? Aren't there dozens of coins out there which have fixed some of it's most glaring flaws?

Network effect?

Momentum

first mover advantage

what glaring flaws?

It continues to function as it set out to be.

For instance, no one really uses it to buy things because it does not really function as a currency?

Bitcoin has proven to be a poor "medium of exchange", but that is OK because buying and selling Bitcoin is easy enough for it to be a practical place in which to park money. I.e., it has proven to be a satisfactory "store of value".

Gold is a poor medium of exchange, too, but that has not prevented it from being a satisfactory store of value.

(Yes, I know that gold actually was a common medium of exchange at one time; it was displaced centuries ago by the greater convenience of paper money.)

Some visionary types hoped Bitcoin would disrupt government-issued (paper) money and governments and banks generally. The fact that these hopes were dashed does not mean Bitcoin will not remain an OK place to park money.

IMO, Bitcoin is not a satisfactory store of value, it is a speculative investment. It is: a) not liquid b) extremely volatile

Most people would not want their asset prices to swing like Bitcoin's value does.

> It continues to function as it set out to be.

Satoshi's paper is literally titled, "Bitcoin: A Peer-to-Peer Electronic Cash System", but it's generally considered to have failed at that. (Even most Bitcoin events don't allow you to pay in Bitcoin, for example.)

Bitcoin folks now talk about it as "digital gold" or "a store of value", which is fine, but very different than what it was set out to be.

I understand, the P2P layer has moved to lightning layer atop Bitcoin. Works very well. In terms of adoption of P2P transactions, we will have to wait till more widespread adoption. And most who have bitcoin will be reluctant to spend it for coffees and would rather let it appreciate in value for now.

Meanwhile adoption does continue to rise with apps like https://gethaven.app

> I understand, the P2P layer has moved to lightning layer atop Bitcoin. Works very well.

I can appreciate how off-chain overlays can allow Bitcoin to achieve transactions at scale. What I don't quite get is why this kind of recentralization[1] is good for Bitcoin. It feels like the endgame may be a kind of "worst of both worlds" solution — no longer decentralized, but still not as efficient as centralized solutions.

Unless: Can Bitcoin users prevent off-chain transactions, to avoid Lightning?

[1] "10 percent of [Lightning] nodes control 80 percent of funds on the network." https://www.coindesk.com/bitcoins-lightning-network-is-growi...

Having fees counted in dollars is a pretty glaring flaw.

Developers unwilling to focus on on-chain scaling is another (leading to the high fees).

Bitcoin also has a big privacy and fungibility flaw, something that Monero aims to solve.

Out of all the coins, Bitcoin has the longest history of being an OK place to park money. History is probably the largest factor in people's decisions about which coin to park their money in. The fact that other coins solve various technical problems will continue to be a small factor as long as Bitcoin continues to avoid running into a disastrous technical problem.

First mover advantage is one rationale. It's a household name around the world, far moreso than any other crypto. My 80 year old grandpa who doesn't even know how to use a mouse or send an email is aware of the hype around Bitcoin.

There are also some advantages to being "simple". Competitors (like Ethereum) have more sophisticated features (such as smart contracts) and may scale better. But none are as battle hardened. Andreas Antonopoulos did a great talk "Bitcoin Security: Bubble Boy and the Sewer Rat"[1] describing how the platform has survived what's now ten straight years in the wild, exposed to the continuous pressure of hostile attacks. It's scarred and ugly as a result (with amputated opcodes and inelegant hacks) but he argues those are symptoms of resilience. And it is still being improved upon to adopt new ideas emerging from the space (eg. Lightning, Schnorr signatures) just at a slow and very cautious pace.

I can run (and sync) a full node on regular hardware, which isn't easy for more I/O intensive coins that have accreted a magnitude of order larger blockchain history. The HN crowd might appreciate the more traditional, native-looking UI of its client software over some of the Electron-like alternatives from other coins (which sometimes lack basic features like viewing history). It focuses on doing a few things well, namely being a wallet and sending and receiving units. That will always be a use case for transacting or storing wealth, and if that's all I'm doing, then I'd rather not have any other cruft.

You asked a really good question, and I personally suspect Bitcoin will eventually get supplanted by something else over the long term (as happens with any tech!). At some point the advantages gained from a clean, ground-up rewrite will surpass the stickiness of its global adoption. But I've come to believe that will take a lot longer than I initially anticipated.

We're already seeing vastly improved power efficiency out of alternative consensus mechanisms like Proof of Stake, and its still very early days for this industry and its technology.

While most of my comparisons above contrast Bitcoin to Ethereum (its biggest competitor) you are correct there are oodles of alternatives to pick from. Some purport cleaner tech stacks and demonstrate superior transaction volume scalability (like EOS).

Analysts have said crypto today is reminiscent of the plethora of startups seen during the dot-com bubble. The survivors were companies that hadn't even been invented yet (like Twitter, Netflix, Google depending when is your cutoff) and the boring but steadfast ones (like Amazon, eBay, Yahoo). So if you accept Bitcoin as falling in the latter camp there's some comfort in placing your bets there compared to newer, more "unknown" options.

[1] https://youtu.be/810aKcfM__Q

But if you can’t do anything with Bitcoin, this is pure speculation. At some point it’s gonna pop.

> you can’t do anything with Bitcoin

"Keeping track of who owns what" is the "something" that Bitcoin purports to do.

I keep track of who wears my socks. If you want in I'll lease you a pair for 5k a month

Now keep track of billions of socks and be incapable of lying and you’re onto something!

why? easy? Just trust me. I track all the socks in the world. Promise I wouldn't fake new socks, or new people with socks. Just trust me.

I only lease out 100 socks. If you fail to pay the lease you keep the socks but now they belong to you and are no longer my socks.

It's a purported utility, but it doesn't really explain the valuation.

Yes, it does. Bitcoin's market cap is ~350b, which is about the same as JPM's market cap, which is exactly what the purported utility aims to replace. Doesn't seem far off to me. Bitcoin aims to make paper money obsolete, which aims to make banks obsolete. Bitcoin is therefore undervalued, assuming it is a valid replacement. $100k per BTC in 5 years is not unreasonable. 5 years ago, if someone said $20k per BTC in 5 years, you would call them crazy.

That's like saying you can't do anything with gold bars.

Well they actually have real value as a material in industry, jewelry, but largely hold value because people say they do. You’re right that there are similarities here, and given gold is also constantly mined it’s often not a great investment. However there are thousands of years of precedent saying this rare thing holds some value; we have no such precedent with Bitcoin.

The wired thing about jewelry is that it’s only real value is mostly in the first sale. After that, it’s rare to get more than the value of its component parts. Jewelers hit estate sales and pick up quite nice gold and silver diamond jewelry for dirt cheap so they can melt the metal into something else and will wind up with jars of small diamonds just sitting around because they’re too small to recut.

>The wired thing about jewelry is that it’s only real value is mostly in the first sale. After that, it’s rare to get more than the value of its component parts.

Is there a reason for this? Why can't you take a piece of used jewelry, clean it, and resell it? Do they go out of fashion?

https://www.theatlantic.com/magazine/archive/1982/02/have-yo...

I'm pretty sure Ray Dalio is not a "hedge fund skeptic".

The article is trying to say he runs a hedge fund and is skeptical of Bitcoin, not that he is a skeptic of hedge funds.

In context, this just looks like a poorly worded sentence. I think they meant that Ray Dalio is a Bitcoin skeptic who is part of the hedge fund industry.

Either way, I don't see anything newsworthy in this article.

Tether has been printing record amounts again. And is also under legal scrutiny as various cases advance against them and other players.

Looking like a last-ditch attempt to fleece the unwary from here.

How do you see the amount of tether printed vs actual amount of tether bought?

Well in theory those numbers are equal, any discrepancy would be fraudulent.

How is it that Tether, with all its reports of unviability, seems to manage to go on?

It seems like if they were the fraud people frequently report, the would have bust long ago.

How long were people talking about Madoff before his firm finally went bust?

(I actually don't know, if anyone has insight, I would appreciate it.)

Markopolos complained about Madoff for around nine years and other people may have seen the signs earlier. There is a great deal of ruin in Tether.

Yup, and when Madoff eventually blew up the SEC instituted the whistleblower program in which they pay up to a fraction of recovered funds, to kind of make up for the fact they slept on this problem for soooo damn long.

Maybe they are backed by 3 letter agencies wanting to monitor crypto activity?

That’s a widely speculative conspiracy. Do you have any evidence?

are you asking that if I am snowden or assange and have managed to uncover the work of 3 letter organisations. No, just like people speculate about why Tether is still alive. I speculate that they might have cut a deal with the various 3 letter agencies to provide data on USD -> USDT flows which will help deanonymize huge branches of the transaction graph. In that way 3 letter agencies can keep an eye on the flows. In return all cases against them will be held up and will not move fast.

In the case of secretive 3 letter organisations you can only observe their actions by second-order effects. In this case the lack of significant prosecution against Tether.

I see Tether and USDC market cap has been increasing considerably last weeks while DAI has not. Do you think this is because Tether/USDC are more easily to be printed (aka not backed by real USD) compared to DAI that is decentralized?

- Tether: https://coinmarketcap.com/currencies/tether/

- USD Coin: https://coinmarketcap.com/currencies/usd-coin/

- DAI: https://coinmarketcap.com/currencies/multi-collateral-dai/

Tether supply is more than reasonable if you compare it to USDC and take into account that USDT is more widely used in exchanges than USDC.

USDT going bust was a nice story. Many of the big exchanges now support USDC, and so people could easily switch if they thought Tether was not solid.

The fact the article doesn’t cover this at all except for a passing mention of USDT as “pegged” (talk about legitimizing!) is really all you need to know about the fluffiness of this article. We are at cotton candy levels of writing here.

Well, Bitcoin's stability increases all the time and it will continue attracting more risk averse investments. Institutions are also more strategic in their investments, which will increase but also stabilize the price even further. That's basically the story why it's attractive for speculators right now. It might be 'get rich quick scheme' but also becoming a stable store of value.

> Bitcoin's stability increases all the time

Does it?

https://www.tradingview.com/symbols/BVOL24H/

The most positive thing I can say about that chart is that volatility was higher when price last was at these levels, but I wouldn't claim a downtrend.

Lol, old thinkers who are towing the party line and are also grumpy they missed out. Most "trustworthy" financial news outlets are all pushing messaging that Bitcoin is too risky and to avoid it like the plague. However in a "Great Reset" environment coming upon us fast having ways to move wealth with fewer restrictions suddenly become very attractive. Compare the price charts of gold and bitcoin for this year. They rise together pretty well until the election. Then suddenly gold flatlined and Bitcoin started trending upwards again. Regardless of your theory of what a Biden administration means for the country, the market says people want freedom and independence from whatever is coming.

No, people want to get rich quick and that’s it. Nobody is buying Bitcoin as a store of value. Everybody buys because they put a bet on the narrative "Bitcoin could easily be worth 100k-200k". This is 100% speculation and nothing else.

Most do for sure. I'd say 95% of the people I introduced to crypto feel this way. However, the same people who were into BTC back in the early 2010s are the same people who see the fed print 22% of all USD bills in 2020 alone as something very concerning. BTC is not my only investment against hyper inflation but its for sure always been in my portfolio.

As optimistic I am about crypto, I think this type of modelling (BTC at 300k in a year) is taking the price action around previous Bitcoin cycles and naively extrapolating it into the future. I think in reality there are many holders who would sell way before that, and not many buyers at levels approaching anything like that.

If Bitcoin replaced gold completely as a store of value, and had gold’s marketcap - maybe. I don’t think we’ll get there that soon. Also, so far Bitcoin has acted more like a risk asset than a store of value, like mentioned in the article. Central bank action continues to be in favour of the “sound money” story of Bitcoin, but it wouldn’t surprise me if Bitcoin also dives with the next stock market correction.

Dalio has some legit concerns, I think we can bypass the points about bitcoin as everyday currency because that's clearly not going to happen for a while. But regulation of Bitcoin could certainly happen if it becomes large enough a parallel financial system. I hope it won’t be regulated negatively but wouldn’t rule it out.

I also think Dalio is open to having his mind changed, it’s his style to get different perspectives. Bridgewater missed COVID pretty bad, I don’t think he wants to be seen as the old guy who missed Bitcoin if it turns out even more successful.

I am buying bitcoin as a store of value. Be sparing in your use of "Nobody".

Regardless of your theory of what a Biden administration means for the country, the market says people want freedom and independence from whatever is coming

I think that's an odd way to read BTC pricing. The number of people buying because bitcoin represents freedom is significantly lower than the number of people buying simply because they're speculating that the price will go up some more. If those people decide to cash out their gains the price will go down again. There's nothing inherently more free about bitcoin at $18000 than there is at $12000. The value is not linked to the politics.

>Lol, old thinkers who are towing the party line

OT: isn't the expression "toeing the party line"?

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