Bitcoin may be optimally positioned to become preferred currency for world trade | Hacker News Reader

Bitcoin may be optimally positioned to become preferred currency for world trade

ir.citi.com

59 pointsDocFeind99 comments

How can a currency that is so volatile be used for actually buying and selling stuff? If you were going to put your car up for sale today and you had to set a price in bitcoin how could you possibly choose a number? Will bitcoin ever settle down to a stable currency?

Maybe (maybe) volatility will die after this cycle. It's one theory thrown on the web.

Other than that news regarding cryptos these days should be avoided.

When the Euro was careening +/- anywhere from 20% to 100% against USD twenty years ago, everyone still managed.

“Euro’s a dollar, Euro’s a dollar twenty, oh, Euro’s a dollar again” just sounds less dramatic than “Bitcoin’s $40K, Bitcoin’s $50K, omg, Bitcoin’s lost $10K and is $40K again!”

While Euro is more stable now, it still changes real time and the system has to handle that. Same methods can apply.

> “Euro’s a dollar, Euro’s a dollar twenty, oh, Euro’s a dollar again” just sounds less dramatic than “Bitcoin’s $40K, Bitcoin’s $50K, omg, Bitcoin’s lost $10K and is $40K again!”

Six months ago, Bitcoin was literally selling for 25% of its current price (~$11,500), and about half its rise has been in the last two months.

Twenty years ago, the Euro didn't look that volatile. It bottomed out at ~70% of its previous high, and it took two years to get there.

https://fxtop.com/en/historical-exchange-rates-graph-zoom.ph...

Toggle the “Candlestick chart” on your diagram.

Though it could and did change percentage points a day, financial industry was still comfortable how to do business with ongoing volatility.

Those same mechanisms are useful here, meaning volatility isn’t the thing that precludes what Citi is discussing.

BTC's main purpose is as a store of value not as a currency. Volatility will eventually go down, think 30+ years.

> BTC's main purpose is as a store of value not as a currency.

Not if you read Satoshi’s original paper on the topic!

That was over ten years ago. Things change. And it can still be a currency, just not a good one today.

I think what many people are missing is that it may not be a good currency for small purchases but for moving very large sums of money it can be very convenient.

There are no instruments in the world today that would allow you to move from $1,000,000 up and up by fitting it easily and discretely into your pocket. Could be a smartphone, USB drive, or a san disk.

People in the west forget that like 85% of the world live in very corrupt countries where confiscation of property/wealth is real. If you want to get your money out of said countries this is the best way to do it hands down!

I don't even know what that means.

The most common store of value is cash. But it can be other things like a house, or stocks, or bonds. Anything that you can use to purchase other stuff. Key desirable store of value attributes is that it is widely accepted and doesn't lose value over time.

But for something to have "value", at some point, it can be converted to currency .. i.e., I can use it to buy something.

During a bull market you could sell the car at a discount, and during the bear market, at a markup.

FYI, every single time I have sold bitcoin or ethereum (even at historical peaks) it has a been a "mistake" in the sense that 2-3 years later it was worth more than before.

> FYI, every single time I have sold bitcoin or ethereum (even at historical peaks) it has a been a "mistake" in the sense that 2-3 years later it was worth more than before.

Following that logic, pretty much everyone that ever sold bitcoin made a mistake, given we were at an all time high last week or so.

I am not an economist, but I know that a deflation can be bad for the economy. People are encouraged to wait rather than spend because the price will be lower if you can hold out a little longer. This can become a positive feedback loop which is bad news for the economy.

I’m not sure what Bitcoin is really about, but it sure makes for good speculation and day trading.

The mining reward is not intrinsic to BTC. It can be adjusted as needed (provided 51% of compute agree.)

a majority of hashpower can enforce a softfork (tightening of rules), but has nothing to do with a hardfork (change of rules). If non-miners stick with old rules, then miners using new rules simply get ignored by everybody else.

For the past 10 years or so , bitcoins long-term volatility has consistently gone down. This is yet not as intense as 2017, for example.

This is one trend I expect will continue. Eventually if will stabilize.

You don't have to set the price in Bitcoin. Thinking in terms of opportunity cost tells us that all prices are already set Bitcoin (and every other easily fungible asset).

The RGB protocol is one attempt to allow tokens on Bitcoin -> https://www.google.com/amp/s/www.coindesk.com/rgb-smart-cont...

Another idea is Discreet Log Contracts https://suredbits.com/blog/

That is a great question. There are already people that are selling airplanes for bitcoin. See here: http://cubcrafters.com/carboncub/ex/configure

Those are very clearly priced in USD and not in BTC.

prices are set in USD not BTC, they just accept BTC.

You advertise the price in the fiat currency you want.

Bitcoin is only used in transit.

You just kicked the can one level down the road if you take the bitcoin payment ...

Okay this may come off as naive, or even completely wrong, so give me a break but...

What if you tied the price to a trade able good. Eg: $x USD in BTC. While it completely negates the idea of BTC, allows you to list an item for sale at a stable value.

wide acceptance would MAKE it stable

As a seller you'd simply denominate the prices in USD, keep some percentage of the btc as it is very likely to appreciate and convert the rest to USD as soon as possible to mitigate fluctuation risk.

As a buyer, you'd just purchase btc in the moment preceding the transaction or spend from your own hodlings if it seems like a good moment to reduce exposure.

Volatility is not that big of a deal.

A few large holders commonly referred to as whales continue to own most Bitcoin. About 2% of the anonymous ownership accounts that can be tracked on the cryptocurrency’s blockchain control 95% of the digital asset, according to researcher Flipside Crypto.

Is that number substantially different for any other currency?

No but there is a problem with Btc that is not comparable to other currencies.

Satoshi own 1 million btc. That is 49 billion usd.

When he made that 1 million 11 years ago nobody knew what btc was...

Do you see the problem.

Most currency would be publicly owned and regulated.

Flipside Crypto is a co-author in this report.

Also another thing that has to be remembered is that a large amount of crypto in circulation is actually stolen crypto.

Anyone that has been in crypto pre 2016 has lots of it being stole or lost. MtGox, Cryptsy, Poloniex, DarkWeb. Most of these coins just went to other wallets.

Also alot of whales just have a ton of wallets, so we will never know....

I just know that a 1000 btc at the moment is enough to move the market billions.

And alot of people have bigger wallets

https://bitinfocharts.com/top-100-richest-bitcoin-addresses....

Except it can’t handle the transaction volume. Who writes these things?

Simple. People trying to pump the price up. Bitcoin went from a way to buy drugs to a hype-fueled pump and dump scheme.

Layer 2 solutions. Apart from Lightning and Liquid, I think we should also count the tokenizations on Ethereum (tBTC, renBTC and others).

It’s still early days. Give it another 10 years.

Oh and hey, who knows, maybe the block size will increase one day.

Of course companies like Citi and MasterCard aim to capture the majority of transactions inside their own private networks (hence stripping all the benefits and limitations of bitcoin for “the user”)

Someone who just put their life savings into it and is looking to make a buck.

People without a conscience.

... just don't @_#&ing dance.

https://m.youtube.com/watch?v=7eYcWpgCb7o&t=18s

But of course you understand Bitcoin can be transacted in off-chain, yes?

Bitcoin was the first famous crypto currency. But it has been surpassed by many other digital coins with lower fees, more transactions per second, better technical design and all these things combined. Bitcoin also suffers from whales routinely mass selling and buying to make profits at the cost of traders, resulting in volatility.

I'm sure it will rise again a few more times but there are better alternatives available.

Bitcoin is terrible as a currency. It's OK as commodity but these are two separate things.

Well, international trade is generally a higher stakes lower frequency operation. So bitcoin as a commodity should work fine for it if it stabilizes.

Please no. It's an environmental disaster, transaction time is stupid long, fees are too high, and it's vulnerable to attack by state-level actors.

How is it an environmental disaster? I hear you on energy use but that if we get to 99% renewables the excess generation/load capability could turn this statememt on its head.

The US gov will sacrifice their place in the world order by undermining US dollar sanction power tho!

Is there just a bot crew that goes around boards looking to deny the obvious evidence?

It's powered by coal. Look at who runs the major mining operations.

when will that happen? how much damage will be done before then? there is not a lot of excess CO2 budget remaining.

The majority of all electricity and auto power we use is an environmental disaster. My gore tex jacket, anything producing forever chemicals as biproducts is an environmental disaster (Dupont). Your car tires and mine apparently have biproducts affecting salmon health. But you're just calling out the hot topic -that's my point.

bitcoin's energy useage - yes it's completely wasteful by design. But one day in the future Bitcoin may not be in comparison to our gore-tex problem, our cow-methane problem. Keepin' it real. I'm saying 2050 it could be solar powered completely. Then batteries can be an enviromental disaster ... it's a never ending cycle

Call a spade a spade: it's the financial sanction power that will stop bitcoin. Why would the US give that up? Decline only.

Can a deflational currency really be the preferred method for trade? Not only limited amount for a theoretically increasing demand, but existing amounts being locked in inaccessible wallets. I have doubts.

As long as bitcoin can't be a currency (and it certainly can't), it's fate is doomed. A more suited criptocurrency still yet to come.

Indeed. Gresham’s Law.

In other news there has been an unusual spike of unlicensed micro nuclear plants found in peoples back yards.

Optimally positioned, as most mining happens in China and the only other candidate is the Yuan? :)

I wonder if the Citi analysts knew of the mining farms installed in Iran by Chinese businesses in order to access cheap electricity. If Bitcoin's value is derived solely from narrative, it's going to be great to see how the world reacts to that story finally turning up in the mainstream press.

Should specify that this is a PDF file.

Financial Times: Hey Citi, your bitcoin report is embarrassingly bad. https://www.ft.com/content/8553aba7-8beb-4b48-9287-be6a08065...

Yeah, with 7tps

meh, bundled, off-chain transactions. Examples:

https://blog.coinbase.com/coinbase-rolls-out-bitcoin-transac...

https://en.bitcoin.it/wiki/Off-Chain_Transactions

Great, so let's use a... separate system... with none of the advantages associated with a cryptocurrency to do actual transactions.

https://lightning.network/

Why would anyone use a complex disaster that people are avoiding like the plague when they could just use other cryptocurrencies that didn't intentionally cripple their throughput to sell that hacky second layer?

Ethereum dwarfs everything else in transaction volume and bitcoin cash has already consistently passed bitcoin in transactions per day.

https://bitinfocharts.com/comparison/transactions-btc-eth-bc...

My criticism was in direct response to the lightning network.

Surely you understand how "with none of the advantages associated with a cryptocurrency" could make it seem like you were referring to Coinbase batching (since that's centralized). How exactly does Lightning negate any of bitcoins advantages?

Enough to be the first settlement layer of the whole finacial system. On top of that layer, you can have country fiat coins, centralized exchanges and others.

...a first settlement layer that the normal person simply cannot use. 7 billion peopl and 7 transactions per second is 1 billion seconds between transactions. Over 30 years.

Going completely to only larger players and being inaccessible to most people at the first layer is completely missing the major purposes of Bitcoin as laid out by Satoshi.

Most people in 1900 would not transact in Gold although it was the first settlement.

The world was fine till governments decided to operate without hard money as first settlement layer.

We are going to revert back. It _has_ to be fixed.

Reminds me of the transaction speed of gold back in the days they called it a gold standard.

During gold rush a Mug of beer was a pinch of gold.

Bartenders would favor employees with big hands.

Government came in and printed gold coins to solve the currency problem. However it turns out that a 50 dollar gold coin is not useful in any but the largest transactions.

How can a currency that is so tied to two brands become mainstream? Those two brands are Satoshi Nakamoto and Elon Musk. What happens to Bitcoin if Elon Musk for any reason decides to sell Tesla's coins and announce it on Twitter?

This sounds like what a bot would say after reading only the last three months of headlines and nothing else.

is that why you keep downvoting people for disagreeing with you?

Bitcoin is still vulnerable to nation state manipulation. I would guess that greater than 50% of the mining capacity is in China. If the Chinese government decides they want to screw with Bitcoin, they can.

This is not true. Network consensus is not reached by miners but by the nodes in the network that recieve/transmit transactions and blocks.

If you want to protect Bitcoin from "chinese nation state manipulation" simply run a full node.

Amusing to read the conclusion then flip to the next page listing their other reports. Top of that list: "Financing a Greener Planet".

A common criticism of Bitcoin that I've seen on HN and elsewhere is that Bitcoin is far too volatile with respect to established currencies like the US dollar and the Euro. Just look at any historical USD-per-BTC chart and judge for yourself: https://www.xe.com/currencycharts/?from=XBT&to=USD

Until recently, this criticism has made sense to me... But as Bitcoin adoption has increased worldwide, I've come to think this criticism isn't as valid, because from the perspective of a growing number of Bitcoin owners, ALL established currencies are incredibly volatile.

For example, the US dollar's exchange rate has bounced from a low of ~5000 Satoshis in 2017, to a high of ~30,000 Satoshis in 2018, to a low of ~8,000 Satoshis in 2019, to a high of ~20,000 Satoshis in 2020, to a low ~2,000 Satoshis at present.[a]

From the perspective of holders of Bitcoin, the US Dollar is insanely volatile. Just look at any historical BTC-per-USD (or Satoshi-per-USD) chart and judge yourself: https://www.xe.com/currencycharts/?from=USD&to=XBT

If and as more people start using Bitcoin (or Satoshis) as their frame of reference, their perception of volatility will change accordingly.

[a] 100,000,000 Satoshis = 1 Bitcoin.

I'm curious to see how Bitcoin does vs. a 10 year period of decline worldwide. If you consider that Bitcoin was created basically just before the worlds longest and greater bull run you can see that it's lacking experience in surviving a greater decline.

Aren't BTC's biggest issues volatility and transaction speed? I can understand volatility eventually settling once all the BTC are mined but the transaction will take longer and longer, not to mention a huge power consumption to do so?

Except that in another 2 years it will take more energy than 10 suns to mine one coin.

Obviously I didn't read the whole thing since it's over a hundred pages, but the paper says that BTC will used to do the mechanics of the trade, but settlement will be in fiat currencies.

Does Citi still have a good reputation in US?

And anyway, bitcoin became too big to fall easily, but making money in your basement was and always will be spiting into a faces of hard working people.

The only thing that is "spitting into faces of hard working people" is the relentless printing of money by central banks that incentivize speculation over productive work and make bubbles like Bitcoin or GameStop possible in the first place.

US has too much to lose if this happens and the dollar is displaced. SEC will knock the legs out from under crypto first.

Looks like bags are arriving. Empty ones. People will be holding those eventually.

No.

what's the value of bitcoin?

optimally positioned = few people bought it cheaper and now enjoy an excess of it and wants to start to spend it?

if its value is USD, then i'm afraid to tell you that it's worthless

the future is a world without currency, without money, a world where people freely create things, people freely use things, and people freely do things

if it becomes chaos, then be it, no need to fake things with "money" c'mon people, we can do better as a virus

imagine if molecules needed money to do things, we wouldn't even exists! haha

It's all fun and dandy until someone hacks satoshis wallets.

hitting $1 trillion in market capitalization in February 2021

Multiplying the price of 1 BTC by the number of BTC to get a "market cap" is pretty wishful thinking. Significant selling would tank the price.

Multiplying the price of 1 share by the number of shares to get a "market cap" is pretty wishful thinking. Significant selling would tank the price.

"Market capitalization refers to the total dollar market value of a company's outstanding shares of stock. Commonly referred to as "market cap," it is calculated by multiplying the total number of a company's outstanding shares by the current market price of one share. "

Sure the definition mentions shares, but the concept can theoretically be applied to anything.

Ain't that true for any currency and stock?

The definition of Market Capitalization is "Commonly referred to as "market cap," it is calculated by multiplying the total number of a company's outstanding shares by the current market price of one share." according to investopedia.[1]

[1] https://www.investopedia.com/terms/m/marketcapitalization.as...

The price has skyrockted but transaction volume is not keeping pace. This is not what you'd expect if the market cap is anything close to meaningful and unlike heavily traded securities:

https://ycharts.com/indicators/bitcoin_transactions_per_day

It's exactly what you'd expect for a price increase driven from the supply side, which is kind of expected for a commodity like BTC whose attraction is largely the expectation of price appreciation because of supply restriction.

That's how market cap is defined, and that criticism that selling would tank it applies to everything...

> Significant selling would tank the price.

And significant buying would raise the price. “Market cap” is a weird thing which requires assuming symmetric expansion of supply and demand. It's the least-bad general-purpose valuation metric, but it's not really good for any specific purpose, and it's specifically farther from any kind of meaningful reality the lower the ratio of actual units traded to total available units is in any given interval of time.

That is to say, BTC’s market cap is mostly meaningless, but that's really a difference only of degree and not kind with market caps generally.

Isn't that how you calculate a company's market cap?

That will also tank with significant selling.

A bigger issue to me, would be we don't know how much BTC is lost due to wallets being inaccessible.

But that's how market cap is calculated. It doesn't mean BTC has that value.

It also doesn’t account for all the locked btc due to theft, fraud or just the owner losing the key. I’d put it at half that, most btc never moves.

What calculation do you propose? And which asset doesn't behave in this way?

True for all securities.

It is not "wishful thinking", it is misleading because approximately more than half of all Bitcoins are lost for ever or tainted. Especially early Bitcoins mined by Satoshi himself should be considered inactive permanently. Additionally liquidity for Bitcoin is even worse than that of other assets/currencies because it is a store of value which means people buy it and don't spend or sell it. If Bitcoin wants to be suitable as a world trade currency the price has to rise at least 4 orders of magnitude to be able supply the required amount of liquidity.

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