Tuesday, December 3, 2013

Bitcoins: Get Out While The Getting's Good

By Gonzalo Lira

Everyone hates the dollar and the euro—and with good reason. By the lights of any thoughtful observer, the two reserve currencies are being crashed by their respective central banks: The dollar by the insanity which is Quantitative Easing, the euro by the insanity which is German intransigence. 

So everyone in the blogosphere is looking for a savior, a way out of this looming inflationary/deflationary collapse. 

Enter bitcoin. 

Bitcoin presses all the erogenous zones of nerdy tech guys everywhere, who are after all the dominant demographic of the internet, and who are not coincidentally wild about bitcoins. 

First off, bitcoins are a virtual currency, stored in “digital wallets”, rather than embodied in actual physical paper—which makes it very cool: Abstract or immaterial stuff is always cooler than brick-and-mortar stuff to tech guys. 

Second, bitcoins’ existence is decentralized, eschewing a central bank to issue and police it, or a government to control it—also very cool: Quasi-anarchic decentralization is a utopian dreamland of tech guys everywhere. 

Third, bitcoins’ rise in price has rewarded (so far) the early adopters—also very cool: After all, what are tech guys if not the embodiment of the early adopter. We’re the poor suckers who bought a Betamax VCR in the early Eighties, a DivX player in the early Nineties, a MiniDisc car radio in the early Oughts. We’re always the ones who bought some expensive new tech too fucking early, and so we’re thrilled that something we adopted first on our block is finally—finally!—succeeding. Part of the reason we’re cheerleading so strenuously and relentlessly is that we want to hold on to that good triumphant feeling of being an early-adopter of a successful technology.

Fourth, even understanding bitcoins, let alone making, buying and selling them, requires a tech guy to teach the savages—which is coolest of all: Tech guys as a class love being the intermediary of a cool (or even better, a necessary) new thing to the wider mainstream. After all, most of us were the nerdy kids who taught the cheerleader math, then watched her gleefully hop into the jock’s car. With bitcoins, we get to explain to her how they work, and get her to go out on a date with us, ‘cause now we’re bitcoin millionaires while the high-school jock is now a used-car salesman.

We so want bitcoins to succeed, and thereby validate us. So we spew out all sorts of cheerleading ridiculousness that doesn’t even make any rational sense, such as this;  or a bit more rationally but still far too uncritical, this, or this, or this. 

There’s just one teeny-weenie problem with bitcoins: 

Read the rest here.


  1. 1) It's DIVX player, not DivX. DIVX players were first released in 1998, not the early 90s. DivX codec has nothing to do with the DIVX player.
    2) The dollar is not being crashed by QE

    1. not yet...
      What is Quantitative Easing?

      Quantitative easing is a form of monetary policy pursued by central banks that increases the monetary base via the outright purchase of financial assets, typically with the aim of stimulating the economy. Such policies often result in an expanded central bank balance sheet, as the money to fund such purchases is literally created from nothing.

      America in Worse Fiscal Shape than Detroit-Professor Laurence Kotlikoff

      Dr. Kotlikoff says, “The government is printing mountains of money to pay its bills. The Fed is printing 29 cents of every dollar that Uncle Sam is spending.” What happens if this continues? Dr. Kotlikoff says, “Eventually somebody recognizes this and starts dumping the bonds, and interest rates go up, and inflation takes off, and were off to the races.”


  2. I guess you still haven't found any criticism of Bitcoin that's actually useful, constructive, relevant, or even in touch with reality on a basic level.

    Here's a question: what would the world have to look like for you to admit that there's something to Bitcoin, that it's not just some kind of fluke or pump-and-dump scam that will crash and burn, never to be heard about again?

    1. That's an emotional plea if I've ever read one, not a rational argument.

    2. Rational arguments don't go very far around here...

    3. In the comments sections of these posts, I've been supplying the rational arguments, or links to them, for those with eyes to see and ears to hear. Increasingly, I'm reminded of the old Navajo proverb that "you can't wake a person who is pretending to be asleep." People like Peter Schiff aren't likely to understand crypto-currencies as long as their salaries depend on them not understanding crypto-currencies. Sad, but true.

  3. Bitcoin's self-imposed scarcity is completely offset by the unlimited amount of potential cryptocurrency competitors.

    1. That's the only argument I accept. The trackable nature of Bitcoin, plus the current attacks by the Federal Reserve and central banks, makes it fragile. I've got a few Bitcoin from a year or so ago, and plan on keeping them, but wouldn't dare buy much more at this point.

      Gold backed Bitcoin ---- that I wight buy!

    2. The potential number of competitors is unbounded. The number of crypto-currencies people are willing to adopt and use on a day-to-day basis is obviously limited. This is precisely what implies the network effect.

  4. The key to his rebuttal:

    " There is currently no market where you can buy any mundane good or service exclusively and necessarily with bitcoins.
    There is currently no market where you can sell any work or service that you provide, or for any good you wish to sell, exclusively and necessarily with bitcoin."

    Completely applies to gold as well. Basically he's a statist cheering on the use of force on defining and enforcing legal tender--fiat money--by denying the legitimacy of private money. He's attempting to erect barriers to entry with his "rule"

    In addition, he neglects that cycles of heavy volatility with regards to dollar exchange that bitcoin has already gone through many times, as if a steep drop means the end of bitcoin.

    1. Can you please answer a question for me? I don't pose this question sarcastically, I genuinely am ignorant of the answer: why should someone buy bitcoins if they don't think they can sell them for more later? What purpose do they serve other than speculation?

    2. ncomplete wrote: “Basically he's a statist cheering on the use of force on defining and enforcing legal tender--fiat money--by denying the legitimacy of private money. He's attempting to erect barriers to entry with his "rule".”

      Wow, I said all of that? Must’ve been sleeping when I did.


    3. What purpose do they serve other than speculation?
      Buying stuff. Particularly drugs.

      Wow, I said all of that?
      Yes, you did. Stop playing stupid. npcomplete's point is correct. You also are a Keynesian cretin (who else complains about "deflationary spirals"?)

  5. As the debate continues, my pile of bitcoins continues to grow along with my wealth. People have been making these same, anti-bitcoin arguments since it cracked $1. You guys amuse me.

  6. He wailed about a "deflationary spiral", why are you linking to this crap?

  7. In India, smugglers move gold like narcotics

    (Reuters) - Indian gold smugglers are adopting the methods of drug couriers to sidestep a government crackdown on imports of the precious metal, stashing gold in imported vehicles and even using mules who swallow nuggets to try to get them past airport security.

    Stung by rules imposed this year to cut a high trade deficit and a record duty on imports, dealers and individual customers are fanning out across Asia to buy gold and sneak it back into the country.

    Sri Lanka, Thailand and Singapore are the latest hotspots as authorities crack down on travellers from Dubai, the traditional source of smuggled gold.

    In a sign of the times, whistleblowers who help bust illegal gold shipments can get a bigger reward in India than those who help catch cocaine and heroin smugglers.

    "Gold and narcotics operate as two different syndicates but gold smuggling has become more profitable and fashionable," said Kiran Kumar Karlapu, an official at Mumbai's Air Intelligence Unit.

    "There has been a several-fold increase in gold smuggling this year after restrictions from the government, which has left narcotics behind."


    1. And with Bitcoin you can simply click a button and transfer value anywhere, instantly without interference.

  8. Paper implosion bullish for gold, says Tocqueville's John Hathaway

    John Hathaway's interpretation of gold's decline, with prices nearing $1,200 as he spoke on Wednesday morning, paints an exceptionally bullish long-term picture.

    Central bank buying and gold repatriation outside the US most notably by Germany, Hathaway said, has pulled the physical foundation out from under a highly leveraged and unstable credit structure. Citing figures used by the Reserve Bank of India, he said physical backing in the gold market is collateralised up to 90 times over.

    “When we saw Germany repatriate its gold, my reaction was, great, you're going to see a shortage of physical gold. But when collateral comes out of the system the scramble for physical means there's a de-leveraging taking place like a credit contraction that has nothing to do with the macro outlook for gold.”

    “The banks that lend against the underlying collateral extend less and less credit, so the scramble for physical, which in the long run I think is very bullish, is the biggest reason for the disappointment in the gold price.”

    Hathaway's interpretation of gold's decline, with prices nearing $1,200 per ounce as he spoke on Wednesday morning, paints an exceptionally bullish long term picture. An era or indefinite money printing has created “a rage for tangibles”, he said, with individuals dashing out of visible or digitized wealth into everything from Bitcoins to antique cars held in warehouses in Belgium and Luxembourg.

    The same physical demand that has caused an apparent unwinding of trades in the paper market will therefore drive a “new leg in a secular bull market for gold”, with an eventual “implosion of credit structures” in the gold futures markets of London and New York.


  9. Bitcoin = Internet Stock Euphoria of late 1990's.
    Free advice to anyone holding them that got in at a lower
    price point - SELL!

    1. Advise based on the power of an "argument" like yours better be free, or you'd be arrested for fraud.

  10. Excellent piece by Gonzalo Lira.

    1. Easily traced

    2. No recourse if stolen

    3. Not backed by anything tangible.

    4. Not comprehensible to the public

    5. Unknown originator indicates possible intelligence operation.

    6. Misuse by criminals would lead to tarnishing of all non-fiat currencies.

    7. Being repeatedly associated with libertarianism puts whole libertarian movement in a bad light when criminal networks use it.

    8. Extremely volatile and will continue to be so.

    9. Not really anonymous

    10. Could lose its value overnight

    11. Likely to be a psyop to show necessity of government regulation or issue of coin.

    But, Tony, Edward, and all other financial geniuses on this board...

    GO BTC!!

    1. I'm particularly interested in arguments 4, 6, 7 and 11.

      "4. Not comprehensible to the public"

      Then they shouldn't use it. Problem solved. This is called freedom.

      "6. Misuse by criminals would lead to tarnishing of all non-fiat currencies."

      Define "criminals". Are you talking about drug dealers? Newsflash. Libertarians have no problems with drug dealers. Or with weapons dealers.
      And tarnishing of "non-fiat currencies"? In the eyes of whom? People who don't even see what is immoral about the fiat currency they have been using and have embraced, and the violence of the state they've legitimized?
      But the funniest of all of this: that apparently the use of ALL money, including gold, silver and fiat currencies are being used by criminals yet these have somehow NOT tarnished these currencies. But Bitcoin would somehow be "tarnished" just because it is used by criminals.
      How more blatant can someone's bias and hatred for Bitcoin get than to use such nonsense double standard argument?

      "7. Being repeatedly associated with libertarianism puts whole libertarian movement in a bad light when criminal networks use it."

      Criminal networks have used gold, silver, diamonds, liquor, gambling, drugs etc.
      QUICK, libertarians. Let's all reject these because criminal networks have used them and continue to use them.
      And again, in a bad light to whom? I always have this itch i can't seem to scratch whenever i encounter a "libertarian" who is worried about his reputation and standing in the eyes of the general public. I think it's my BS-alert going off.

      "11. Likely to be a psyop to show necessity of government regulation or issue of coin."

      Let's forget your paranoia for the moment.
      What's left is we can see that fortunately fiat currency and all other generally accepted currencies have not shown a necessity of government regulation or issuance. Those are all genuinely FREE from government meddling, aren't they? (this is sarcasm)
      Hey, let's reject Bitcoin because government WANTS to regulate and issue it. As if they wouldn't want to regulate your toilet habits. Duh. This is the point where you ignore the simple fact that government will want to regulate Bitcoin regardless of any lame excuse they come up with. Because they're the government. It's how they roll.

      "But, Tony, Edward, and all other financial geniuses on this board...

      GO BTC!!"

      This is why i am utterly convinced there are personal issues involved with the hatred of Bitcoin. The mere notion that there are people who refuse to jump on the "hate Bitcoin" bandwagon here has some people's panties in a wad. You can see the contempt dripping from the words of the likes of "anonymous" and you have to ask: what's with the emotion and the sheer bias of these individuals? Why are they so god-almighty upset at dissenters of their theories about Bitcoin?
      They sound like liberals confronted with people who think it might be a good idea to let a free market play out to see what happens.
      If you're right, then Bitcoin will fail and people will stop using it. Lesson learned. So what are you people so worried about? It can only be the mere possibility that maybe, just maybe, you turn out to be WRONG.

  11. What happens when the power goes out? Can I use bitcoins? I'll stick with hard money, gold and silver in my possession. Gold and silver are widely recognized all over the world. let me know how bitcoin has done in another thousand years. I'll stick with gold.

  12. @Anonymous

    I googled some of the threads you mentioned. BTC looks like a con to me. But I agree with you it has too many problems.