Debt Rattle September 20 2017


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    Edward Hopper Automat 1927   • Australia: A Delusional, Stuffed, Basket Case, Bubble, Third World Economy (MB) • With QT On The Way, This Market
    [See the full post at: Debt Rattle September 20 2017]

    V. Arnold

    Love the art; great choices, thanks.
    The rest, meh.
    The fog of the financials; barrages of information; obfuscation paraded as intelligence and knowledge.
    The macro gone insane while we here in the micro struggle to see the present reality with some clarity.
    Avoid debt, avoid banks (use credit unions), understand what a store of value is and get some of it, keep cash, as much as possible, in a balance with a store of value.
    Never put a store of value in a safe deposit box; you may not have access to it at a critical time.
    Never talk of your store of value… to anybody…ever…

    Dr. Diablo

    I know they have to write something to illustrate Bitcoin, but there are more oversights in the HowMuch article than even they extensively admit.

    One, as they say, the exchanges mass-own wallets. That is, the people-owners of the exchange-based-wallet don’t own Bitcoin, they are not recorded transactions on the ledger. In that way, they don’t exist, and they don’t own Bitcoin but a claim on the exchange corporation. They may be recorded if you leave the exchange, but not within it. In addition, transactions within exchange, say between two Coinbase users, are not recorded, not real, and perhaps not even purchased, as the exchanges make their money by fractionally-reserving the asset. Maybe they own 70% of the coins they pretend to. This was one of the problems in China, or back with Mt. Gox. They SAID they bought coins, but didn’t, which is fine as long as liquidity is good. This also leads to problems if the coins split, as they only have access to 70% of the BitcoinCash they claim to own, and must buy the rest. How? Before we get moralistic on them, this is how all actual stock and commodity exchanges work, with futures bidding on delivery that isn’t there, and stock exchange failure-to-deliver — that is, we charged you, but didn’t, you know ACTUALLY find and buy the stock share, much less sign it to your name — is over $1.3 Billion a day. Oh, and we’re also voting on corporate business with 2x, 10x as many shares voting as were ever issued. Not owning and delivering the product is industry-standard now, and Bitcoin exchanges only share that same drawback.

    Next there’s a huge statistical quirk in the data, because 1 Million out of a mere 20 Million coins owned by the original Sataoshi have never been touched — and with a Bitcoin ledger, you can and MUST know with absolute truth. That stat alone would blow the concentration ratio out of the water.

    Next problem is, thousands of people were involved back in the beginning when Bitcoin was a worthless novelty under 10c. Did they keep their wallets? Back them up? Still have access to them? Unlikely. More likely, a few million more of the original 20M are on crashed hard drives, vanished, never to be recovered. With Bitcoin at $1 instead of $5,000, it’s far more likely these are owners of 10, 100, 1,000 coins, not .002 coins as more likely today. And yet those coins are lost at sea and for all purposes don’t exist. You need to run stats on the active wallets, but who are they? How active? Pension Fund owners of IBM don’t necessarily touch their shares for decades, yet are legally real and active.

    Next, suppose you’re a type to get into early Bitcoin — and it’s still so early only the Edmund Hillarys have arrived. Why are you in this weird new frontier? For privacy on the Silk Road, dodging Chinese currency controls, hiding that extra fund money outside of Panama, off-book deal sweetener, that sort of thing. So, Mr. Paranoia, you use one wallet, or two? Or Ten? All with different numbers on different hard drives, in case someone police official demands the numbers? Yeah, as many as possible in as complex a route as possible. And not on an exchange. So these large owners look small.

    Last, we have the basic problem: Jamie Dimon’s bitcoin traders, the ones who were bragging on their winnings, who just had a Crypto conference sponsored by Morgan — you know, the ones he said he doesn’t have — might be only in the thousands worldwide, but have access to ten million USD each. They have to, or they can’t manipulate the price like Dimon did this week. The common man will only risk thousands each. So the wealth concentration only mirrors the wealth concentration of the real world. Pull Satoshi and inactive wallets out and you’ll probably find it’s MORE equitable than other wealth holders, but that’s not saying much, and with access to unlimited, unbacked printing from the Fed, Dimon Boyz will catch up fast.

    Moving on to wallets, NO, YOU DON’T NEED AN EXCHANGE. You shouldn’t use one. That’s the WHOLE POINT, and if you’re in Bitcoin on an exchange you may be doing it wrong. That’s why it’s called “peer to peer”, “trustless” currency. If you add an exchange anywhere, the exchange can be corrupted, counterfeited, bombed, shut down, charge fees, use their influence to rig markets: all the same problems Bitcoin was created to get away from. You hold your OWN wallet, on your own PC, phone, or paper printout, and transfer it the same way, as the Chinese found out this week. That also says that if you want to BUY Bitcoin, Mr. HowMuch, you DO NOT buy it from an exchange, but person to person, where it actually exists and is actually transferred on the ledger. I know that isn’t how it mostly occurs right now, but that’s the whole point of its existence. If you traffic through an exchange and not peer-to-peer, you might as well just stay where you are, with Wells Fargo creating millions of phony accounts, trading millions or billions of cartel drug money (U.N. official report), while buying commercial jets for Mexican Drug cartels to run illegal guns (public record), and asking for $23 Trillion in taxpayer bailouts (minimum, official), all funded by the Fed printing unbacked dollars.

    …And they say Bitcoin is in the underworld! Wells and Morgan probably move more drug money in a month than Bitcoin has in its whole existence. Bitcoin needs to be purchased, held, and sold person-to-person or it’s pointless, and therefore worthless. The whole point to Bitcoin is that there are and can be only 20M coins, and no more ever. It can only deflate, never inflate, and never be waved into existence, showing the present system is so broken and corrupt that Bitcoin is bizarrely MORE real and trustworthy than actual, national currencies! I know it’s new and different, but HowMuch and many/most other commentators need to just do a base wiki and get up to speed before reporting wrongly on accident out of sheer unfamiliarity.

    John Day

    Thanks for the Bitcoin insights, Dr Diablo. I am much like Simple Simon, “penniless”, myself. No virtual dog in this fight…


    Thank you, Dr. Diablo. Your comment is more informative than all the other Bitcoin news on this blog combined.


    Dr Diablo: thanks for the bitcoin comments. As an amateur miner, it all seemed quite accurate.

    I started CPU mining a long time ago (should dig out the date) because my kid wanted a “Bought it with Bitcoins” badge. Cost 1 bitcoin, took about 3 days to mine it back then. Was somewhat fun, so I continued on, thru GPU mining and even bought some low end Butterfly ASIC equipment.

    Of course, I’m somewhat kicking myself now, for example the $200 gift card I bought for 40 BTC. Seemed like a good idea at the time! Oh well, we are doing OK.

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