Mr. Robo: Really, Mr. Ham, there was no need to rush to get through the buffet, it's only us four here; look, Mr. Ducky isn't even approaching the table, probably out of politeness...
Mr. Ham: *munching with mouth full* Iszt commitment to competitiveness, Robo. Lifeblood of a trader! No rest, no mercy! You don't have the proper mindset and edge to succeed in this side of the business, I see.
Me: *sighs* Seeing as Mr. Ham has appropriated the remaining food to his cheek pouches, we might as well get on with the econs part.
Bubble, Toil, Trouble
Back to the statement made a month ago, that Bitcoin's growth is not a bubble - considering that the price was somewhat over US$14k then, roughly the same as it is now, the evidence appears to have borne out on that for the time being.
And what growth it has been; in these heady days, it's easy to forget that some lucky few are sitting on thousands of Bitcoins just by participating in some random geek experiment maybe seven years ago, with a slightly less lucky fellow inadvertently having spent over US$700 million at today's valuation on pirated movie torrents. Price-wise, its rise to the moon and beyond has been inexorable over the past year: its breaking of US$1500 as recently as May last year brought some attention, but that was nothing compared to what came after. Predictions were raised to the giddy heights of US$5000, heck, US$6000 in 2018, and were almost immediately shattered as Tim Draper's understated foresight proved to be prescient.
Wary of being caught short after that, pundits have begun throwing out larger and larger figures - US$50k with money put on it, US$200k by the Titan Digital Asset Group, all the way up to millions and more (which, by the way, has long been breached in Yen). And perhaps more impressive than all this, is the cast of luminaries who have had to eat their words thus far: the distinguished jstolfi, of course, must top this list, with the victory of the Core dev team and now China's miner ban (on which more later) not helping his rhetoric either. Nobel laeurate Eugene Fama is on it too, and perhaps Buffett himself may yet join them - check back in five years.
As for Wall Street, they have gone straight from "blockchain not Bitcoin", to elbowing their way to the feeding trough, without the slightest hint of irony; JP Morgan CEO Jamie Dimon went from an eyebrow-raising fraud accusation to regretting the statement in a short few months, possibly owing to competitors like Goldman Sachs being rather more open to the idea... while feverishly building their crypto patent portfolio on the down-low. Definitely, it's getting tougher to dismiss the crypto space outright with former Fed chairs speaking at blockchain conferences, and even as the public faces of big financial institutions take a hard line, they have to be watching with trepidation as nimbler hedge funds get a headstart, and their own rank-and-file ditch banker suits for hoodies.
The Deathless Hybrid at the Big Boys' Table
- Spencer Borgart, head of research at Blockchain Capital
Here, an obvious question presents itself: do these Masters of the Universe like what's happening? The short answer is an unqualified no - in general, those at the top disdain shakeups, if only because there's only one direction to go for them - down. As such, the hostility from much of the banking sector as well as government actors is only expected, with South Korea the latest to spread some classic China-style ban FUD.
However, the same proposition has played out with any number of disruptive technologies - borrowing a recurrent example from the military arts, aristocrats have oft endeavoured to outlaw equalizing innovations such as the crossbow with full blessing of the Church, because why should some filthy peasant be able to skewer a gentleman knight (later Kipling: "Two thousand pounds of education/Drops to a ten-rupee jezail")? The Chinese and Japanese feudal lords, secure in their insular superiority, closed their borders (and not in the sensible GOD-EMPEROR way); it didn't take long for them to be completely pwned.
Erm, the guys who want to win?
The main point here is then that, cryptocurrencies cannot be un-invented. Leaders may contend with the Internet for its deleterious impact on good old-fashioned propaganda and thought control - some much more than others - but there is no longer any question about opting out wholesale. The same, we feel, goes for cryptos. Certainly, the world elite might prefer that Satoshi had never existed. However, going by what we've seen in the United Nations, achieving consensus on any action of import is a pipe dream, and cryptocommodities present a classic Prisoner's Dilemma: ban its use, and suffer as other nations latch on to the tech and investment; don't, and risk losing control of one's own monetary policy. Decisions...
While it has become fashionable of late to deride the store-of-value utility of Bitcoin, the enormity of this single function, we feel, has seldom been properly recognized. In particular, consider the prevailing distinction between money and investment assets; one holds cash for its liquidity, but it is basically guaranteed to depreciate. Indeed, over longer time horizons, one would do better to trade liquidity for returns, by investing in some asset - bonds for the cautious, stocks for the more adventurous, and it only gets more fun from there.
Such investment has traditionally come with all sorts of barriers to entry, however. For instance, if one wishes to invest in real estate, there are minimum down-payment and mortgage eligibility requirements to satisfy. For blue-chip stocks, there's a minimum lot size, with all sorts of costs for smaller holdings. The little guy just can't catch a break, it seems... and then, there's BTC, a global currency-commodity divisible to eight decimal places or sub-cent amounts, a decreasing rate of supply, and only twenty-one million units ever.
Now, perhaps this alone may not be irresistable to your average first-worlder, but consider the masses in well, less competently-managed economies, and the attraction of Bitcoin is evident. Consider your average Venezuelan - why would they want to hold ever-inflating Madurobucks, if they had any alternative at all? It follows, then, that a strong currency-commodity would continually vacuum up capital from weaker currencies, and unlike fiat, there's no recourse to legacy financial institutions to try and stem the outflow of larger amounts.
Well, professional economists can't always be wrong,
though they've generally been quite reliably clueless on crypto.
Probably still better than journalists and many analysts though.
[N.B. To us, Satoshi roundly deserves the Economics Nobel,
for effectively devising a scheme for the scarcity of bits]
(Source: r/bitcoin; see article text circa 1988)
Here, we return to Borgart's characterization of Bitcoin: it may not qualify as a currency, some sneer (but not Goldman Sachs, not any longer), and traditional commodity dealers may not know what to make about it, but is this in fact a deficiency? What if, in its hybrid vigour, it turns out to be accepted widely enough to be used as a neutral global currency, while retaining the quite-desirable appreciation-through-deflation property of a rare commodity, further improving on gold?
It should be evident that Bitcoin, by its very nature, avoids many issues thought conterminous with state-issued fiat currency. While demand through taxation has been held as a supporting intrinsic of fiat, this brings with it its own problems. This denomination irrevocably ties a fiat currency's fate to its country's - or more usually, the country's ruling elite - needs, and the ongoing Greek debacle amply illustrates the difficulty of administering an international, or even inter-regional, currency. Shorn of the ability to influence the exchange rate of one's own Eurofiat, Merkel has done to Greece what Hitler failed to.
Although we are not so bold as to suggest that Bitcoin is a financial panacea, it does fill a very large void in the emerging space: being completely opt-in and free of any state-level encumbrance, there are no natural restrictions on its price level. While even Great America and China have to sweat over the consequences of exchange rate fluctuations on their import-export balance, Bitcoin just exists in a parallel space. With no taxes payable in it, no transactions forced to take place with it as with the embattled petrodollar (another Saudi princeling and Bitcoin hater falls to the TRUMP CURSE), and no inscrutable central bank pulling its strings, Bitcoin returns a long-lost simplicity to the monetary fold: what you see is what you get.
The implication, then, is of a near-frictionless global crypto economy overlaid on current nation-state markets, with capital flowly freely in and out - but mostly in. Increasingly, the attractions of this store of value will be recognized, as world citizens seek an outlet for the products of untrammeled quantitative easing, which has expressed itself for some time in the form of burgeoning asset values - in particular, real estate. When the next currency crisis hits, we may well see some exciting crypto fireworks...
Venezuela has turned to the Pepedollar, I shit you not.
Doubtless at least some governments and central banksters have seen the writing on the wall, as they quietly dabble in their own state-sanctioned cryptos, while issuing warnings about the free-market ones rather more loudly. There's Venezuela trying to save themselves with oil-backed crypto (good luck), Russia's CryptoRuble (possibly with Vitalik's input), Sweden's e-krona, Israel's crypto-shekel, the Catalans are thumbing their noses at Spain with the idea... even the venerable Bank of England is getting into the act, with a digital pound.
None will catch on.
The trouble with trying to retain control this way, as with the pointless R3 bankster initiative, is that state cryptos bring nothing extra to the table. Case in point, the Bank of England's proposition that "British citizens can now keep their money with the central bank itself, without needing a retail bank"; the obvious response would be: what's the difference? It goes without saying that the digital pound will be subject to the BoE's Q.E. whims, exactly as the paper pound is, while exposing users to additional privacy intrusions. No, they have totally missed the point about Bitcoin's founding slogan: Be Your Own Bank.
Thing is, much of fiat cash is already digital anyway. The machinery has been deployed throughout, with credit card and online payment processors prevalent in developed countries, and next-generation mobile solutions like M-Pesa and WeChat popular elsewhere. A cryptofiat, if it is to stay under state control, makes no sense to be decentralised, because it is centralised by definition. A citizen may be forced to use state fiat for his local transactions, but a crypto version of that fiat proffers zero attraction over existing avenues.
Certainly, it's hard to believe that at least some central bank advisors haven't seen through this logic, which may however explain why Singapore for one has abandoned the notion after initial forays into cryptofiat. In summary, the brave new financial space that Bitcoin and other cryptos are opening up, cannot be challenged by state-sponsored products. All that can be done is to try and stem the outflow by regulation and banking red tape, but this opens democratic governments to public outrage, as in South Korea, and merely drives the trade underground in more heavy-handed authoritarian states, as in China. Moreover, even if a state actually manages to eradicate crypto within its borders through egregious penalties, it would still have to suffer the penalty of financial isolation, as in Best Korea.
The definition of futility
A related folly should now be addressed - that of non-backed stablecoins. The previous argument does not deny that government fiat can be embedded in crypto, only that it is meaningless. However, some have approached this in the other direction: since excess volatility is not desired, is it possible to peg a crypto's price to some stable value (hence stablecoin), while retaining its independence?
The short answer is no. We note first that this function has largely been fulfilled by tokens like Tether, which admittedly do not escape central authority through a simple mechanism - X units of the pegged token are issued for X units of the pegged fiat received by the authority, with tokens likewise destroyed by the authority when the corresponding fiat is cashed out.
This has not stopped plush VC-funded outfits from trying. Take for instance Basecoin, founded by three former quants, on the concept of an algorithmic central bank. Traditional central banking money market operations automatically occur as needs arise: bonds are issued for coins when the price relative to the chosen peg is too low, contracting supply and driving the price up. These bonds throw off more coins when the price is too high, expanding supply and driving the price down.
Without even going into the technicalities and gameability of fixed algos (which is why most central banks worth their salt employ a hidden peg), along with the cost of providing security, there are broader reasons why this won't work. A simple proof by empirical example would be the travails of real-life central banks - it turns out that they have never been able to consistently maintain stable fiat values despite access to these operations, and other measures besides, in the first place! In particular, while new coin issuance might work to suppress Basecoin price increases, its problem is that there's no real safety net when price falls - only Basecoin bonds can be issued within the Basecoin system, and the trouble is that capital flights out of a currency tend to be self-perpetuating in practice, per Taleb's well-worn warning on rate convergence.
Another problem, of course, is that the utility of such a stablecoin, even if somehow implemented, is necessarily limited. A US Dollar stablecoin would be worth exactly one greenback, but in this case, why bother with the stablecoin at all, when typical cryptos have the potential to appreciate wildly?
Against All Alts
Here, we again qualify H.L. Ham's belief in Bitcoin maximalism, in the face of a red-hot altcoin market. Note that this does not preclude multiple cryptos from existing, nor even that some new crypto may produce returns much higher than that with Bitcoin (and other major cryptos). This does, however, suggest that there will be a single crypto encompassing most of the entire market's value (with roughly Zipf distribution, which is indeed currently the case), and that almost all altcoins, assuming they survive, will remain relatively tiny.
This general analysis has not changed from 2013, since the overarching economic reality remains the same - the natural tendency is for value to coalesce in a single, or at most a few, cryptos over the long term, because of positive liquidity and security feedback effects, despite largely misguided opinions on the applicability of "substitutability". A case may be made for broad-enough use-case differentials, e.g. Ethereum for apps, but to be honest this is already pushing it.
Definitely, altcoins do have one very tempting selling point - outrageous and quick speculative returns, particularly for smaller sums involved. The trouble however is that these gains are often ephemeral, with tenfold losses seldom given a fraction as much airing as tenfold gains, once the pump-and-dump merchants have moved on. Quite unfortunately, many old and now-illegal stock market techniques apply only too naturally to the crypto space, and sadly one expects that history will repeat with too many derivative penny alts.
This is certainly hardly a popular point of view in forums such as the CryptoCurrency subreddit, where every other post seems to be egging for Bitcoin's collapse, or proclaiming as to why this particular crypto will overhaul it from nowhere. The motivations are easily understood, though the arguments are, to put it lightly, extremely one-sided, even by crypto-cult standards. A follow-up on IOTA's feud with the MIT Media Lab is deserved, as well as discussions on at-least-interesting tech like RaiBlocks, but the maximalist response remains: if open-source, it can be incorporated as a Bitcoin sidechain. If not... let's see just how much trust a closed system can garner.
The Bad News On Wealth Inequality
Before wrapping up, some negativity - Bitcoin, and crypto in general, probably won't do much for inequality. Sorry.
There's the oft-acknowledged fact of Bitcoin holdings been highly-concentrated, but it's not even the main reason why talk like "Bitcoin is the real Occupy Wall Street", or that it's "a gift from God to help humanity sort out its [monetary] mess" isn't quite accurate. Yes, there may be some redistribution to longtime hodlers as their (outsized) reward for taking on early adopter risk, but in the grander scheme of things, it simply isn't that big a deal - the already-wealthy as a whole will simply buy in, as they have with every other new asset class, which should be a named economic law; concrete case in point, the Bitcoin billionaires Winklevii started out as multi-millionaires.
Sadly, sudden wealth does tend to skew attitudes. Eighteen year-old Erik Finman made some waves half a year back by declaring that he saw no value in attending college after turning US$1000 into about 400 Bitcoins, worth over a million at that time (and well over US$5 million today). Then again, he appears to appreciate the GOD-EMPEROR, so we have to suppose he's indeed pretty intelligent. Less happy is the tale of a young electrical engineer who offed himself, because he lost some 6000 Bitcoin back in 2013, which today represents a windfall he could likely not have earned in many lifetimes; to compound the sadness, he might have made the bulk of it back simply by picking the right altcoin. Hodl without regrets...
Finally, on the "rich get richer" trend, many altcoins are offering interest-bearing options whether by node hosting or proof of stake, while the Big Two of Bitcoin and Ethereum often attract free airdrops of new alts or forks - all the more reason to stick something with the elephants in the room.
The Path Forward
We have not shied from sticking our necks out with bold predictions in the past, and we have done so once more with price projections, last week.
And, despite last year's crazy growth, the crypto game is only just beginning. Each government will have to choose as to how it wants to deal with this inconvenient upstart, and as we have stated, this is hardly an easy choice. We have thus far mainly seen a mix of denial and regulation, as states try to delay crypto's relentless growth, to buy time for their own solutions. However, as also explained, this is unlikely to work.
Big finance, as usual, has been faster on the uptake, given that their allegiance has always been to profits. We have seen Goldman Sachs and JP Morgan change their tune, and with Bitcoin taking the next step towards legitimacy with its futures offerings, the real money is beating down the door. Geopolitically, the lure of a flagless reserve currency has to be tantalising, if only for ideological reasons. America's competitors have been straining at the bit to abandon the dollar, but are at the same time wary of trying to promote their own coinage. If only there were something truly international...
The stranger thing is perhaps China foregoing their advantage by exiling their miners, but this could be understood by their preference for sandboxing their economy, which has been tenable if only due to sheer scale. Their role has apparently been taken over by Russia, who have been busy organizing their own crypto mining sector, while launching their own firms and opening trades on the Moscow exchange. Non-strategic powers have been less circumspect, with Belarus for one aiming to be a crypto haven, and Bulgaria digging three billion up from under the sofa probably won't hurt either.
Meanwhile, the honey badger that is Bitcoin lurks, and its winning formula remains the same as ever: spread to more users (its price has been startlingly correlated with user numbers, by Metcalfe's law), soak up value, and wait for fiat currencies to hang themselves - as they have unfailingly done...
Me: It's slightly delayed, but finally, the fifth annual general meeting of the firm of H.L. Ham... hey, what's on the wall here?
Mr. Ham: *entering with coffee in paw* Ah, human, I see you've just discovered our updated organizational chart; pretty damned fine year for the firm, you got to admit; revenue up, profits up, headcount up... come, come, we'll start with the presentation of the Employee of the Year award.
Me: The voting's done, I expect. *shaking ballot box* And why am I disenfranchised, may I ask?
Mr. Ham: You're not a full-time member, and more importantly, I had the feeling you might be biased against me.
Me: Well, you're probably right on that. So, going over the rules again, one ham one vote, one duck one vote, no-one can vote for himself. That was quick. And the first vote, by Mr. Ham, goes to... *opening envelope* Mister Ducky!
Mr. Ham: Well, communication has really improved since he got hired. In the past, whenever I set a direction for the company, Mr. Robo would talk about things like "not practical" or "unrealistic" or "impossible by the basic laws of physics". What poppycock! I can't fulfil my grand visions for the company, with such a negative attitude from my subordinates! Now, look at Mr. Ducky; he doesn't say no, he just looks me straight in the eye, with that ever-present confident smile of his. That's what I expect from a middle manager!
Me: Point taken, I guess. And the next vote, from... *reads name on envelope* Mr. Robo, is for... Mr. Ducky too!
Mr. Robo: Really, he's the best overseer I've ever had; unlike Mr. Ham, he won't peek over your shoulder and try to teach you how to program when he doesn't know nuts about it himself, or ring you up at two in the morning and insist you come back to the office to balance the books, because he forgot the inspection date. No, Mr. Ducky just sits there with that kind, supportive expression on his face, and lets me get on with my job! Er, no offense intended, Mr. Ham.
Me: *turning ballot box over* And it seems that Mr. Ducky has abstained, not that it matters.
Mr. Robo: How diplomatic! I always knew he was considerate and mindful of others' feelings!
Mr. Ham: What self-effacing dedication! The quiet and unshakable sort! Top leadership material!
Me: So it's settled, the rubber duck is H.L. Ham's employee of 2017. That went better than I feared.
Mr. Ham: On to the review of the past year. *flicks projector on*
We were off by an order of magnitude from our US$1800 projection, but in our defence, we did state that it was less set in stone than our previous spot-on calls; a big pop was almost inevitable from our models, the big question was when, and we were holding out for closer to 2020.
On the bright side, we simply hedl our reserves due to that, even as other gurus cashed out for understandable if probably misguided reasons. Recall the big events of the year - the Winklevii's ETF was rejected in March, tanking the price temporarily, before segwit was finally forced through by threat of UASF in the middle of the year. This brought about the BCash and other Bitforks, and of course, the price just kept steadily steaming along in the middle of all that, with regular pullbacks.
Before that, a recap on our previous AGMs:
Me: Sometimes I think, we should have charged a lot for our newsletters, you know. Publish our research for free on a blog, and next to nobody takes an interest, even if they would have been looking at 100x returns in less than three years had they followed it; maybe people will value it more, if we typeset it nicely and print it on high-grade glossy paper, and stick a, I don't know, US$10000 tag on it or something.
Mr. Ham: I'll get Mr. Ducky onto that. So, our research assistant assistant, what's the outlook?
Mr. Robo: Erm, it's a bit long, so I've broken it into bite-sized sections. We'll also reveal our price targets at the midway point before the luncheon, as Mr. Ham requested.
*shuffles notes* We'll start with the tech, then, before the econs and finance part after the break. It's not news that there has been much acrimony over the direction of Bitcoin, although that has been solidly settled in the Bitcoin Core dev team's favour, despite rogue miners and Bitcoin Judas trying to wrest control. It is perhaps testament to the Bitcoin brand's strength, that BCash somehow remains the coin with the fourth-highest market cap, a cool US$50 billion, despite being a complete rip-off that left out the latest Core improvements, because their dev team couldn't figure out how to integrate it.
Inside Attacks - Bitforks
The Pirate Bay knows what's up
[N.B. And oh yes, it is BCash, whatever they try to say]
While Bitcoin's cryptographic security has thus far been bulletproof, there looms an ever-present threat to its integrity: internal splits. One of the worst-case scenarios would be roughly evenly-matched hostile fork camps, that further actively perform double-spending attacks on enemy Bitcoin fork chains. Thankfully, despite the BCash faction's grandstanding and shilling, the BCash chain has settled into a clearly-subsidiary and generally-declining position, leaving no doubt as to what chain the venerable Bitcoin name refers to.
Though the Segwit drama and power struggle had us concerned for a bit, all's well that ends well, and its conclusion supports one welcome realisation: miners are not in practice as influential as we feared. Indeed, despite the vast majority of hashpower supposedly signing onto the ultimately-misconceived New York Segwit2X agreement, the devs called their bluff by doing almost nothing, and miners and other signatories ended up gradually dropping out, despite their cheap signalling beforehand, likely encouraged by Bitmain's near-monopoly on ASIC supply.
Fortunately, that last may be coming to an end with GMO and others entering the manufacturing business, and the failure of B2X - which to be honest, could have been an agreeable compromise had the Core devs acquiesced - should give added confidence that future attempts to hijack Bitcoin are probably not going to succeed. Interestingly, many BCash supporters appear against Segwit (and thus, S2X) in any case, for what I personally think are short-sighted reasons, as so often explained since 2014. Moreover, the proliferation of random Bitforks should also help to subtly inform the public, that not all that has "Bitcoin" in its name (unlike BCash) is, well, Bitcoin.
Back to the miners, all evidence over the past year has been that they are ultimately self-interested, as assumed by Bitcoin's design. Once price signals confirmed, upon BCash's release, that users preferred the original Bitcoin by far, miners flocked to it (and Segwit), pledges be damned. Resistance was limited to mostly snide mempool spamming, with next to no actual attacks, even on the much-weaker BCash chain. Then again, this makes complete sense - miners are in it for the long haul, after all, and have plenty of fixed equipment and location costs. From Bitmain's perspective, yes, they may prefer BCash since it retains their proprietary ASICBOOST advantage, but is that worth risking it all going up in flames, especially with Bitcoin exploding in value over the past year?
Hey, it's a *healthy* bait-and-switch!
Me: Disclosure here: H.L. Ham has swopped the bulk of its BCash for Bitcoin on ViaBTC and later Bitfinex, whom we have to commend for their sensible reading of the situation. We foresee no reason to doubt our decision.
Altcoins, Scaling & Security
Just to make it clear, H.L. Ham remains fully behind Bitcoin Core's scaling roadmap, which remains on track with Segwit leading into Lightning Network, and on-chain scaling also in the picture - but only once Segwit etc have been properly evaluated, as it should well be. And then, there's Mimblewimble and other proposals, that are certainly more sustainable than simply raising the block size limit every time they become full...
A mention of altcoins here cannot be avoided, given how some of them have achieved on-paper gains that dwarf even Bitcoin; while we're at this, it may be timely to address the "cashing out" issue, which not a few of my acquaintances seem to doubt can be done. Although there have been scattered account closures, converting Bitcoin into the fiat of your choice hasn't been a problem - Coinbase, for all their other faults, would probably do for smaller amounts, and even if you're talking low millions, breaking it up into several orders should do the trick on most major exchanges. Anything more than that, and there will be over-the-counter trade specialists from those exchanges eager to assist, for a small commission.
The other interpretation of not being able to cash out, is not being able to cash out at a fixed price. Personally, this assertion appears very strange, since traders of other commodities such as oil, soy beans, etc are definitely not guaranteed a certain price, especially for large lots, either. If the point to be made is that crypto is volatile, then certainly that is true, in which case the statement could stand to be more precise.
With the understanding that H.L. Ham's view may be biased in light of our major holdings being in BTC and ETH, we find it difficult to recommend longer-term investments in alts in general. It is true that an altcoin can more plausibly increase in price by say, five-fold in 2018 (with associated GPU mining craze), while we think it unlikely for Bitcoin. However, in the same vein, we think it unlikely that Bitcoin's price will fall to one-fifth its current value, which is harder to vouch for for most alts. In a sector that is already high-risk, high-return, we deem the current altcoin mania too much of a pure gamble.
New innovation: Proof Of Marketing
[Winning quote: Bitcoin was developed as a decentralized digital currency, meaning that, until now it has had no single administrator. Kitcoin overcomes this deficiency by establishing an administrator.]
Going back to the cashing-out issue, it should be noted that this is exacerbated with altcoins, especially those not in the current Top 50 and therefore having a cap of less than a billion bucks. Of course, if you're punting a few hundred dollars about and it grows to tens of thousands, good on ya; trouble is, when you start talking about hundreds of thousands or millions, the slippage when trying to get out would be enormous; in these cases, there really aren't that many reasonable options in crypto to place the capital. The take-home point being, one seriously needs to know what to expect with one's investment decisions.
Our other main knock on many alts, is that their value proposition is extremely unclear. Some, like Ripple and various Ethereum-based ICOs, hawk institutional support, which while better than nothing, should be carefully analysed on a case-by-case basis - it is not unlikely that they fail the basic sniff test: given the setup, would a simple database server do as well? And then we enter oBikeCoin and DentaCoin territory, and we've got to say, well...
Mr. Ham: Hey, don't knock my SPANK hoard!
Me: *ignoring Mr. Ham* To summarize, while many altcoins tout superiority in some way over Bitcoin and competitors, there are really very few free lunches in crypto; yes, maybe you can demo thousands of transactions per second with low fees (quite common, frankly), but does it really hold up under serious attack? An admirable attitude that the Core devs hold, I feel, is that of no second chances. If they open the door to premature node centralisation by raising the block size too much, there's no way back. If they introduce a zero-day vulnerability by rushing Segwit or Schnorr or whatever, ditto. I'd say they understand well what they've been entrusted with, and aren't about to risk it for temporary - and probably non-critical - competitiveness.
Mr. Ham: I'm hungry.
Me: Gah, fine, on to the price projection.
(Source: r/bitcoin, also enlarged at bitcointalk.org)
A New Valuation Era
Mr. Ham: What's this? A chart for ants?
Me: You can just click to the bigger version. The important thing is that we have moved away from our previous models from 2014-2017, which emphasized micro effects on Bitcoin's price... which, from how it missed last year, was getting outdated.
It's no secret, I believe, that H.L. Ham peruses external data in our own research - not all of which makes any sense, obviously. As such, when we come across a model that closely approximates what we had in mind, it is only proper to acknowledge the idea.
Here, we see US$100k reached sometime in 2021, which we feel reasonable if maybe slightly optimistic - but hardly unrealistic, given that it's just a five-fold increase on what has already been reached, over three years. A more conservative outlook would be US$40k stable - coincidentally the Winklevii's small bull outlook, and Novogratz's end-2018 call - before the next halving, and then stable six figures around the halving after that, or closer to 2024.
Given this, a annual projection is not really relevant for the firm's purposes given our long-term horizon, somewhere between say US$12k-30k would be very comfortable, for the coming year. And we note that this should mitigate energy concerns somewhat, since this implies that mining energy demand should not increase overmuch from today, broadly assuming that it remains in proportion to profits.
[To be continued...]
I came across an old passage of my acquaintance today. For long I sought it in its original, drawn by its unsparing probity, and today found it vintage Mencken.
Zinsser in On Writing Well notes his characteristic momentum and irreverence, and despite the manual's fixation on an almost ascetic brevity otherwise, it cannot help but let Mencken's loquaciousness slide. Though here, I hasten to add that Zinnser and others are probably correct in advising against textual adornment; if a writer be artless, better that he be thus in a plain and fundamentally comprehensible way, than through a pretentious and migraine-inducing stew of tortured words.
The masters are, of course, allowed - nay, expected - to break such stylistic strictures. Shakespeare coined words, indulging in a linguistic seigniorage reserved for its aristocracy. The GOD-EMPEROR, naturally, does too. For the rest of us, Strachan's timeless quip rings true: "if a Frenchman goes on about seagulls, trawlers and sardines, he's called a philosopher. I'd just be called a short Scottish bum talking crap."
But enough of that, and on to Mencken:
Where is the graveyard of dead gods? What lingering mourner waters their mounds? There was a time when Jupiter was the king of the gods, and any man who doubted his puissance was ipso facto a barbarian and an ignoramus. But where in all the world is there a man who worships Jupiter today? And who of Huitzilopochtli? In one year - and it is no more than five hundred years ago - 50,000 youths and maidens were slain in sacrifice to him. Today, if he is remembered at all, it is only by some vagrant savage in the depths of the Mexican forest. Huitzilopochtli, like many other gods, had no human father; his mother was a virtuous widow; he was born of an apparently innocent flirtation that she carried out with the sun.
When he frowned, his father, the sun, stood still. When he roared with rage, earthquakes engulfed whole cities. When he thirsted he was watered with 10,000 gallons of human blood. But today Huitzilopochtli is as magnificently forgotten as Allen G. Thurman. Once the peer of Allah, Buddha and Wotan, he is now the peer of Richmond P. Hobson, Alton B. Parker, Adelina Patti, General Weyler and Tom Sharkey.
Speaking of Huitzilopochtli recalls his brother Tezcatlipoca. Tezcatlipoca was almost as powerful; he consumed 25,000 virgins a year.
Lead me to his tomb: I would weep, and hang a couronne des perles. But who knows where it is? Or where the grave of Quetzalcoatl is? Or Xiuhtecuhtli? Or Centeotl, that sweet one? Or Tlazolteotl, the goddess of love? Of Mictlan? Or Xipe? Or all the host of Tzitzimitl? Where are their bones? Where is the willow on which they hung their harps? In what forlorn and unheard-of Hell do they await their resurrection morn? Who enjoys their residuary estates? Or that of Dis, whom Caesar found to be the chief god of the Celts? Of that of Tarves, the bull? Or that of Moccos, the pig? Or that of Epona, the mare? Or that of Mullo, the celestial jackass? There was a time when the Irish revered all these gods, but today even the drunkest Irishman laughs at them.
But they have company in oblivion: the Hell of dead gods is as crowded as the Presbyterian Hell for babies. Damona is there, and Esus, and Drunemeton, and Silvana, and Dervones, and Adsullata, and Deva, and Bellisima, and Uxellimus, and Borvo, and Grannos, and Mogons. All mighty gods in their day, worshipped by millions, full of demands and impositions, able to bind and loose - all gods of the first class. Men labored for generations to build vast temples to them - temples with stones as large as hay-wagons.
The business of interpreting their whims occupied thousands of priests, bishops, archbishops. To doubt them was to die, usually at the stake. Armies took to the field to defend them against infidels; villages were burned, women and children butchered, cattle were driven off. Yet in the end they all withered and died, and today there is none so poor to do them reverence.
What has become of Sutekh, once the high god of the whole Nile Valley? What has become of:
All there were gods of the highest eminence. Many of them are mentioned with fear and trembling in the Old Testament. They ranked, five or six thousand years ago, with Yahweh Himself; the worst of them stood far higher than Thor. Yet they have all gone down the chute, and with them the following:
You may think I spoof. That I invent the names. I do not. Ask the rector to lend you any good treatise on comparative religion: You will find them all listed. They were gods of the highest standing and dignity - gods of civilized peoples - worshiped and believed in by millions. All were omnipotent, omniscient and immortal.
And all are dead.
*As recently noted, again put down by the GOD-EMPEROR; some deities just can't catch a break
**A selection have gained some exposure thanks to Blizzard Entertainment, H.P. Lovecraft and Capcom, amongst others. The last in particular we find to have much potential, all the more after her healing buffs
As foreshadowed on Xmas, the King of Twitter loves impartially, and accomplishes much, despite the FAKE NEWS now garbling about how he doesn't host tea parties (yes, for real)
Well, the next year is set to be even more MAGA than the last, despite the handicap of having to clean up the easy and politically-correct, yet ultimately misguided policies of his predecessors. But, as his supporters recognize:
THE GOD-EMPEROR SHALL NOT STAND ALONE!
(with apologies to DotA 6.83)
- Eddard Stark
Merry Christmas, and God Bless TRUMP!
The evening of Christmas Eve was spent watching Jackie Chan going up against an Eva Green lookalike who borrowed her stylist from Æeon Flux, with a Voldemort who's finally gotten reconstructive nose surgery as her boss, and a bunch of Tronned-up stormtroopers as her mooks (eh, doesn't that make her basically Sexy Vader?). The MacGuffin is Captain America's super-soldier serum, and the producers rip off a cut-price version of the Avengers' flying aircraft carrier as well as the Fast & Furious franchise's mid-air bust-up, because hey, why not? Throw in Comic Relief Hacker and Spunky Cute Girl Who Kicks Nuts Because That Always Gets A Laugh, and you've got Jackie Cookie Cutter Action Movie CXXIII.
First Year of The Golden Emperor
Among Emperors, of no equal since Constantine.
It may be a month or so early, but I feel it safe enough to put forth the above appraisal, from what has been achieved thus far. While a more in-depth substantiation of this verdict will follow in due time, the gist of his greatness can be summarized by: he keeps his word.
In stating this, we must first distinguish between pledges of policy, and personal rhetoric. Expressions like "Lock Her Up" belong definitively to the latter category, because, really, TRUMP is underneath it all a Nice Guy - he's long tolerated the Clintons glad-handing him, for one, so what's a bit of ribbing between First Families?
With that settled, the current scorecard:
One final observation: recall our prediction a year back, on what would happen with user and "fact-checker" flagging of so-called "fake news" on Facebook? Well, they've belatedly realised that people ain't trusting the checkers either - and for good reason, going by how Facebook is selling out their data to governments, alongside pushing their own propaganda (which isn't fake, not at all).
to be the capital of Israel."
- from bitcointalk.org (on which more later)
A groggy morning in the offices of the firm of H.L. Ham. The floor is strewn with food wrappers, some of the remains of what was within said wrappers, partially-destroyed documents, overturned chairs, scribbled-over stock charts and the odd clump of wet dollar bills, the provenance of which it would do the firm's reputation no good to delve further into. From beneath a heap of back-copies of the Financial Times and related periodicals, something stirs.
Mr. Ham: *yawning* Now that was a proper party - and look, I even managed to stay within the premises this time, instead of passing out in some gutter, or winding up shoeless and passport-less in Krabi like... you know what, never mind. We should do this more often, Mr. Robo - never knew you had it in you, a tipple of alcohol and you're tearing up the room with your rendition of My Heart Will Go On!
Mr. Robo: *bleary-eyed* Please let us agree to forget that any of that ever happened, boss.
Mr. Ham: *winks* Sure thing, I've had my own share of... indiscretions. Comes with the territory. Bitcoin at five figures! Who would have thought that? Honestly, Mr. Robo, a 30% retrace back to maybe seven thousand wouldn't be surprising, and even if that happens, we'd still be sitting on a ten-bagger for the year. Glorious, isn't it?
Mr. Robo: True that. *waiting for trading terminal to boot back up* We were at what, eleven thousand, when the ladies arrived? Wait... have we been blacked-out for two whole days?!
Mr. Ham: That's not even very impressive, let me tell you...
Mr. Robo: Er boss, I think you better come over and watch this. It's over US$14000 now. And, uh, as I was talking, it broke past US$15000.
Coming alongside the TRUMP initiative to Return To The Moon
(and possibly repurpose it)
Mr. Ham: What?
Mr. Robo: I know, right? It's defying gravity now. *scrolling through newsfeed* And this is coming as the Ethereum network is being clogged up by CryptoKitties.
Mr. Ham: *smashing random coffee mug on ground* HAH! I knew those cats were up to no good! Vulture capitalists, that's what they are! But really, all that complaining about scaling, when it's evident that it's mostly a case of "that joint's too popular, it's too crowded, nobody goes there anymore"; let's see how the other haters hold up, when they start transferring a hundredth of the value of the BTC network.
Mr. Robo: Well, I dunno about this, IOTA has been booming despite folks starting to come to grips with its technical limitations. It's old-fashioned mania with many of these alts. And I can't even blame them, when the smaller shitcoins can potentially pump several multiples a day. Not that we can dabble in any meaningful volume without badly distorting those markets nowadays, oh well. Anyway, as predicted, lots more Bitforks are coming, including Bitcoin God on Christmas.
Mr. Ham: *rubs chin* Bitcoin Silver, Bitcoin Uranium, Bitcoin Cash Plus... gee, are they ripping off the periodic table or something? Isn't anybody interested in actual developments, like Bitcoin Rootstock and Lightning Network making the mainnet? And, um, it's at US$16000 now.
Mr. Robo: My word. It's not stopping. Sixteen point two. Sixteen point five. Sixteen poi... aahhh chooo! Haah choo!
Mr. Ham: Seventeen! All Time High after All Time High! They're off to the races! The ask walls are coming down! GDAX is surging! Seventeen point six! The bears have conceded, it's clear skies all the way! South Korea is pushing like an autistic Starcraft champion executing a 14-gas Zerg rush, it's TWENTY-TWO THOUSAND in Korean Won now! The Westerners are lagging, but they're chipping away at 18k... there it goes! Japan are following up, the Venezuelans are pouring into the breach... it's a global effort, I tell you! It's thirty thousand in Zimbabwe, but that doesn't really count of course... the bears are utterly routed! THERE ARE NO SELLERS ANY LONGER! NINETEEN THOUSAND IS GONE! The Indians, the Chinese, the North Koreans in their own little way... they're all working towards the same ends - is this what world peace looks like? We're warping space-time itself!
TAKE DOWN 20K! TAKE DOWN 20K!
*Mr. Robo stops sneezing*
Mr. Ham: No! We were so close! IT'S ALL COMING DOWN NOW! THE EXCHANGES ARE CRASHING, LITERALLY! WE'RE FALLING BACK TO EARTH! *grabs Mr. Robo* CONTINUE SNEEZING, YOU WORTHLESS WHIPPERSNAPPER! SNEEZE!
Mr. Robo: Huh, I... whut?
Mr. Ham: *roaring* I SAID SNEEZE, MISCREANT, OR BY THE HAMPEROR ABOVE, I WILL HAVE YOUR LIVER FOR A PAPERWEIGHT! I WILL HAVE YOU HUNG, DRAWN AND QUARTERED! I WILL...
Mr. Robo: I'm trying, I'm trying! And, I do think it's properly "hanged", not "hung"...
Mr. Ham: I DON'T BLOODY CARE! IT'S FALLING BELOW FOURTEEN NOW! HURRY UP AND SNEEZE, OR BY TRUMP, AFTER YOUR HUNGING AND QUARTERING, I WILL HAVE YOU CHOPPED INTO LITTLE BITS! AND... AND... AFTER THAT, I WILL *STOMP* ON THOSE BITS!
Mr. Robo: *hopefully* Ah... choo?
Mr. Ham: *pausing his shaking of Mr. Robo* Oh, it's stabilizing. It's going back up. We're back at 15k. Good job, Mr. Robo.
Me: Another entertaining day at H.L. Ham, I see.
Mr. Robo: Oh hi, human. Was just about to ask you about the proper trading response to this Bitcoin bubble we're in...
Me: Well, I don't agree that it's a bubble this time - personally, this is merely the expected lead-in to the CBOE and CME futures listings. I mean, I don't know why you even bother with the so-called experts, given that they've been yelling about the futures allowing shorting, when that maneuver has been possible on Bitfinex, OKCoin and a multitude of other exchanges for years now, with more to come?! It's like the old fogeys have no idea what they are talking about... but what else would you expect from the dishonest and fake mainstream media, who have again been caught with their pants down, making stories up to crash the stock market, before covering it up?
You tell them, GOD-EMPEROR!
The man's been on a roll recently - barely a year into office, and he's already more-or-less passed a historic tax cut, while bringing chocolate milk back to the kids; something for everyone, I say.
Not only that, he's hardly paused for a breath, before going on to settle what generations of pussies had continually put off, because real men say what they do, and do what they say. One can only shake one's head at how all those congress critters - Republican and Democrat all - who essentially voted unanimously to move the U.S. embassy to Jerusalem, are now all "well I voted for that, but I didn't actually, you see". Thank goodness that there's finally a grown-up around to put his hand down and recognize reality, in a rotten world where hypocrisy appears to be a virtue. He's known as the GOD-EMPEROR for a reason, mind...
Bonus: Obama seems to be completely losing it;
then again, seeing as how his legacy's basically gone,
the mad ravings are at least understandable
[N.B. I do like our northern neighbours, here's to hoping they don't actually set forth to embarass themselves]
It's... it's gorgeous.
(Sources: flickr.com, pinterest.com & thespruce.com)
Mr. Robo: ...I don't know, Mr. Ham, "Arise, fair moon, and kill the envious financial establishment" doesn't roll off the tongue as smoothly as the original...
Mr. Ham: Well, so sue me, I'm not a poet by profession. Have a cigar, Mr. Robo? I know you don't smoke, but the occasion positively calls for it - the moment we've been anticipating has arrived! Bitcoin at US$10000!
Mr. Robo: Well, to be precise, it smashed US$11000 in passing too, boss. Barely noticed it myself. Kind of amazing, adding over a thousand in a single day, when we were struggling to find the four-figure level again for years...
Mr. Ham: *waving cigar dismissively* Nah, Mr. Robo, that's your problem. Sweating the small stuff. Think bigger, my assistant! We shouldn't be fussed about scalping a paltry few hundred grand here and there any longer! The CME has confirmed that official futures are arriving on December 18, Nasdaq are entering shortly after, The Economist has turned to whining about liquidity, even as a host of new crypto funds eyes the market - which includes the likes of J.P. Morgan, despite their CEO calling it a fraud; it was kinda hard to keep a straight face when he first said that, given how Wall Street operates. I'd gather the lot of them would call their own grannies a fraud, or worse, if there were a dime in it.
Mr. Robo: Speaking of which, some of the senators who sold out to Big Telecom on net neutrality, did it for as little as US$1000! I mean, I do understand greed in politics, it's acknowledged and enshrined in the local scene, but that's just pathetic now.
Mr. Ham: Not our problem yet, and honestly, I'd rather focus on what may be the hottest openly-accessible market in history. We're breaking parabolas on a log chart, boy! You just don't see these things on the bourse, outside of fly-by-night tuppenny stocks... and the kicker is, we likely ain't seen nuthin' yet!
Couldn't locate the BTC curve on first glance
(Source: toptwitter.com, from the Wall Street Journal)
Mr. Robo: To be frank, boss, I'm a little worried, this kind of rise can't be sustainable...
Mr. Ham: *flicking cigar ash impatiently* Pshaw! Of course it isn't, but that's not the point, boyo. Did you see me panicking when it bled from US$5k to US$3k in September, or from US$8k back to US$5k just last month? Given your professed competency in statistics and pattern recognition, Mr. Robo, I'd have thought you would have understood well that these things happen - in the short term, it goes down, it goes up, we lose or gain some millions in our sleep, who cares really? It's expected. As long as you aren't one of those bright sparks who goes in on margin, you'll always retain the underlying.
Mr. Robo: Yeah, as the Oracle of Omaha saith: "When leverage works, it magnifies your gains. Your spouse thinks you're clever, and your neighbors get envious. But leverage is addictive. Once having profited from its wonders, very few people retreat to more conservative practices. And as we all learned in third grade - and some relearned in 2008 - any series of positive numbers, however impressive the numbers may be, evaporates when multiplied by a single zero. History tells us that leverage all too often produces zeroes, even when it is employed by very smart people."
Mr. Ham: One of his better quotes, although of course you can't trust him on everything either. The silly thing with Bitcoin, as it happens, is that there is no trick to it. Nope, none at all. It's not your fancy "financial math", nor "playing the range", nor even technical analysis. It is merely the quintessence of economics, as we have been saying since 2013 and before - a proven, fungible, frictionless commodity leads inevitably to soft singularity. Economics, being a social science, has few hard laws, but this is probably as close as it gets.
The greatest difference, then, is not in any especial cleverness, or particular facility with numerical manipulation, but between those who recognize this reality - like Falkvinge - and those who don't. Detractors tend to be fixated on finding reasons as to why it can't happen, and are down to rehashing poor arguments that apply even more strongly to fiat money, if anything. You won't find them spending a fraction as much effort thinking about multi-trillion national debts, for one.
*puffs on cigar*
No, my friend, this is a game for those with balls - and the best of them put it all on the line, like the poor Redditor who bet his left nut that Bitcoin wouldn't hit US$10000 this year, and gamely followed through by eating it. And then, there's John McAfee:
Mr. Robo: I don't want to say this, but this man appears unduly determined to lose his dick...
Mr. Ham: It's the modern day, Mr. Robo. It is Mr. McAfee's prerogative as to when and how he disposes of his body parts. Which reminds me of the sheer insanity over in Europe - TRUMP tweeted awareness of a mob slaughtering a gay person by throwing him off a building, and their response was to criticize him for smearing the murderers! Now, maybe TRUMP didn't get all his sources right, but this is madness! Objectively, what the fake mainstream media is doing is, when presented with multiple videos of inexcusable crimes being committed, picking out the sole inaccurate one to slam and discredit the whistleblower!
I tell you, Mr. Robo, this is exactly why people believe in the TRUE GOD-EMPEROR, who has relieved America of onerous and unjustified commitments with nary any praise from his ungrateful citizens; and this coming so soon after his Hollywood detractors are turning out to be a nest of pedos and rapists! And these are the people we are supposed to take seriously, when they slam the GOD-EMPEROR?! Since I'm in such a good mood today, Mr. Robo, I'll let you into a little secret - remember how you were always so frustrated at not achieving my level of returns, despite putting in so much more back-analysis and computation?
Mr. Robo: Still am pissed, actually.
Mr. Ham: Well, I'll tell you: 紫微斗數; by apprehending the movement of the stars, I read the destiny of men and gods. And, just last year, the Star of the Heavenly Emperor rose over the northwestern sky, an event of magnitude not seen in ten thousand years! Thus, it is as fate has long decreed - this is the TIME OF TRUMP indeed.
Mr. Robo: And what did it say about Bitcoin?
Mr. Ham: Eh, the moon looks larger to me tonight, doesn't it? Next stop, Mars - don't worry, Elon Musk is on board, even if he's not Satoshi.
Mr. Robo: Great! And maybe England might win the World Cup, after they got an easy group?
Mr. Ham: Come on now, we're talking realistic miracles here.
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