Mr. Robo: ...well, that was a long intermission. How was Hong Kong and Hawaii?
Me: Good, but, one matter at a time. Let's finish up the Bitcoin analysis, before doing the travel recap. Beginning with a question that has been raised by a number of my friends and acquaintances: as anyone who has browsed CoinMarketCap must have noticed, why are the price movements for all cryptocurrencies so correlated?
More specifically, consider this observation: the price of Bitcoin rises (or falls, which seems to be the more common movement these days) 3%. The general tendency, then, would be for the prices of alt-coins to also rise (or fall) about 3%, thereby largely preserving exchange parity when denominated in Bitcoins. However, one would expect that if the change in price had been driven by some Bitcoin-only news (e.g. another Bitcoin ETF delay), then the price of alt-coins should remain largely unrelated, in fiat currency terms. Why this discrepancy?
The answer then would firstly be that Bitcoin remains the main trading pair for alt-coins, especially the smaller ones that exist only on smaller crypto-only exchanges (that avoid having to contend with pesky banking regulations). As such, the natural inertia indeed tends towards preserving the exchange rate on the Bitcoin trade pairing, in the same manner that a drought in California would increase the price of locally-grown artisanal almond juice in US dollars due to reduced supply, but have next to no effect on said almond juice price in, say, Indian Rupees.
At this point, it may be appropriate to confront an interesting thought experiment proposed by a couple of Federal Reserve economists, arguing that the proliferation of alt-coins is dragging down the Bitcoin price:
While the economists do submit that the analogy isn't perfect because crypto exchange rates aren't fixed, one could note that the analogy is much poorer than it could have been. By conflating Bitcoin with a Hamilton tenner, and Altcoin(s) with a Lincoln fiver, they are insinuating that various crypto systems are entirely interoperable, and thus any Altcoin could sink Bitcoin by issuing coins willy-nilly. The far more natural analogy, one would feel, would be to conflate Bitcoin with a US dollar bill, and Altcoin(s) as foreign dollar bills. The question could then be posed as to what would happen if the supply of foreign (say, Venezuelan) bills were increased dramatically; a short visit to a Caracas dining establishment should provide the economists better intuition about whether hyperinflation in a two-bit currency materially depresses a reserve currency (it doesn't)
Mr. Robo: ...to be honest, the standard of reporting on crypto mostly leaves much to be desired.
Market Segments & Use Cases
- Darius510, r/cryptocurrency
"The first mover status of Bitcoin is an objective truth in an ocean of subjective tribalism. It is the only characteristic of any coin that can never be imitated, iterated upon, cloned, forked, or be challenged in a debate of merit.
Without Bitcoin, cryptocurrency has no scarcity."
- polomikehalppp, r/bitcoin
(consider also: Lindy effect in crypto)
Me: That said, in their defence, alts do probably affect Bitcoin prices, although the exact relationship is tricky. For example, Monero and the like might attract a privacy-obsessed crowd, that might not otherwise have been interested in Bitcoin, thus expanding the crypto market as a whole. The question, then, would be: how many different (types of) cryptocoins does the world really need? From existing evidence, the answer seems to be: quite a lot fewer than already exist.
As repeatedly emphasized, cryptos are fundamentally monetary (or protocol) plays, and not technology plays; as such, rampant innovation-for-its-own-sake was never the point - nobody buys into a national currency because they introduced new high-tech shiny plastic banknotes, and in fact reinvention has led to the decline of more than a few high-profile platforms (Digg, maybe Facebook). It has been noted that indexing in crypto has historically been a losing proposition due to the high number of rubbish hype alts and ICOs that oft die completely, which has brought with it the advice to stay within one's circle of competence - which we have striven to. Of course, in a true bull run, it probably won't matter much, from the price correlations.
In the wake of this latest popped bubble, a back-to-basics reassessment might be in order: what use-cases are there for crypto, and what is the demand for each of those? Off-hand, we might recognize:
Beginning with random services, we might note that many of those seem mostly... unnecessary (e.g. Dentacoin, oBike's oCoins, Sakae's Bitecoin, imgCoin for image hosting and Kim Jong Coin, greatest of them all), with many of these fanning interest by touting partnerships with big-shot companies - oft short on details. But seriously, why does every firm or industry need its own token? Like, a dozen Weedcoins?! It's like having your friendly neighbourhood pot dealer insisting on non-transferable vouchers, rather than good ol' greenbacks. Bankster initiatives like R3 aren't doing too well either, even considering it got picked over Ripple for SWIFT, as the extant financial system is arguably fundamentally trust-backed-by-legal-might based - contrasting heavily with blockchain's most novel property of decentralised trustlessness.
Interoperability protocols appear to necessarily be a secondary, derived demand, which brings us to Ethereum-style platforms. Personally, I adore the vision, but Oracle problem of interfacing with the real world for error-prone smart contracts aside, it remains that distributed apps have been exceedingly slow - likely unavoidably slower than simple value transfer, for the same security - and something of a solution in search of a problem. This is not to say that Ethereum, EOS, NEO etc are doomed, ETH for one remains very thoughtfully designed and actively developed. It remains, however, that platform-centric tokens appear somewhat easier to replace - in other words, have a weaker "economic moat".
Which takes us to the original commodity money and payments motivation, as exemplified by Bitcoin. We have argued for the attractiveness of its store-of-value function, and we might also note that the "naivety" of Bitcoin's design - as compared to Ethereum's latest iterations, for example, and oft derided as out-of-date by the r/Cryptocurrency set - is actually an asset. As with all good cryptography (and unlike IOTA), Bitcoin is relatively straightforward to analyze, and its limitations and failure conditions are well-known, rather than obscured.
These security basics, by the way, have been rather harder to come by with most altcoins. In practice, we have seen EOS block producers forming cartels out of the gates, resulting in double-spends being rubber-stamped. Bitcoin Gold and Ethereum Classic got 51% attacked, as most cryptos not called Bitcoin are frankly quite vulnerable to. Bitcoin ABC is relying on the hack of enforcing immutability after ten confirmations - which brings its own set of issues, while the experience of Nano and IOTA thus far suggests that theoretical blazin' speed by itself really isn't the point, not with decentralization at stake.
Pumpy Dumpty Broke The Wall
Best crypto trading video of 2018
Mr. Robo: So, in short, continue loading up on Bitcoin.
Me: Well, and maybe Ethereum.
See, the trouble with investment advice is, you gotta recommend what you're holding; because if you promote something else, the obvious question would be, if it's so good, why aren't you into it? Can't be having that, can we?
Just to make it clear - when my pals buy alts, I'm hoping they succeed, but the fact is that objectively speaking, I can't be confident of that. Goodness, I've tried to read the alt markets, but the sheer amount of dodginess going on, such as with market cap gaming - even acknowledging that Bitcoin's hardly that pure either - is astounding.
There's the pump-and-dump groups, of course, where the ringleaders arrange to pump the price of some benighted altcoin up, only to then dump their bags on late-arriving chumps. The trouble with getting on this action - ethics aside - is that one can hardly be sure of not being on the "chump" side, especially without insider information. But seriously, this is just classic penny stock shenanigans, transplanted. Fortunately, this is not too hard to detect by machine learning, it appears.
This might however pale in comparison to the long con of scam projects (many originating from you-guess-where), in which the coin, exchange, ICO or dApp creators put up just the right front, throw out the hottest buzzwords and organize rigged contests, to lure unsuspecting investors. And, the best thing is, if executed correctly, the big exit's probably even legal. Then again, one supposes the incentives are often out of whack. Consider some hotshot ICO hawker - guy makes some outlandish promises and poses with Jack Ma, and gets tens of millions thrown at him with next to no conditions, all upfront; cutting and running, claiming most of the profit with none of the scheduled work, sure sounds tempting...
Long story short - if you're going to play the altcoin markets, at least spread your investments out. Perhaps the proportion of altcoins that die can be slightly exaggerated, but not by much.
Are Bitforks Any Better?
- Vitalik lays on the burn
Alright, no alts. But what about those Bitcoin forks then? Surely they, as the direct descendant of the chain, might pose a threat to replace it, and thus be a value buy?
Recall our piece on the dear Dr. Craig S. Wright, and his quite senseless hocus-pocus, two and a half years back. He certainly hasn't been idle about spamming nonsense, and his alliance with Bitmain's Wu Jihan predictably eventually went up in flames, with Dr. Wright insisting on his own Bitcoin Satoshi Vision (BSV) fork - which is just as well, given that they've all but exhausted materials-based suffixes with Bitcoin Polyester.
This led to the November hash wars on the already near-unused Bitcoin Cash chain - so people aren't hung up on block size, after all - which saw both Jihan's Bitmain and Wright's Ayre burn millions on renting hashpower, only for the combined price of the resulting chains to be lower than what Bitcoin Cash had started with. BSV remains, as Vitalik so poetically put it, a pure dumpster fire, leaving Dr. Wright a pile of unsellable tokens after conceding defeat.
It's hardly better for Jihan, however, as he by all accounts swopped just about all their real BTC for BCash, somehow managing to turn a near-IPO money-minting miner manufacturing business, into a firm that's shedding staff and overseas offices, while pushing questionable cloud mining and A.I. out of nowhere, in an effort to stave off bankruptcy. Quite a remarkable development, given that all Bitmain had to do was to sell their machines honestly, possibly after "burning them in" with a bit of mining on the side. But ego always gets in the way, one supposes. And, get this, after resisting segwit for so long, Jihan wound up proposing the segwit-enabled Lightning Network as a BCash scaling solution. Maybe next time...
Rule One: Never fight a hash war in Asia
Scaling By Lightning
Returning to the scaling issue that precipitated the Bitcoin forks in the first place; it's not gotten much press, unlike more flashy alts, but the Lightning Network's quietly up to roughly five thousand-plus nodes, twenty thousand channels, and 500 BTC over the past year - even after a partly-adversarial experiment. As explained last February, it's a true network, rather than a collection of separate peer-to-peer channels; in theory, once it gets big enough, Bitcoin microtransactions - the ubiquitous coffee payment problem - will be nigh-instantaneous and nearly-free. Assuming most future users being happy to rely on a Lightning Network or similar second-layer solution, almost all transactions can be offloaded from the base Bitcoin layer.
This tradeoff - using a secondary layer, rather than continually expanding the capacity of the base layer, as the Bitforks do - has always been the more sensible solution to us, all the more given the security limitations of Bitfork zero-confirmations. Definitely, Lightning has its own limitations - channels closing all at once, intuitively - but clever fixes are constantly coming into play. For example, regarding the cost of using two transactions on the base network to open a channel, researchers have proposed Channel Factories to batch channel creation.
Certainly, it's important to question the Lightning Network setup, with concerns that it cannot be properly decentralized - due to the formation of large hubs - pretty common. On the surface, this seems to be happening with payment providers such as Square getting into the act. However, personally, this seems like an issue that LN will naturally outgrow, with the target endpoint being normal users eventually transferring crypto over LN seamlessly, oblivious to the internal workings.
Obligatory Crystal Ball Gazing
Mr. Ham: Privacy patches like Mimblewimble are also coming - interesting times ahead, to say the least!
Me: To be honest, I'm a teeny bit concerned that improving privacy too much might scare regulators off at this point. Then again, I don't see them holding the tide for long, given how the blockchain concept's getting normalized. Thirty years ago, you'd be something of a weirdo - or a boffin, at best - to be tinkering with mobile phones or related computing devices. Today, every kid is face deep in their smartphones and tablets.
Warranted or not, optimism's not yet in short supply, despite the market taking an absolute beating in the past few months. The Satis Group's reasoned out about US$100k in 2023, Draper's sticking with US$250k in 2022, rather earlier than the pattern recognitioners over at r/bitcoinmarkets. Myself, I'm holding firm on US$40k after the next halving about 2021, and just for fun, a range of US$3k to US$8k this year.
...and really, where's our CEO? Let's check on Mr. Ham's office, Mr. Robo.
This is not what it looks like.
Me: ...okay, no point waiting for Mr. Ham to return, I suppose. Let's carry on, Mr. Robo.
The BTC Community Of Practice
Before continuing, we should perhaps establish some background for what is to follow. Amidst all the doom and gloom, the degree to which Bitcoin has captured the imagination of millions about the globe, is perhaps not often appreciated.
There's the grassroots-level engagement popping up in the most unexpected of places, and the acknowledgment - oft grudging - from hallowed international organizations. National leaders are reading up; Savvy countries, Singapore included, are not-so-quietly positioning themselves. South Korea has admitted that it's impossible to ban crypto exchanges, and their chaebol are joining in. Goldman Sachs traders are quitting for blockchain startups, while Russian nuclear scientists are mining alongside local Ah Beng BBFAs. The New York Stock Exchange's owners are integrating Bitcoin, even as it gains the thumbs-up from Muslim clerics. And, let's be frank, crypto's got to be tempting to anyone who has beef with the US Dollar, or whose own fiat currencies are crashing - and there's plenty of both to go around.
There is a sociological concept called the community of practice - defined by the people that share a collective interest. This, then, might be a partial solution to the "what underpins Bitcoin's value?" puzzle. Previous famous fads, other than involving items unsuited to be stores of values - tulips rot, beanie babies can be endlessly produced, etc - have arguably never captured such a diversified and robust community. This community has exploded with each bubble, and shrunk as the bubble deflates, but the main point is: by all indications, it has grown with each bubble cycle, and there are now millions who "get it"; and yet, this remains a tiny fraction of the available global population.
E-mail? What's wrong with pen and paper?
The resistance to digital cryptocommodities, from my observations, have been strongest amongst the old set. Recall, granddaddy Bitcoin has just celebrated its tenth birthday - there are Silicon Valley startups that have been in stealth mode for longer than that. Today's teenagers have shown themselves to have fewer hang-ups about adopting alternative forms of money, and why not, given how the wiseguy seniors have f**ked their economic future up? If one needs more convincing, the Bitcoin subreddit is nearly twice the size of r/investing, and the CFA exams are including crypto and blockchain topics. Does this look like something that will fade quietly into the night?
- MakeTotalDestr0i, r/bitcoin
The emergence of Bitcoin and other cryptocommodities has slowly garnered some respect in academia, with polytechnics and universities, and journals of the stature of Science publishing policy op-eds. However, while originally mainly a technical breakthrough in computer science (Byzantine consensus), Bitcoin's largest significance is arguably in economics: is it possible for a major money to be viably supported by a community of practice, instead of an issuing nation-state?
The more traditionally-trained, doubtless, would insist the negative - to them, Bitcoin has no possible plausible premise, and its very existence refutes the Efficient Markets Hypothesis itself. To this, we might attribute a forgivable deficit in imagination. Their almost-religious vehemence towards crypto's empirically-observed growth however cannot help but remind me of Galileo's whisper after being forced to recant by the Church: "And yet it moves!". Personally, one might next remember Planck's quote about science advancing one funeral at a time.
I for one am willing to state that cryptoeconomics will become a recognized part of economics, as new generations of econs professors struggle to deny crypto's survival - and perhaps as pertinently, get invested in it. As explained in last year's AGM, Bitcoin was never purely a replacement currency, or US Dollar #2. It is partly that, maybe, but more a commodity money.
Consider now the issues with existing fiat currencies, seldom explored with similar passion by mainstream economists. The arguments against commodity-backed (sound) money are pretty well-known: in theory, the money supply should optimally mirror the growth of the real economy. As such, fiat currencies were established to enable this, by delinking from a commodity monetary base. An obvious next question would be whether states can be trusted to manage the supply side of money properly, given their proven incompetence with the supply side of goods - see Soviet and other command economies.
One might, I hope, reasonably assume that states are, in fact, not perfectly knowledgable or disciplined, and that their issuance of fiat currency is, to some certain extent, suboptimal. This isn't an insurmountable failing, of course - people will simply organically hedge in other monies. One might plausibly explain the persistent property, stock and other asset bubbles as a manifestation of this suboptimal management of the currency supply. Now, one might not naturally associate an apartment in, say, a Chinese ghost city as the modern analogue to a Rai stone, but really, they are in practice a similar sort of "money" - citizens have limited trust in governments not to overprint and devalue the currency, and are therefore hedging with investments in a commodity that is less easily created - housing.
Both are a hard shell, with a hole in the middle...
Now, as discussed back in 2016, this "property as money" concept has generally received little pushback from states all around the world, thus the bubbles everywhere. Clearly, at least some policymakers must have realized that they were likely over-issuing currency through quantitative easing - and to the already-wealthy - as the path of least resistance. Then, if this is unavoidable, real estate would be one of the best asset classes to direct the excess currency to; unlike gold and other commodities, at least the rich can't just abscond with them. Gold in particular remains heavily suppressed - to the extent of execution for hoarding - since millenia of experience in currency failures has left little doubt as to where citizens would prefer to store value, in periods of state weakness.
Cryptocommodities, however, have upended this uneasy equilibrium. Property is, ultimately, hardly a perfect "money", after all. Land, especially in desirable areas, may be limited, but as Alex Au memorably mentioned, housing itself is largely a matter of fiat - developers can usually just build a taller high-rise structure, and/or shrink the units. Gold, the self-named standard for eons, is heavy, and adulterated coins are not easily assayed. Many other commodities are perishable, or have a supply that is highly manipulatable. Enter Bitcoin: scarce, durable, portable, fungible, infinitely divisible for all intents and purposes, non-counterfeitable with simple precautions, reliable supply schedule. That it happens to excel in all these classical dimensions of "money" is no coincidence - it was designed this way.
And so, for all the spluttering insistence by certain respected economists that Bitcoin should have zero value because it has no premise, traders and practitioners holding actual power - and facing actual consequences - have been rather less confident of avoiding a crypto-inspired monetary revolution. As explained last year, national policymakers continue to confront the dilemma of legitimizing crypto but losing some state control over money, or banning it and losing out on its economic benefits. As expected, the larger and more authoritarian the state - China probably the biggest example - the less welcoming they have been. On the other end of the spectrum, nimbler navigators like South Korea, Switzerland and Singapore aren't waiting to get in.
With official blockchain versions of national currencies thus gaining relatively little uptake, given that they don't actually fill a new niche in the money landscape, there have only been so many countermeasures to slow the migration, given that stopping crypto itself would be about as difficult as blocking the entire Internet. The entry and exit points where fiat is exchanged for crypto has been a natural bottleneck, oft enforced by regulating exchanges. Other than this, financialization and rehypothecation - where exchanges or other institutions claim to have additional coins on their internal books - is probably the gravest danger. Fortunately, longtime crypto hodlers should recognize that if one doesn't have the keys to their crypto on the de-facto settlement network itself, they don't actually own it.
The real fun, I gather, will begin when crypto becomes officially legitimized - say, when some big central bank declares that they're storing Bitcoin as a reserve asset; I'd pay good money to watch Krugman's - or other similarly-minded big-shot economists' - reaction to that. It would, certainly, be interesting to observe how opinions on crypto might change among normal citizens, if the only real difference were backing by some authority, instead of current barely-disguised disdain. It wasn't that long ago that exposed ankles were immoral, after all...
The Power/Proof of Work Argument
Of all the arguments against Bitcoin's ascendancy that I have come across - many actually anticipated by Satoshi and friends in the original conception - the most convincing was probably that on its energy cost of production. Just to reiterate, the Bitcoin mining proof-of-work algorithm automatically adjusts itself to produce one block - with associated block reward, currently 12.5 Bitcoin - every ten minutes on average. The energy expended at equilibrium is then equal to the expected revenue; assuming a price of US$4000 per coin, about some US$50000 worth of energy should be spent every ten minutes, regardless of miner efficiency. It gets slightly more complicated since the cost of energy differs according to location, but this is the general idea.
We have explained this expenditure of energy as the "price of honesty" for a commodity token previously, but it is easily understood why detractors might consider this mechanism as "insanely wasteful". According to a recent paper in Nature Climate Change, "Bitcoin usage, should it follow the rate of adoption of other broadly adopted technologies, could alone produce enough CO2 emissions to push warming above 2 degrees Celsius within less than three decades". The environmental angle, from personal experience, has become the go-to objection against crypto.
One reaction is, of course, to move towards proof-of-stake and other algorithms that do not rely on work produced, as Ethereum is planning. The thing, though, is that these alternatives are generally not trivial to secure, as might be explained in more depth later. Even considering the current situation of Bitcoin, however, there are several additional mitigations even considering likely faulty math in initial estimates. A first is that, while seemingly large in isolation, even more energy is being spent on less-worthy causes. Another is that the cost of mining, by virtue of reward halvings, naturally halves every four years. In other words, Bitcoin can double in price every four years with no change in energy expenditure. Not only that, by the nature of Bitcoin mining, it tends to migrate to places where energy is cheapest, and would not be stored elsewise anyway. Such sources are often naturally renewable - e.g. Iceland - and crypto can in this sense be seen as a buyer of last resort for electricity, unlike with other commodity monies.
[To be continued again...]
Me: Ho hum, another media exposé on our local universities' obsession with KPIs and rankings causing academics to quit, promptly sent down the memory hole; same for the HWZ forum gossip. This sort of censorship's getting more and more insidious everywhere, what with CBS News "fact-checking" the current POTUS's national address, only to delete confirmation of his apparently most outrageous assertion on migrant women victims, when it turned out to be a gross understatement if anything. How does one trust the media in this climate?
Ah, you're early, Mr. Robo.
Mr. Robo: *sitting down* Not too much good news on the investment front for the firm of H.L. Ham in 2018, I'm afraid. Hedged a lot less that we should have.
Me: Oh, that's not a huge problem - I'd say our major thesis remains intact, but we'll get to that in the meeting proper. But just curious, Mr. Robo - what do you think the point of gathering wealth is? Or, what's in it for you?
Mr. Robo: Ah well, my stake in the firm's not that big to begin with, but there's the challenge, I suppose. And, as you once mentioned, the relative transparency and independence - make your call, and next to nobody can just pull rank to tank your decision. As for the money itself, well, I've taken to thinking of it as some form of potential energy, after trying to make my way through Mirowski's More Heat than Light; modern economics has drawn heavy inspiration from physics, and if you carry the analogy deeper, the application of cash is no more than that of a force: neutral in itself.
Me: Yep, there's the Tale of Thales again - there is some satisfaction, even for those who consider themselves philosophers first and foremost, to demonstrate their ability in more... worldly affairs. Ability that, ideally, derives from some more-involved theory. As for the eventual dispersal of the loot, I'd say Maimonides might make a good guide:
Mr. Robo: So the less recognition obtained, and the more pro-active and purer the intent, the better, it seems. A fairly common concept across religions, I think, though to be frank I wouldn't have thought that you amenable to the source...
Me: *wags finger* Nuh-uh, hamster. I'm against the illogical bits, like the pick-us-only-or-fry mentality - but today's not the time for that discussion. Anyhow, an implicit addendum to Maimonides would be that a grudging gift remains superior to piety without giving - i.e. thoughts and prayers - of course assuming that one has the means. I can get behind that.
This is also entirely in keeping with your conception of wealth as a resource towards bringing about a desired change. Capitalism remains the worst method of allocating resources, it seems, other than everything else that has been tried, at least at scales larger than a tight-knit clan group. On objective inspection, much of the world's ills can be - indeed, are possibly most appropriately - mitigated by judicious use of moolah. And if so, if one believes oneself to be a decent farmer and steward, so to speak, does it make sense to give away all one's seedcorn?
That was quick
Mr. Ham: *waddling in* You got that, human. Can't give what you don't have, my pa always said, whatever the commies try to argue. A plump portfolio's the difference between making a difference and sitting with your bits in your paws, he said!
Me: Ah, the prodigal CEO returns. So, as I was discussing with Mr. Robo, why exactly do you wanna be rich?
Mr. Ham: Three chicks at once.
Me: ...okay, cancel the scheduled shareholder address. We might have some editing to do.
Nothing New Under The Moon
Me: Well, I'm sure neither of you need a play-by-play of the painful details. Long story short, we were inaccurate. It was, again, a bubble. On this, we were wiser and more circumspect in 2014. However, a pronouncement that "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" has just about come to pass, considering Bitcoin's price of some US$16500 - if highly unstable - then, compared to about US$3700 today.
This drop has, as expected, brought eager naysayers out of the woodwork, with prominent critic Nouriel Roubini observing that cryptos are rather less decentralized than advertised. Others have resummoned old critiques about a lack of value tethering - see our previous rebuttal - and resemblances to tulips, beanie babies, Pokémon collectible cards and the South Sea Bubble. Some have at least, while celebrating the collapse in price, acknowledged that the price remains, like, forty times that of five years ago despite the crash - or an annual 100+%, compounded. Surely then, if this is accounted a failure, where might we encounter a whole lot more of it? Not even Google or Berkshire Hathaway have anything on this rate of growth. It can be hard to maintain proper perspective, considering the current price remains 4x that of two years ago, right on trend.
An interesting consideration here is that, the older the hand, the more fortified they tended to be about these developments. We drew upon the experience of 2012 back in 2013/2014 ourselves, and the biggest surprise might be how closely 2017/2018 repeated that period, and the classic bubble chart to boot:
Complete with prescribed bull trap both times,
after the implacable run through 2017
Mr. Ham: Spooky, maaan.
Me: The psychology does seem empirically solid, and while I didn't discount a drop, I must confess I didn't see it repeating an 80+% retrace. But to reiterate, the main takeaway should be that virtually none of the critiques about Bitcoin are new. Almost all of them had been accounted for on the BitcoinTalk forums before 2012, back when discussants were nearly without exception thoughtful technical enthusiasts - who tend towards Bitcoin maximalism, and for good reason - instead of the loudmouthed get-rich-quick shills that populate r/cryptocurrency and the like nowadays - many of whom have gotten badly burnt. As for the participants, the discussion content from when prices were soaring/diving about 2014, can hardly be distinguished from the corresponding threads four years on.
Mr. Robo: The question is then, is there anything significantly changed about the crypto scene, from 2014 to 2018, or will it be roughly the same pattern all over again?
Me: Right on. A fresh critique is then that, instead of being five years old then, Bitcoin had become nine years old, and thus expected to be more mature. Well, to this, one might suggest that a some 20x jump in maximum price might qualify, the 341st declaration of Bitcoin's demise notwithstanding. Keeping in mind the old hat about past performance and future results, the recent price action has supported theoretical projections about Bitcoin price growing by bubbles - with more to come.
No, as we hinted in our last AGM and before, it all reduces to a single question: is crypto the future of money, as the Internet was the future of information? If no, then the critics will be right, and they can smugly regale captive audiences about how it was all obviously smoke and mirrors; if yes, however, then one might consider the various dot-com busts - and wonder at what, say, the next twenty years might bring...
Listen here, son. It might hurt, but you HODL THE LINE, you hear me?
'Cause you neva know when the BIG BULL appears.
[To be continued...]
I am a Democrat."
- Will Rogers
"The right thinks the left is stupid.
The left thinks the right is evil."
- Charles Krauthammer (paraphrased)
To make it clear, I don't think Democrats are bad people, given that I've identified more with them for much of my life; no more bad or BAD than the average person, anyhow. As an institution, however, it's tough to figure out what they stand for nowadays - bar obstructionism and random corporate interests.
This might be best illustrated with reference to a movement closely connected to supposed Democrat ideals, the Women's March. Note, I broadly support gender equality - if a female, or any being identifying appropriate-pronoun-self on any dimension of genderness does the same work as a cismale (normalized by hours, mind), that person should be paid the same. All sentient citizens, regardless of genital preference or lack thereof, should hold the basic rights to vote, to worship any deity-monarch of their choice, to assemble sporting any headwear they like, and to openly lambast any other individual or group they so desire, on Twitter or otherwise.
No, the objections here are not against particular objectives, but on logical consistency. Consider the issue of abortion - the Women's March has been chartered to be pro-choice, but one finds it difficult to believe that a significant percentage of women aren't pro-life... which, as it happens, about half of them are. Are their views, as women, not to be respected? On the other hand, their inability to draw sensible boundaries has seen them exalt oppressive religious head coverings unlike those actually compelled to wear them, while delivering leadership to an anti-Semite, because inclusiveness. Moreover, they have just cancelled a rally for being "too white"; this is evolution culling the herd in real time, folks. But back to the main course.
Despite routine midterm election gains in the House (nowhere near the purported "Blue Wave", given they actually managed to lose ground in the Senate), the Democrats remain stricken with no coherent narrative, because they have become essentially two at-odd factions rolled into one: the Third Way Clinton-Obama establishment corporate Dems, and the radical Progressive wing of Bernie, Warren and of late, Ocasio-Cortez.
...but we'll unite against the GOP, right? Right?
This is the root of Democrat ineffectiveness. On the surface, they are a smiling Big Tent - all are welcome, none to be turned away. Underneath this idyllic facade, however, lies a mess of serpentine self-consumption. As explained in our analysis in 2016, American political history - and successes - are founded on factional alliances and compatibility. Precious little of the latter exists in the present-day Democratic Party.
Consider the GOP. By and large, their situation can be summarized as follows: they have a bloc of single-issue voters, say on abortion (pro-life). Then there is another bloc of single-issue voters, say on guns (out of my cold, dead hands). Simplifying, the first bloc generally doesn't have strong opinions about the Second (sure, guns, why not?), and the second bloc is fine with the core beliefs of the first (I kinda like babies too). Thus, each of their factions yields something they don't mind much, in return for support over what they really want. This is willing compromise, and makes for a cohesive unit.
Compare Democrats. They espouse various minority and social rights, but seldom deign to acknowledge that these interests are often fundamentally incompatible. For instance, they may embrace certain supposedly-marginalized religions, disregarding that their mainline stance on LGBT remains rejection at best and death at worst, despite hopeful presentations to the contrary (Singapore's still stuck, btw). This may be good for at least spurring some superficial contact between disparate groups; not so good for actually getting votes.
The major break within the Dems, without question, remains that between CorpDems and Progressives - the Hillary/Bernie divide. This rift doomed them in 2016, and as we march towards 2020, I see it only widening. The Progressives have again been loud and energetic, but the sad truth is that they really aren't that liked, outside certain self-reinforcing echo chambers - and for good reason, given that their policies tend not to make practical sense. This hasn't stopped them from openly trying to oust the Pelosi CorpDem leadership, of course, and if we're fortunate enough, this timeline could witness an official splintering of the Democrats soon. As it is, Pelosi seems to have picked gun control as their hill to perish on, demonstrating yet again the Dems' commitment to principled losing.
Bernie Or Bust, replayed
At this point, we might also come to ponder: why is it so acceptable to disparage TRUMP supporters, to the extent that admitting to being one can be grounds for cessation of discourse? One doesn't find it fair to tar all Democrats just because a small minority of their number goes about spreading violence and anarchy, so why is the presumption of racism bigotry sexism etc for their opponents, all but the default? Maybe it is, as we pointed out in our play-by-play of the Republican primaries, primarily a disagreement on economic realities, and only tangentially on race and other stuff?
Rewinding, the unchallenged ruling philosophy had been, for some decades, been that of neoliberal globalization. Trade's not a zero-sum game, the wisdom went. Grow the pie, and everyone will get a larger slice when we divvy it up. The trouble was that, while the pie might have grown, the workers' share of it declined if anything. The CorpDem (and CorpGOP) response was largely to shrug their well-padded shoulders - it's the free market. The Progressives at least registered it as a problem, but their solution was to Tax The Rich, not recognizing that they would just scoot offshore. Only TRUMP had a viable long-term solution - Take It Back From China (And So-called Allies). In doing so, he captured a good chunk of the now-uncool working class faction, that once was loyal to the Democrats.
Which brings us to the rise of nationalism, which some of the more liberal-minded can't seem to wrap their heads around. It might be instructive to consider the perspective of the poor, i.e. the "common man". Not for him the extensive social support structures of the upper and middle classes. He has no professional societies or guilds to speak for him; unions have long been in decline. No club or lobby or fellowship solicits his custom. However, he did use to have at least one entity to have his back, to look out for him, the friend of last resort. This was his birthright, paltry as it was. This entity was the nation-state.
What is globalization to such a common man? Globalization is his country telling him that he's on his own; that he will have to pay rent for a thousand-dollar-a-month apartment competing against Third World labour. Globalization is his leaders welcoming said labour into his home, to further drive wages down and prices up, as its proponents have belatedly acknowledged. They tell him it is for his own good - he doesn't feel it. He just sees rich f**ks poncing about jurisdiction shopping for the lowest taxes, while his is the sense of pride and accomplishment getting conscripted to guard their assets.
So he votes for a change. And now he's racist.
Environmental Sense (and Nonsense)
The love of globalization also produces yet another deep contradiction, this one pertaining to the environment. Suing one's government over climate change is the hip in-thing now, so it seems, and it is also a characteristically leftist approach - identify a problem, get behind unrealistic or pointless solutions. Recalling Krauthammer's earlier quote, perhaps it is not that the Right are fundamentally self-destructive Nazis out to burn the planet? Perhaps they do what they do because, you know, it's the best compromise? Or, to employ a concrete example, maybe the gilet jaunes aren't ignorant knuckle-dragging climate change deniers, but just ordinary fellows placing slightly less weight on tomorrow, as elsewise they would not survive today?
Amidst all the weeping and gnashing of teeth over climate change, and the eager dumping on TRUMP about his Paris Agreement no-show, the simple truth of the matter, as far as I can make out, is that the change is inevitable... and has been for some time. Not only that, the fine print of the Agreement is kind of a joke, as explained before. Just for example, China gets to set a target that is above their current projections, and expects to get rewarded for it. If one is to be honest about it, the agreement's something like requesting the orchestra of the sinking Titanic to throw their instruments overboard. In theory, it technically helps, and I wouldn't fault them if they complied (as with plastic bags and straws). Then again, I wouldn't be too arsed if they just continued playing music, either.
Looks like a feel-good conclave
So, is this it? It's the end, then? Hardly, I would say. Humans have survived far worse, and frankly, we'll probably keep living at the edge of sustainability and winging it. Mainstream discourse on climate change seldom directly touches upon population, and the implications of improving standards of living for the developing world. Can't have it all, it seems... but wait, isn't the situation fixing itself naturally in a way, through falling birthrates - and eventually, total population - in developed countries? But guess what do even "responsible, pro-environment" governments do in such circumstances? That's right, import people. For economic growth.
I'm not proposing that nothing be done, just to make it clear. I'm just asking that the actual impact and costs of actions be considered objectively, and not judged by their uplifting label (e.g. "social enterprise", in the local context). This is often in short supply when it comes to environmental issues, for instance the distaste for nuclear power (Singapore gets a bye here, for obvious reasons). Callous as it may sound, the most responsible advice for those living on low-lying Pacific islands, or on certain shores, would be: prepare to move, since it's probably happening, magical Paris consensus or not.
Such inappropriate reasoning and appropriation of blame was well in evidence for the recent California wildfires. The Democrats' line has been to stick them on climate change - a massive, abstract, global threat - and declare it the enemy. TRUMP's argument, however, was rather more enticing:
The timing of the relevant tweets probably wasn't sensitive, given the loss of life involved, and the reflexive FAKE NEWS response was expectedly that TRUMP was stupid and wrong - forest management had no part to play, they were urban interface fires... which, I don't know, might conceivably be interpreted as a private forest management thing. Referencing Krauthammer a third time, the heart vs. head dichotomy again appears to be in play. And indeed, after the initial passions cooled off, the Governor would quietly tweak his forest management laws, ample evidence would surface of past mismanagement, and sorta-respectable news outlets would gather the courage to tell the bitter truth - it's the management, stupid.
But not, so it seems, the NYT FAKE NEWS.
And hey, we might science our way out of disaster again. Or the experts could be wrong, after all. It wouldn't be the first time.
2019 In The Dankest Timeline
Anger. it's not been in short supply, in this political climate. Many feel powerless, and attempt through outrage to regain a sense of control. Longstanding institutions are failing. Those with the requisite credentials - reporters pushing manufactured narratives, economists pushing free-market globalization, foreign policy experts pushing war - are no longer being deferred to. To some, it must feel as if it's all coming apart.
Contrary to appearances, though, I can be quite the idealistic optimist. From this perspective, all this anger, all this conflict, serves to reaffirm one very important thing - American democracy is working as intended. It has ever swung between the right and the left, and what is happening is merely the pendulum making its way rightwards again, as it well should; for under the pendulum, is a pit, and within that pit is chaos without a ladder, and if the pendulum should stop swinging - if the people are forced, by violence or social pressure, to converge upon a single acceptable view - it will surely not be long before the pendulum falls.
As the New Year arrives, perhaps give the other side a try-out? It'll be fun, and there's plenty of space!
Unlike the opposition, we're upfront with intentions;
in honour of the Babylon Bee's Christian of the Year 2018
- Former Fed chair Janet Yellen, barely a year after predicting that there would not be another financial crisis in our lifetime
As 2018 winds to a close, I wish to offer several apologies in the formal sense: "an explanation or defence of a belief or system, especially one that is unpopular".
Much of today's polarization, I feel, has been driven by the possibility of sequestering oneself in a singular mindspace, this largely enabled by technology. Whereas physical realities might have in the past encouraged a degree of tolerance by necessity (a tendency that LKY and company imposed with the HDB racial quota system), it is only too easy nowadays to seek out - and consume - only perspectives that jive with one's own.
While doubtless some of my readers might consider many of my stands incorrect, or even reprehensible, I believe myself to have at least sought out, and weighted, both sides of each argument, and derived the conclusion in a rational manner. This might be more than can be said for certain media outlets.
Bad vs. BAD
I get it. You (I use you here referencing a hypothetical second person, so if it doesn't actually apply, please roll with it) hate him. For the various many transgressions, real and imagined, parroted from all directions. Some of these denunciations, I suppose, are even deserved. The gaucheness, often morphing into outright belligerency. Perhaps the reliance on family members as agents and emissaries. Certainly, if one looks up Presidential behaviour in an etiquette guidebook, he won't be featured overmuch.
Now, one might say, he is bad. This judgment is one that any American citizen - or non-citizen, for that matter - should be free to make. This verdict is actually one that I am prepared to concur with... if it is recognized that previous Presidents of the United States were, in comparison, relatively BAD.
The definitions of bad and BAD here are drawn from Fussell. Simply put, bad is not good - a two-dollar Chinesium screwdriver is bad, compared with more durable tools; it'll probably break after a few months of use. But what did one expect? It was dirt cheap, it performed as one would have expected, based on the (price) label.
BAD, in contrast, is when the same Chinesium screwdriver sells for twenty bucks. The differentiating factor, then, is the pretense, the element of deception, of something being better than it is. Maybe it got a similar handgrip to that of more upmarket products slapped on. Maybe it got more stylish packaging. Or maybe it received an edifying backstory - the kid that assembled it in some Xinjiang sweatshop went on to win a scholarship. Who knows? It could well be true.
By this definition, after nearly two years of his tenure, I have to consider TRUMP as the least BAD of all recent POTUSes.
Example One: the humaneness of keeping migrant minors in cages. The outrage would be fanned to fever pitch, with the former President's speechwriter pouring oil on the fire by tweeting the miserable sight of two detained girls in a holding cell... only to realise that it had taken place under his guy's watch. The (honest) reaction was then to admit that he would never have posted the picture, had he known. Similar outright fake exaggerations on illegal immigrant treatment abound, the most famous perhaps being the TIME cover story on a "separated" toddler.
The bottom line is: firstly, the family separation policy was ill-conceived (one of the few black marks on the current administration), and rightly terminated after it became public knowledge. However, it is also evident that the cage accomodations - also presented as a symbol of the heartlessness of the current admin - were never publicized to any comparable extent, despite by all accounts being in place throughout the previous administration, and beyond.
Here, I am assuming that if a person has a moral objection to the caging, he would hold the same objection whether it happened today, or five years ago. As such, if the guy in charge for keeping kids in cages is bad, the guy who does the same thing - but never has it emphasized to the populace - is BAD. The former pays the price, in reputation and opprobrium garnered; the latter gets away with the dastardly deed.
This then is the essence of mainstream FAKE NEWS: the lie by omission. The professionals are by and large too experienced to resort to outright mistruths, but they can steer - or torture - the facts to tell whatever story they so desire. The same deficits, the same policies, can be presented in entirely different lights; for one particular POTUS, questionable decisions are consistently magnified, while all the good he does - for the disadvantaged, for science, etc - is interred. As Vox inadvertently confessed: truth is irrelevant, image is all.
Fair & balanced education in a Californian high school
And you know what? This is GOOD.
It is oft stated that the current POTUS is enemies with the press. A better question might be why the POTUS should be pally-pally with the press. So that facts not be reported, so that the media can paint him in a better light, as part of some entrenched quid pro quo? Why was the monthly usage of tear gas against would-be border jumpers glossed over for years, and only dragged out into the limelight - and criticized as an illegal chemical weapon to boot - when convenient?
These things are fine, the message seems to be, when the incumbent is more quiescent - a little more surface charm, a dab more glibness of the sort favoured by those graduating from the same elite four-year colleges, and a multitude of sins can be overlooked. Again and again, some fresh new evil is unearthed, only for it to be hilariously revealed (but not broadcast with nearly the same eagerness) that this was just how America had gone about it all along. But it was okay.
I say, continue with the revelations - the people have a right to know, after all, even if the whole truth can get rather unappetizing. Whatever happens, the power of the mainstream media looks to be irrevocably and permanently broken - and for good reason, given how it had been consolidated into the hands of only a few private interests, with next to no accountability. Finally, they are confronted by someone who will rip them on obsessing over extra ice-cream scoops, and nothingburger mixups. And this loss of blind trust, I say, is good.
Many countries, including us truly, are attempting to arrest the decline of mainstream media propaganda. Heavy-handed punitive measures aside, the real trouble with educating the populace to identify FAKE NEWS is, of course, that much of the mainstream media is actually also biased BAD FAKE NEWS. This is a guerilla War of Information that I cannot see the antiquated mainstream behemoths winning, against far nimbler foes.
FAKE NEWS with local flavour!
China - The Defining Issue
Administrations should be assessed based on their major strategic decisions, and in my opinion TRUMP is entirely correct in his laser focus on China, rather than getting distracted by the empty suits' screeching to pile on Russia.
Before continuing, it should be clarified that I have no intention of being a "race traitor" or somesuch; my recommendation rests wholly on the expectation that the path the CCP is dragging China along, being a dead end - a hutong with no exit. Politically, it is difficult to envision anything but a tech-enhanced dystopia. While I have never hidden not being a supporter of organized religion, the internment of a million Uighur Muslims in re-education camps, and barely-lighter treatment of unsanctioned Christians, remains clearly unpalatable.
For whatever reason, Xi Jinping is done with Deng's advice to bide one's time, and has come out swinging with initiatives such as Made in China 2025 and the Belt and Road project. Perhaps they're banking on A.I. being a paradigm-shifting technological equalizer, perhaps it's as simple as having to try something, anything, just to keep it all from falling apart. Either way, alongside the unfettered pursuit of taboo techs such as gene-editing, mind-reading, and outright pilfering of trade secrets, already-extant technologies have already been driven into service of that most traditional of Imperial Chinese philosophies: absolute control. No longer do the Red Emperors have to fret, if their officials in some far-flung province remain loyal; now, it's all merely a single, centralized social credit system away. Wrongthink, comrade? Now you can't go anywhere.
Thucydides Trap (on which more next time) aside, it remains that the (nominally Communist) Chinese worldview remains the only viable competitor to Western classical liberalism - as exemplified by Great America - for the foreseeable future. Now, I'm not insinuating that the US of A is without its faults, far from it. However, the relevant concern is whether the philosophy that they would cede hegemony to, is preferable. I'd say that it's not even close. Consider: in America, critics are hollering authoritarianism for banning a single reporter from the White House for bad behaviour. In China, this isn't a problem, because the reporter would likely quietly vanish without a sound.
The recognition of China as the main challenge to American leadership and liberal democracy is something that the current POTUS has never wavered on, from well before it was fashionable. His identification of the problem - no actual opening-up and democratizing despite WTO engagement - was spot-on. His execution of countermeasures - a trade war right as China comes up against the middle-income trap - is also masterful and forward-thinking. Where past acclaimed-great Presidents built their legacies on bloody wars, this POTUS has restricted himself to more civilized confrontation.
Certainly, friend and foe are amorphous terms, on the world stage - Russia's definitely no saint, but frankly, if it comes to election meddling, what major power doesn't try it? The criteria often aren't even well-defined - for example, overt support by foreign dignitaries for the establishment Stay Vote during the Brexit build-up appeared more than welcome, but much less so for Leave... and in any case, if Russia could swing it with like US$5000 in Google ads, perhaps they deserve the win after all.
The bottom line remains, however, that Russia remains a virtual nonentity in the future game, outside of nukes and natural gas, unlike China. The American people needed a visionary who could identify actual key threats, and stick to a rational gameplan despite Deep State interference. They are fortunate to have elected one. Elsewise, the future might not be one of a boot stamping on a human face forever, but only because citizens, knowing that the boot is waiting for them, live with their gaze fixed firmly to the ground...
In which Putin redeems himself slightly,
by purchasing honey for Xi.
[N.B. Winnie the Pooh still banned in China]
[to be continued again...]
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