Hits and misses

Looking back at past posts, it’s enjoyable to find those where I went out on a limb and have been proved right by events, or at least supported by subsequent evidence. A couple of examples

It’s less fun when things don’t go as expected. Take Bitcoin as an example. Its uselessness is now even clearer than it was when I started writing about it 2013. Use in legitimate market transactions is almost non-existent, while the darknet illegal markets in which it is the preferred currency are being busted so frequently as to suggest that anyone using them is taking a big risk of losing their money, or worse. Meanwhile, the dream that Bitcoin would justify itself through the magic of blockchain has evaporated. As far as I can tell, cryptocurrencies on the Bitcoin model are the only genuine examples of blockchain technology in actual use (the label has been attached to some other projects for marketing purposes.

I’ve always said that, given the irrationality of markets, no one can predict when Bitcoin will reach its true value of zero, and I was careful to maintain this position when I posted on Bitcoin’s decline below $4000 late last year. Still, I have to admit that I expected this mania finally to come to an end. That hasn’t happened; in fact the price has doubled.

I won’t worry too much about the occasional (or not so occasional) error. My track record is still far better than that of the many pundits who predicted success for the Iraq war and continued claiming imminent victory years after the disaster had become evident. And most of them are still in business, apparently just as credible as ever to their audiences.

14 thoughts on “Hits and misses

  1. You’re right, of course, that repeated prediction failures never discredit Very Serious People, any more than they discredit astrologers. Churchill was right to note “Better for one’s reputation to fail conventionally than to succeed unconventionally”.

    I think Bitcoin’s value is clearly being supported by its use as a medium of exchange in the dark net; I suspect that, just like drug smuggling busts, the high profile of dark net busts disguises their low incidence. The sustained value of Bitcoin is an indirect indication of the size of this black economy, which is probably by no means confined to online purchases of illicit physical goods. If so, Bitcoin and its cousins will continue to work.

  2. Agree with DD. Anonymity on the dark web in doing illegal business deals requires use of bitcoin or some digital equivalent. This creates a demand based on transaction needs. The possible gains are so big that the riskiness of bitcoin is nt enough to severely limit its use.

  3. That’s not obvious to me. The drugs (etc) are sent one way in the post, with low interception rates. Why not send dollar notes the other way?

  4. The volatility of crypto-currencies also tempts the tech-savvy student into a bit of market gambling.
    Stick a $100 into a crypto when they think it is low and reap a 10% return a few weeks later if/when the price jumps.
    It can be a sustained as a virtual speculative market without any connection to a ‘real world’ transaction.

  5. John, can you send large amounts of cash? I don’t think it is practical. A recent article I read on the Dark Web said that all transactions were carried out in Bitcoin like vehicles. HC

  6. “can you send large amounts of cash” I could send a book, with $1000 in hundred dollar notes between the pages. If drugs can make it through routinely, why wouldn’t this work?

  7. Criminals routinely shift very large amounts of cash. Sure they lose a lot (roughly 25% in one area that was studied), but they don’t care. They’re criminals, not accountants. Major criminal transactions are very often a series of one-offs, with cash handed over on the spot. It’s untraceable, and you can argue about how you got it, and very often the cops will take the cash and leave you alone.

    If bitcoin and similar are being used for dark web transactions, its for thousands of small transactions, not major criminality.

  8. My biggest miss would have to be thinking that computerisation was always going to be just a fad for nerds like CB radio was at the time. To be fair ,I was young and not paying much attention . Now that I am older and wiser I feel that on big national or international political issues I am usually on the mark . Its always possible to be right for the wrong reasons but I think just being cynical of popular received wisdom, believing that the vast bulk of others ore normally OK and being able to trust in them will get you there 90% of the time. Its not fashionable but ‘Compassion is OK’ might be a summary of that.

  9. Visa and Coinbase (a rival to Bitcoin) are getting together to make it easier for people to make and receive payments in Coinbase. Presumably the other big payments companies won’t be far behind, maybe with Bitcoin itself. This will make these ‘coins’ much more respectable and easy to access by ordinary people. It might also solve the chicken and egg problem that no one accepts coins for payment because no one holds them and no one holds them because no one accepts them. Their price might then become less volatile making them even more attractive to hold for buying things,

    The danger of course is that it will enable laundering of drug and other dirty money that much easier.

  10. “Salesforce, the leading provider of cloud solutions for business management, revealed its own blockchain solution today [May 29, 2019] built on the Hyperledger Sawtooth platform. Executives made the announcement at the company’s tech conference, TrailheaDX.”

    “Arizona State University, is testing tracking academic records on the blockchain.


    This network has the potential to be a game changer for integrated, seamless learning — increasing transparency of student achievements and ultimately making the exchange process of academic records easier for both learners and institutions,” Kent Hopkins, vice president of enrollment at Arizona State University, said in a release. “

    https://www.coindesk.com/cloud-giant-salesforce-unveils-first-blockchain-product

    Make of that what you will.

  11. The problem with the cash in book example is that police can also use darknet markets. If police buy drugs and then mail cash to the dealer then the police now have the dealer’s address. Or they can wait for the dealer to pick it up. Either way it is very easy to find the person selling drugs online.

    The Farmers Market was a precursor to The Silk Road but did not use bitcoin. Instead they used normal money laundering. It was shut down and police estimate less than three million in sales were made over the lifetime of the site. Present day darknet markets probably make well over a hundred times that a year. Bitcoin makes illegal transactions between parties who don’t know each other much easier.

    The one advantage of bitcoin is that it is much harder to track payments compared to cash. Darknet markets use this advantage to conduct substantial numbers of transactions. This gives bitcoin value.

  12. Who would ignore 10% annual market increase?

    The elephant is talking global coin… “and has already spoken to Bank of England governor Mark Carney.”

    “Facebook is finalising plans to launch its own crypto-currency next year.

    It is planning to set up a digital payments system in about a dozen countries by the first quarter of 2020.

    The social media giant wants to start testing its crypto-currency, which has been referred to internally as GlobalCoin, by the end of this year.

    Facebook is expected to outline plans in more detail this summer, and has already spoken to Bank of England governor Mark Carney.”
    https://www.bbc.com/news/business-48383460

    “The Bank estimates that officially recorded annual remittance flows to low- and middle-income countries reached $529 billion in 2018, an increase of 9.6 percent over the previous record high of $483 billion in 2017. Global remittances, which include flows to high-income countries, reached $689 billion in 2018, up from $633 billion in 2017.”
    https://www.worldbank.org/en/news/press-release/2019/04/08/record-high-remittances-sent-globally-in-2018

    Say $700bn money transfers in 2020 @ less than btc transfer cost …
    (approx 2.5% btc or 3% WU …cryptonews.com/exclusives/international-money-transfer-western-union-vs-world-remit-vs-3888.htm ) 
    … so if fb GlobalCoin prices transaction cost less than / around 2%, – $700 = 14bn and say $2bn for facebook to develop / launch, I predict (!)  +1% to fb GlobalCoin digital cash within 3yrs, 5% within 5yrs so in 2025 (700@10% compound = $805bn) fb fees for GlobalCoin transactions around $24bn. A tidy sum. Please check my very back of neocortex calcs. I could not find which were the dozen countries fb GC launching in, yet low to middle income countries digi cash payments arounf $500-600bn I think. More than happy to be corrected.  Imagine when cash goes from say 85% now to less than 50% of payments. Buy FB?

    “Payments will continue moving towards the ideal state of being fully instant, automated, efficient and thus become more than ever, a game of scale. Differentiate will come from new value creation in the greater process of companies that ultimately lead to payments and receivables.”
    Wim Grosemans
    BNP Paribas 2018
    https://worldpaymentsreport.com/

    “Coming out on top is Canada, where an estimated of 57% of transactions are cashless,”…
    Rank / Country
    1. Canada
    Sweden
    United Kingdom
    France
    United States
    China
    Australia
    Germany
    Japan
    Russia
    http://www.forexbonuses.org/cashless-countries/

  13. Crypto is undoubtedly used to some degree for laundering and to a much lesser extent black market purchases, but that’s not what’s driving the price. The net result of buying in at one end and selling at the other = more or less zero price change.

    https://www.theblockcrypto.com/2019/05/21/tether-admits-in-court-to-investing-some-of-its-reserves-in-bitcoin/

    By ‘some of its reserves’ they’re referring to ~$1 billion, and that’s just the amount Bitfinex is admitting to. If you can be bothered, it’s worth reading the court documents in their entirety to get up to speed. Here’s a brief rundown of how Tether works:

    https://hackernoon.com/a-closer-look-at-tethers-blockchain-5c3032328e52

    In short – you encourage investors (gamblers) to buy in with USD, and then park their money on the exchanges in USDT (Tether dollars), which are supposedly ‘stable’ at 1USD = 1USDT, and backed 1 to 1 with USD. The advantage to the investors (gamblers) is they get to trade in and out of Bitcoin and other cryptos, without incurring bank fees every time, or having to declare their capital gains to the tax office etc.

    In actual fact, USDT is monopoly money, and Bitfinex are printing far more USDT than is backed by USD. They then use this on USDT-only exchanges to purchase bitcoin and pump the price up. Investors (gamblers) follow suit and also purchase more bitcoin. Bitfinex then sells the bitcoin they’ve purchased from under them – but they do this on the USD exchanges, not the Tether exchanges. It’s a gigantic scam which consists of converting monopoly money into other people’s real money.

    What’s happening now is a smaller version of what happened in 2017. The ‘mania’ was real in 2017 in terms of the mainstream media being totally suckered by the whole thing – but the incredible parabolic price rise which peaked to $20,000/bitcoin was *completely fictional* and absolutely did not represent any kind of ‘real demand’ for the coin (not withstanding that some people were willing to pay those exorbitant prices due to all the hype).

    Likewise, in the last 2 months, there’s no way $27 million/day in April, and $9 million/day in May of new investment money has been entering the system:

    https://docs.google.com/spreadsheets/d/1VfwJb5Xd5mIJKQevcscmLK4rM87hwVpeQYHydOfgQu8/edit#gid=0

    There’s more to it than all of this – the exchanges are entirely unregulated, so all kinds of other dodgy practices are going on as well – but this is the main one driving the current price increase.

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