Bitcoin and the prospects for a dollar collapse

For Medium, I take a skeptical view of the value of Bitcoin as a hedge against hyperinflation.

For citizens looking for hard assets, gold is not the only option. Other commodities, such as copper or wheat, are traded in futures markets. By taking long positions in those commodities, you can profit from inflation. There are mutual funds that invest in commodity indexes, just as there are stock mutual funds that invest in stock indexes.

9 thoughts on “Bitcoin and the prospects for a dollar collapse

  1. If bitcoin holders believe in a USD collapse they should simply buy TIPS. You can “lock in” <2% inflation for 30 years.

    • Ah yes, after the collapse of the dollar I want an asset denominated in dollars and backed by the organization in the middle of a financial crisis.

      • A government in a crisis will criminalize and prosecute what it perceives to be threats long before it’s own sanctioned assets. Owning TIPS might come with a haircut but it won’t come with jail time. Anyone thinking Bitcoin (or anything else) is anonymous is simply delusional.

  2. Bitcoin surpasses traditional FX tools, and always prices central banker insider information. Thus bitcoin actually supports fiat banking because if stops the central banking from becoming unhinged.

    The real issue is what happens to central banking when we adopt auto-traded banking? The answer is that central banking remains alive and well, as an auto-traded complex, and fiat currencies become part of a competitive currency market.

    What falls apart are the member banks, anyone can be a member bank as long as they pay the central bank seigniorage fees, which remains positive trade for many. An auto traded central bank allows wealthy to peek at the central bank books sooner and earlier, always, as long as the wealthy cover the seigniorage fees. It is a form of triple entry accounting called TBTF.

  3. There’s always been a desire to protect your money in the face of collapse. It’s not just inflation, there was a real, maybe 5%, that Bernie would have been president, and that could have resulted in serious increase in taxes on the wealthy. The problem with TIPS or Copper futures, is that those trades are tied to a social security number. If the government seizes your assets or sues you for any reason, or even another person sues you and you’ve already fled the country, all of those assets can be seized.

    Unregistered assets such as precious gems and metals and artwork have a value as long as those markets will continue to exist. They’re lightweight and you can buy and sell them without any interference. Artwork might have been fine in the steam era where you’d travel with tons of luggage, and have privacy of cabins but in the airplane world it stands out and is a bit hard to move. There are other assets that have value near artwork, precious collectibles like Magic Cards (The very best magic cards can go for like $500k / oz, putting in par with a 3’x3′ painting worth 9 million; more realistically, most of the best stuff goes for around $50k-100k / oz). But collectors markets have problems and have a bit of a storage issue. Still, it’d be pretty easy for someone like Martin Shkreli, a prime target for a populist eat the rich, to smuggle a few million out of the country, and he could even do it with the US postal service!

    The advantage of crypto currencies is that if you do it correctly, it’s anonymous. If you do it correctly, you can store your money anywhere on the planet, even physically on a usb stick, and you can smuggle that money out of the country without being found out instantly.
    Bitcoin Cash (which you’d want to use because it’s easier to get your money out of) is still pretty volatile, and all this stuff is going to hit a wall some day and collapse, but if you’re a rich man in the third world *today* and don’t have access to art or a way to move and store it, or if you’re a smart young techie who’s made a few million in a socially questionable activity, who’s head is on the chopping block when the revolution does come, it’s not the worst place to store some wealth.

  4. One aspect of the Bitcoin that I haven’t seen much these days are the logistical (rather than technical) constraints on exit when you want to sell. In theory – the current block-size will make it impossible for everyone who wants to sell in the event of a crash. There will be a massive back-log of transactions that could take days to clear, by which time the value of Bitcoin could be near zero.

    In practice, virtually all of the exchanges are so overwhelmed that they are taking weeks –
    and could very well take months – to complete all of the steps that are necessary for you to be able to sell your bitcoin and have the money transferred back to your account. I bought 4 bitcoin for about $1K after I heard Russ Roberts’ discussion with Wences Cesares in 2103. Now I want to liquidate the balance and use the proceeds to pay off a loan. “You never go broke taking profits.”

    I attempted to se-up an account with Coinbase in mid-December, and cannot complete the account set-up process because their software cannot seem to recognize/process the pictures of my drivers license that I submitted. This also rules out using the sister-site GDAX. I’m having the same problem with Gemni, and have yet to get more than an auto-reply when I ask for an estimated timeline.

    Even if you can register – the daily redemption limits on Coinbase and GDAX are $10K per day. If you have more than a single bitcoin that you want to sell, good luck locking in a price during an “up” day. The limits on Gemni are higher – but you if you can’t register then higher limits don’t do you much good.

    Having said all of that – I’m not particularly upset about this since the initial $1K was from the “Mad Money” pile that I was prepared to lose every penny of, and if we do make any profits I’ll consider that “magic money from the sky” that we earned through pure luck. But….I am quite surprised that the exchanges are such a cluster this late in the game, particularly with all of the silicon-valley tech money/hype that’s been focused on this technology for the past several years. Particularly when the old, boring retail bank that I opened an account with just to receive funds from Bitcoin redemptions walked me through a very sophisticated identity-verification process in about three minutes and had my account fully up and running at the end of it.

    • Ron, I also had trouble getting through the drivers license upload process. My recollection is that I couldn’t get it to work when using the desktop website, but it ended up working much more quickly when I tried the mobile app. That may be worth a try.

  5. Gemini was able to verify my identity as of a couple of days ago – and I liquidated my entire position tonight. I feel obligated to say that since my identity was verified their system has worked flawlessly, and both their fee structure and interface are far superior to that available on coinbase or GDAX.

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