Thread by @JasonNelford

1/Really enjoyed this convo between @profplum99 & @nic__carter. I am bullish on #BTC but, like everyone, I suffer from some level of confirmation bias, and so I've been following Mike more closely for the past few weeks. Here are some key takeaways and thoughts from the debate:

https://twitter.com/ttmygh/status/1353482867091894280

2/Mike is clearly a very smart guy. Prior to seeing this debate come out today, I spent the day binging on podcasts he's done and learned about the effects of passive investing (vs discretionary/active) on price discovery, volatility, and market trends, among other things.

3/The more I listened to him, the more I realized I needed to listen to him, because he's a thoughtful person with deep insights. It's important that I reevaluate my assumptions continuously.

But, importantly, that doesn't mean he's free from confirmation bias either.

4/From what I could gather, Mike has three key contentions with BTC:

1. It is used primarily by criminals/enemies of the US (China, Russia, Iran) as a way to, essentially, convert electricity into USD more profitably than (normal) trade

5/

2. #USDT is printed (without backing) to prop up BTC during selloffs so that market participants view it as having less downside risk than it actually does

3. It has a high Gini Coefficient and is/has always been (by design) concentrated in the hands of few participants

6/Addressing point 1, Mike asserted that China's foreign reserve holdings have been relatively flat until BTC miners started operating, which he contends shows that they are essentially using BTC as a way to undermine US currency markets, and by extension the US

7/He also asserted that these flat foreign reserve holdings prior to BTC mining were because, although China runs a trade surplus with the US, they "run trade deficits with the rest of the world". From what I can tell, this isn't true; it's the opposite:
en.wikipedia.org/wiki/List_of_t…

8/I also think it's important to note that although China's foreign reserve holdings may not have been increasing over the past few years, their holdings of gold have almost doubled, from 1055 tonnes at the start of 2015 to 1948 tonnes in 2020:
gold.org/goldhub/data/m…

9/So, this nil increase in foreign reserve holdings may be, at least in part, a choice, rather than a constraint of their relatively "low value add" to global trade as I think Mike is contending.

I'd love to hear @LukeGromen's thoughts on this.

10/I should also note here: I'd love to be corrected if I'm misrepresenting Mike's position. It's important to steelman someone's arguments, or intelligent debate doesn't progress.

So, apologies in advance, @profplum99, if I've misinterpreted your views/words.

11/I think Nic did a fantastic job of addressing this first point by Mike. He outlined how the US and western Europe are by far the largest purchasers of BTC on the open markets, both from retail and institutional perspectives. Mike acknowledged this too.

12/Nic also made the point that the scale of China's BTC mining operations is an essentially insignificant attack vector: the current annualized mining rate for new BTC is ~328,500, or $10.7b USD at current prices.

13/So, China can mint a few billion USD per year through mining (at current prices). This is tiny when compared to the market cap of BTC - $609b USD. Thus, if Americans and western Europeans hold most of the BTC, how can mining be an attack vector on the USD?

14/If the price of BTC rises significantly, then the wealth of American and western European HODLers will appreciate far more than the Chinese miners. Sure, the Chinese miners can sell their newly minted BTC for USD, but so can everyone else.

15/Addressing point 2, it is clear that USDT is a problem, and hopefully one that is resolved soon. Smart regulation and enforcement is absolutely critical to the success of the crypto space. There are sound, audited (American) alternatives though, such as USDC.

16/The extent to which USDT is propping up markets is unknown. If USDT isn't properly backed with USD, it is likely having some adverse effects on prices. However, why did BTC languish from 2018 until 2020? USDT was there the entire time. There are clearly greater forces at play.

17/For instance, @Grayscale has been purchasing BTC at a record and rapidly increasing pace. In 2020, they purchased almost 500k BTC, or ~$15.7b USD worth at current prices.

https://twitter.com/Grayscale/status/1352671743056482310

18/Mike references John M. Griffin's paper, "Is Bitcoin Really Untethered?", in support of his USDT-BTC manipulation argument. The research was based on data from the 2017 BTC bull run, which was characterized almost entirely by retail investors (unlike now in 2021).

19/Importantly, for me at least, the study doesn't seem to properly address USDT's impact on prices when BTC crashed at the start of 2018. Why didn't it offer sufficient price support then?

It may have a nefarious impact on price, but I'm skeptical of the extent.

20/Addressing point 3, BTC (like every asset on earth) is concentrated in the hands of relatively few. This, for me, is one of the most disingenuous critiques of BTC.

Out of all the arguments for BTC, I think the moral one is maybe the strongest.

21/First, Mike contends that BTC's genesis was inherently unethical and resulted in huge wealth concentration to the early adopters. As Nic points out (and Grant agrees with him), Satoshi promulgated BTC to the world in the most ethical way possible.

22/This was a passion project by a brilliant inventor, combining computer science, cryptography, and economics. The universe of people who would have been interested in BTC in 2009 was incredibly small.

In most revolutionary projects, early adopters get rich - I'm OK with that.

23/From what I can gather, Mike is a proponent of MMT and a believer in the state's role as the sole administer of currency and monetary policy. I can respect this view, because I understand the theoretical rigour of MMT, but I think there are some dubious assumptions built in.

24/Most relevant here: that central bankers and government officials can and will always act ethically, doing what's best for the greatest number of people (utilitarian perspective).

This is evidently not the case. The Covid response is a perfect example.

25/Per @profgalloway, out of the $5 trillion spent through the CARES acts, $3 trillion essentially flowed to the shareholders of US corporations, primarily America's 1%.

The corporate and regulatory capture of policymakers and central bankers is maybe the strongest case for BTC.

26/In closing, I really enjoyed the conversation and thought @nic__carter did a fantastic job holding his own against a formidable intellect in @profplum99.

Was confirmatory for me, though. Still long #BTC , but still open to thoughtful, evidence-based critiques.