Thread by @smdiehl

Let's talk about why the #bitcoin narrative is intellectually incoherent and why the emperor has no clothes. 🧵 (1/)

Bitcoiners are deeply confused people. In particular they are duplicitous (or genuinely confused) about the purpose of their allegedly paradigm-shifting technology and whether it is:

A) An Investment
B) A Currency

(2/)

These two classes of financial instruments are complete opposites. The better something is as a speculative investment, the worse it is as an actual currency.

However crypto advocates want to use and refer to the properties of both simultaneously without justifying either.

(3/)

Ideally an investment asset generates what's called a "return". You buy a product for €10,000, wait some time, then sell sell/generate €20,000 from it and then you made a 50% return on your investment.

(4/)

We want the exact opposite property of a currency. We want it to be stable relative to the goods you plan to purchase in an economy. It should be reliably saved, stored, and retrieved when needed for a purchase or transfer.

(5/)

en.wikipedia.org/wiki/Money#Pro…

If I go the pub the bartender will sell me a pint of beer for €5. If I go tomorrow I expect to pay the same €5 for the same beer. I expect this not to vary drastically over short periods of time.

(6/)

What I don't want is to go to the pub have the bartender tell me:

The pint is €5
Now the pint is €9000
Now the pint is €170

If the purchasing value of the Euro fluctuates that much then the merchant, the customer, and financial intermediates all have a huge problem.
(7/)

Between when the merchant purchased the keg of beer and sells it if the value changes drastically either he has to update his prices constantly or take a loss. If it value fluctuates mid-transaction one party is getting screwed and the economy cannot efficiently price goods.
(8/)

We can't run an economy on a hypervolatile medium of exchange. The Euro doesn't drastically fluctuate relative to the value of a baguette baked in a boulangerie in Paris. And that's a good thing!
(9/)

Bitcoiners incessantly talk about the price of a coin going up as if this is a good thing, and it is *if and only if* they're treating it as an investment.

However it completely undermines any veracity to the argument for it being a currency.
(10/)

Euro is a fiat currency, not backed by gold, any commodity or anything. Just an idea, treaties, legal system and an economic region.

It's backed by the European Central Bank's monopoloy on the right to print the Euro and by the debt and assets of the Eurozone it supports.
(11/)

You get paid a salary in Euros, you buy groceries, pay your rent, pay your taxes, and this whole process has a circular flow from central bank to individuals to productive enterprise back to government that sustains and allows the economy to function.
(12/)

There is no economy in bitcoin.

Everyone simply hordes it and prays it goes up in value so they can exchange it for more real money than what they bought it for. There's zero rational economic reason to spend a bitcoin if one thinks it will appreciate in value.
(13/)

No vendors would accept it either, because it's an absolute pain to handle, custody and accept because of slow transactions and volatility.

The underlying technology is irreparably broken (by design) and can't be upgraded.
(14/)

Conversely as an investment, bitcoin also has a serious problem, there's no fundamental reason a token is worth anything or is priced at any specific value.

There's no rational valuation method that anyone can justify. Is it worth $1 or $1 million. Who's to say?
(15/)

Investments that have aren't tied to any economic activity are known as "greater fool investments". I covered them in this thread.

tldr; They inevitably implode because there aren't enough fools in the world to maintain returns on long time scales.

https://twitter.com/smdiehl/status/1384052914415566848

(16/)

Crypto advocates now usually cite a whataboutism argument where they claim "well the Euro or the Dollar isn't backed by anything either". Which is true.

Because the Euro is a currency. You get Euros to buy actual things in Europe and invest in productive economic activity.
(17/)

Crypto advocates really just want to cherry pick the get-rich-quick story of a speculative investment AND also fall back on whataboutism comparisons to unbacked currencies when the two are mutually exclusive.

It's an intellectual bait and switch that nobody buys anymore.
(18/)

Despite the namesake, cryptocurrencies are absolutely not currencies. They are predatory speculative investments where most people lose money.

The emperor has no clothes and some day very soon a little boy is going to yell and the whole thing will come crashing down.

/fin