Author Topic: Money/inflation, the Fed, Banking, Monetary Policy, Dollar, BTC, crypto, Gold  (Read 512782 times)

Crafty_Dog

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From YA:

https://www.cnbc.com/amp/2021/06/05/el-salvador-becomes-the-first-country-to-adopt-bitcoin-as-legal-tender-.html

El Salv. is considered a banana country...but still

KEY POINTS
El Salvador President Nayib Bukele plans to introduce legislation that will make it the world's first sovereign nation to adopt bitcoin as legal tender.
Bukele broadcast his intentions on a video at the Bitcoin 2021 conference in Miami.
Bukele said the country is partnering with digital wallet company, Strike, to build modern financial infrastructure using bitcoin technology.

Crafty_Dog

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Scott Grannis against BTC
« Reply #1451 on: June 06, 2021, 08:45:36 PM »
Bitcoin has so many potential pitfalls (hard forks, many hundreds of competing crypto currencies, wildly unstable bitcoin/dollar exchange rate, huge potential for loss—think forgotten codes to $billions!—and the ginormous cost of mining and processing). Not to mention the fact that the US government is already mandating the reporting of all bitcoin-dollar transactions that occur at bitcoin exchanges, which in turn removes one of the key attractions (anonymity) of using bitcoin. I think it will take many, many years before it could—maybe—garner a meaningful percentage of global transaction volume. Between now and then what will be its eventual (stable?) price?

-Scott Grannis

YA:  I thought you had a good response to this, chart and all.  May I ask you to post it here?
« Last Edit: June 06, 2021, 08:48:04 PM by Crafty_Dog »

ccp

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trump on bitcoin
« Reply #1452 on: June 07, 2021, 05:33:14 PM »


Crafty_Dog

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ccp

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ya

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Re: Scott Grannis against BTC
« Reply #1456 on: June 08, 2021, 08:37:06 PM »
Bitcoin has so many potential pitfalls (hard forks, many hundreds of competing crypto currencies, wildly unstable bitcoin/dollar exchange rate, huge potential for loss—think forgotten codes to $billions!—and the ginormous cost of mining and processing). Not to mention the fact that the US government is already mandating the reporting of all bitcoin-dollar transactions that occur at bitcoin exchanges, which in turn removes one of the key attractions (anonymity) of using bitcoin. I think it will take many, many years before it could—maybe—garner a meaningful percentage of global transaction volume. Between now and then what will be its eventual (stable?) price?

-Scott Grannis

YA:  I thought you had a good response to this, chart and all.  May I ask you to post it here?
1. Hard forks: All of them are failed currencies (BCH, BSV). There is only one king.
2. Hundreds of competing currencies: Most are centralized scams, BTC is decentralized. No serious competition, BTC has13 yr history, tried and tested. Its like competing with Facebook, network effects rule.
3. Wildly unstable $ rate: Please remember 1 BTC=1BTC, but still see this list of corrections

ya

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BTC bill has been submitted  in El Salv Congress. The Prez has a majority so the bill will likely go through.



Crafty_Dog

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I could be wrong (not for the first or last time haha) but this seems to me to have huge implications:

Surely, the El Salvadorans did not write this.  Who did?  If I read correctly, there are some deep implications here-- for example Article 5 is an incredibly pithy and precise refutation of the coming US Govt push to treat BTC appreciation as a capital gain.

If I grasp correctly BTC is now the legal tender of a nation, a base of operations from which to take over the world?

ya

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BTC is now an official asset class, It will not be criminalized or banned.

https://www.bis.org/press/p210610.htm

ccp

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Group 2 cryptos
« Reply #1460 on: June 10, 2021, 05:28:55 AM »
Hi Ya,

thanks for post :

"Group 2 cryptoassets - are those, such as bitcoin, that do not fulfil the classification conditions. Since these pose additional and higher risks, they would be subject to a new conservative prudential treatment."

I do not know how to translate what this means into English.  :-o

treated more like stocks ?

Aslo googling BIS  it represents 63 national Central Banks

but I do not see the US federal reserve Central Banks on list:

https://www.bis.org/about/member_cb.htm
« Last Edit: June 10, 2021, 05:43:24 AM by ccp »

ccp

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2ND POST; MicroStrategy CEO on Bitcoin on Hannity
« Reply #1461 on: June 10, 2021, 05:56:50 AM »
for those who did not pick it up last night :

https://www.youtube.com/watch?v=HTsVHqoRfbQ


ya

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Re: Group 2 cryptos
« Reply #1463 on: June 10, 2021, 06:38:29 PM »
Hi Ya,

thanks for post :

"Group 2 cryptoassets - are those, such as bitcoin, that do not fulfil the classification conditions. Since these pose additional and higher risks, they would be subject to a new conservative prudential treatment."

I do not know how to translate what this means into English.  :-o

treated more like stocks ?

Aslo googling BIS  it represents 63 national Central Banks

but I do not see the US federal reserve Central Banks on list:

https://www.bis.org/about/member_cb.htm

I dont know a lot about BIS, except that its very important organization. Re:BTC they want banks who hold BTC to have fiat reserves in a 1:1 ratio. BIS thinks this ratio will discourage banks, but actually its great for BTC, as leverage will not be encouraged.

Crafty_Dog

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G M

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ccp

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".Is that Krugman is against it"

Love the point that Krugman stated the internet no more important to the economy than a fax machine.

Then thinks he is explaining the major stupidity away by saying he said that as a "thought experiment".

 :-D

G M

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".Is that Krugman is against it"

Love the point that Krugman stated the internet no more important to the economy than a fax machine.

Then thinks he is explaining the major stupidity away by saying he said that as a "thought experiment".

 :-D

He's the George Costanza of economics.

https://www.quotes.net/mquote/847510

ccp

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Bitcoin back up to near 40 K
on the news Krugman called it a waste !    :-D :-D :-D

thanks Paul

indeed you do have some utility as a 100% wrong contrarian


DougMacG

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Isn't that funny, the only thing we knew for sure was that Paul Krugman would be wrong.


Crafty_Dog

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WSJ must have read my comments on El Salvador
« Reply #1470 on: June 16, 2021, 04:41:35 AM »
Central banks around the world have been scrambling to co-opt digital currencies for their own purposes. El Salvador beat them all to the punch by passing a law that makes bitcoin legal tender for all debts public and private.

Through this law, El Salvador’s legislators essentially voted to begin the process of outsourcing the country’s monetary policy to a decentralized network of computers governed by a fixed set of rules. This is an important step toward a world where money is sound, not subject to the vagaries of politics.

Most proposed central-bank digital currencies would be tightly controlled by governments. These currencies would reinforce the status quo, not revolutionize monetary systems. That’s because the overwhelming majority of money in existence issued and controlled by central banks is already digital—only a small share of global money supply exists as paper money and coins. When most people talk about a digital coin issued by the Federal Reserve, they do not have in mind a rules-based, censorship-resistant money like bitcoin, but rather a mechanism for the Fed to control the money supply directly without private banks serving as intermediaries.

One huge concern about granting the Fed this much power is the distinct possibility of weaponizing the money supply. Certain parts of the country could be targeted with lower interest rates to spur economic growth selectively, creating opportunities for partisan conflict.



El Salvador, which doesn’t have its own currency, is avoiding this risk by making bitcoin legal tender alongside the U.S. dollar. The law provides that any economic actor technologically able to accept bitcoin is required to do so for payments of goods and services. It also permits bitcoin to be used to pay taxes and exempts bitcoin transactions themselves from capital-gains taxation.


To deal with bitcoin’s wild price fluctuations, the legislation establishes a free-floating exchange rate determined by the market. If someone immediately transfers his bitcoins to dollars when he receives them, then it shouldn’t matter how volatile the exchange rate is because he’ll always have the equivalent in dollars. Salvadorans are free to hold their savings in either currency; the legislation simply puts bitcoin on par with the U.S. dollar and doesn’t disadvantage the cryptocurrency with higher transaction costs.

There are distinct advantages to this dual-track system. In a recent National Bureau of Economic Research paper, David Yermack, Fahad Saleh and I use an economic model to show that the existence of private digital currencies not controlled by the state has important implications for countries in the emerging market. They discipline the government and encourage local investment. Throughout history, central banks have devalued their currencies or tried to maintain untenable exchange rates to the detriment of investors.

This isn’t the first step El Salvador has taken away from monetary uncertainty. In 2001 the country officially dollarized its economy. The colón was taken out of circulation and all prices, including taxes and wages, became denominated in U.S. dollars. Among other effects, this decision limited the discretion of the Central Reserve Bank of El Salvador to manage monetary policy, essentially outsourcing the function to the Fed.

El Salvador has the right idea here. In “The Denationalization of Money” (1976), F.A. Hayek questioned whether government control over the money supply was necessary and argued that competition in money had the same benefits as competition in goods and services. It disciplines economic actors and gives them incentives to serve consumers better—in this case by acting as a check on governments’ tendency to inflate and forcing innovation in payment systems.

Central banks want the benefits of digital currency, but they also want to control the system and not cede their monetary tools. This makes the concept of a central-bank digital currency inherently contradictory. Bitcoin was created to provide an alternative to a currency managed by the state.


Sound monetary policy isn’t a magic solution to a country’s every economic woe. El Salvador needs to embrace the rule of law, private property and limited government. But having faith in a sound currency is going to become more and more important as the inflationary costs of monetary stimulus become known.

Mr. Raskin is director of research at Qvidtvm Inc. and an adjunct professor at New York University School of Law.

Crafty_Dog

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ccp

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Chinese bitcoin miners kicked out
« Reply #1472 on: June 16, 2021, 08:17:47 AM »
https://www.cnbc.com/2021/06/15/chinas-bitcoin-miner-exodus-.html

(how do we know they are not all spies? -  We don't)

Crafty_Dog

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Anonymous, but not private
« Reply #1473 on: June 16, 2021, 11:38:41 AM »
WSJ:

How did the Justice Department recover $2.3 million of the ransom paid by Colonial Pipeline to a group of hackers known as DarkSide? Isn’t bitcoin, the cryptocurrency in which the payment was made, supposed to be untraceable? Actually, no. Bitcoin is anonymous, but it’s far from private—an important but often overlooked distinction. The Justice Department recovered more than $1 billion in bitcoin in various investigations during 2020 alone.

The blockchain—bitcoin’s historical ledger of all transactions—is publicly viewable at all times by anyone, so that there can’t be any under-the-table cash transactions. Software firms such as Chainalysis and Elliptic have supported federal investigators with a suite of analysis tools intended to help trace criminals and tax cheats, including those who try to obscure the bitcoin trail through dozens of successive transactions.

What complicates recovery is bitcoin’s anonymity. Senders and recipients are denoted by wallet addresses—a string of numbers and letters—rather than names or Social Security numbers. Other cryptocurrencies such as Monero, zCash and Haven are working on technologies that would offer both anonymity and privacy. But even then, users would face the “off-ramp” dilemma.

That arises when criminals need to spend their bitcoin or convert it into conventional currency. The final transaction deanonymizes the participant and usually triggers the jurisdiction of one or more government agencies. Thus, once criminals transfer their coins into an exchange wallet—even one that doesn’t adhere to the exchange’s Know Your Customer/Anti-Money-Laundering requirement—investigators have what they need to freeze and ultimately claim those assets. That’s likely what happened in the case of Colonial Pipeline.

Traditional currency poses problems of its own for investigators. Bank notes are untraceable unless authorities note the serial numbers in advance. Global banks amassed some $15 billion in fines in 2020 for tacitly enabling money laundering and other financial crimes. Bitcoin’s transparency may do more to mitigate fraud and theft than traditional banking and currency ever could.
Mr. Galston is managing partner of Starting Line, an early-stage venture-capital firm, and an investor in bitcoin among other cryptocurrencies.

ya

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The US $ and currency notes in particular is the currency of choice for illegal dealings. The smart crooks dont use BTC, after all its a public ledger. There are coin mixers available, which can make your original BTC untraceable but most dont use them.

ya

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Fascinating interview with Jack Mallers of Strike, 1 hr long but worth it. He got El salv do make the Bitcoin standard. Why BTC will be a world currency someday.

https://www.youtube.com/watch?v=yL6J56Jzvl0

DougMacG

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Fascinating interview with Jack Mallers of Strike, 1 hr long but worth it. He got El salv do make the Bitcoin standard. Why BTC will be a world currency someday.

https://www.youtube.com/watch?v=yL6J56Jzvl0

Wow, sharp kid (27 y.o.).  If you're interested in this topic, this is a must see.

There are some things I still don't understand, but this is amazing.  This widens economic freedom and inclusion right where it's been forever denied.  Disintermediation, cross border payments, disruptive innovation for all things financial.

It's great how he describes the fight for economic freedom as the fight for humanity.  I wish more could see that connection.

ccp

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China taking control back
« Reply #1477 on: June 21, 2021, 05:34:24 AM »
" China reiterated its crypto ban last month, citing dangers associated with speculative trading."

 :roll:

https://finance.yahoo.com/news/ether-drops-below-2k-bitcoin-090610954.html

ya

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China has banned BTC many times, I think if the choice is between the Chinese CBDC and BTC, BTC will win every time. However, this is a strategic blunder by China, as all the mining is moving to the US, where most of it is done with reusable energy. This is actually good for the space and for the USA. In the past there was a concern that most of the mining was located in China. Mayor of Miami wants to provide cheap nuclear energy to miners!.

Re: BTC, there is strong support at 30K, if it breaks that, might be a rare opportunity to buy more, cheaply. Last year the low was 3500, now its about 35,000 $, not bad.


Crafty_Dog

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Crafty_Dog

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China Clobbers Crypto

Bitcoin has lost more than half its value since April, due in large part to a move by Chinese authorities to regulate crypto markets:

The original cryptocurrency has lost more than 50% from its mid-April high of almost $65,000, leaving it up marginally for the year. That compares with a 12% gain for the S&P 500 since the end of December. The coin started 2021 trading around $29,000 following a fourfold increase in 2020.

Chart-watchers said Bitcoin, which failed to retake $40,000 last week, could have a tough time finding support in the $20,000 range following its drop below $30,000. Still, Bitcoin had prior to Tuesday breached $30,000 during at least five separate instances this year but recuperated to trade above that level each time.


Elsewhere:

Representatives from Industrial and Commercial Bank of China Ltd., Agricultural Bank of China Ltd. and payment service provider Alipay were reminded of rules that prohibit Chinese banks from engaging in crypto-related transactions, according to a statement from the central bank on Monday.

The latest development is a sign that China will do whatever it takes to close any loopholes left in crypto trading. In May, China’s State Council – the country’s cabinet – called for a renewed crackdown on Bitcoin mining and trading activities. . . . Crypto activities “disrupt financial order and also breed risks of criminal activities like illegal cross-border asset transfers and money laundering,” according to the statement from China’s central bank.

China has been more zealous in cracking down on crypto than many market watchers expected: While it started with a ban on Bitcoin mining, the regulatory push has expanded to include trading and holding of cryptocurrencies. Because an estimated 65 percent of global Bitcoin mining is done in China, this push has had a significant effect on the processing power devoted to Bitcoin, and therefore on the functioning of Bitcoin markets.

While China has hinted at regulation in the past without following through, it seems this time is different
===================
https://www.bloomberg.com/news/articles/2021-06-21/china-s-pboc-orders-alipay-banks-not-to-assist-crypto-business?sref=KgEBWdKh&utm_source=Sailthru&utm_medium=email&utm_campaign=CAPN_20210622&utm_term=Capital-Note-Smart

https://www.bloomberg.com/crypto

ya

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China has banned BTC many times, I think if the choice is between the Chinese CBDC and BTC, BTC will win every time. However, this is a strategic blunder by China, as all the mining is moving to the US, where most of it is done with reusable energy. This is actually good for the space and for the USA. In the past there was a concern that most of the mining was located in China. Mayor of Miami wants to provide cheap nuclear energy to miners!.

Re: BTC, there is strong support at 30K, if it breaks that, might be a rare opportunity to buy more, cheaply. Last year the low was 3500, now its about 35,000 $, not bad.

We may have seen the bottom...30-42K is the chop zone.

ya

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BTC will rise again soon.

GBTC premiums are rising again (see chart) and secondly BTC will soon undergo its largest difficulty (decrease) adjustment due to the shift of mining capacity out of China. This is hugely bullish.

Crafty_Dog

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Super long term bonds, interest rates, and variables
« Reply #1483 on: July 04, 2021, 03:39:19 PM »
From Pensions & Investments in January:

All it took was a non-committal comment from Janet Yellen to persuade Treasury traders there’s a chance the U.S. will finally expand maturities in the world’s biggest bond market beyond 30 years.

The Treasury Department has pondered ultralong bonds for years, but they’ve never been introduced in part because of resistance from Wall Street. But Ms. Yellen, President-elect Joe Biden’s pick for Treasury secretary, got people buzzing about them again by discussing the topic Tuesday during her Senate confirmation hearing. Markets responded, with traders selling 30-year bonds.

“There is an advantage to funding the debt, especially when interest rates are very low, by issuing long-term debt, and I would be very pleased to look at this issue and examine what the market would be like for bonds of this maturity,” Ms. Yellen said when asked about longer-term debt, including 50-year Treasuries.

From the same story:

Just this month, former Treasury Secretary Robert Rubin cautioned against taking rock-bottom interest rates for granted and said the government should take advantage of the moment by substantially increasing the maturity of its debt, including possibly issuing ultralong bonds.

Such long-dated Treasuries would probably find takers. After all (via CNBC, from June 2017):

Argentina sold $2.75 billion of a hotly demanded 100-year bond in U.S. dollars on Monday, just over a year after emerging from its latest default, according to the government.

The South American country received $9.75 billion in orders for the bond, as investors eyed a yield of 7.9 percent in an otherwise low yielding fixed income market where pension funds need to lock in long-term returns.

Although, if it’s not impolite to mention this (from the Wall Street Journal in August):

In the restructuring agreement, the [Argentinian] 100-year bond’s maturity will shorten substantially, along with its value. Holders will end up with bonds maturing in 15 and 26 years and can expect to recover something broadly in line with the recovery value of the restructuring, on the order of 54.5 cents on the dollar.

The U.S. is not (yet) Argentina, but, speaking purely for myself (admittedly someone with no technical reason to hold long-dated dated bonds), even the yield on Uncle Sam’s ten-year bonds (roughly 1.47 percent) looks . . . unappetizing.

Nevertheless, if the U.S. can borrow long, and in size, it should. That is not what it is doing.

Riedl:

Washington is behaving like a subprime homeowner and making long-term debt commitments based on short-term interest rates. The average maturity of the U.S. debt is five years and sharply declining, which means most of the national debt would quickly roll over into any future interest rate increase.

Whether the U.S. could lengthen the maturity of its debt on a scale large enough to eliminate the longer-term problem heading its way is, to put it mildly, doubtful, but its failure to take any steps in that direction is another sign of a complacency that beggars belief and may end up beggaring us all.

Riedl:

There is simply no guarantee that interest rates won’t rise. The reasons that interest rates have not gone up as debt has risen remain much debated. But they include declining productivity and lower inflation growth, a global demand for safe assets (inspiring investment in bonds over stocks) and — relatedly — baby boomers saving more as retirement nears. In a recent post, former Obama Treasury adviser Ernie Tedeschi confirms that — all else equal — the coming 100 percent of GDP rise in the debt would ordinarily raise interest rates by approximately four percentage points. But he argues that (so far) pressure on interest rates has been offset by higher saving and the like.

But for interest rates to remain low, those offsetting factors would have to not only continue, but accelerate enough to offset all the upward rate pressure from this new debt. This seems unlikely, as productivity is unlikely to fall further, retired boomers will draw down those savings, and investors may eventually seek out higher returns than government bonds. In that context, assuming the average interest rate gradually nudges upward from 2 percent to 4.4 percent is far from outlandish.

All in all, it seems reckless for debt advocates to dismiss the possibility of interest rates returning to 4, 5 or 6 percent in the medium to long term. The past half-century has not been kind either to economic forecasters or to the pronouncements of overconfident technocratic economic managers. Just 15 years ago Wall Street’s mathematical models failed to anticipate how mortgage-backed securities and the housing market could crash. Advocates for long-term deficit spending say the low rates on 30-year bonds show that markets aren’t worried about the debt, but markets rarely predict future economic and budget crises.

Reality check: No one knows for sure what interest rates will be in five, 10 or 20 years. Yet an economic recovery and $104 trillion in new debt are likely to push rates above today’s low levels. Deficit doves would gamble America’s economic future on the hope that interest rates will never again top 4 or 5 percent. Are you feeling lucky?

G M

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Re: Super long term bonds, interest rates, and variables
« Reply #1484 on: July 04, 2021, 03:50:51 PM »
There is ZERO political will to fix things. Thus, it's not IF, but WHEN the crash happens.


From Pensions & Investments in January:

All it took was a non-committal comment from Janet Yellen to persuade Treasury traders there’s a chance the U.S. will finally expand maturities in the world’s biggest bond market beyond 30 years.

The Treasury Department has pondered ultralong bonds for years, but they’ve never been introduced in part because of resistance from Wall Street. But Ms. Yellen, President-elect Joe Biden’s pick for Treasury secretary, got people buzzing about them again by discussing the topic Tuesday during her Senate confirmation hearing. Markets responded, with traders selling 30-year bonds.

“There is an advantage to funding the debt, especially when interest rates are very low, by issuing long-term debt, and I would be very pleased to look at this issue and examine what the market would be like for bonds of this maturity,” Ms. Yellen said when asked about longer-term debt, including 50-year Treasuries.

From the same story:

Just this month, former Treasury Secretary Robert Rubin cautioned against taking rock-bottom interest rates for granted and said the government should take advantage of the moment by substantially increasing the maturity of its debt, including possibly issuing ultralong bonds.

Such long-dated Treasuries would probably find takers. After all (via CNBC, from June 2017):

Argentina sold $2.75 billion of a hotly demanded 100-year bond in U.S. dollars on Monday, just over a year after emerging from its latest default, according to the government.

The South American country received $9.75 billion in orders for the bond, as investors eyed a yield of 7.9 percent in an otherwise low yielding fixed income market where pension funds need to lock in long-term returns.

Although, if it’s not impolite to mention this (from the Wall Street Journal in August):

In the restructuring agreement, the [Argentinian] 100-year bond’s maturity will shorten substantially, along with its value. Holders will end up with bonds maturing in 15 and 26 years and can expect to recover something broadly in line with the recovery value of the restructuring, on the order of 54.5 cents on the dollar.

The U.S. is not (yet) Argentina, but, speaking purely for myself (admittedly someone with no technical reason to hold long-dated dated bonds), even the yield on Uncle Sam’s ten-year bonds (roughly 1.47 percent) looks . . . unappetizing.

Nevertheless, if the U.S. can borrow long, and in size, it should. That is not what it is doing.

Riedl:

Washington is behaving like a subprime homeowner and making long-term debt commitments based on short-term interest rates. The average maturity of the U.S. debt is five years and sharply declining, which means most of the national debt would quickly roll over into any future interest rate increase.

Whether the U.S. could lengthen the maturity of its debt on a scale large enough to eliminate the longer-term problem heading its way is, to put it mildly, doubtful, but its failure to take any steps in that direction is another sign of a complacency that beggars belief and may end up beggaring us all.

Riedl:

There is simply no guarantee that interest rates won’t rise. The reasons that interest rates have not gone up as debt has risen remain much debated. But they include declining productivity and lower inflation growth, a global demand for safe assets (inspiring investment in bonds over stocks) and — relatedly — baby boomers saving more as retirement nears. In a recent post, former Obama Treasury adviser Ernie Tedeschi confirms that — all else equal — the coming 100 percent of GDP rise in the debt would ordinarily raise interest rates by approximately four percentage points. But he argues that (so far) pressure on interest rates has been offset by higher saving and the like.

But for interest rates to remain low, those offsetting factors would have to not only continue, but accelerate enough to offset all the upward rate pressure from this new debt. This seems unlikely, as productivity is unlikely to fall further, retired boomers will draw down those savings, and investors may eventually seek out higher returns than government bonds. In that context, assuming the average interest rate gradually nudges upward from 2 percent to 4.4 percent is far from outlandish.

All in all, it seems reckless for debt advocates to dismiss the possibility of interest rates returning to 4, 5 or 6 percent in the medium to long term. The past half-century has not been kind either to economic forecasters or to the pronouncements of overconfident technocratic economic managers. Just 15 years ago Wall Street’s mathematical models failed to anticipate how mortgage-backed securities and the housing market could crash. Advocates for long-term deficit spending say the low rates on 30-year bonds show that markets aren’t worried about the debt, but markets rarely predict future economic and budget crises.

Reality check: No one knows for sure what interest rates will be in five, 10 or 20 years. Yet an economic recovery and $104 trillion in new debt are likely to push rates above today’s low levels. Deficit doves would gamble America’s economic future on the hope that interest rates will never again top 4 or 5 percent. Are you feeling lucky?

Crafty_Dog

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Crypto energy debate is freedom vs. servitude
« Reply #1485 on: July 05, 2021, 03:03:45 PM »
https://bombthrower.com/articles/the-bitcoin-energy-debate-is-one-of-freedom-vs-servitude/

Free Newsletter
The Bitcoin Energy Debate is One of Freedom vs Servitude
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BY MARK E. JEFTOVIC

July 2, 2021



If you’re arguing against Bitcoin, then you’re in favour of serfdom

In the most recent edition The Crypto Capitalist Letter I cited Elizabeth Warren’s comments in a senate banking committee meeting where she said

“Digital currency from central banks has great promise. Legitimate digital public money could help drive out bogus digital private money, bogus crypto currencies”

My remarks were that as a creature of the state she has it exactly backwards. This is predictable. For years I’ve been saying that the most oft-used criticisms against Bitcoin (backed by nothing, ponzi and tulipmania) were more accurate descriptions of the US dollar, social security, and meme stonks, in that order.

In TCC we spend a lot of time thinking about the coming bifurcation in digital money: how Central Bank Digital Currencies will be the rails for things like UBI and welfare dependency while crypto currencies will be actual stores of wealth and capital formation. If there was one distinctive feature that would enable one to tell the difference between a “bogus” digital currency and a real one, it would be this:

If you can hold your private keys, it’s real. If you can’t, it’s bogus.

Precisely the opposite of how Warren is spinning it.

The exact phrase I used in this month’s issue was :

“The era of private, cryptographically secured money is here, and there’s not a damn thing any bureaucrat, any politician or any nation state can do about it.”

That particular phrase “private, cryptographically secured money” is important. If you do not fully understand the implications of that and you unwittingly accept establishment arguments against  Bitcoin, then you are tacitly ceding authority over your entire life, every transaction, every decision, every interaction with the world at large, to The State.

Warren also piled onto the energy argument, which seems to be the latest unified front against the upstart non-state currency:

“Cryptocurrency has created opportunities to scam investors, assist criminals and worsen the climate crisis”

The energy argument fails on two fronts:

There are two distinct rebuttals to this issue. One is by putting Bitcoin energy usage into perspective and showing how the benefits justify the costs. (Even the World Economic Forum recently published a remarkably clueful paper saying that the arguments against Bitcoin were mainly FUD and that the energy usage was worth it given the benefits).

The total electrical usage of all Bitcoin mining is approximately 110 TWh (Terra Watt hours) per year. It is estimated that as much as 20% of all electrical energy produced is wasted. The Energy Information Administration (EIA) puts it even higher, at 34%.

The total electrical energy usage of the world in 2018 was around 22,000 TWh and 20% of that would have been 4,400 TWh (at the higher EIA figure it would be 7,480). Seen in that context, Bitcoin mining uses somewhere between 2.5% and 1.4% of all wasted electrical energy. It’s been written up by others how Bitcoin by its nature can be moved toward sources of energy waste and thus covert otherwise lost energy into real economic value. Great American Mining is already doing it (and one of the companies we hold in our Crypto Capitalist Portfolio is in a joint venture with them).

Another example of providing context is when people like Alex Gladstein document how the US military empire is really a support structure for the US dollar, and compared to that, Bitcoin has a smaller carbon footprint and causes a lot less damage. Bitcoin is not actively conducting drone assassinations in multiple foreign countries. The petrodollar is.

The other approach to the energy usage criticism by people like Nic Carter is the categorical rejection that any Bitcoiner is under any obligation to explain or justify their energy usage. If Bitcoin and cryptos have to rationalize their energy footprint, then that follows for everything. From “Keeping Up with The Kardashians” to NASA, can anybody truly rationalize their energy expenditure over the supposed conservational benefits of that activity not occurring?

Energy as Authority:

It’s this attack on individual rights to use private, cryptographically secured money that I want to focus on in particular because to even accept  that Bitcoin energy argument as valid, you are tacitly accepting that some authority other than you has the ultimate verdict over all energy usage including your own.

Isn’t watching (or being) the Kardashians an exercise in self-absorption and triviality that glamorizes wealth inequality?

Should NASA really be concerning itself with space when we have so much social justice to undertake here on Earth? We only have one Earth. Don’t those rockets use a lot of fuel and deplete the ozone layer?

There are already serious academics suggesting that we should genetically engineer humans to be less harmful to the environment. Here is a bioethicist and NYU professor in a 2016 symposium making the case for genetically engineering humans so that they are born allergic to red meat and grow up to be on average 12 cubic centimeters smaller. For climate.

In 2015 the UN adopted 17 sustainable development goals for working toward Agenda 2030. On the surface, these goals appear laudable and uncontroversial. They include objectives such as No Poverty (#1), Zero Hunger (#2), Gender Equality and Clean Water for All (#5 & 6), who isn’t in favour of any of these things?

If you’re running the list you would almost gloss over SDG-12: Responsible Consumption and Production, because “By 2050, the equivalent of almost three planets could be required to sustain current lifestyles”

You see where this is going. I’ve said it before, all this talk about Great Resets, The New Normal and Building Back Better is about getting the masses to ratchet down their lifestyles so that the managerial elites and experts can keep running the show (and maintaining theirs).

Standards of living are all about energy inputs. As people and communities become more prosperous, their per-capita energy usage rises. The official canon of the national and supra-national elites is that this has to stop. Never mind that history is the story of humanity achieving exponentially higher productivity gains and energy efficiencies, never mind that the world was already on a trajectory to achieve many of the SDGs  already without overbearing government intervention (see Ana and Hans Roslings’ “Factfulness” or Matt Ridley’s “The Rational Optimist”)

All that matters is that the experts, the same technocratic class that brought you double masks, double vaccines and two years of lockdowns, have decided that this is the way things have to go. Incidentally, the COVID pandemic (which was arguably brought about by the very experts who were purportedly trying to prevent one) is the perfect opportunity to fast track new policies toward these Sustainable Development Goals.



Make no mistake, the same climate technocrats who are saying Bitcoin’s energy footprint isn’t justified are already thinking in terms of a totalitarian system of energy and carbon rationing based on purported benefits of any given activity.

If you think I’m exaggerating the extent to which the coming “resource based economy” model will subordinate your day-to-day activities and life choices to some greater good narrative, take a look at this recent research paper from  multi disciplinary Sustainability institute about the cognitive dissonance and anxiety “PEBEXs” (Pro-environmental Behaviour Experts”) have to struggle with because their aspirational climate ideology clashes with the demands of everyday life.

These are the people who’s job it is to advance policy and advocate for everybody else ratcheting down their consumption patterns (SDG-12, basically).

“A practical behavior applied by participants to feel better about their consumption is to minimize it. These PEBEXs question their private and job-related consumption to acknowledge that they (and others) are better off with less. These narratives also contain social criticisms of materialism, perceived as a social norm of the Western world” (emphasis added)

One of the tensions PEBEXs experience is the seeming futility of “engag[ing] in individual sustainable practices, to avoid a suboptimal allocation of their resources”, because at the individual level, change is insignificant

“I don’t believe that much in individuals deciding to do things different. I want more the structures to be changed. I don’t know if I want to change people’s behavior, I want to change the society. So that we consume less energy. That is two different things for me.” (Emphasis added)

For a fairly short quote, there’s a lot in there, including:

the mindset that society should be restructured to accommodate these people’s feelings. The idea that the entire climate alarmist narrative is not settled science (see Steven E. Koonin’s “Unsettled”, or Michael Shellenbergers’s “Apocalypse Never” for example) is not even imaginable to them.
the compartmentalization between working for a radical structural change to society is different than ordering people’s lives on an individual level. Very similar to the progressive mindset of cost-free entitlements. Second-order effects are ignored, all policy objectives can be achieved by wishing for them to be true.

that change at an individual level is meaningless or insignificant. Again, telling. Because the overall policy is collectivist and for many of these people, individualism is a mental disorder.  Suffice it to quote Samuel Konkin’s “Liberty cannot be achieved en masse. It can only happen individual by individual”)
As if to drive the entire point home for me, no sooner had I posted this when I came across  a “think piece” from Time Magazine lecturing us on  air conditioning:



The upshot is that air conditioning is bad for the environment and problematic, thus, it must me ‘re-imagined’ I guess…:

The troubled history of air-conditioning suggests not that we chuck it entirely but that we focus on public cooling, on public comfort, rather than individual cooling, on individual comfort. Ensuring that the most vulnerable among the planet’s human inhabitants can keep cool through better access to public cooling centers, shade-giving trees, safe green spaces, water infrastructure to cool, and smart design will not only enrich our cities overall, it will lower the temperature for everyone. It’s far more efficient this way.

 

To do so, we’ll have to re-orient ourselves to the meaning of air-conditioning. And to comfort. Privatized air-conditioning survived the ozone crisis, but its power to separate—by class, by race, by nation, by ability—has survived, too. Comfort for some comes at the expense of the life on this planet.

 

It’s time we become more comfortable with discomfort. Our survival may depend on it.“

Ok. That’s not hyperbolic at all.

And yet again we see that same diminution of individual agency and autonomy in favour of the collective. Private is bad. Public is good. I’m sure the offices at Time have the a/c switched off as do the staff remote working from home. If they don’t, then whoever wrote this may be experiencing the same anxiety as the aforementioned PEBEXs.

This kind of sanctimonious shrieking doesn’t take into account that pretty well everything being made in industrial society today is becoming more energy efficient over time. It doesn’t take into account that four times as much energy is spent on heat than on air conditioning.  Or that without widespread private air conditioning, a lot of people would actually die, especially among the elderly and medically at-risk.

The idea to redesign public spaces to afford more cooling areas aren’t bad ideas, but the real solution to addressing the disparities in underdeveloped communities is to increase economic prosperity for the citizens who inhabit them. One way to do that could happen if they had access to some kind of private cryptographically secured money, whose purchasing power increases over time… or something.

Just a thought. But that would be better than  marshalling them into communal herds of dependancy (which is basically what the ultimate aspiration is for everyone except the billionaires and elites zipping around the world on private jets to climate conferences).

Bitcoin today. Cars tomorrow.  Then hamburgers. Heated bathroom floors Air conditioning after that. Second homes. Cottages. Excessive wardrobes. Rationing shoes. Vacations.

If you accept that anybody has the moral authority to tell you what you can and can’t do with your own wealth and how you consume energy, then you are submitting to their judgement on every aspect of your energy consumption, and thus, your entire life.

What people don’t realize is that there is an overarching framework that already mediates energy usage and consumption, one that allocates resources toward optimal outcomes. This already exists (or at least it used to), it’s called free markets that are driven by economic tradeoffs.


Crafty_Dog

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GBTC keeps diving , , ,

DougMacG

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Money, the Fed, Banking, Monetary Policy, Dollar, Deficit = $3 trillion
« Reply #1488 on: July 13, 2021, 10:51:30 AM »
[from political econ thread]

Who knew that continuing to print $3 trillion per year excess worthless money even after the crisis was over would affect the value of [existing] money?

https://www.cbsnews.com/news/federal-deficit-to-hit-3-trillion-congressional-budget-office-says/

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Desmond Lachman: no easy way out of this
« Reply #1489 on: July 13, 2021, 03:15:17 PM »

DougMacG

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Stanford Professor John Taylor puts Bidenflation in historical perspective. Other than, "it's not too late", he gets it right.

My recollection from Robert Bartley, long time editor of the WSJ, Seven Fat Years, inflation was 7% when Nixon ordered the fascist price wage freeze in 1971 and was at 14% at the end of the decade.  In other words, that wasn't the problem; that wasn't the solution.  The smartest people in the room were not all that smart in that day.  Worse today. 
--------------------------------------------------------------------------
https://www.project-syndicate.org/commentary/inflation-us-federal-reserve-ignoring-history-by-john-taylor-5-2021-06

Is the Fed Getting Burned Again?
Jun 25, 2021
JOHN B. TAYLOR
As in the stagflationary 1970s, the US Federal Reserve is once again denying that its own policies are the reason for a recent surge of inflation, even though there is good reason to think that they are. It is not too late to learn from past mistakes and reverse course – but the clock is quickly ticking down.

STANFORD – Fifty years ago, on June 22, 1971, US Federal Reserve Chair Arthur Burns wrote a memorandum to President Richard Nixon that will long live in infamy. Inflation was picking up, and Burns wanted the White House to understand that the price surge was not due to monetary policy or to any action that the Fed had taken under his leadership. The issue, rather, was that “the structure of the economy [had] changed profoundly.” Accordingly, Burns was writing to recommend “a strong wage and price policy”:

“I have already outlined to you a possible path for such a policy – emphatic and pointed jawboning, followed by a wage and price review board (preferably through the instrumentality of the Cabinet Committee on Economic Policy); and in the event of insufficient success (which is now more probable than it would have been a year or two ago), followed – perhaps no later than next January – by a six-month wage and price freeze.”

Perhaps owing to Burns’s reputation as a renowned scholar (he was Milton Friedman’s teacher) and his long experience as a policymaker, the memo convinced Nixon to proceed with a wage and price freeze, and to follow that up with a policy of wage and price controls and guidelines for the entire economy. For a time after the freeze was implemented, the controls and guidelines seemed to be working. They were even politically popular for a brief period. Inflation inched down, and the freeze was followed by more compulsory controls requiring firms to get permission from a commission to change wages and prices.

But the intrusive nature of the system began to wear on people and the economy because every price increase had to be approved by a federal government bureaucracy. Moreover, it soon became obvious that the government controls and interventions were making matters worse.

Ignoring its responsibility to keep inflation low, the Fed had started letting the money supply increase faster, with the annual growth rate of M2 (a measure of cash, deposits, and highly liquid assets) averaging 10% in the 1970s, up from 7% in the 1960s. This compounded the impact of the decade’s oil shocks on the price level, and the inflation rate shot into double digits – rising above 12% three times (first in 1974 and then again in 1979 and 1980) – while the unemployment rate rose from 5.9% in June 1971 to 9% in 1975.

As we know now, the US economy’s performance in the 1970s was very poor owing at least partly to that era’s monetary policies. This was when the word “stagflation” was coined to describe a strange mix of rising inflation and stagnant economic growth. As James A. Dorn of the Cato Institute recently recounted, Nixon’s “price controls went on to distort market prices” and are rightly remembered as a cautionary tale. “We should not forget that the loss of economic freedom is a high price to pay for a false promise to end inflation by suppressing market forces” (emphasis mine).

As it happens, Choose Economic Freedom is the title of a book that I published last year with George P. Shultz, who passed away in February at the age of 100. Schultz had gained decades of wisdom and experience as both a diplomat and economic policymaker, serving as the Nixon administration’s budget director when Burns wrote his audacious memo. In an appendix to our book, we included the full text of that document, because it had only recently been discovered in the Hoover Institution archives. It should now be recognized as required reading for anyone seeking to understand the recent history of US economic policymaking.

The Burns memo is a perfect example of how bad ideas lead to bad policies, which in turn lead to bad economic outcomes. Despite Burns’s extraordinary reputation, his memo conveyed a set of terrible policy recommendations. By blaming everything on putative structural defects supposedly afflicting the entire economy, the memo’s worst effect was to shun the Fed’s responsibility for controlling inflation, even though it was clearly responsible for the rising price level.

By the same token, good ideas lead to good policy and good economic performance. As Schultz and I showed, this was certainly the case in the 1980s. The Fed reasserted itself as part of a broader economic reform, and the economy duly boomed.

The message from this historical experience – and many other examples in the United States and elsewhere – should be abundantly clear. And while history never repeats itself, it often rhymes, so consider where we are midway through 2021: inflation is picking up, and the Fed is once again claiming that it is not responsible for that development. Instead, Fed officials argue that today’s surge in prices merely reflects the bounce back from the low inflation of the last year.

Worse, the Fed’s policy is even more interventionist now than it was in Burns’s day. Its balance sheet has exploded from massive purchases of Treasury bonds and mortgage-backed securities, and the growth rate of M2 has risen sharply over the past year. The federal funds interest rate is now lower than virtually any tested monetary policy rule or strategy suggests it should be, including those listed on page 48 of the Fed’s own February 2021 Monetary Policy Report.

It is not too late to learn from past mistakes and turn monetary policy into the handmaiden of a sustained recovery from the pandemic. But time is running out.

John B. Taylor, a former under-secretary of the US Treasury (2001-05), is Professor of Economics at Stanford University and a senior fellow at the Hoover Institution. He is the author of Global Financial Warriors and co-author (with George P. Shultz) of Choose Economic Freedom.

Crafty_Dog

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WTF GBTC?!?
« Reply #1491 on: July 15, 2021, 06:20:27 PM »

Crafty_Dog

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Crime and Technology: Cryptocurrency
« Reply #1492 on: July 16, 2021, 05:14:29 AM »
Crime and Technology, Part III: Cryptocurrency

Editor's Note: Criminals have long benefited from new technologies, and the current era of digitalization has been no exception. In the first two parts of this series on crime and technology we explored how criminals have adopted new technologies to communicate and coordinate activities, as well as establish new marketplaces online. Both have facilitated the expansion of traditional criminal activity, such as drug sales, as well as the emergence of entirely new criminal activities, such as hacker-for-hire services. In the third and final article of this series, we will explore how criminals have adopted new financial instruments to facilitate old and new criminal activities. As with new forms of communications and marketplaces, new financial tools present both opportunities and vulnerabilities to the criminals who adopt them.

A cryptocurrency is a financial instrument that exists solely in digital form. Its original creators designed it as a system that allows people to send money quickly and easily to each other around the world, avoiding the fees, regulations and delays of transfers associated with traditional physical cash-based currencies. The underlying technology that made cryptocurrency possible is blockchain, a decentralized system for keeping accurate, secure digital records.


Cryptocurrency technology graduated from theory to practice in 2009 with the launch of Bitcoin, the most successful of the thousands of cryptocurrencies that have followed in its wake. A decade ago, cryptocurrencies were an untested novelty mostly for financial speculators and internet hobbyists. As of July 2021, however, the total market capitalization of all cryptocurrencies combined was $1.4 trillion, $635 billion of which is in Bitcoin, representing about half of the total cryptocurrency market by value. Since its inception, the value of a single bitcoin has risen from around $1 to over $30,000, making many of those early speculators and hobbyists millionaires in the process. Amid growth in the wider cryptocurrency market, Bitcoin's rise in value has made it a somewhat mainstream financial instrument, with financial institutions like Morgan Stanley and MasterCard incorporating Bitcoin into their services and offerings.

How Criminals Use Cryptocurrency

Contrary to popular perception, criminal activity makes up a very small percentage of the cryptocurrency market. A recent report by the blockchain data analytics firm Chainalysis on criminal exploitation of cryptocurrencies estimated that only between 1-2% of transactions by volume were linked to criminal activity, representing nearly $30 billion in 2020. The United Nations estimates that global criminal activity amounts to $1.5 trillion to $4 trillion per year, so cryptocurrency makes up a small fraction of overall criminal financial activity. More conventional financial vehicles such as cash, real estate and luxury items remain the most popular options for criminals to conduct transactions and conceal illicit gains. Furthermore, as major cryptocurrencies like Bitcoin go mainstream and regulation of the cryptocurrency market increases, criminals cannot conduct cryptocurrency transactions with impunity. Even so, cryptocurrencies still offer immense opportunities for criminal exploitation.

As noted in the first two parts of this series, cryptocurrencies have facilitated criminals' adoption of other technologies such as encrypted communications and online marketplaces. Criminals can use cryptocurrencies to complete transactions hammered out over encrypted messaging platforms, and online criminal marketplaces deal almost exclusively in cryptocurrencies. In short, these alternative currencies complement alternative communication platforms and marketplaces. Criminal uses for cryptocurrencies roughly break down into two different categories: conventional criminal activity, and new forms of criminal activity.

Conventional Criminal Uses for Cryptocurrencies

The conventional criminal uses for cryptocurrencies include the purchase of illicit goods and services, money laundering and ransom payments. In these cases, cryptocurrencies either replace or supplement conventional financial instruments that have traditionally facilitated criminal activity. As noted in part two of this series, online criminal markets have broken the billion-dollar per year mark in transactions, a volume made possible by cryptocurrencies. Online criminal marketplaces account for the second-largest volume of criminal cryptocurrency transactions behind scams (something we will address later). Cryptocurrencies provide a degree of anonymity, are easy to transfer over international boundaries and mostly do not fall directly under government regulation, thereby making them essential to the operations of online criminal marketplaces.

Cryptocurrencies have also facilitated money laundering by offering criminals an additional instrument to obscure illicit funds and move them around the world quickly and efficiently. As noted in a previous analysis on money laundering, cryptocurrencies alone are not sufficient, but when used in conjunction with traditional tactics such as structuring, fraudulent invoices and trade-based money laundering, they offer criminals a valuable tool. Criminals also appear to be increasingly adopting cryptocurrencies to facilitate money laundering, nearly tripling the estimated volume of bitcoin used in money laundering from $1 billion in 2018 to $2.8 billion in 2019 — and presumably more today, according to Chainalysis.

The third conventional criminal activity that has embraced cryptocurrencies is ransom payments, specifically with the growth of cyber ransomware attacks in recent years. The perpetrators behind the recent high-profile ransomware attacks targeting Colonial Pipeline, JBS and Kaseya all demanded ransom payments in cryptocurrency. Colonial Pipeline and JBS ended up paying ransoms of $4.4 million and $11 million, respectively, in bitcoins, and it appears that at least some of the companies impacted in the Kaseya attack are negotiating payments in bitcoins or other cryptocurrencies to regain access to their networks. In the physical world, at least some kidnapping-for-ransom gangs appear to be transitioning to cryptocurrencies as well, with the first documented case of a kidnapping gang demanding a Bitcoin ransom occurring in Costa Rica in 2015. Since then, the practice has become more common, even though for now cash and physical assets remain the preferred medium for most conventional criminal activity.

December 2020 - A gang demanded 100 bitcoins (the equivalent of $2.3 million at the time) in ransom for the return of a local businessman's son in Bengaluru, India.

January 2020 - A gang in Thailand kidnapped and tortured a Singaporean businessman, demanding a ransom of $740,000, to be paid in bitcoins.

November 2018 - A Costa Rican kidnapping-for-ransom gang murdered an American online gambling organizer despite receiving nearly $1 million in bitcoins as ransom.

New Criminal Activity Made Possible by Cryptocurrency

The most common form of criminal cryptocurrency transactions is scams, mostly related to speculative investment in new cryptocurrencies. Scams make up an estimated 73% of the $30 billion in annual criminal cryptocurrency activity, accounting for about $22 billion. Chinese authorities seized a cumulative $5.3 billion in cryptocurrencies and arrested dozens of people associated with the Plus Token and Wotoken Ponzi schemes in 2019 and 2020, respectively. Another common scam is a fraudulent initial coin offering (ICO) — or the launch of a new cryptocurrency. Fraudulent ICOs attract investors but then never actually launch the promised cryptocurrency. In June, the U.S. Securities and Exchange Commission charged three people with carrying out a $30 million ICO scam earlier in the year. The FBI and other national law enforcement agencies routinely issue warnings to cryptocurrency owners regarding scams and other fraudulent activity on exchanges. As cryptocurrencies continue to grow in number and value, more scams will exploit the hype surrounding cryptocurrencies, meaning that anyone who speculates in cryptocurrency should be well aware of the risk of being involved in such scams and factor it into their calculations when choosing to invest.

Other, far less common, criminal activities involving cryptocurrency impact people without their consent or knowing participation.

Cryptojacking involves gaining unauthorized access to a computer in order to use the device's processing power to create more units of cryptocurrency. Currencies like Bitcoin are only able to operate by solving long, complicated calculations that ensure the integrity of the blockchain — the ledger of transactions over time. Such calculations require massive amounts of processing power but are rewarded with the payment of newly generated bitcoins in a process known as mining. A recent report from the BBC estimated that bitcoin mining consumes around 121 terawatt-hours per year — the equivalent of the annual electricity consumption of Argentina. While some people have invested thousands of dollars to build their own legitimate bitcoin mining operations, others have leveraged malware packages available for as little as $30 on online criminal markets to break into other people's devices and siphon off the processing power of their machines to mine for bitcoin. The process is essentially hijacking another's computer to create cryptocurrency, thus the name "cryptojacking." Since cryptojacking exploits only the processing power of someone's computer, it can run in the background for months or years without the owner noticing the breach. Cryptojacking campaigns typically distribute mining efforts over hundreds or thousands of devices, so the increased power consumption on a single machine is barely noticeable.

Crypto wallet theft involves stealing the credentials to someone's cryptocurrency account and gaining control of its contents. Just as normal bank accounts rely on account numbers, PINs and passwords, cryptocurrency transactions rely on keys, or lines of code that allow users access to their cryptocurrency funds. If unauthorized individuals gain access to that key, they can transfer funds wherever they chose. Crypto wallets come in many forms, ranging from mobile apps to physical devices such as a USB drive. They are generally referred to as either being "hot," meaning connected to the internet, or "cold," meaning stored offline. Hot wallets tend to be more vulnerable because they can be compromised, but their internet connectivity makes them more convenient and user-friendly than the more secure, unconnected cold wallets. While physical wallets can be stolen just as any physical asset (and often are), they are less vulnerable to fraudulent crypto wallet apps or cyber hacks into legitimate apps that can compromise digital keys and the cryptocurrencies associated with them.
Crypto-exchange hacks attack the online exchanges that facilitate the purchase, transfer and sale of cryptocurrencies. Cryptocurrency holders often hold their keys on hot wallets supported by these exchanges and, while major exchanges tend to invest in security to protect their investors' keys, like everything else online, they are still vulnerable. In November 2020, for example, the KuCoin exchange suffered a hack that saw an estimated $150 million stolen. Since most countries do not have a mechanism insuring cryptocurrency holdings similar to the U.S. Federal Deposit Insurance Corp.'s commitment to back up conventional bank accounts, once cryptocurrency is lost (whether through scam, theft or otherwise) it is up to the various actors involved to figure out how to remediate losses. In the case of KuCoin, they were able to arrange for the return of $126 million in stolen funds through a complex process unlikely to be replicable at scale, so there is no guarantee that the next exchange hack will be able to do anything remotely similar. And apart from the threat of hacks against legitimate crypto exchanges, as evidenced by the prevalence of scams in the cryptocurrency world, less reputable exchanges are even less likely to recover stolen assets — and their administrators might even work with hackers to defraud customers.

How Cryptocurrencies Have Made Criminals Vulnerable to Detection

Just as with encrypted communications and online criminal marketplaces, the advantages of cryptocurrencies also come with risks to the criminals who use them. Some security experts even argue that police services have a better chance of catching illicit financial activity done through cryptocurrencies versus traditional financial vehicles because of the public nature of blockchain technology. Currencies such as Bitcoin function by adding each transaction to a publicly viewable ledger. And while the record does not specify the name of the individuals involved in the transaction, it does record an account number that can be linked to an individual with additional investigatory resources.


This is vastly different from the traditional financial sector, where transaction information is private and typically requires a warrant to view. So when, for example, criminal actors conduct a ransomware attack and demand a payment in cryptocurrency, they must provide a wallet number for the victim to direct the funds. That wallet number, and any other wallet numbers associated with it, are forever linked to criminal activity. Due to the public, open-source nature of the blockchain, anyone can conduct due diligence on an account; meanwhile, numerous websites, such as blockchain.com, provide live views of cryptocurrency transactions and the ability to search for previous transactions. The public nature of transactions at least partially explains how the FBI was able to recover $2.3 million of the $4.4 million ransom Colonial Pipeline paid to the criminal ransomware group, DarkSide, in June.

Detecting illegal activity is one thing, but stopping it and rectifying the underlying crime is another. The FBI's seizure of bitcoins linked to the Colonial Pipeline attack was an exception — most cryptocurrency ransom payments are never recovered. Instead, the biggest weak point for criminal transactions involving cryptocurrency is converting it to cash and/or other physical assets, which online crypto exchanges play a large critical role in facilitating. Nearly all (99%) of cryptocurrency transactions involve an exchange, and governments around the world are increasingly regulating the exchanges that facilitate cryptocurrency markets in order to curtail illegal activity. Banks and other financial institutions have long been subject to penalties related to money laundering and terrorist financing; as previously noted, even though only a fraction of overall criminal activity involves cryptocurrencies, there is strong potential for growth that is increasingly of concern to financial regulators and legal authorities.

Governments are using threats against cryptocurrency exchanges in an effort to get them to follow the same anti-money laundering laws and reporting requirements applied to traditional financial institutions, with some signs of success.

July 2021 - The British Financial Conduct Authority officially identified Binance, one of the largest cryptocurrency exchanges in the world, as not being authorized to operate in the United Kingdom. While the virtual nature of exchanges (and the fact that Binance is based in the Cayman Islands) means that British citizens can still use Binance, the measure has hurt Binance's standing, especially as major banks such as Barclays and Santander blocked the exchange following the ruling. Many users have left Binance to join registered and regulated exchanges, such as Gemini, to reduce their risk.
June 2021 - As Binance faced legal challenges in the United Kingdom in June, it also worked with authorities in Ukraine to identify and eventually arrest members of a ransomware group using its exchange to facilitate criminal activity.

May-June 2021 - Several Chinese financial regulatory bodies outlawed cryptocurrency mining and trading and censors blocked social media accounts that reported on cryptocurrency trends, with more legal regulations and restrictions expected later this year. Meanwhile, China's Central Bank is working on rolling out its own state-backed cryptocurrency in part to block criminal exploitation of the technology.

April 2021 - South Korea's Financial Services Commission threatened to shut down all 200 cryptocurrency exchanges operating in the country if they did not apply for licenses to operate as a Virtual Asset Service Provider, which would force them to adhere to anti-money laundering policies such as know your customer and filing suspicious activity reports. The deadline for application is September 2021, after which point unauthorized exchanges are at risk of restrictions.

April 2021 - Turkey placed restrictions on cryptocurrencies, resulting in the collapse of the Vebitcoin exchange after authorities shut down its domestic bank accounts and arrested four founders for supporting fraudulent activity. Authorities also issued an arrest warrant for the CEO of another exchange, Thodex, after he left the country with $2 billion in investors' funds.

At the heart of regulation is the cultural division within the cryptocurrency-holder community between those who want to grow it into an even more mainstream financial vehicle versus those who want to keep the market small and alternative. As major banks increasingly offer cryptocurrency services, investment firms like BlackRock look to diversify portfolios by introducing cryptocurrency and even MasterCard offers credit services based in cryptocurrency, the value of currencies like Bitcoin has risen astronomically, benefiting those who invested early. But introducing more institutional involvement in cryptocurrency markets also introduces more scrutiny and regulations, since those companies are very much liable to regulations and penalties regarding criminal financial activity. As demonstrated in the British example above, government regulatory bodies may not be able to shut down cryptocurrency exchanges, but they can certainly hurt their bottom line by disincentivizing institutional relationships. For this reason, some cryptocurrency holders want to avoid the regulations that come with mainstream adoption in order to preserve cryptocurrencies' status as a truly alternative, parallel financial vehicle — even if it means less growth in the long run.

The Future of Crime and Cryptocurrencies

Similar to online criminal markets, new cryptocurrencies are launching on a daily basis that tweak algorithms and features to cater to an ever-changing market. One direction of development particularly relevant to criminal involvement in cryptocurrency is the growth in anonymity-enhanced coins (AECs), aka privacy coins. Unlike the majority of cryptocurrencies that list transactions on a publicly accessible ledger, AECs conceal the accounts involved in a transaction, making it more difficult to identify and track criminal activity. Ransomware groups such as REvil have been known to offer a discount to victims who pay ransoms in Monero, one of the more popular AECs within criminal circles. As of February, a major online criminal marketplace, White House Market, switched from dealing mainly in Bitcoin to exclusively using Monero to reduce the risk to its users. The FBI's partial recovery of the Colonial Pipeline ransom — facilitated in part by the traceability of major currencies like Bitcoin — could drive even more criminal actors to switch to lesser-known, but more discreet, cryptocurrencies.

The challenge to criminals using Monero is that if it becomes synonymous with criminal activity, the exchanges that are already under increasing regulatory pressure from both national governments and institutional investors could place restrictions on dealing in Monero or other AECs. Such restrictions would make it harder for holders of Monero or other AECs to convert their holdings into physical assets such as cash, property or luxury goods, thereby complicating criminals' money laundering needs. Such restrictions could also decrease the overall value of AECs, thus creating an incentive for legitimate holders of cryptocurrencies to self-regulate and discourage criminal activity.

Nonetheless, despite looming regulations and the risks of being associated with criminal activity, cryptocurrencies will continue to play an important role in criminal finance, especially when it comes to online criminal activity. To be sure, as some cryptocurrencies go mainstream, the return on investment for attracting institutional investors will be well worth the sacrifice of unregulated financial activity, thereby making criminal activity more difficult. Even so, other cryptocurrencies will inevitably arise to meet demands for less transparency and more privacy, even if doing so means sacrificing market share and/or profits. This dynamic mirrors what we previously explored regarding encrypted communications apps and online marketplaces: Namely, even if many platforms seek to purge criminal activity, there will always be niche ones that arise to meet this demand. And as cryptocurrencies themselves become more widely accepted as legal tender, criminals may have less need to launder their illicitly acquired crypto funds into cash and/or other physical assets, thereby lessening their reliance on exchanges and their risk of detection.

As for the overall relationship between crime and technology, our series has shown that new technologies will allow criminals to conduct traditional activity with more efficiency and more profits, and open the door for entirely new criminal activities. The efficiencies and anonymity that new technologies afford criminal actors, however, also benefit law enforcement and regulatory bodies seeking to stop criminals. Whether it is intercepting supposedly secure messages, shutting down online criminal marketplaces or tracking criminal financial transactions, police have proven they can use technology against the criminals who adopt it. But as always, criminals' higher appetite for risk and willingness to find and exploit loopholes in the law means they will always be a step or two ahead of the state — and new technologies will help criminals maintain at least a short-term advantage.

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« Last Edit: July 17, 2021, 07:25:20 AM by Crafty_Dog »

ya

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 Expect a large move in the next couple of weeks, most likely UP. GBTC unlock period starts July 17...it is unclear if that is going to be bullish/bearish. Below is a note from Willy Woo.

Top level summary for 15th July 2021 (current price $31.8k):

Macro cycle: User growth is on a parabolic climb. Structurally we are in the middle of a bull market. This has not been reflected in price due to the size of the selling pressure of large investors (likely hedge funds) months ago, it’s forced a sideways re-accumulation band, where speculators who absorbed the coins are selling down their inventory to long term investors. The long term picture is strongly bullish once re-accumulation is complete.

Supply shock: The market is undergoing supply shock at levels that price it above $50k. Price needs to climb +50% to find balance with historical levels of valuation. This is expected to happen once fear subsides from the market. To do this price needs to break above its current resistance trend-line.

A large move is probable: Price action is setting up for a large squeeze, a significant move is expected soon. 17 Jul - 24 Jul is a high probability zone for a large price move.

Short term on-chain metrics are bullish: Smart money has ceased selling. Long term investors are absorbing coins at peak levels. Exchange outflows are signalling consistent buying demand.

Price action expectation: I’m expecting price to break from its bearish sideways band in the coming week followed by a recovery to the $50k-$60k zone before some further consolidation.

ya

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The growth curves are getting vertical, expect a near vertical growth curve for BTC.


ya

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See the exponential growth of the BTC lightning network, this is the second layer network which is currently used for instantaneous payments. ..like VISA or Mastercard. And did you know that the actual transaction behind a VISA/Mastercard takes 4-5 days to settle, unlike the Lightning Network which is in seconds.


ccp

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Ya,

Not sure how to interpret the graph

transactions instantaneously - increasing capacity
  would essentially rid BC of one of the biggest drawbacks.

The grapevine whispers we are in a BC winter
 but the supposed upside is that  the large banks (etc.) are buying up at these prices



ya

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You have it exactly right. Transactions on layer 1 (BTC blockchain) are intended for large transactions like buying a house, car etc, where you can wait for 20-30 min for the transaction to clear. On the other hand, small transactions, like buying coffee, need to be instantaneous and "free", that is where the lightning network comes in. STRIKE app https://bitcoinmagazine.com/business/strike-in-app-bitcoin-buying
 is the leader in the field and is gaining tens of thousands of members on a daily basis. Expect the banks to be disrupted, they cant even send a wire transfer instantly after charging 25 $.

ccp

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will this disrupt coinbase
or alt coins too?

how is the security on Strike?


ya

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See this interview of Jack mallers, the maker of Strike. Super eye opening, the way forward. According to him, banks, Coinbase, Paypal etc are toast.
https://www.whatbitcoindid.com/podcast/lightning-series-why-bitcoin-is-global-money

No specific info on security, I assume its safe, otherwise the BTC community would have already discussed it.
Coinbase is hated in the BTC community...may not be a great investment, though Cathy Wood of ARKK investments is buying heavily,
« Last Edit: July 17, 2021, 05:09:02 PM by ya »