by Stephan Livera
Tuesday, 7
December 2021
Response
15:15

Bitcoin is more than a Wall Street plaything

The cryptocurrency can offer freedom from surveillance and government control
by Stephan Livera
Bitcoin is a vital way to protect against inflation in countries like Turkey

In ‘Why Bitcoin is tracking the stock market’ Philip Pilkington writes that Bitcoin is ‘growing up’ and becoming a Wall St plaything that finance bros use for ‘fun and profit’. It is for this reason, he writes, that the cryptocurrency is heavily correlated with the stock markets:

“Bitcoin followed the stock markets, with the S&P500 falling around 3.5% over the same period…. In the past two years, moves in the stock markets explain anywhere between 30% and 40% of moves in the Bitcoin market.”
- Philip Pilkington, UnHerd

This point is true enough in recent times. A recent NYDIG weekly research report confirms as much: there has been strong Bitcoin correlation with equities since March 2020, and this represents increased institutional investor activity since that time.

But even still, Bitcoin can represent a useful diversifier. For example, over the last year, investing in the S&P 500 returned 23.85% versus Bitcoin’s 174% (even after this recent dip). And on a 10-year basis, Bitcoin has risen 163% per year, whereas the S&P500 has only grown 13.8% per year. That marks a dramatic increase in the purchasing power of Bitcoin holders.

Importantly, Bitcoin is not anti-finance but it is anti-central banking. Contrary to Pilkington’s argument, the established monetary system is on very shaky ground and Bitcoin can serve as an alternative to that. There is a very real battle going on for the future of our monetary freedom, and the world will have to decide whether it wants an open monetary standard with a strict hard cap of 21 million Bitcoins, or whether it wants central banks pumping trillions and trillions of dollars into the economy. Given that the current monetary system is in the process of rapid devaluation and the cost of living is rising rapidly, Bitcoin seems like the better bet.

It’s therefore not surprising that day traders want to get involved in Bitcoin. In the western world, people are rushing to a multitude of investments, whether they are stocks, property or memecoins. Trust in central banks and governments are decreasing, particularly when the latter are proposing their own digital currencies (such as the ‘CBDC’ surveillance coins) that will be detrimental to individual freedom. Bitcoin, meanwhile, is an open standard that allows users to operate and exchange as they wish.

Thus to portray Bitcoin as a tool of the Wall St establishment misses the point. For people living under authoritarian regimes, Bitcoin is a vital way to protect their ability to transact. This might not mean much to you if you’re coming from a place where you have access to fiat banking, credit and so forth. But if you, like over a billion people worldwide, don’t have a physical address with a street name and number, or identity documentation, or live under a highly inflationary regime, you would appreciate the value of Bitcoin’s open system.

Join the discussion


To join the discussion, get the free daily email and read more articles like this, sign up.

It's simple, quick and free.

Sign me up
Subscribe
Notify of
guest
9 Comments
Most Voted
Newest Oldest
Inline Feedbacks
View all comments
Galeti Tavas
Galeti Tavas
6 months ago

I assume this was co-written by Michael Saylor….

Gareth Soloway is my favorite trader for covering Bitcoin in a positive light, and here is on Kitko explaining why Bit Coin is tracking equities – because of stock Margin, leveraging, and so Bitcoin is sold to cover margin calls on equities during a drop – but he is always fun and well worth a watch – Also- if you know nothing about ‘Technical Trading’ he is a master of it (using charts and rules to finds ups and downs to trade, not worrying at all – about any other issues, just the lines on the charts – as this is how most trading goes, it is very interesting to see. https://www.youtube.com/watch?v=AjmpznRmAIQ

But I also fallow Bit Coin’s biggest anti, Peter Schiff, and tend to agree with him.

As you point out a smart phone and Bitcoin means the Un-Banked may do currency moving and use, which is very good – Except – that means they put their meager savings and income in the fantastically volatile thing

– and if, or when -( as Central Banks will stomp it when they create their own Digital currencies – also most countries cannot afford the native people selling of local currencies for outside ones as it will utterly devalue their domestic fiat currency, so doing this will likely crash their own nations mony – I think you do not understand anything of ‘Unintended Consequences, and just drank Saylor’s Kool-aid) These poor people will lose their money – you ask them to go WAY out on the ‘Risk Curve’ to do that – and they may win… but I think more likely lose. The poor putting their money into purely speculative assets with extreme volatility is Not Prudent, and I am surprised how many people think they should.

But doing so is a good way for the ‘Whales’ (the large holders of Bit Coin) to harvest the world’s poor people’s money before the coin crashes.

Vijay Kant
Vijay Kant
6 months ago

Bitcoin, by being in an artificially limited supply, is deflationary. A growing GDP requires a currency that is expansionary. In the world of Bitcoin, global economies could not have been saved from lockdowns resulting in handouts. Thank God for the expansionary nature of fiat currencies. Bitcoin enthusiasts implicitly wish for the world economies to freeze. In a dynamic world that needs to survive external shocks we need dynamic currencies that can be expanded and shrunk by responsible governments. Bitcoin is a product of an idealist’s dream suspicious of governments.

Bitcoin does not solve anything! It is like throwing away the baby with the bath water. What we need is a more accountable governance at the centre, not throwing away the centre itself.

Sure, the technology of Blockchain can be fruitfully utilised in legal contracts and other financial transections, but it surely will fail as a currency in a dynamic and economically expansionary world.

Last edited 6 months ago by Vijay Kant
Jon Hawksley
Jon Hawksley
6 months ago

There is so much wrong with this article it is hard to know where to start.
The holder of a Bitcoin has a number that can be verified by the records in a distributed blockchain ledger in a community that uses computers to calculate new bitcoins. There is no record of who owns a bitcoin so if you lose your number you no longer own a bitcoin. If someone else finds out the number they can spend it and you will then no longer own a bitcoin. Spending a bitcoin requires the number to be verified against the blockchain ledger and in the process the buyer gets a different number. Actually using a bitcoin is a cumbersome process so brokers have set up to intermediate between investors and the community of computers that holds the ledgers. They are subject to all the rules of the financial market they are part of and if they are not part of one then there is the additional risk of them not being regulated.
Bitcoin can represent a useful diversifier” A Bitcoin is a token with no intrinsic value. There are no assets backing it. When you sell a Bitcoin you depend on someone else wanting to buy it from you and one day no one will want to. The supply of bitcoins is fixed so its value goes up and down proportionate to the number of people that want to invest in it. That value is the last price paid not the price you will be paid if you want to sell. If everyone wants to sell the price will go to zero. There are no assets, at least with most fiat money someone creditworthy has promised to pay you something.
the established monetary system is on very shaky ground and Bitcoin can serve as an alternative to that” If the community of owners of the computers that hold the blockchain ledgers turn their computers off then all Bitcoins cease to exist. That community has and can change the rules arbitrarily.
But if you, like over a billion people worldwide, don’t have a physical address with a street name and number, or identity documentation, or live under a highly inflationary regime, you would appreciate the value of Bitcoin’s open system” Assuming you have a computer, internet connection and means to access the community of computers that holds the blockchain. Otherwise you are in the hands of an intermediary with all the attendant risks and difficulties.
Governments can and will exercise control. They can control the payment interface between Bitcoins and fiat money. They can control the intermediaries who hold bitcoins for investors. They might be able to use quantum computing to negate the value of new bitcoins that the community rely upon to fund themselves causing them to disband.
Before accepting any article on Bitcoins UnHerd should check that the author understands the mathematics including the use of the secure hash algorithm SHA 256 in Bitcoins.

Last edited 6 months ago by Jon Hawksley
Justin Clark
Justin Clark
6 months ago

excellent positioning. for all those who “don’t get it, regarding bitcoin”, check this out in support of Stephan’s points – https://www.youtube.com/watch?v=FXvQcuIb5rU. It becomes de facto, when you see what Lightning adds as a L2…. Enjoy!

Galeti Tavas
Galeti Tavas
6 months ago
Reply to  Justin Clark

What a nasty video you link – calling crypto ‘Immaculate Conception’ – “The Immaculate Conception: Bitcoin vs Fiat Standard”
This is highly offensive. Remember Jesus driving the Money Changers out of the temple? Four days later Christ was Crucified. It is not fun to use this offensive wording to describe Money!

I notice the author is from Columbia University – the place all this horrors of Post Modernism spread out from to destroy the Decency of the Western Society..

I suspect Bit Coin is really a bad force, and seeing the name of this video has now convinced me it is likely evil in its mission.

Galeti Tavas
Galeti Tavas
6 months ago
Reply to  Galeti Tavas

“The Immaculate Conception is a doctrine of the Roman Catholic church that states that the Virgin Mary was free of original sin from the moment of her conception.”

I know you Secular Humanists think “Blasphemy, as defined in some religions or religion-based laws, is an insult that shows contempt, disrespect or lack of reverence concerning a deity, a sacred object or something considered inviolable.”

Is just being witty, but it is not, it is fantastically rude.

Michael Coleman
Michael Coleman
6 months ago

I would likely invest in Bitcoin if I thought my coins were extremely safe from theft. Having said that, I wonder if the author or another bitcoin enthusiast would describe likely scenarios if and when the US and partners ban crypto currencies when they establish officially sanctioned crypto a la China. Biden has proposed $79B additional IRS funding to go after cheats – there is little chance they ignore Bitcoin in the long run if they are serious about tax fraud

Galeti Tavas
Galeti Tavas
6 months ago

The Feds are already nobbling Bit Coin by IRS reporting laws – requiring every transaction over $600, by everyone involved, be reported – I think this means internationally too – like FATCA this puts a huge burden on foreigners doing business with American Bit coin users… here is Q&A of the IRS on Bitcoin… and it is ugly…. https://www.irs.gov/irb/2014-16_IRB#NOT-2014-21

And what is cool is Mining Bit Coin is ‘Self Employed Income’ – so you have to pay Social Security and Medicare on it….. (%15, on top of Fed and State income tax…)

Jeffrey Chongsathien
Jeffrey Chongsathien
6 months ago

Who owns Bitcoin? One guy Satoshi, the Winklevoss Twins, the FBI and drug cartels. Why would everybody want to hand their money over to these guys?!