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Despite Criticism, Bitcoin Is A Superior Investment To Gold

What’s been a hedge against inflation for thousands of years has had its throne usurped by bitcoin, and for good reason.

Alexander Vasiliev is the co-founder and CCO of the global payment network Mercuryo.

Ever since bitcoin began to grow in popularity, many people have come to call it “digital gold.”

And for valid reasons.

While the cryptocurrency’s anonymous creator, Satoshi Nakamoto, originally intended bitcoin to function as a peer-to-peer (P2P) electronic cash system, BTC also possesses excellent store of value and safe-haven asset qualities.

Gold has similar store of value properties, with many conservative investors considering the precious metal one of the safest traditional investment instruments on the market. There’s also a popular belief that the financial instrument is a good inflation hedge.

However, numerous experts from the same group also criticize bitcoin for its lack of stability, often calling the cryptocurrency a bubble.

That said, such statements about gold and bitcoin don’t reflect the full truth.

Bitcoin Beats Gold in Terms of Purchasing Power

To see the entire picture, it’s essential to analyze gold and bitcoin in regard to how the two financial instruments perform in terms of inflation hedges, stores of value, and safe-haven assets.

According to the Bureau of Labor Statistics’ Consumer Price Index (CPI), the United States Dollar has lost 11% of its purchasing power due to inflation in the last five years.

This shouldn’t come as a surprise as fiat currencies like the USD are inflationary due to the lack of fixed supply and continuous money printing practices of central banks.

For an asset to be a decent inflation hedge, it must maintain a value growth at or above the inflation rate to protect investors against the price depreciation of fiat currencies.

If we take a look at the SPDR Gold Shares’ (GLD) performance in the last five years via the chart above, we can see that the precious metal has maintained a value increase of nearly 54%, which is almost five times higher than the USD’s inflation rate.

For that reason, we can call the instrument an inflation hedge. But is it better in this field than bitcoin?

The simple answer is no. The chart above clearly shows that in the last five years – even after bitcoin’s recent price drop and 2018’s bear market – BTC maintained a price appreciation of nearly 7,500%, which is over 138 and 680 times higher than gold’s and the USD’s rate of inflation, respectively.

More Than Simply an Inflation Hedge

Throughout its twelve-year history, bitcoin has outperformed all other asset classes, increasing its purchasing power so significantly that it clarifies that the cryptocurrency is more than just a simple inflation hedge.

Due to BTC’s limited supply capped at 21 million coins, as well as the halving mechanism that cuts the new coin supply into half roughly every four years, the digital asset features a deflationary monetary policy that is hard-coded on the protocol level.

For that reason, there is no way to increase the bitcoin supply during times when the demand for the cryptocurrency is higher.

At the same time, due to the continuously decreasing flow of new supply, BTC will experience a long-term price appreciation even if the demand stays at the same level as it is now.

This, in addition to its durability due to its highly resilient and immutable blockchain network, makes bitcoin an excellent store of value.

While gold is also a highly scarce asset, like oil its production can be increased or decreased based on the current demand.

However, due to the vast stockpile present on Earth and the complexity of gold mining, the precious metal’s annual production rate is usually at around 2% of the total supply.

For that reason and due to gold’s qualities that make it impossible to destroy or synthesize the asset from other materials, the precious metal is also a good store of value that has experienced a long-term price appreciation.

But, in this field, bitcoin has a major advantage over gold. While BTC can be easily utilized for P2P payments without any intermediaries, there is no system of buying products or services with a gold bar.

In terms of being a safe haven asset – a financial instrument that can retain or increase its value when the general market is in turmoil – both bitcoin and gold maintain a relatively low correlation with other asset classes.

Thus, both instruments have safe-haven-asset qualities that distinguish them from others in this field.

Bitcoin Is on the Road to Become a Viable Alternative to Gold

Bitcoin has the necessary qualities to be a viable alternative to gold and other precious metals in terms of an inflation hedge, store of value, and a safe-haven asset.

Despite the criticism, many businesses and institutional investors have chosen to invest in bitcoin to safeguard their assets during the pandemic and the economic fallout that followed.

Tesla is an excellent case study for that, even with Elon Musk’s recent criticism concerning BTC’s high energy usage. The electric car maker generated 23% of its Q1 2021 profits only by selling some of its bitcoin holdings.

And with excellent store of value properties, increased purchasing power, and high versatility, bitcoin has the potential to take the lead from gold and become the standard asset to fight inflation and hedge against general market turmoil.

This is a guest post by Alexander Vasiliev. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.

Source: Bitcoin magazine

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Crypto News Updates

Taproot Locks In: Bitcoin Protocol Upgrade Will Activate In November

Taproot has locked in with the Bitcoin protocol upgrade now set to activate in November.

Bitcoin is upgrading.

Taproot, the Bitcoin protocol upgrade that makes smart contracts more private and compact, has locked in. As of just now, more than 90 percent of all blocks that will be mined in the current difficulty period have signaled support for the upgrade, which means that Bitcoin Core versions 0.21.1 and newer will start enforcing the new rules in November of this year, as will the alternative Taproot activation client.

Taproot

Taproot is the first Bitcoin protocol upgrade to go live since Segregated Witness activated in 2017. First proposed by former Blockstream CTO Gregory Maxwell and developed by Bitcoin Core contributors including Pieter Wuille, Anthony Towns, Johnson Lau, Jonas Nick, Andrew Poelstra, Tim Ruffing, Rusty Russell and Maxwell himself, Taproot will make Bitcoin’s smart contract features more compact, potentially more private, and in some cases a bit more flexible. As a soft fork, the upgrade is backwards compatible as long as a majority of miners enforce the new rules.

Taproot really consists of two big upgrades rolled into one. The first is the introduction of Schnorr signatures. Many cryptographers consider the Schnorr signature scheme to be the best in the field, as its mathematical properties offer a strong level of correctness, it doesn’t suffer from malleability and it is relatively fast to verify. The most notable benefit in the context of Bitcoin, however, is that Schnorr’s “linear math” enables a new class of smart contracts, where tweaks to a signature can be used to embed various spending conditions.

This tweaking of signatures is used for the second part of the upgrade, which is the part that’s really called Taproot itself. Leveraging cryptographic tricks like Merkle trees, Taproot lets users cryptographically combine several spending conditions in a single output (simplified, in a single “address”). The funds in this address can be spent in multiple ways, for example by different people depending on which other conditions are met.

To a large extent this is already possible on Bitcoin, but Taproot lets these different people cooperate to make the transaction that spends the funds indistinguishable from regular (single user) transactions. This is more efficient because not all potential spending conditions need to be revealed when the funds are spent (translating into lower fees), and it is more private because such transactions better blend in with other transactions. (As a notable example, Lightning channel closing transactions can be made to look like regular payments.)

Taproot Activation

Activating upgrades on the Bitcoin network has in the past sometimes proven difficult. The Segregated Witness activation process, in particular, turned into a bit of a battleground, where (some) miners refused to activate the upgrade, until (some) users presented them with a somewhat controversial ultimatum in the form of a user activated soft fork (UASF), defined in BIP148.

For some time, this controversy appeared to carry through into the discussion around Taproot activation. Some developers and users argued that a similar UASF-style activation should be built into the activation mechanism from the start, while other developers and users objected to such a solution as they considered it too risky and/or aggressive.

A compromise was ultimately found between the two main camps in the form of “Speedy Trial” (although some proponents of a built-in UASF did still release their own client). The Speedy Trial activation mechanism would give miners three months to signal support for the Taproot upgrade. If miners would signal support for the upgrade in 90% of all blocks within a single two-week difficulty period (1,815 or more blocks out of 2,016), Taproot would activate on block 709,632, estimated to be mined this November.

The 1,815th signaling block of this two-week difficulty period (the third difficulty period since Speedy Trial’s signaling period started) was just mined. This means that the Bitcoin ecosystem — users, miners, businesses, projects — have about five months to get ready for the upgrade, by upgrading to compatible software, or perhaps by taking alternative security precautions.

Since Taproot is a soft fork upgrade and miners have indicated that they are ready for the upgrade, even non-upgraded software should remain compatible with the Taproot rules, however; this non-upgraded software just won’t enforce or benefit from these new rules.

For more information on what Taproot is exactly, also see this explainer.

Source: Bitcoin magazine

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Donald Trump Is No Fan of Bitcoin

President Donald Trump is in the news after spending a few months out of the limelight. In a recent interview, Trump took aim at bitcoin, the world’s number one digital currency by market cap, calling it a “scam” and saying that it was a threat to the U.S. dollar.

Donald Trump Believes BTC Is a Scam

In the interview, Trump says the following:

Bitcoin, it just seems like a scam. I do not like it because it is another currency competing against the U.S. dollar.

He went on to say that he wanted USD to be the “currency of the world.”

This is not the first time the President has taken aim at the digital currency. He first criticized bitcoin two years ago, claiming that cryptocurrencies had no value and that their prices were “based on thin air.” In other words, there was nothing in existence to make crypto legitimate currencies, and thus he was not crazy about their existence, feeling they could potentially lead to “illicit or unlawful behavior.”

Interestingly, he is not the only one to voice opposition to bitcoin in recent days. Similar verbiage came from Justin Urquhart-Stewart, the co-founder of Seven Investment Management. He stated that bitcoin could be a threat to other currencies, claiming:

It has taken off in such a way that it has created a popular appeal without any sound financial strength… Bitcoin is dangerous because it is trying to create a level of credibility to unreliable and wholly unfounded value. Quite often, unsophisticated punters are drawn in at the wrong time to something they think they can make a quick buck on. To them, it does not matter what it is, whether it is bitcoin or GameStop or AMC, it is something you can bet on.

For the most part, he believes bitcoin has done well simply because figures such as Elon Musk have behaved “stupidly,” and that everyone falls for their antics. However, he says that there are far too many people taking unnecessary chances and that they need to educate themselves on the risks of crypto before jumping in headfirst. He says:

What we have now is a young generation of punters who have no knowledge of financial planning and development. They understand how to buy and sell things, but they have no concept of how to create longer-term wealth.

Some Say It’s Not a Currency

Others – such as Neil Wilson, chief market analyst for Markets.com – believe that Mr. Trump’s criticism and fear of BTC is irrelevant given that bitcoin does not qualify as a currency. Wilson states that bitcoin is not a threat given that it cannot operate in the same way as USD due to its volatility. He states:

I call bitcoin more of a security, like a stock or a bond. Although it has appreciated massively, it is far too volatile to be a currency. It moves around more than most stocks do.

The post Donald Trump Is No Fan of Bitcoin appeared first on Live Bitcoin News.

Source: Live Bitcoin News

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Mike McGlone: Ethereum Will Soon Eclipse BTC

Crypto analyst Mike McGlone is predicting that Ethereum, at some point, will likely eclipse bitcoin and become the number one digital currency by market cap.

Mike McGlone Thinks Highly of Ethereum

As a senior commodity strategist for Bloomberg, McGlone has been following cryptocurrencies for a long time just like the rest of us. In a new report, he details why Ethereum – still only the second largest digital currency in the world at the time of writing – could potentially earn the top spot within the virtual ladder. He explained:

Emphasizing the benefits of diversification, notably in an asset class as nascent as cryptos, the trend that appears enduring is Ethereum gaining market share versus bitcoin.

In recent days, bitcoin has taken another hard crash. The world’s primary form of digital money has tanked and fallen to $32,000 per unit. This is about $4,000 or $5,000 less than where it stood early in the week. The asset has continued to travel south over the past month or so and has officially lost 50 percent of its value since mid-April when it was trading for a new all-time high of approximately $64K.

For bitcoin to drop this much in such a short period is not putting it in the best light, and thus many traders and analysts have since turned to other large competing digital assets as a means of staying in the crypto world while also recuperating some of their BTC losses. McGlone has continued his push of Ethereum by stating the following:

Both [bitcoin and Ethereum] have bullish underpinnings, but the foundation and use case of [Ethereum] is a strong complement to the more macro store-of-value attributes of [bitcoin].

ETH is among the most popular cryptocurrencies given its technical abilities with smart contracts. It has become widely sought after by crypto developers who are looking to establish new coins, decentralized applications (dapps) and non-fungible tokens (NFTs).

McGlone comments that while Ethereum is currently facing opposition from other coins that boast the same technology, the asset is still the go-to network for many upcoming projects, and that it is not likely to lose this status anytime soon. He says:

Ethereum faces competition from other crypto asset and smart contract platforms, but the number two crypto has won the adoption race as the go-to for digitalization of money and finance.

More Money Coming In

In addition, investors have continually thrown their money into the Ethereum space, and products such as the Grayscale Ethereum Trust have seen their numbers explode in just this week alone. ETH has also proven diverse in that it can be purchased outright or offered as a security through various platforms for less risk. Asset investing company Coin Shares explained in a recent report:

Ethereum continues to see inflows into investment products totaling $33 million [over the last week], remaining the altcoin of choice for investors.

The post Mike McGlone: Ethereum Will Soon Eclipse BTC appeared first on Live Bitcoin News.

Source: Live Bitcoin News

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China Shutters Social Media Accounts of Crypto Influencers

China is moving forward with its anti-crypto attitude. It has now shut down the social media accounts of several bitcoin and cryptocurrency influencers as a means of stopping people from learning about and investing in digital currencies.

China Makes Another Anti-Bitcoin Maneuver

China has long had an up-and-down relationship with bitcoin. While the country has always been a hotspot for bitcoin and digital currency activity, government officials and regulators have never been kind to the world’s number one digital currency by market cap. For example, 2017 saw the nation shutting down all initial coin offerings (ICOs), claiming that they were fraudulent and open doorways to financial crime. From there, China took steps to close all crypto exchanges.

Now, China is looking to end all bitcoin mining within the nation, along with other forms of crypto activity. The move has sparked criticism from executives with companies such as Canaan Creative, one of the largest mining corporations in the world. Stationed in China, Canaan Creative put out a statement saying that the country is making a big mistake, claiming that it would soon fall behind its neighbors in terms of technology use and understanding. In addition, it said that bitcoin mining brought jobs and revenue to China’s economy.

These complaints were apparently not enough to get China to listen, as it is now taking steps to stop bitcoin influencers from spreading the word about cryptocurrency. The country is home to a social media platform known as Weibo, which presently features many crypto heads posting data, videos, and messages about the growing digital currency space. Several of these accounts were mysteriously shut down over the weekend, with Weibo later putting out a statement saying the accounts were in serious violation of the company’s rules and regulations.

The move led to another massive bitcoin drop, with the world’s number one digital currency falling to about $35,000 per unit, though at press time, the asset has added an additional $1,000 to its price.

This Has Happened Before

Despite the harshness of the move, various influencers affected by the account halts said that they were not surprised, and to an extent, even expected to have their pages hit given how stringent China has become when it comes to crypto regulations. China has also taken hits at Weibo accounts delving in crypto information in the past, with accounts belonging to Binance co-founder Yi He and TRON founder Justin Sun having been suspended prior due to regulatory concerns.

Beijing has been particularly strict when it comes to mining regulation, saying that it would like the entire country of China to be fully carbon neutral by the year 2060. Presently, China accounts for close to 70 percent of the world’s bitcoin mining operations per data from the Cambridge Center for Alternative Finance.

The post China Shutters Social Media Accounts of Crypto Influencers appeared first on Live Bitcoin News.

Source: Live Bitcoin News

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Bitcoin Cash Analysis: Remains At Risk Unless It Clears $650

  • Bitcoin cash price is struggling to gain momentum above $650 and $700 against the US Dollar.
  • The price is now trading well below $650 and the 55 simple moving average (4-hours).
  • There is a major bearish trend line forming with resistance near $650 on the 4-hours chart of the BCH/USD pair (data feed from Coinbase).
  • The pair could extend its decline unless there is a clear break above $650 and $665.

Bitcoin cash price is struggling to recover above $650 against the US Dollar, similar to bitcoin. BCH/USD remains at a risk of more downsides below $550.

Bitcoin Cash Price Analysis

After facing hurdles near $750, bitcoin cash price started a fresh decline. BCH broke the $650 support level and the 55 simple moving average (4-hours) to move into a bearish zone.

There was also a break below the $600 level. The price traded as low as $545 and it is now correcting higher. There was a break above the $600 level. The price climbed above the 23.6% Fib retracement level of the recent decline from the $736 high to $545 low.

However, it is facing resistance near $635 and $650. It is now trading well below $650 and the 55 simple moving average (4-hours). There is also a major bearish trend line forming with resistance near $650 on the 4-hours chart of the BCH/USD pair.

The trend line and $650 are close to the 55 simple moving average (4-hours). It also coincides with the 50% Fib retracement level of the recent decline from the $736 high to $545 low.

Therefore, a clear break above $650 is must to start a steady increase. The next key resistance is near $665, above which the price could clear $700. An initial support on the downside is near the $580 level. The next major support is near the $550 level, below which bitcoin cash price could dive towards the $500 level.

Bitcoin Cash Price

Bitcoin Cash Price

Looking at the chart, bitcoin cash price is clearly trading well below $650 and the 55 simple moving average (4-hours). Overall, the price is could extend its decline unless there is a clear break above $650 and $665.

Technical indicators

4 hours MACD – The MACD for BCH/USD is now losing pace in the bullish zone.

4 hours RSI (Relative Strength Index) – The RSI for BCH/USD is just below the 50 level.

Key Support Levels – $550 and $500.

Key Resistance Levels – $650 and $700.

The post Bitcoin Cash Analysis: Remains At Risk Unless It Clears $650 appeared first on Live Bitcoin News.

Source: Live Bitcoin News

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Interview: The Epic Of Bitcoin With Allen Farrington

Allen Farrington joined the “Bitcoin Magazine Podcast” to discuss his articles and Bitcoin’s cultural alignments.

Watch This Episode On YouTube

Listen To This Episode:

Prior to the Bitcoin 2021 conference, “Bitcoin Magazine Podcast” host Christian Keroles sat down with keynote speaker and incredible Bitcoin thinker Allen Farrington for one of his very first podcasts appearances. This interview covered two of Farrington’s seminal works and why Farrington prefers to investigate Bitcoin’s cultural and literature alignments over the typical framing of economics, trading and technology.

First, Keroles and Farrington dove into the latter’s article, “The Capital Strip Mine.” The article is a roughly 30-minute read and it dives into why the current fiat system is effectively strip mining the U.S. and current financial system of its resources. Farrington compares what is going on in capital markets to the strip mining techniques that have become popular in the modern day. Farrington laments that, because of fiat money’s poor incentives, civilization has taken on a growth-at-all-costs mentality and has thrown away all regard for long-term thinking and preservation.

Second, they got into Farrington’s blockbuster article” Bitcoin Is Venice, Bitcoin Is.” In this article, Farrington educates the reader about the anomaly that is Venice, Italy at its peak. Venice was a magical mixture of sound money, capitalism and free society when many of its neighbors were still operating in futility. Venice, in contrast to other large cities, was a bastion for the arts, wealth and thought. Farrington details how Bitcoin’s sounds and fair monetary properties provide a framework for humanity to return back to Venice-like conditions and hopefully prosperity.

Lastly, Keroles and Farrington discussed Farrington’s plan’s for his now live Bitcoin 2021 keynote presentation titled, “The Milk Of Paradise: Bitcoin And The Western Canon.” The speech discussed how Western literature, culture and historical lessons can all be fit into the values and properties that Bitcoin codifies into a physical network on nodes that maintain consensus in a decentralized way. Please enjoy this fascinating conversation with Allen Farrington. 

Source: Bitcoin magazine

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Goldman Sachs Report: Hedge Funds Now Hate BTC

It looks like bitcoin may be losing some of its popularity – at least among hedge funds, according to a new report issued by financial giant Goldman Sachs.

Goldman Sachs Says Hedge Funds Now Dislike BTC

The volatility of the world’s number one digital currency by market cap is really coming back to bite it in the rear. The asset – which over the past year has earned the attention of major institutions ranging from software firm MicroStrategy to electric vehicle company Tesla – is now being looked down upon by the world’s biggest hedge funds and investing firms, according to Goldman Sachs. At the time of writing, one unit of bitcoin is only trading for about $36,000.

At first glance, this seems like a rather solid number – especially when one considers that bitcoin was trading below $4,000 per unit in mid-March of 2020. This would suggest that the currency has grown 12 times its previous size in just 15 short months. However, when one considers that just over a year later bitcoin would trade for about $64,000 in mid-April – a new all-time high for the currency – it is understandable why so many investing enterprises have come to dislike the digital asset.

It is often stated that bitcoin’s rise to the top can be attributed to newfound attention from institutions like the ones stated above. However, what none of them could have predicted was that bitcoin would crash in such dramatic fashion. The currency has lost close to $30,000 in just the past two months, and things are not looking good for the asset. In fact, some analysts believe that the currency could wind up falling further before it begins to recuperate.

As a result, hedge funds have really turned away from bitcoin and are doing all they can to avoid it. A new survey conducted by Goldman Sachs suggests that many chief investment officers are now turned off by the very notion of BTC. Goldman released the following statement:

We held two CIO round table sessions earlier this week, which were attended by 25 CIOs from various long only and hedge funds. Their most favorite is Growth style, but least favorite on bitcoin.

Some Additional Information on the Topic

Data suggests that approximately 35 percent of the CIOs that took part in the survey said that bitcoin was their least-favorite asset. In second place were initial public offerings (IPOs), which were hated most by approximately 25 percent of the survey respondents, while in third place were rate sensitivities, which were hated most by roughly 20 percent of those participating.

Goldman has become known for its regular reports detailing new findings in the crypto industry. Not long ago, the company issued a separate document suggesting that Ethereum – the second largest digital currency by market cap – could potentially overtake bitcoin’s number one spot in the future.

The post Goldman Sachs Report: Hedge Funds Now Hate BTC appeared first on Live Bitcoin News.

Source: Live Bitcoin News

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Dhruv Bansal On Societal Organization Systems And Bitcoin

The visionary Unchained Capital co-founder excitedly details his thoughts on why bitcoin is so inspirational.

This interview with Dhruv Bansal was conducted by myself in an effort to obtain valuable insight into a rather visionary Bitcoiners mind, and I believe my mission was accomplished. Bansal’s answers are profound and thought-provoking, giving us a glimpse into his thoughts on Bitcoin at large. Be sure to check out his talk at Bitcoin 2021 here after reading the edited transcript of our interview below.

Casey Carrillo: Hi everyone, I have here Dhruv Bansal, co-founder and CSO at Unchained Capital.

I was lucky enough to have an email Q and A with Mr. Bansal, and we agreed to sit down here at Bitcoin 2021, where I’ve had the pleasure to finally meet him in person. First of all, welcome to Bitcoin 2021, and I hope you are enjoying your time here.

Dhruv Bansal: Thanks Casey, it looks like I’m going to be a little overwhelmed, it looks like a huge conference.

Carrillo: Absolutely. So, jumping right in: in your previous article you mentioned that you’re excited to see the Bitcoin-inspired discoveries other scientists make within their respective fields. What, in your opinion, gives Bitcoin this capacity to inspire different ways of thinking about things?

Bansal: I think anytime humanity discovers a new principle of organization, governance, construction or material science, it affects everything. I think that’s true for ideas of evolution and for ideas of computation. I think we’re seeing that with Bitcoin. Bitcoin is interdisciplinary. One of the things it does is that it distributes decision-making, order matching, reality and truth in a way that we’ve never seen happen before, which gives Bitcoin a lot of its strength and resilience and is what makes it unique. I would love to see scientists and researchers of all stripes apply those kinds of thoughts and methods to other kinds of systems. My talk with Ryan is attempting to apply some of this thinking to things like the internet, other networks and civilization. But I think Bitcoin can go beyond that: it can teach us how to deal with systems that don’t have any definite state in a given moment in time but that eventually become consistent. We know this from databases quite intimately, but to see it not only affect a database in an esoteric programming context but to see normal people talking about notions of forks and eventual consistency is really powerful. I love to see that learning wash over humanity as a whole and allow us to be more informed of the trade-offs and rules of distributed systems.

Carrillo: I find your business, Unchained Capital, extremely interesting. What is your personal interpretation of the macroeconomic conditions surrounding the surge in bitcoins price, and do you believe the conditions we’re in currently are set to continue?

Bansal: That’s an interesting question—and I’m certainly not an economist or anybody you should look to for macroeconomic commentary—but what I’ll mention is that like a lot of Bitcoiners I expected the price to increase in 2021 tremendously. Why? History, stock-to-flow, four-year cycles. It feels a little bit silly to say that just because it happened four years ago it’s going to happen again, but I have admitted to myself that that’s kind of what I believe. And here we are: it’s happening again and it’s been happening. Now, truthfully, it’s not happening merely because it’s four years from the last time. It’s happening for real reasons. Most people who are buying bitcoin probably don’t care that four years ago was the halvening or that last year we had a halvening. It’s so curious to me, believing that the price would increase, to watch things like the COVID pandemic happen, to watch things like money printing go crazy over the last year, and to watch people pay attention to that and connect it to bitcoin. And lo and behold, the price started to increase. And as much as I expected it would, I was still shocked to understand why it did. Obviously nobody expected the COVID pandemic. There are probably other reasons too, which if I was more of a macroeconomic thinker I would be able to draw out. To me that’s been the most interesting part of this whole process, knowing that it would happen but not really knowing why and then seeing the why and understanding thesense behind why it happened.

Carrillo: Going off that, I suppose it may be believed that these conditions drive the price in the short term. Are you of the personal belief that in the long term these things are irrelevant to bitcoin and we’re experiencing a sort of water flowing down a mountain, a sort of inevitability?

Bansal: I think that’s a nice way to put it. I mean yes, this is something Ryan and I were talking about: Bitcoin has already won. And I’m not saying there’s no risk or no concern and we should all just be chill and not try to work hard to make this asset class better, richer, stronger and more robust. We should be doing those things. But essentially I believe it’s already won. That, in your words, it’s kind of like we’re just going to be going downhill in the next fifty years as Bitcoin takes over every aspect of society and affects it in some meaningful way. Nevertheless, even water going downhill has to contend with things in its way like obstacles, boulders, whatever you like. And there are a lot of those. So I think when we see the price retrace by 50%, that affects my business very strongly, it affects so many people here [Bitcoin 2021], and so when I see that happen I kinda think “well, we’re still just rolling down hill, aren’t we?” Like, we’ll be right back at $60,000 in a couple months, we’ll maybe cross $100,000 after that. I still tend to be extremely optimistic. Of course I could be wrong and it won’t work out this way, but hopefully it continues to do, on the largest scale, the thing I think it’s going to do, which is increase in price tremendously over the next few decades.

Carrillo: Having conducted this interview at Bitcoin 2021, I want to ask you what you’re most looking forward to at the conference.

Bansal: Oh that’s an easy answer. There are so many people here that part of me is worried that, while walking through the conference and all the events, there’s gonna be so much noise and chaos. But the excitement is that there are so many people here, so many of my friends and colleagues, people I’ve been reading the last few years and admiring from a distance. And I’m getting to meet them, have drinks, go on walks with them. You know, the chance to really dig in and have that kind of conversation you can only have in person is what’s so great about conferences in general, and in particular that’s what’s going to be so great about this one for me.

I really appreciate Mr. Bansal taking the time to answer my questions at Bitcoin 2021. Thanks for reading, and be sure to check out his talk at the conference on YouTube.

Source: Bitcoin magazine

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The Conundrum Of Bitcoin Legal Tender Laws

The adoption of bitcoin by El Salvador poses an interesting contradiction of freedoms, albeit solved on a secondary level.

Nayib Bukele, El Salvador’s laser-eyed President, shocked the world at the Bitcoin 2021 conference in Miami when he announced that bitcoin would become legal tender in his country. A few days later, the “Bitcoin Law” was passed, ushering in a new era for the virtual currency.

There is something about the law — mandating that vendors accept bitcoin — that goes against the voluntary “opt-in” ethos of Bitcoin. However, there are key features of the law that many people may have overlooked that protect vendors from the risk of holding the volatile asset while maintaining the benefits of using bitcoin in transactions.

First, the law confirms that vendors are indeed mandated to accept bitcoin as legal tender. However, for accounting purposes, dollars will still be the “reference” currency — meaning prices will still be expressed in dollars but “may” be expressed in bitcoin. Secondly, steps have been taken to avoid forcing vendors to hold bitcoin.

Art. 8. Without prejudice to the actions of the private sector, the State shall provide alternatives that allow the user to carry out transactions in bitcoin and have automatic and instant convertibility from bitcoin to USD if they wish. Furthermore, the State will promote the necessary training and mechanisms so that the population can access bitcoin transactions.

Art. 9. The limitations and operations of the alternatives of automatic and instantaneous conversion from bitcoin to USD provided by the State will be specified in the Regulations issued for this purpose.

Art. 14. Before the entry into force of this law, the State will guarantee, through the creation of a trust at the Banco de Desarrollo de El Salvador (BANDESAL), the automatic and instantaneous convertibility of bitcoin to USD necessary for the alternatives provided by the State mentioned in Art. 8.

Source: Nayib Bukele

In an impromptu interview with Bukele, it was revealed that the citizens of El Salvador will have open access to an official government wallet — designed by Strike — that will allow receivers to instantly and automatically convert incoming bitcoin into dollars if they don’t want to take on the risk of holding an asset as volatile as bitcoin. This is what Strike does best: turning bitcoin into a payment rail that users don’t even have to think about.

The El Salvador government is setting up a $150MM trust fund with the Banco de Desarrollo de El Salvador (BANDESAL), and anyone who converts their bitcoin to dollars with the official wallet is essentially selling their bitcoin to the trust fund.

When the trust fund has more than $150MM of bitcoin it will rebalance and use the proceeds to fund technology investments in El Salvador. The worst possible outcome is that the $150MM only spurs tourism and investment to the impoverished country. The best possible outcome is limitless upside potential.

Users will not be forced to use the government wallet either. They can use a private custodial or non-custodial Lightning wallet if they want. And any private wallet service, made by Strike or any other neobank, could offer the same conversion service.

Thus, this isn’t a full legal tender mandate in the traditional sense. Users aren’t forced to take on the risk of holding bitcoin nor provide change in bitcoin and are free to receive dollars if someone sends them bitcoin. Vendors only have to have a Lightning QR code and they can instantly and automatically receive dollars when someone gives them bitcoin.

One can envision a world where this kind of adoption model spreads to other countries — using bitcoin as an open payment rail that spurs regional investment, while third parties take on the risk.

Your average saver may not like volatility, but guess who does? Professional money managers. If banks want to stay relevant, they will eventually figure out that there is money to be made by becoming the third party that will take on and manage the risk of holding bitcoin from Lightning payments as a value-added service.

Is forcing bitcoin as legal tender still a form of government coercion? Yes, of course. Users are mandated to, at least during the transaction, accept an open payment rail as a payment option. However, Bukele’s implementation is a less forceful way to mandate it. Private wallets are open to compete with the government’s implementation and nobody is forced to hold bitcoin.

The ethos of bitcoin is to not mandate its use and to allow the free market to decide its ideal use case. If private banks or services made wallets that utilized bitcoin’s open payment rails, to reduce friction — and users had free choice to use those wallets — those wallets would be adopted organically, without anyone needing to mandate their use. However, any law that eliminates capital gains taxes, for bitcoin users, is a huge win.

This is a guest post by Level39. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

Source: Bitcoin magazine