The Future of Bitcoin – Bitcoin As A Reserve Asset presented by Tuur Demeester at Bit Block Boom.
Blog post by Cousin Edgar Stumblefield.
Local government trying to raise taxes from a construction company. It could only be done in kind, so they had them build something that was not needed, but served as the payment for their taxes.
If Bitcoin was around during the time that many countries had financial problems, it would have given the country an alternative currency to work with.
Minsky moment ; happened in Russia ; 1998 ; sudden major collapse of asset values ;
Monetary Competition
Parent Population → Bottleneck (drastic reduction in population) → Surviving Individuals → Next Generation ;
Credit Boom → Minsky Moment → Next Generation
If Bitcoin is the only source of capital…
- Bitcoin borrowing
Adoption is non-intuitive
Adoption we have seen so far has been driven by engineers. That is going to continue with Generation Z, but it is also going to happen with the older generation as well. They will not even know they are being exposed to Bitcoin adoption. Might be disillusionment if some of these hopes do not come to fruition soon.
“Hidden adoption” is coming
4 weeks in the past 5 years ; then there were only 3 weeks when it went up 3 percent
Bitcoin ; 1 week with a serious draw down ; then 2 weeks of price rise ; then 2 weeks of rise ; can be very volatile, but…
Central bank asset? Originally the money had value, but over time it has because fractured ;
History of reserve assets
Back in the day, it was only gold, but the Breton Woods agreement among the various countries to get countries to go off the gold reserve ;
From gold to flat fragmentation
Definitions
“Gold reserves” – gold bullion held by banks or central banks
International Reserves
Today…
IMF's definition of “Reserve Asset”
- readily available
- value shouldn't depend on country's residents
Central bank asset?
More and more countries are starting to buy exotic assets ; many are becoming more positive about Bitcoin
Federal reserve act was founded after a large banking crisis ; allows banks to bail out each other ; problem is that it concentrates the risk ; there may be a push for a federal reserve push
What's next?
- Stress tests
- Custody tech: multi-sig, federated sidechains, time locks
- Legal: Bitcoin needs currency status
- Insurance: DTCC / Reinsurance / Central Bank?
- Division of labor
Right now, there is not an exchange standard ; there are some technologies coming out to help with that ; if there is a Man In The Middle Attack, there may be something in place to help to keep the coins from going to the hacker ;
In sum:
- Bitcoin is…
- a superior savings asset
- a candidate reserve asset
- Minsky Moments can lead to HyperBitcoinization
- After Fork Wars (2017), next is Custody Wars
Tether , started in 2013 or 14 , tokens put into a storage and represent real dollars ; whether it is legitimate? I am afraid the dollars backing Tether may be deemed as fraudulent ;
Custody Wars – I mean there is going to be tension, governments are going to veer to one or the other model ; there are going to be different attentions given to different things ;
Outliers in Bitcoin ; research has been done, let's say you hold it for an average year, and take away the 10 best days, your line graph would be flat ; it may be because there is a repetitive bubble of word that goes around that Bitcoin is going up, more people buy it, etc. which affects the last few days on a cycle ;
Q: Could you address some of the rumors of Switzerland laws favoring robust custody solutions?
A: When it comes to off short jurisdiction, there is roughly two categories ; all of the off shore jurisdictions have been having problems due to having to reveal the information of the owners so that they can be taxed ; Banks are inundated with requests for custody solutions for Bitcoin ; there are Bitcoin companies that are buying up banks ;
Bitcoin gives you optionality ; you can bury it in your garden ; there is an enormous range ; also allows for auditability which is not true for traditional banks ; the way Bitcoin technologies works allows places to have your keys without getting into your Bitcoins ;
Tuur Demeester is founder of Adamant Capital and is currently ranked as the ninth most influential personality in the industry by cryptoinfluencers.io. He previously co-founded the Rothbard Institute and is an investor in the Bitcoin exchange Kraken. In January 2012, Tuur added Bitcoin (trading at $5 at the time) as part of the recommended currency basket of the Dutch-language investment newsletter he publishes, MacroTrends.
