Attacks naysayers wring their hands speculative how Bitcoin can't go mainstream. I get schadenfreude from their lack of schadenfreude. Demographically, they probably overlap with fans of The Secret. Reduction in information asymmetry — people are learning about Bitcoin and coming to the bitcoin that bitcoins are indeed the best money. Why Use a Blockchain?
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The Federal Reserve Andreas Antonopoulos On the liability side of the Bitcoiner's balance sheet there are mortgages, student loans, car loans, credit cards, etc. However, the IMF does not have any bitcoin currently, and will find it challenging to obtain enough bitcoin for their reserves. Although this would require a mechanism for borrowing the state crypto. Morgan Stanley chairman and CEO James Gorman has said that bitcoin is "punching above its weight," according to a news report. Contrary to popular belief, good money drives out bad.
Take for instance there is a rush to purchase bitcoins in Venezuela. I attacks upvoted you! Bitcoin naysayers wring their hands over how Bitcoin can't go mainstream. One bitcoin reasonably predict that this will speculative be attacks case a year from now. One can reasonably predict that this will also be the case a year bitcoin now. Over the span of several millennia, strong currencies speculative dominated and driven out weak in international competition.
Once it gets bootstrapped, there are so many applications if you could effortlessly pay a few cents to a website as easily as dropping coins in a vending machine. Slow bleed leads to currency crisis as the expected value of bitcoins solidifies in people's minds. At first they are conservative, they invest "what they can afford to lose". After months, their small stash of bitcoins has dramatically increased in value. They see no reason why this long term trend should reverse: They buy more bitcoins.
They see the price crash a few times, due to bubbles bursting or just garden-variety panic sales — it entices them to buy more, "a bargain". Bitcoin grows on the asset side of their balance sheet. On the liability side of the Bitcoiner's balance sheet there are mortgages, student loans, car loans, credit cards, etc.
Everyone admonishes people to not borrow in order to buy bitcoins. The reality is that money is fungible: Almost everyone is a leveraged bitcoin investor, because it makes economic sense within reason. How leveraged someone's balance sheet is depends on the ratio between assets and liabilities. The appeal of leveraging up increases if people believe that fiat-denominated liabilities are going to decrease in real terms, i. At that point it becomes a no-brainer to borrow the weak local currency using whatever collateral a bank will accept, invest in a strong foreign currency, and pay back the loan later with realized gains.
In this process, banks create more weak currency, amplifying the problem. The effect of people, businesses, or financial institutions borrowing their local currency to buy bitcoins is that the bitcoin price in that currency would go up relative to other currencies.
To illustrate, let's say that middle-class Indians trickle into bitcoin. Thousands of buyers turns into hundreds of thousands of buyers. They borrow Indian Rupees using whatever unencumbered collateral they have — homes, businesses, gold jewelry, etc. They use these Rupees to buy bitcoins. The price of bitcoins in Indian Rupees goes up, a premium develops relative to other currency pairs. Traders would buy bitcoins in the U. They would then sell their Indian Rupees for dollars. This would weaken the Indian Rupee, causing import inflation and losses for foreign investors.
The Indian central bank would have to either increase interest rates to break the cycle, impose capital controls, or spend their foreign currency reserves trying to prop up the Rupee's exchange rate. Only raising interest rates would be a sustainable solution, though it would throw the country into a recession. There's a huge problem with the Indian central bank raising interest rates: The result is evident: This example is purely illustrative, it could happen in a small country at first, or it could happen simultaneously around the world.
Who leverages their balance sheet and how is impossible to predict, and it will be impossible to stop when the dam cracks. Which countries are most vulnerable to a currency crisis?
Business Insider provides a helpful list here http: Bitcoins will have to reach certain threshold of liquidity, indicated by a solid exchange in every financial center and a real money supply — i.
This will either coincide with or cause a currency crisis. Maybe you've heard about a few? With luck, I might even be able to crash the whole damned system. Destroy all records of ownership. Think of it, Marty. No more rich people, no more poor people, everybody's the same, isn't that what we said we always wanted?
Cos, you haven't gone crazy on me, have you? Who else is going to change the world, Marty? I forgot about that one. Need to give it another read. They can't raise interest rates on bitcoin to counter such a move either They will fight like hell to figure out a way to regulate Bitcoin for reasons such as this.
I hadn't thought about this before. Thanks for helping bring the possibility to light! How does one attack a currency? I feel like this is good news but don't follow your meaning at all.
Essentially, by borrowing massive amounts of money in one currency, then selling that currency in favor of another such as bitcoin , thus driving down the price of the former and up the price of the latter.
See the link in lukestokes comment to my post for more details. The normal way for central banks to defend against such attacks is by raising interest rates so high that speculators can't afford to borrow vast quantities of the currency.
What is a Bitcoin Speculative Attack? Take for instance there is a rush to purchase bitcoins in Venezuela. The result will be speculators rushing in to sell the Bolivars for US dollars to purchase bitcoins. Listen to the audio: When will bitcoin start being used to fund speculative attacks on weak fiat currencies? We are close to that. I see such speculative attacks as being the primary driver of The speculation has benefited anonymous payment systems, which are being used by cyber criminals executing widescale attacks such as the In order to fully appreciate the potential threat Bitcoin poses, it is important to first understand speculative attacks on currencies.