Is Bitcoin's Growth Driven By Speculative Investors? (yahoo.com) 130
"Bitcoin is now trading near $18,000, up almost 100% in six months," notes Bloomberg columnist Lionel Laurent, "and it's flirting with an all-time high reached in 2017 (which, given it was followed by an ugly crash, faithful Bitcoiners would rather forget)..." .
But what exacty does that mean? He challenges the notion that Bitcoin is the new wealth-protecting investment like gold, asking "is this really being driven by people seeking protection from a more uncertain world...?"
If anything, Bitcoin looks much more like the stock market on steroids than it does a digital version of gold, which has barely budged since the end of October as confidence about a Covid cure has gradually improved. You can see why hedge fund skeptics like Ray Dalio are dubious of Bitcoin's charms. The cryptocurrency's recent above-average correlation with equities is fine when everything's going up, but not in times of stress: In mid-March, for example, a flight to safety triggered by Covid cut Bitcoin's price in half. A recent Kansas City Fed study comparing bonds, gold and Bitcoin between 1995 and Feb. 2020 found Treasuries behaved "consistently" as a safe haven, gold "occasionally" and Bitcoin "never."
Behind the talk of digital gold is the reality of an erratic, still-speculative asset with the potential for big price swings...
While digital payment firms such as PayPal Holdings Inc. and Square Inc. have launched Bitcoin applications, this price jump is not about people buying cappuccinos. Data from Chainalysis estimates merchants made up only about 1% of crypto activity in North America between mid-2019 and mid-2020, while exchanges accounted for almost 90%... Crypto is still a heady bet on life-changing wealth, not a disruptor of how normal people use money.
But what exacty does that mean? He challenges the notion that Bitcoin is the new wealth-protecting investment like gold, asking "is this really being driven by people seeking protection from a more uncertain world...?"
If anything, Bitcoin looks much more like the stock market on steroids than it does a digital version of gold, which has barely budged since the end of October as confidence about a Covid cure has gradually improved. You can see why hedge fund skeptics like Ray Dalio are dubious of Bitcoin's charms. The cryptocurrency's recent above-average correlation with equities is fine when everything's going up, but not in times of stress: In mid-March, for example, a flight to safety triggered by Covid cut Bitcoin's price in half. A recent Kansas City Fed study comparing bonds, gold and Bitcoin between 1995 and Feb. 2020 found Treasuries behaved "consistently" as a safe haven, gold "occasionally" and Bitcoin "never."
Behind the talk of digital gold is the reality of an erratic, still-speculative asset with the potential for big price swings...
While digital payment firms such as PayPal Holdings Inc. and Square Inc. have launched Bitcoin applications, this price jump is not about people buying cappuccinos. Data from Chainalysis estimates merchants made up only about 1% of crypto activity in North America between mid-2019 and mid-2020, while exchanges accounted for almost 90%... Crypto is still a heady bet on life-changing wealth, not a disruptor of how normal people use money.
Is the Pope Catholic? (Score:5, Insightful)
Does a bear "function" in the woods?
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Considering that it has built-in price deflation, that's about as deep an analysis that is called for, but for people that didn't know...
When the supply of new currency continually shrinks, while the economy grows at least as fast as the population, then only speculation will drive the currency exchange rate, and the actual economy will continue to use other currencies. Duh. Bitcoin, and in fact all "cryptocurrencies" that feature a mathematical "mining" feature to grow the supply, have a currency supply th
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That actually isn't true. BTC is one of the few "mineable" currencies that have such limited supply built into the mining algorithm. Ethereum is often lambasted by BTC maximalists for being so inflationary (there's no real cap on how much ETH can/will be produced via rewards, though Ethereum does have upward-scaling difficulty and the PoS algorithms that go online once Ethereum is no longer "mineable" may actually be deflationary).
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That actually isn't true. BTC is one of the few "mineable" currencies that have such limited supply built into the mining algorithm.
The only way you think you're moving away from the criticism with this statement is if you really don't have any clue how important it is to actively manage a fiat currency.
Its a frog's ass water-tight? (Score:1)
If a sky-screamer screams at the sky and nobody hears it, did they make a sound?
Re: Is the Pope Catholic? (Score:1)
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poor headline writing (Score:2)
It's my understanding that when writing a headline as a question, there needs to be the possibility that the answer is "no". That's just not the case here.
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Better call an "editor" and let them know!
But considering there isn't only one use case, but actually two, perhaps it is the money launderers who are actually driving the price growth, and the speculators are a smaller group that isn't impacting the price substantially?
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When was it not speculation? (Score:2)
Is Bitcoin's Growth Driven By Speculative Investors?
When was it not? Adding Wall Street and Main Street speculators to a mix of techy speculators would not change this simple fact. Fear Of Missing Out.
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You gotta be pretty "techy" indeed to think a fiat currency where the rate of new currency can't be increased, and slowly gets lower over time, could be useful for commerce.
Like, "I don't know algebra, but I like video games" level of Techy.
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You gotta be pretty "techy" indeed to think a fiat currency where the rate of new currency can't be increased, and slowly gets lower over time, could be useful for commerce. Like, "I don't know algebra, but I like video games" level of Techy.
Actually, no, its more like a "I don't know history, but I like video games" level of techy to believe that fiat currencies are not useful in commerce.
By the way, do you have typos in the above? Because fiat absolutely can have new currency introduced, ex the printing press. Also fiat losing value over long time periods does not impede commerce, it hurts savings. Commerce requires a somewhat short term stability, a problem with bitcoin by the way. Its saving where interest cannot keep up where there are
Centralized commercial mining under 1 gov't (Score:3)
only a problem in the short term
Note the context of "commerce". Which is why, where bitcoin is accepted in commerce it is nearly always instantly converted into fiat rather than held.
hint: evaluate btc's trends for past 10 years, then project 5,10,20,30 years forward.
As I said, the HODL crowd argues for bitcoin in the "savings" context. But that is highly speculative.
Bitcoin is flawed. It will likely be replaced. Will that be next year, in 5 years, I don't know. I just know it is flawed, it fails according to its design's security model. Bitcoin requires a diverse distributed community of miners to maintain its blockch
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It's not "investing" (Score:2)
..it's gambling, with a dashy of fraud
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The difference between investing and gambling is that in gambling some random event happens, and you either win or lose.
In investing, some random event(s) happen(s) continuously, and you choose when and if to buy or sell. The choosing when is the investing, and is not random. Even where the event, for example the current trading price of an issue, is entirely random. The investing is still not random, because when you choose to buy, or choose to sell, you know the current value and get to make a decision, u
LOL at investing description (Score:1)
In investing, some random event(s) happen(s) continuously, and you choose when and if to buy or sell.
In actual investing, the events are not random, you can pretty well tell what companies will do well and what will not - sometimes there are random failures, as there are with anything in life, but a great number of things are far more predictable than random.
It is a crap investment that has no fundamental value,
This lacks any understanding of what Bitcoin is, or the wider world we live in. Bitcoin is a ver
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In investing, some random event(s) happen(s) continuously, and you choose when and if to buy or sell.
In actual investing, the events are not random
Now look up what the word "random variable" means in the context of statistics, and then note that this is the meaning of "random" that we use in investing.
I'm making close to 100% per year as a swing trader, so when I say it is a random variable, I'm not saying I don't know anything about the probabilities of different values. It means something different than that.
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fundamental value
What do you mean by that? As in, how do you calculate it?
The financial instrument I'm investing in is entirely detached from the market
I'm not sure you understand what an ETF is. Are you thinking of an ETN?
Posts summary (Score:1)
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TL;DR: Ponzi schemes and stocks aren't the same
The main difference between a Ponzi scheme and regular stocks is that you're likely to lose your money if you invest in a Ponzi scheme, whereas, on average, you'll make money investing in stocks. Another difference is that a Ponzi scheme claims that it is not a Ponzi scheme, whereas a stock is quite clear that it's a stock.
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It hasn't been around long enough to test that theory. And people can and do lose money in stocks. In the long term you won't, but if you need to cash out say when you are 75 to pay health bills, you may not be around long enough for an upswing.
Re:Ponzi (Score:5, Informative)
Stocks are backed, bitcoin isn't, it's a big difference.
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and 'backed' means... what? Just that somebody agrees to trade your goods for a particular price. This is just the same deal with Bitcoin as with stocks, fiat, precious metals and so on. All of them have value only because somebody is willing to trade them, without that they are all equally worthless.
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Which can disappear in a heartbeat. When co's used to own big expensive factories, then liquidation may get you something back. Intellectual properly can fade in worth almost instantly.
No profits [Re:Ponzi] (Score:1)
Addendum: "real" owners of companies get a share of the profits. Outside of piddly dividends, stockholders don't. Thus, they are not comparable to full-out owners of a company.
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Bitcoin is a vehicle for "greater fool theory" investing. The perception of its value is based entirely on how much investors believe they can profit by reselling at a later date, as Bitcoin has no intrinsic value (whereas even an overvalued stock share represents a stake in a company). Unlike a ponzi scheme, Bitcoin doesn't completely collapse when there are no further greater fools buying in, instead, the value undergoes a correction.
A ponzi scheme eventually collapses under its own weight, as it become
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it is a Ponzi scheme
So are stocks, they are just a slow motion Ponzi.
This just means you don't math.
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So are stocks, they are just a slow motion Ponzi. Other than dividends, which are usually paltry, one only makes money off of stocks by selling them.
Owning stocks are owning a part of a company, and over the time the value of that stock will reflect the results of the company. Owning bitcoin means you just own a part of a crypto Ponzi scheme backed by nothing, which you bought only in the hope of finding a bigger fool.
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Not quite sure if you don't understand stocks or Ponzi schemes. But if I had to take a guess based on that sentence you seem to understand neither.
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Bitcoin is a Ponzi scheme and a pump-and-dump scam.
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These days companies are fuzzy "assets" that can fade in a lawsuit or technology change.
How is this notion even new? (Score:1)
I thought everyone knew that Bitcoin was a grift.
Makes me wonder what's going to happen (Score:4, Insightful)
And eventually the cops will get wise to the money laundering. I know it seems like it's been a long time but they're way, way slower than you think.
It's probably more than just pot (Score:1)
Bitcoin probably funds a lot of shady stuff (ransomware included), so I doubt legal weed is going to upend the Bitcoin economy.
I've always felt Bitcoin's demise will result from succumbing to the will of the mob. Some other coin will eventually be more stable/easier to turn back into real money/not require insane amounts of electricity for mining (take your pick), and Bitcoin will go the way of MySpace, AIM, Napster, etc.
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True but it's probably the largest market (Score:3)
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Christ, do you realize how easy it is to get weed where it's illegal? Hardly anybody uses a cumbersome traceable digital currency to buy pot or any other drug.
https://www.rand.org/randeurope/research/projects/online-drugs-trade-trafficking.html
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when Marijuana is finally legal in developed nations.
It already is.
Taxes went up, incarceration went down, the advertising on billboards changed from some bullshit about getting high and eating fried eggs, to ads for weed stores.
Those were the only notable changes in society.
And eventually the cops will get wise to the money laundering. I know it seems like it's been a long time
They seized ~ $1B worth of bitcoin a couple weeks ago, and I read about money laundering networks getting rolled up all the time. Maybe they just don't have any reason to put a sign on the mob's door that says "investigation in progress." Maybe they don't announce how they found out about
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Yeah, but vaping is huge among high school and college age people.
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Drugs & money laundering form the backbone of the Bitcoin economy since, well, you can't do anything else with it
There are a few other possible uses, 1.) conduct private transactions without government scrutiny or taxation, 2.) store of wealth that isn't subject to government debasement inflation, 3.) can cross international boarders without detection or taxation. While it isn't perfect, and some other assets have advantages that crypto does not (example: physical precious metal ownership does not have a counterparty risk, whereas crypto relies on the continuation of the network; example 2: cash works in the event of
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Not anymore it doesn't. BTC is easy to track. Using it to exchange in goods/services of dubious legality is a surefire way to get caught. Only criminals that seem to want BTC anymore are the guys pushing ransomware from countries with weak extradition treaties.
Dunning-Krugerrands (Score:2)
It's a trap! (Score:2)
As noted previously, go here: http://bitcoinity.org/markets [bitcoinity.org]
Set the horizontal timeline to show "all".
The purple bars behind the graphs are trading volume. Not that in 2017 there was massive trading and this time there isn't.
ie. There's no demand, only supply. That's a sure indicator that somebody with lots of bitcoin to sell is trading between sock puppet accounts at elevated prices in order to draw in the suckers (again).
tldr: They're pumping like mad and preparing to dump.
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Nice. This means even if you get suspicious now, you cannot actually get out because there are no buyers. Exactly what I expect is happening, but I had no hard data. You just supplied that. Thanks!
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Only if you're a wale.
It's not like they can pick and choose who to buy from, so if you throw a couple bitcoin on the exchange they'll have to buy it.
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It's not like they can pick and choose who to buy from, so if you throw a couple bitcoin on the exchange they'll have to buy it.
They'll buy/sell in quantities that make it very likely they'll end up trading between their own accounts.
.
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If you put a lower ask on the exchange and it doesn't get picked up, you determine the price. So they better ...
Re: It's a trap! (Score:2)
2017 corresponds to 2021 on the chart. You're looking at the wrong part of the graph.
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Ooops, typo!
I meant to type, "...note that in (the bubble of) 2017 there was massive trading and this time there isn't."
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tldr: They're pumping like mad and preparing to dump.
I hope so, considering the feds control the exchanges! It will make for entertaining articles in a couple years when they roll these fuckers up.
IRass (Score:2)
I was inches from buying some for speculative reasons, then discovered the IRS demands to know if you invest in cryptocurrencies; and tax experts speculated it could increase the chance of being audited. I decided the hassle wasn't worth it.
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I mean, there's no reason bitcoin is different from other speculative investments for tax purposes. I'm not sure why an aboveboard statement you invest in cryptocurrency would increase your chance of getting audited.
That story is based on the evidence that the IRS is hiring crypto experts to assist with audits and checking crypto claims. It was a huge jump in percentage of employees, but that's because the IRS was flying pretty blind on that front. And they started mailing letters to 10,000 odd people sa
Bitcoin part 35869375 (Score:2)
What more can be said about BitCoin and its volatile price hikes and crashes that hasn't already been said on here?
Every time it jumps up 1000$ there is an article about it and all the usual things are said, by those with money invested and those without. I'm not sure any new news has come out to change either sides opinion?
Plane crashes make the news too (Score:1)
It's news because we all know the bubble will eventually burst again, but investors with balls of steel are still putting money into it. It's a financial game of chicken, and sooner or later someone is going to swerve.
Re: Bitcoin part 35869375 (Score:2)
No, the news is that it's near an all time high. If you follow Bitcoin you know that new all time highs are a great time to make money on momentum investing. Time to buy in if you missed the last bubble.
Re: Bitcoin part 35869375 (Score:2)
Re: Bitcoin part 35869375 (Score:2)
Sure, if you want to have your money locked up waiting for the bubble. But for all those people who don't care about Bitcoin except as a get rich quick scheme, this is the entry point.
Umm what other investor kind is there? (Score:2)
Unless they are doing something illegal like insider trading, anyone who invests money in anything is speculating.
Re: Umm what other investor kind is there? (Score:2)
Putting money into startups is speculation. Putting money into profitable companies who pay a dividend is investment. Most stocks sit somewhere in between, providing dividends, but relying on stock price growth over time to make those dividends worth it.
beanie babies (Score:2)
Not any more than any other collectible. Its worth what the next collector will pay for it.
Do you have to ask? (Score:2)
This is a classical pump & dump. Requires you to pump until enough dumb people are buying into it and then you can safely dump and laugh at the idiots all day long. If you do this with stocks, you go to prison. Bitcoin is unregulated and even this very, very old scam works nicely because there is an endless supply of morons with money to lose.
Sure, you _can_ do some ride-along with such a scam, but only if you bough in low. And you need to get out in time to actually be able to sell and that means _befo
Re: Do you have to ask? (Score:3, Funny)
I'm sorry you missed out. Just an FYI, you still have time to get in so you can stop feeling sorry for yourself.
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Hahaha, thanks, but no thanks. I prefer money that I have to money that I may potentially maybe have if I can get out at exactly the right time.
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Pump and dump is only illegal if little guys do it with penny stocks ... if you're big enough it's just a legitimate trading strategy.
https://news.slashdot.org/stor... [slashdot.org]
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Bitcoin is unregulated
Absolutely false, at least in the US.
Bitcoin is an unregistered security. Which are nearly as regulated as registered securities. With a registered security there is a bunch of fraud and other liability resting on the person who registered the security, but if they did everything right and released the correct public information, they're less restricted than an unregistered security.
The SEC clarified this years ago. It is no different than starting a business and selling "bonds" to the public; there is lo
Bitcoin is an asset not a security (Score:2)
Bitcoin is an unregistered security
In the US bitcoin is an asset. An unregistered security is a stock not registered with the SEC. The handling of assets, including bitcoin, for US tax purposes is pretty much the same as the handling of stocks (date and basis, date and sale, long/short gain/loss) but securities and assets remain different things.
Like asking if religion is driven by fantasy (Score:2)
Time to buy (Score:1)
Bitcoin FUD marks the start of bull runs. Buy now to double your money in short order.
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...and criminals, with money laundry (Score:1)
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Surprised that works. Have the authorities down there not figured out how to track transactions yet?
Re: ...and criminals, with money laundry (Score:1)
Yes (based upon original title) (Score:1)
Ponzi-tastic (Score:2)
No, its Tulip-tastic (Score:2)
When has Bitcoin's growth ever not been through speculative hype & bullshit about its potential as an "investment".
That's more "Greater Fool" scheme not "Ponzi". See Tulip Mania.
I **LOVE** reading the comments here on Bitcoin! (Score:4, Insightful)
I can't believe after 11 years of Bitcoin being around, at near all time highs (after passing through 4+ other bubbles and crashes), after Wallstreet starting to invest in it, after corporations starting to invest in it by the hundreds of millions, when Central Banks are trying to copy it, when mainstream banks are starting to offer exchange services to trade Bitcoin and other cryptos, when dozens of governments in various countries pass laws specifically considering crypto and Bitcoin thus making it legal to buy and trade, when trusts tradeable on wallstreet offer it, when Stock broker companies are all starting to offer trading services for it.... ... there's still piles and piles of idiots around here claiming it's for drug dealers, pedos, etc. Un-F'ing-Believable! That's all I gotta say.
I'll enjoy selling my Bitcoin to you after it hits $100K/BTC.
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Er, the banks have all labeled Bitcoin as risky speculative spots to park money, not investment-grade.
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Yes. At 7 transactions per second, BTC is going to take over the world. Moron.
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Pump and Dump? (Score:1)
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AFAIK mining also gives you a percentage of the transactions, that's why sometimes the transfer fees go through the roof when the trading volume is too high and other times it's free when there's not many transactions at once.
Paypal Effect (Score:2)
Actually, it's just the Paypal effect. Given anyone with a Paypal account can suddenly trade in cryptocurrencies, it makes it more "mainstream". Thus speculators pretty much saw the influx of new fools, err marks, err, "ivnestors" as an opportunity.
Just like when people mortgaged their houses the last time Bitcoin jumped, the influx is only temporary and once the Christmas bills come due, the crash will occur as everyone starts bailing out their Bitcoin. Of course, just like people are ill-informed about h
compared to gold..? (Score:1)
Percentages are useless for 2020 (Score:2)
And it also crashed at the beginning of the pandemic, then remained stable for a few months before starting to go up [coingecko.com] after Trump lost the USA elections.
A lot of things crashed/slowed down/stopped at the beginning of this year, stating numbers and percentages for 2019 is sort of meaningless compared the previous years.
Do you ever get tired of being wrong? (Score:2)
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I've made a lot of money off of it. I could be wrong, however I think you're nuts if you buy right now. It'll go back down. Whole bunch of people will get hurt again.
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"Whole bunch of people will get hurt again."
They won't get hurt, they will get educated. After enough people are educated and there are no more "greater fools", that will be the end of Bitcoin.
I'm looking forward to a cryptocurrency that is actually a functioning currency.
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Is that what we're calling money launderers, pedophiles, drug cartels, terrorist groups, and tax evaders now? Speculative investors?
You can try if you like, but better not do it in the UK since they'll probably be able to sue you for libel. Even in the states they might consider it such an insult to their honour they just shoot you.
Re:"Speculative Investors" (Score:5, Informative)
Actually those groups are using Bitcoin exactly as it was promoted to be: as an anonymous means of value exchange that is beyond the reach of government control. The volatility of that medium doesn't really help them, it's more something they work around. They can't denominate a contract for a future drug delivery in BItcoin; they have to denominate it in regular currency and convert.
We actually know who a lot of the BItcoin "whales" are, and I bet the government knows even more, because to be one you have to move lots of dollars into or out of Bitcoin and that triggers money laundering record keeping.
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Correct. There are coins you can use for anonymized transactions. BTC isn't one of them.
You left out the uberwealthy (Score:2)
There's also a number of uberrich people who are buying bitcoin as a "just in case" hedge, like the CEO of Softbank did for a while. But if you put $50MM in our of several billion, you don't risk getting frozen out if bitcoin somehow becomes even huger or if all currency suddenly hyperinflates at the same time the markets crash.
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