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Question: Why did Jorge Stolfi lie to the SEC that commodity money is an equity?
He's an idiot - 5 (45.5%)
He was paid off - 0 (0%)
He's indoctrinated by formal education - 5 (45.5%)
He was correct! - 1 (9.1%)
other (see thread) - 0 (0%)
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Author Topic: Why Jorge Stolfi lied to the SEC that commodity money is an equity? Bitcoin ETF.  (Read 1035 times)
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iamnotback
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April 11, 2017, 09:00:26 AM
Last edit: April 11, 2017, 08:51:32 PM by iamnotback
 #1

In his presentation to the SEC for the Winkervoss twins' ETF application, Professor Jorge Stolfi wrote:

Quote from: Jorge Stolfi
For the purpose of the fund, bitcoin is being characterized as a commodity. However, bitcoins do not really exist.

Commodities don't have to be physical. A commodity is defined to be a fungible good whose supply is not controlled by any one entity:

"A reasonably interchangeable good or material, bought and sold freely as an article of commerce."

"A commodity is a basic good used in commerce that is interchangeable with other commodities of the same type"

"a good or service whose wide availability typically leads to smaller profit margins and diminishes the importance of factors (as brand name) other than price"

Quote from: Jorge Stolfi
They do not have material existence, of course; but they don't have even the virtual existence of MP3 or video files.

The latter are specific patterns of bits, that can be "owned" in the broad sense of the DCMA and other "intellectual property" legislation. Bitcoins are not specific patterns of bits, however. One cannot display them on a screen, print them, play them on a speaker -- as one can do with other forms of intellectual property.

Duh, Bitcoins are fungible, so they can qualify as a commodity. Non-fungible digital content such as MP3s can not be a commodity.

Proving ownership over a quantity of Bitcoins does require possession of a specific pattern of bits. Which is analogous to proving ownership over gold is having possession of a quantity of gold.

Quote from: Jorge Stolfi
In that respect, bitcoins are similar to the money in a bank account. The bank client cannot see his money, either. All he can do is see a ledger entry that states that he has a certain amount in his account. Likewise, he cannot display his bitcoins, but only see a ledger entry -- in the "blockchain" -- that states that he owns a certain amount of bitcoins.

There are important differences, however. A bank is bound by contract and by law to transfer the amount stated in that ledger to other banks, or to cash, if the client requests it; and the government is morally obliged to preserve the purchase value of that cash, to a reasonable degree. But there are no legal, contractual, or moral obligations about bitcoin transfer or conversion to other money instruments; and there is no entity tasked with preserving its value.

Hodling gold is also similar to the money in a bank account and also has the analogous independence from banking regulation. Yet there is a gold ETF in existence!

Quote from: Jorge Stolfi
Thus, bitcoins are more like "penny stock", shares of a company with no assets, no products, and no staff; or shares in a pure ponzi schema, like Madoff's fund. The value of bitcoin is supposed to come only from the existence of an
(allegedly) secure ledger that records the distribution of coins among numerous accounts ("addresses" in the system's terminology), and therefore allows their use as a means for internet payments. But penny stocks and ponzi funds offer that capability, too.

While it is true that shares of bearer stock equity certificates of an individual issuer company are fungible (i.e. there is no name associated with the certificates so they can be freely bought and sold), they are not divisible, not tradeable in an unregulated exchange markets, and are not a fungible money because the value of the stock fluctuates w.r.t. to the performance of the company, i.e. a form of 3rd party liability. Whereas, Bitcoin like gold has no 3rd party dependence, nearly infinite divisibility, trades on unregulated exchange markets. These factors in addition to rarity and anonymity, give Bitcoin and gold their perceived value and nearly constant marginal utility as money. Bitcoin is superior to gold in that it has an inelastic supply and can move non-physically across borders unregulated which enables it to be more efficient than existing fiat currencies, and more difficult to regulate all possible exchange market markers for Bitcoin compared to gold. The lack of regulation is what makes Bitcoin very efficient, per John Nash's Ideal Money concept. When politicians/central bankers can get their grubby regulatory hands on money and issuance, they distort the free market causing inefficiencies.

So first Jorge compares Bitcoin to money which was correct, but complains it is not regulated, yet gold is also not (at least not entirely) regulated and has an ETF. Then he compares Bitcoin to equities which are not money. Duplicitous much.  Roll Eyes

Jorge insinuates that Bitcoin is high risk because its small market cap, but note that Bitcoin's market cap already exceeds by far any penny stock and it will soon exceed the marketcap of every company in the world.

Quote from: Jorge Stolfi
Another important difference between bitcoin and other assets, real or virtual, is that the ledger (blockchain) does not really establish ownership of the bitcoins to identified individuals. The bitcoins are assigned to "addresses" (accounts) that are identified by numbers, and can be moved anonymously by using "private keys" associated to the addresses.

Anyone who knows the private key of an address can move the bitcoins stored there. By design, there is no identity verification, not even the possibility of it. In that regard, bitcoin accounts in the blockchain are like the old numbered accounts in Swiss banks. As the case of the MtGox exchange showed, when btcoins are stolen, it is nearly impossible to identif the thief, or even to determine whether it was an outside or inside job.  This feature creates a security risk that is impossible to quantify.

Since 2010 or so, bitcoin has been heavily used for for investment and speculative trading, more than as a currency or payment network. All that trade has been occurring in totally unregulated exchanges that are not subjected to any meaningful auditing.

All of those statements apply to gold also.

Although gold trades less on entirely unregulated exchanges, that is one of the reasons that gold is inferior to Bitcoin as an investment commodity money.

Quote from: Jorge Stolfi
The market price of bitcoin, like that of a penny stock or ponzi fund, is entirely speculative, based on expectations of traders about future prices, which will be based on expectations of future expectations...

Unlike legitimate stocks and bounds, that infinite regression is not ultimately grounded on fundamentals -- because bitcoin does not have any. In fact, its primary use as speculative financial instrument causes extreme price volatility, that prevents its use as a currency.

Ownership of bitcoins does not yield any dividends or interest. While eventual users of bitcoin as a currency would be required to pay transaction fees, those fees will not be paid to bitcoin holders, but to the "miners" that maintain the public ledger.

The only way to make a profit by investing in bitcoins is by selling them to other investors, for more than their purchase price. Thus, bitcoin has the essential character of a penny stock, or a pyramid schema: the profit of early investors comes entirely from the investment of later ones.

All of those statements apply to gold also. Gold has nearly no utility other than as money. The ornamental jewelry demand (i.e. that people want to flaunt it) is because of the perceived value of gold as money. If we remove that perceived value as money, then the tangible material of gold would have nearly no use and thus no value, except as its price dropped it might become economic for new uses.

The basis of gold's perceived value are the qualities I mentioned already, e.g. rarity, fungibility, infinite divisibility, lack of 3rd party dependence, etc.. Bitcoin has these same attributes and also excels in ways that gold can't, for the purpose of money.

Again the comparison to equities is incredibly stupid for the reasons I had already stated.

Quote from: Jorge Stolfi
Investment in bitcoin does not contribute to mankind's real wealth or well-being: it does not finance the creation of any material goods or real services. On the other hand, it has ruined many naive investors who have been induced to put their savings into it, by spurious promises of fantastic price increases in some undefined future.

This is incredibly myopic. Jorge Stolfi doesn't seem to appreciate the entire reason for money to exist is because it raises the efficiency of commerce. The free market Invisible Hand of money is doing things that can't be seen (because they occur decentralized). For example, Jorge Stolfi can't see that Bitcoin as a reserve currency of altcoins has motivated and financed my development of BitNet which I posit will entirely revolutionize the Internet. I even told Jorge about my project in our private discussions on Reddit in 2016.

Quote from: Jorge Stolfi
In my view, since it is primarily used for investment, bitcoin should be regulated like a security; in which case it would probably get from the regulators the same treatment that a penny stock or ponzi fund would get.

No single government can regulate blockchains, because it is a globalized phenomenon and it is like playing Whac-A-Mole (even if you could kill Bitcoin, another altcoin would rise to replace it and all the value from the public keys of Bitcoin would be burned to the new altcoin seamlessly). Analogously no single government can regulate gold outside its borders. Gold's disadvantage compared to Bitcoin is that gold can't be traded across borders without government interference with the free market. John Nash's Ideal Money states that huge distortions in the free market are caused by government interference with money.

Bitcoin's addresses are like a genetic DNA from a virus that can't be permanently destroyed. Shut down all the mining, yet the dormant virus will come back alive in the future will all value still intact. So we can say that Bitcoin is at least as durable as gold (and I will soon show a Theory of Everything for our universe in which I can posit Bitcoin being intangible information is more durable than tangible gold, because information is transferable to dimensions not representable in the tangible classical mechanics).

Quote from: Jorge Stolfi
As for the proposed ETF, it does not add any productive mechanism to the underlying bitcoins. It only provides a level of indirection, that is intended to make bitcoin accessible to investments funds that it would not otherwise get (such as retirement funds). But, would the SEC authorize an ETF whose shares are to be backed exclusively by shares of a specific penny stock?

Adding to the market cap of Bitcoin will grow Bitcoin's utility.

The physical gold backing any gold ETF only has value because of the perceived monetary value of gold, of which Bitcoin has the same attributes. The physical gold would become worthless tomorrow if people decided that gold has no utility as a store-of-value money (and in fact this is coming because gold is inferior to Bitcoin and governments are intent on confiscation of physical assets and regulated assets such as bank money, stocks, and real estate).
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April 11, 2017, 12:49:30 PM
 #2

lol

the real "commodity"

is a raw material
(oil, gold, beef)
which the quality matches enough that its comparable to the same raw material from other sources.
EG oil is oil - but diesel is different to unleaded car fuel, aswell as the obvious that diesel/unleaded are not raw.

the commodities markets are about raw materials that are sourced and marketed to later be used to make other produce.
EG
gold-> circuits/jewellery
oil-> diesel/unleaded car fuel/plastic products
wheat->bread


now take a breather


things like gold. although it sits on a commodity market. it can also sit on other markets too.
like asset markets and final product markets.


take a breather i know your itching to reply


now here is the thing. because bitcoin has certain 'features' that resemble golds ASSET features. does NOT make bitcoin pass the test of the "commodity" market test.

bitcoin is an ASSET currency. not a commodity.
once you realise that gold sits on many seats/markets because it has many properties both raw/final... physical/non-physical. and you separate those features to which market fits which.
you will start to see the separation of the asset features market and the commodity market and not be so quick to want to throw bitcoin into the "commodity" category simply with rebuttles of "but bitcoin is like gold"

I DO NOT TRADE OR ACT AS ESCROW ON THIS FORUM EVER.
Please do your own research & respect what is written here as both opinion & information gleaned from experience. many people replying with insults but no on-topic content substance, automatically are 'facepalmed' and yawned at
iamnotback
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April 11, 2017, 12:58:55 PM
Last edit: April 11, 2017, 02:32:14 PM by iamnotback
 #3

the commodities markets are about raw materials that are sourced and marketed to later be used to make other produce.

Just because you've heard some nonsense in school, read on Google, or where ever, doesn't make it logically consistent.

Any way, I understand it is pointless to have a discussion with someone who can't even phrase his argument cogently, nor in the context of the generative essence criteria raised in the OP.

things like gold. although it sits on a commodity market. it can also sit on other markets too.
like asset markets

You shouldn't conflate perishable commodities with commodities in general, i.e. commodities is a superset of perishable commodities.

The better fit a commodity is to the definition I provided in OP, the more utility it has for money (i.e. assets aka store-of-value and unit-of-account for settlement), although money is more ideally those commodities which have very low or no utility for anything other than money.

now here is the thing. because bitcoin has certain 'features' that resemble golds ASSET features. does NOT make bitcoin pass the test of the "commodity" market test.

bitcoin is an ASSET currency. not a commodity.

You're confused. Try reading what I wrote above and think about the logical consistency of subsets and supersets for taxonomy.

There are many things which are assets, which are not fungible and don't have the properties of a commodity per the definition I provided. You're conflating assets with commodities. Assets and commodites can partially overlap on a Venn diagram, but they are neither subsets nor supersets of each other. Thus your taxonomy is logically inconsistent. For Bitcoin to be only an asset, then it would not possess all the features of a commodity, yet it does. Otherwise you need to argue that the features of gold which are not in common with other assets are not a commodity. Logic.

Since tangibleness and perishableness are not properties that are shared by all commodities, then they are not attributes of commodities. To reiterate, commodities are fungible goods in which no one entity has control over the supply. They key attributes that distinguish commodities from other goods is that they are fungible and that their supply is not a 3rd party dependency, i.e. we don't depend on any one company to get pork bellies, but we do depend on Microsoft for supply of the Windoze operating system. And for money it is most ideal if the supply is inelastic, which is another minor reason Bitcoin is better than gold for money.

The proof (as explained in the OP and requoted below) that tangibleness is not what gives gold its monetary attributes proves that tangibleness is not an essential feature of money. Again it is logic.

Gold has nearly no utility other than as money. The ornamental jewelry demand (i.e. that people want to flaunt it) is because of the perceived value of gold as money. If we remove that perceived value as money, then the tangible material of gold would have no use and thus no value.

The physical gold backing any gold ETF only has value because of the perceived monetary value of gold, of which Bitcoin has the same attributes. The physical gold would become worthless tomorrow if people decided that gold has no utility as a store-of-value money (and in fact this is coming because gold is inferior to Bitcoin and governments are intent on confiscation of physical assets and regulated assets such as bank money, stocks, and real estate).





now take a breather



take a breather i know your itching to reply


You haven't earned the cojones to write condescendingly to me. Do it again, and your post will be summarily deleted. This is your final warning.

Those who have something to prove about ego, are all elbows and acrimony and lacking of cogent substance.

You can learn to be respectful or you can leave. It is your choice.
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April 11, 2017, 02:28:00 PM
 #4

Stolfi has serious issues. What kind of person dedicates so much time towards something they don't like, value or use?

I really hope he was a highly paid government shill for his own good otherwise he needs to see a shrink.

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April 11, 2017, 03:09:52 PM
 #5

Since when gold market (traded in CME futures market regulated by the CFTC) is not regulated?


     
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iamnotback
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April 11, 2017, 03:11:21 PM
 #6

Since when gold market (traded in CME futures market regulated by the CFTC) is not regulated?

I didn't say it isn't. I did write in the OP that gold has less unregulated exchange than Bitcoin. But physical gold does have some unregulated exchange, but on a small scale basis only afaik.
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April 11, 2017, 03:15:15 PM
Last edit: April 11, 2017, 03:30:39 PM by Dorky
 #7

So first Jorge compares Bitcoin to money which was correct, but complains it is not regulated, yet gold is also not regulated and has an ETF. Then he compares Bitcoin to equities which are not money. Duplicitous much.  Roll Eyes

That bolded statement gave me an impression that gold is (generally) unregulated.

As long as a financial security is generally traded in a regulated market whereby any unregulated transaction is done in reference to the price quoted in the regulated market, we can safely say that this financial security is regulated.

Of course it does not serve the purpose to also include off-market transactions (like me selling some 10 grams of gold to my friend under a tree) to be considered as unregulated, because if that is the case for argument, then we can also say that bitcoin will never ever be regulated even if it is 99% so.


     
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April 11, 2017, 03:17:15 PM
 #8

Nevertheless, since the use of bitcoin is not yet clearly specified, we cannot say bitcoin is commodity or currency until it has a very clear + specific + accepted use.


     
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April 11, 2017, 03:39:41 PM
Last edit: April 11, 2017, 08:50:06 PM by iamnotback
 #9

So first Jorge compares Bitcoin to money which was correct, but complains it is not regulated, yet gold is also not (at least not entirely) regulated and has an ETF. Then he compares Bitcoin to equities which are not money. Duplicitous much.  Roll Eyes

That bolded statement gave me an impression that gold is (generally) unregulated.

I have edited the OP as shown above in your quote to make it consistent with the quote of what I had written above it as follows.

Perhaps you missed this part below which was already in the OP when you read it:

Bitcoin is superior to gold in that it has an inelastic supply and can move non-physically across borders unregulated which enables it to be more efficient than existing fiat currencies, and more difficult to regulate all possible exchange market markers for Bitcoin compared to gold. The lack of regulation is what makes Bitcoin very efficient, per John Nash's Ideal Money concept.

...

Although gold trades less on entirely unregulated exchanges, that is one of the reasons that gold is inferior to Bitcoin as an investment commodity money.



As long as a financial security is generally traded in a regulated market whereby any unregulated transaction is done in reference to the price quoted in the regulated market, we can safely say that this financial security is regulated.

Yes I have also argued numerous times to @r0ach in the Martin Armstrong thread of the Economics section (and also I have an entire thread on precious metals), that gold is effectively regulated because the largest market makers who provide the liquidity (thus set the liquid spot price) are all regulated.

Nevertheless one can exchange gold unregulated but at gouging illiquid spreads. I have actually done this a few years ago in the Philippines.

Of course it does not serve the purpose to also include off-market transactions (like me selling some 10 grams of gold to my friend under a tree) to be considered as unregulated, because if that is the case for argument, then we can also say that bitcoin will never ever be regulated even if it is 99% so.

No argument from me. And gold is becoming more regulated. For now, Bitcoin is only being regulated at the exchanges and only marginally for KYC and AML.

But note that decentralized exchanges already exist for Bitcoin so if ever needed they are ready. It is impossible to make a decentralized exchange for a tangible good.

You may have a correct implied point (which I also did think of before) which is that Gold ETF is allowed by the SEC because gold is effectively regulated (among other factors such as gold having a larger marketcap and historically perceived value that has been indistinguishable from its tangibility in the mind of most n00bs).

Nevertheless, since the use of bitcoin is not yet clearly specified, we cannot say bitcoin is commodity or currency until it has a very clear + specific + accepted use.

Well your statement is more clever/astute than maybe you realize. We would like to perhaps assume that the properties of Bitcoin would not change if it were a currency, but I think we have shown in recent discussions in other threads, that if Bitcoin scales up to be a currency, then it will lose its immutability and thus no longer been an ideal commodity better than gold.

When gold was a currency, then it lost its ideal attributes and was debased, because the public confidence in money was based on the stamp on the coin, not just the metal content. When the coins were debased, then Gresham's Law took hold because yet while the public confidence in the stamped coins remained, then the money did not collapse until public confidence collapsed.

This is why Bitcoin is intended to be power broker ($billionaires) money, not currency for the masses. This is why Bitcoin will never get SegWit nor any more significant changes to its protocol. So if I am correct on that prediction, then Bitcoin is indeed all that I wrote in the OP and will never be currency for the masses.
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April 11, 2017, 03:51:47 PM
 #10

You may have a correct implied point (which I also did think of before) which is that Gold ETF is allowed by the SEC because gold is effectively regulated (among other factors such as gold having a larger marketcap and historically perceived value that has been indistinguishable from its tangibility in the mind of most n00bs).

Well your statement is more clever than maybe you realize. We would like to perhaps assume that the properties of Bitcoin would not change if it were a currency, but I think we have shown in recent discussions in other threads, that if Bitcoin scales up to be a currency, then it will lose its immutability and thus no longer been an ideal commodity better than gold.

Indeed, which is why, when I think about it, for bitcoin to ever have an ETF, it must first have a very definite purpose of use (commodity or currency or settlement layer). Thereafter only can we draft the kind of regulation for it. Unless we finally make up our mind on bitcoin's official use, its ETF will never come.

Because of this, I think for us to have a bitcoin ETF can be a very very long wait.


     
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April 13, 2017, 06:44:49 PM
 #11

Re: Speculation Rule: sell when others are irrationally optimistic or too exuberant

and it will never be forgotten when you are actually "right" as it won't be forgotten when you are actually "wrong"

Actually the opposite is true, because people always blame their mistakes on someone else. So I get no credit for the numerous times I've been correct, and people invent mirages in their mind of how I was wrong, when it was really their own mistake.

I've found that I can be the first to make a very important correct statement, then it spreads around the forum and suddenly everybody thinks it was their idea and nobody knows who was the original seed.

This is why fungible money can be a useful information tool, because it measures phenomenons that humans can't accurately appraise (measure). He who has the most money was the one who was correct more than anyone else. Bullshit walks, money talks.

Note however that fungible money has some serious drawbacks, such as that it is a winner-take-all power vacuum.

Yes some rating system or just + or - it like youtube. Would be fun

Not fun for those who aren't idiots. It would be a clusterfuck power vacuum of ignorance and politics, just like democracy. As if this forum needs more of that.  Roll Eyes
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