Another reason bitcoin will succeed: US to target Putin's $40 billion stash

[Peter R]

This is another reason I think bitcoin will succeed.  Zerohedge claims the US may go after Putin's $40 billion dollars in financial assets stored in Switzerland:

http://www.zerohedge.com/news/2014-04-20/means-war-us-target-putins-personal-40-billion-stash

Whether you agree or disagree that Putin's fortune is "fair" and whether you agree or disagree that it is right for the US to take his wealth, I believe that if you were in Vladimir Putin's position you'd feel more comfortable with a cool billion (2.5% of his financial wealth) sitting in a secure brain wallet, and perhaps another billion or so in carefully planned m-of-n wallets.

I wonder if Vladimir understands bitcoin.  

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[smooth]

I wonder if Vladimir understands bitcoin.  

Probably not. But that's not the point. If V's stash does get raided, it creates that much more incentive for other elites to seek out safer places to store wealth than banks, and eventually they will find bitcoin. For that matter, even just the threat of such a raid has the same effect.

Big money figuring out the value bitcoin offers them is coming. The only question is when.

[Siegfried]

This (not Putin in particular) has been one of the biggest reasons why I believe an explosion in Bitcoin price is inevitable.

[tabnloz]

This (not Putin in particular) has been one of the biggest reasons why I believe an explosion in Bitcoin price is inevitable.

Yep, I think a bail in of a euro country (for eg) that is nether isolated nor smallish like Cyprus should rally the troops to defect to btc. Cyprus was a catalyst for the 266 run up but it was also 'dealt with' and forgotten relatively easily. Now a year later if it goes bigger, btc as an alternative springs to mind as it isnt a strange a phenomenon as last year

[tabnloz]

This is another reason I think bitcoin will succeed.  Zerohedge claims the US may go after Putin's $40 billion dollars in financial assets stored in Switzerland:

http://www.zerohedge.com/news/2014-04-20/means-war-us-target-putins-personal-40-billion-stash

Whether you agree or disagree that Putin's fortune is "fair" and whether you agree or disagree that it is right for the US to take his wealth, I believe that if you were in Vladimir Putin's position you'd feel more comfortable with a cool billion (2.5% of his financial wealth) sitting in a secure brain wallet, and perhaps another billion or so in carefully planned m-of-n wallets.

I wonder if Vladimir understands bitcoin.  

I suppose this begs the question: as we enter an unfolding currency war (us v rus in this case re: ukraine), how does bitcoin fare?

[bitebits]

Really interesting thought Peter R. Think it is beyond our imagination what happens of some Francs from the Swiss mountains are moved into bitcoin.

Now lets pretend we are Putin, and he wants to move one billion from his Swiss bank account into bitcoin. Lets try to help him, because I really see a few hurdles:

- Volume on online exchanges is way too low: getting 2 million bitcoins is near to impossible
- Therefore the price of one bitcoin needs and will rise, so less bitcoins are needed. But this only happens because of the one time instant demand, and likely pops afterwards. Not really a safe storage of value, when 50% of your Francs are happily converted from bitcoin again in fiat by all the current bitcoin holders.
- Think it would maybe be interesting to get a deal with a large mining pool?
- Better ideas?

[smooth]

- Volume on online exchanges is way too low: getting 2 million bitcoins is near to impossible
- Therefore the price of one bitcoin needs and will rise, so less bitcoins are needed. But this only happens because of the one time instant demand, and likely pops afterwards. Not really a safe storage of value, when 50% of your Francs are happily converted from bitcoin again in fiat by all the current bitcoin holders.

These two contradict each other. If he can't go ahead and buy 2 million bitcoins at the blink of an eye (which he can't) then he's going to have to do it over a period of time, in which case his continued buying will continue to support the price.

He won't be the only one of his type buying either.

This will drive the price to much higher levels and keep it there for a very, very long time, once it happens.

- Think it would maybe be interesting to get a deal with a large mining pool?
- Better ideas?

He can set up his own farm. If he mines and holds, fewer bitcoins go onto the market from other miners, and the price goes up.

[drawingthesun]

Really interesting thought Peter R. Think it is beyond our imagination what happens of some Francs from the Swiss mountains are moved into bitcoin.

Now lets pretend we are Putin, and he wants to move one billion from his Swiss bank account into bitcoin. Lets try to help him, because I really see a few hurdles:

- Volume on online exchanges is way too low: getting 2 million bitcoins is near to impossible
- Therefore the price of one bitcoin needs and will rise, so less bitcoins are needed. But this only happens because of the one time instant demand, and likely pops afterwards. Not really a safe storage of value, when 50% of your Francs are happily converted from bitcoin again in fiat by all the current bitcoin holders.
- Think it would maybe be interesting to get a deal with a large mining pool?
- Better ideas?

At the moment getting a billion into bitcoin and not losing your principal because you pushed to price artificially high is simply not possible.

Less than 8% of all bitcoins are available on exchanges and other sources for purchase.

Putin would be better off buying about $500,000 worth per day for the foreseeable future, it's not going to be a billion for a long time, but it's the safest way to do it. Even now I think $1,000,000 a day would be too much.

Other sources are the holders of 100,000+ bitcoin, but why they would sell and loss an instant 25% to tax I don't know.

Putin could get a hundred million fiat into bitcoin if given a year, but a billion is not realistic.

Of course in a couple of years, if Ethereum or Bitcoin is truly a 100,000,000,000 economy, getting 1 billion becomes much easier (Of course if this happens, his 100,000,000 this years becomes worth billions in its own right)

[smooth]

At the moment getting a billion into bitcoin and not losing your principal because you pushed to price artificially high is simply not possible.

It's not artificial if he keeps buying, and especially if other elites do the same thing (which they will).

Putin alone supposedly has $40 billion. He can put $1 billion per year into bitcoin for the next 40 years. There will be no loss of principal.

[drawingthesun]

At the moment getting a billion into bitcoin and not losing your principal because you pushed to price artificially high is simply not possible.

It's not artificial if he keeps buying, and especially if other elites do the same thing (which they will).

Putin alone supposedly has $40 billion. He can put $1 billion per year into bitcoin for the next 40 years. There will be no loss of principal.

Well the idea brings a smile to my face. At $3,000,000 per day it's likely bitcoin would surpass the $100,000 per coin mark in several months and the $1,000,000 coin will be within a couple of years.

[notbatman]

40 billion dollar btc pump, awesome.

[gagalady]

I don't think that Vladimir understands bitcoin but i'm sure he has people who can navigate him through it.

[bryant.coleman]

I think that Obama has gone nuts. Putin's personal wealth might total $40 million, and not $40 billion. Ask anyone in Russia and they'll vouch for it. Obama is still living in dreamland and he thinks that he can make Putin concede Eastern Ukraine by using hopeless sanctions. Most of the Russian politicians don't have any financial assets in the Europe.

[Peter R]

Putin's personal wealth might total $40 million, and not $40 billion.

You have no idea of the vast amount of wealth held by the elites.  A close associate of mine is a private chef for Roman Abramovich (NW ~ $14.8 billion).  He's been sailing on the world's biggest yacht in the Mediterranean and Black seas, while other elites visit by helicopter, and I am quite certain that Putin's been a regular confidant.  Recently (and not on the yacht) he witnessed a beautiful young twenty-something female, wearing the finest furs, get dropped off by helicopter, walk into a waiting Ferrari, and then speed away.  It's a completely different world, Bryant Coleman.  


EDIT: Bryant, some people on this forum have $40 million; it's really not that much in the big Pareto distribution of the world's wealth.

[Fatpony]

USA Is like a big dog that's barking like its ready to attack another big dog but tied, and when that dog is free it's just put his tail behind the ass and does nothing. In other words USA only "attacks" weaker countries so no way they will try to take money from someone like Putin and even more so since the money isn't in USA. The other funny thing is, Russian oligarchs don't have their assets in other countries, so from that side they are secured. And the power of Tzar Putin was best shown in the case of Khodorkovsky. I can only imagine Obama doing something like that to some rich American. No secret service would save his life....

[bryant.coleman]

You have no idea of the vast amount of wealth held by the elites.  A close associate of mine is a private chef for Roman Abramovich (NW ~ $14.8 billion).  

Putin don't have any private yachts and right now he and Abramovich is not in good terms with each other.

[molecular]

I wonder if Vladimir understands bitcoin.  

I wonder if when Vladimir will understands bitcoin.

before or after his fiat stash is taken?

[molecular]

- Volume on online exchanges is way too low: getting 2 million bitcoins is near to impossible
- Therefore the price of one bitcoin needs and will rise, so less bitcoins are needed. But this only happens because of the one time instant demand, and likely pops afterwards. Not really a safe storage of value, when 50% of your Francs are happily converted from bitcoin again in fiat by all the current bitcoin holders.

I disagree: if you buy 2 million bitcoins over a certain period of time x on the exchanges, I am pretty sure the price will settle well above the starting point and not much below the last buy you make (maybe even above, it'll overshoot quite a bit after you bought your 2 millionth coin).

It would be so much fun to execute. Mr. Putin, I'm ready to help.

[giveBTCpls]

Hi, wouldn't it be more beneficial for him to put it all on Zerocoin? (allegedly will be 100% anonymous).
What would be the advantages of putting it in BTC really? If I had that kind of money, I would like it to be untraceable. Im a poorfag so I dont really care, so BTC is enough for me, but for people that move millions and are in deep shit, why dont they just use Zerocoin (or DRK, whatever is more secure)

[drawingthesun]

Hi, wouldn't it be more beneficial for him to put it all on Zerocoin? (allegedly will be 100% anonymous).
What would be the advantages of putting it in BTC really? If I had that kind of money, I would like it to be untraceable. Im a poorfag so I dont really care, so BTC is enough for me, but for people that move millions and are in deep shit, why dont they just use Zerocoin (or DRK, whatever is more secure)

What's with the zerocoin/zerocash trust?

Even the experts that have invented it admit to an insane gaping hole: Someone needs to make the accumulator and then 'destroy' the key.

If that key is kept some third party can un-anonymise all the zerocash transactions forever.

It's likely the key will be kept and sold to the NSA for however many billions, in anticipation of it taking off.

[farlack]

Really interesting thought Peter R. Think it is beyond our imagination what happens of some Francs from the Swiss mountains are moved into bitcoin.

Now lets pretend we are Putin, and he wants to move one billion from his Swiss bank account into bitcoin. Lets try to help him, because I really see a few hurdles:

- Volume on online exchanges is way too low: getting 2 million bitcoins is near to impossible
- Therefore the price of one bitcoin needs and will rise, so less bitcoins are needed. But this only happens because of the one time instant demand, and likely pops afterwards. Not really a safe storage of value, when 50% of your Francs are happily converted from bitcoin again in fiat by all the current bitcoin holders.
- Think it would maybe be interesting to get a deal with a large mining pool?
- Better ideas?

At the moment getting a billion into bitcoin and not losing your principal because you pushed to price artificially high is simply not possible.

Less than 8% of all bitcoins are available on exchanges and other sources for purchase.

Putin would be better off buying about $500,000 worth per day for the foreseeable future, it's not going to be a billion for a long time, but it's the safest way to do it. Even now I think $1,000,000 a day would be too much.

Other sources are the holders of 100,000+ bitcoin, but why they would sell and loss an instant 25% to tax I don't know.

Putin could get a hundred million fiat into bitcoin if given a year, but a billion is not realistic.

Of course in a couple of years, if Ethereum or Bitcoin is truly a 100,000,000,000 economy, getting 1 billion becomes much easier (Of course if this happens, his 100,000,000 this years becomes worth billions in its own right)

Or you can just get a contract with all the merchant processors and buy all the coins that come in every day.

[drawingthesun]

Or you can just get a contract with all the merchant processors and buy all the coins that come in every day.

I'm not sure a billion dollars worth of merchant exchange is currently going on. This method might still take upwards of five years. Unless Bitcoin takes off mainstream.

[DeathAndTaxes]

Putin is probably a bad example.  Putin has no problems with corrupt governments seizing private wealth ... as long as it is the corrupt private wealth seizing government he controls.  For the rich who don't control nation states the risk is more real.

[bryant.coleman]

Putin is probably a bad example.  Putin has no problems with corrupt governments seizing private wealth ...

Are you referring to the Cyprus hair-cut? He tried his best to help Cyprus. Russia was ready to give loans to Cyprus. But the EU officials bullied the Cypriot officials to not to accept them.

[Peter R]

I think Smooth made a good point here:

If V's stash does get raided, it creates that much more incentive for other elites to seek out safer places to store wealth than banks, and eventually they will find bitcoin. For that matter, even just the threat of such a raid has the same effect.

To various extents, the elites are all at the mercy of the direction in which the political wind blows.  As the threat that one can have his bank assets taken increases, the usefulness of the western financial system as a store of value decreases.  As the usefulness of this store of value decreases, so do the legitimacy of the fiat ledgers. 

Big money figuring out the value bitcoin offers them is coming. The only question is when.

The free market will select the best payment network run from the most legitimate ledger.  And the elite represent a large swath of the economic majority.  Now put yourself in the shoes of an elite.  I expect what is important to you is:

- A large market cap with ample liquidity,
- A ledger with wealth distributed efficiently across a broad group of people, that has been "shaken" by numerous bubbles,
- A simple protocol run on a robust decentralized network, that has thrived in spite of efforts to thwart it.

You probably no longer care about block-time targets, writing scripts with for() loops seem a play thing for geeks at best and a threatening complexity at worse, while bitcoins draining into side-chains may look to you like a hole in the core of the system.

You wouldn't dare put your money in Litecoin, or worse yet NXT, simply because you will move the market to a much greater extent, re-creating the booms and busts of bitcoin's past but with an unknown end result.   

You'd store value in bitcoin because it has the largest market cap and the most proven track record.  If your actions make a diverse group of intelligent people who spend their time improving bitcoin more wealthy, you would view this as a good thing.  For you know they will defend the source of their wealth which in turn defends your own. 

And ideology and ideas about fairness will all be secondary considerations.  What matters most (and many won't even consciously realize this) is the strength of our shared agreement that the blockchain is the legitimate ledger and that you prove your spots on this ledger by producing a signature with your private keys.

   

[Melbustus]

Yup. There's supposedly ~$30T (yes, "Trillion") stored as "offshore" (ie, hidden) money globally. With Swiss banks no longer maintaining secrecy, Cyprus, and the IMF publicly making noise about the potential need to haircut all EU depositors, it should already be obvious how much store-of-value potential bitcoin has.

Every crises, seizure, government over-reach, capital control, and "haircut" will make this more obvious to more people.

[bryant.coleman]

Yup. There's supposedly ~$30T (yes, "Trillion") stored as "offshore" (ie, hidden) money globally. With Swiss banks no longer maintaining secrecy, Cyprus, and the IMF publicly making noise about the potential need to haircut all EU depositors, it should already be obvious how much store-of-value potential bitcoin has.

Every crises, seizure, government over-reach, capital control, and "haircut" will make this more obvious to more people.

But nothing good has emerged from the Cyprus hair-cuts... At that time, a lot of people here were posting about how Bitcoin will become hugely popular there. What happened? Bitcoin remains in the shadows in Cyprus.

[leopard2]

As long as governments benefit more from modern slavery (which is what fiat money truly is), than from a form of money than is immune to outside control, they will not adopt BTC.

Russia or even places like Iran or Venezuela may have their problems with outside powers, but even for those countries fiat is still essential in extracting labor from their citizens.

On top of that Uncle Sam would probably "find" some weapons of mass destruction real quick if a country adopts BTC as a currency. Heck, look at Iraq, when they tried to adopt another fiat than USD (EUR).  

[Tx2000]

I find these kinds of rationalizations to be hilarious.  Bitcoin will succeed on it's own merits, not because "zomg wall street/putin/buffet/gates/justin bieber" are going to discover bitcoin and invest in it.

[cryptnutter]

This doesn't make a whole lot of sense - why would Putin keep his stash in a country where the US could get to it?

[molecular]

As long as governments benefit more from modern slavery (which is what fiat money truly is), than from a form of money than is immune to outside control, they will not adopt BTC.

Russia or even places like Iran or Venezuela may have their problems with outside powers, but even for those countries fiat is still essential in extracting labor from their citizens.

On top of that Uncle Sam would probably "find" some weapons of mass destruction real quick if a country adopts BTC as a currency. Heck, look at Iraq, when they tried to adopt another fiat than USD (EUR).  

so much relevant truth in one post

EDIT: however consider that in the end, the government really has no say in what is used as money by the population. If they extract labour from the population under decreasing living conditions for too long, they might wake up, come to their senses and exert the power they have. A dangerous game they play. Also a dangerous game the US specifically plays, by the way, misusing their exorbitant privilege like that (for those who don't know the Charles de Gaulle speech from '65, it's a must watch)

[Beliathon]

Big money figuring out the value bitcoin offers them is coming. The only question is when.

As long as governments benefit more from modern slavery (which is what fiat money truly is), than from a form of money than is immune to outside control, they will not adopt BTC.

Russia or even places like Iran or Venezuela may have their problems with outside powers, but even for those countries fiat is still essential in extracting labor from their citizens.

Very true.

However, let us bear in mind that governments aren't the only ones with big money. As much as we all love to hate transnational corporations, the fact reamins: These entities have no real incentive to store all their wealth in nation-state fiat, and very soon they will have an abundance of reasons NOT to store their wealth in nation-state fiat.

[twiifm]

I find these kinds of rationalizations to be hilarious.  Bitcoin will succeed on it's own merits, not because "zomg wall street/putin/buffet/gates/justin bieber" are going to discover bitcoin and invest in it.

I've witnessed some crazy pumps in pennystock land but nothing as outrageous as bitcoin land.  This idea of Putin moving his $40B into BTC is just nuts.

Usually when someone is said to be worth $40B.  It's probably the net of their assets.  Not a pile of cash sitting in a bank somewhere.  It's probably distributed in stocks, bonds, real estates, cash.  If someone has $40B in the first place then they most likely know a thing or two about finance

[dead_bit]

On top of that Uncle Sam would probably "find" some weapons of mass destruction real quick if a country adopts BTC as a currency. Heck, look at Iraq, when they tried to adopt another fiat than USD (EUR).  

Don't lie, it's not good for the world. The Iraqi invasion had nothing to do with Iraq changing currencies. You and I both know that Iraq doesn't decide anything when it comes to monetary policy. Saddam was a CIA stooge... I suspect though that you've never even been to Iraq and are relying purely on what others tell you to form an opinion.

The idea that Putin or any other elite will go into bitcoin is at best a fantasy. BTC is used primarily as an investment tool not a store of wealth. Anyone who is using BTC as a store of wealth is sweating bullets right now, and obviously no one who has that kind of money can possibly be that stupid. BTC has to stopped being used as an investment tool if it ever hopes to become all of the things you people are talking about.

[Beliathon]

If someone has $40B in the first place then they most likely know a thing or two about finance

Sorry, but that's a stupid comment. There are MANY rich people (mostly software entrepreneurs) who know little-to-nothing about finance.

...Iraq doesn't decide anything when it comes to monetary policy. Saddam was a CIA stooge... I suspect though that you've never even been to Iraq and are relying purely on what others tell you to form an opinion.

A true statement.

Anyone who is using BTC as a store of wealth is sweating bullets right now...

I'm not sweating anything, I went all-in on Bitcoin long before China did. Financially speaking, I'm WAY ahead, and I'll hold like I've always done.

and obviously no one who has that kind of money can possibly be that stupid.

You should also know that, statistically speaking, there is something like a 93% chance that I'm smarter than you.

[dead_bit]

Anyone who is using BTC as a store of wealth is sweating bullets right now...

I'm not sweating anything, I went all-in on Bitcoin long before China did. Financially speaking, I'm WAY ahead, and I'll hold like I've always done.

and obviously no one who has that kind of money can possibly be that stupid.

You should also know that, statistically speaking, there is something like a 93% chance that I'm smarter than you. Now sit your ass down.

Whoa your amazing statistical analysis has proved your awesome intelligence. Typical thinking, why reply with reason when you can attempt to put someone else down instead? That always works... don't worry you proved you were in the 7% with your reply.

[Patel]

Putin wouldn't put his money into Bitcoin because more than likely his address(s) would be blacklisted by mining pools, which will be enforced by governments.

[Lauda]

Putin wouldn't put his money into Bitcoin because more than likely his address(s) would be blacklisted by mining pools, which will be enforced by governments.

Nobody can really force this. How would you know which addresses are his? He could mix this up beyond tracking.
Storing money in a bank is less safer than storing it in a wallet file.
I don't however understand what Obama think he will achieve with this? This won't stop Putin, nor does he care at all.

[Peter R]

I have a feeling we're on to something.

Yup. There's supposedly ~$30T (yes, "Trillion") stored as "offshore" (ie, hidden) money globally. With Swiss banks no longer maintaining secrecy, Cyprus, and the IMF publicly making noise about the potential need to haircut all EU depositors, it should already be obvious how much store-of-value potential bitcoin has.

Every crises, seizure, government over-reach, capital control, and "haircut" will make this more obvious to more people.

But nothing good has emerged from the Cyprus hair-cuts... At that time, a lot of people here were posting about how Bitcoin will become hugely popular there. What happened? Bitcoin remains in the shadows in Cyprus.

Bryant: bitcoin's market cap has increased by a factor of 10 and its generalized user base by a factor of √10 since talk of the Cyprus confiscations began.  I think your statement "nothing good has emerged" is false.  

I find these kinds of rationalizations to be hilarious.  Bitcoin will succeed on it's own merits, not because "zomg wall street/putin/buffet/gates/justin bieber" are going to discover bitcoin and invest in it.

If you think they would be investing, you missed the point.  Bitcoin represents a useful way to store and move wealth outside the western financial system.  

This doesn't make a whole lot of sense - why would Putin keep his stash in a country where the US could get to it?

Is it possible to store value in the western financial system any other way?  If you have USD, euros, pounds, etc., in any bank account anywhere, I believe they are at risk due to the US's influence over the western financial system.  This question is above my pay grade, but I believe that unless you have physical US $100 bills, your wealth can be "sanctioned" by the US's influence over SWIFT, the IMF, and in part due to US dollar's role as reserve currency.  

This idea of Putin moving his $40B into BTC is just nuts.

That wasn't the idea.  The idea is that the elite begin to move small portions of their financial wealth into bitcoin, due to its useful properties as a store of value.

Usually when someone is said to be worth $40B.  It's probably the net of their assets.  Not a pile of cash sitting in a bank somewhere.  It's probably distributed in stocks, bonds, real estates, cash.  

Vladimir's personal wealth is estimated as high as $70 billion.  $40 billion could be the component stored as financial assets.  

The idea that Putin or any other elite will go into bitcoin is at best a fantasy. BTC is used primarily as an investment tool not a store of wealth. Anyone who is using BTC as a store of wealth is sweating bullets right now, and obviously no one who has that kind of money can possibly be that stupid. BTC has to stopped being used as an investment tool if it ever hopes to become all of the things you people are talking about.

Imagine that tomorrow everyone knew for a fact that bitcoin would no longer increase in value.  But they also knew that it would no longer decrease in value.  1 BTC would forever buy the same basket of goods.  What would happen?  Aggregate demand would increase simply due to bitcoin's useful properties as a store of value.  But of course if aggregate demand increases, so must the price.  

The only reason the price of bitcoin isn't much higher is because people believe it could also be a lot lower.

Putin wouldn't put his money into Bitcoin because more than likely his address(s) would be blacklisted by mining pools, which will be enforced by governments.

Why would anyone necessarily know which addresses are controlled by Putin?  For all we know, he could control certain addresses now (although I'm not suggesting he does).  
 

[dead_bit]

The idea that Putin or any other elite will go into bitcoin is at best a fantasy. BTC is used primarily as an investment tool not a store of wealth. Anyone who is using BTC as a store of wealth is sweating bullets right now, and obviously no one who has that kind of money can possibly be that stupid. BTC has to stopped being used as an investment tool if it ever hopes to become all of the things you people are talking about.

Imagine that tomorrow everyone knew for a fact that bitcoin would no longer increase in value.  But they also knew that it would no longer decrease in value.  1 BTC would forever buy the same basket of goods.  What would happen?  Aggregate demand would increase simply due to bitcoin's useful properties as a store of value.  But of course if aggregate demand increases, so must the price.  

The only reason the price of bitcoin isn't much higher is because people believe it could also be a lot lower.

So you're basically agreeing with me, BTC would not be a good idea because it is not a store of wealth. The situation you're speaking of is a fantasy right now. Could the future hold that very situation, well of course it could, but it most likely will not. Why because the greed of the community will force it to maintain it's investment vehicle status.

[jonald_fyookball]

the greed of the community will force it to maintain it's investment vehicle status.

Care to explain this argument?

The only difference I see between 'investment vehicle' and 'store of value' is volatility.

Edit: and longevity.  But I don't think that is in question.

[AnonyMint]

This is another reason I think bitcoin will succeed.  Zerohedge claims the US may go after Putin's $40 billion dollars in financial assets stored in Switzerland:

http://www.zerohedge.com/news/2014-04-20/means-war-us-target-putins-personal-40-billion-stash

Whether you agree or disagree that Putin's fortune is "fair" and whether you agree or disagree that it is right for the US to take his wealth, I believe that if you were in Vladimir Putin's position you'd feel more comfortable with a cool billion (2.5% of his financial wealth) sitting in a secure brain wallet, and perhaps another billion or so in carefully planned m-of-n wallets.

I wonder if Vladimir understands bitcoin.  

Problem is Bitcoin isn't anonymous and the mining is 51% controlled by two pools and few major holders of ASICs.

[dead_bit]

the greed of the community will force it to maintain it's investment vehicle status.

Care to explain this argument?

The only difference I see between 'investment vehicle' and 'store of value' is volatility.

Edit: and longevity.  But I don't think that is in question.

It's volatility keeps it from being a store of value, keeping it unpredictable. I guess the term "community" is a bit much. The greed of the few is what keeps BTC in this long term status. Most have no interest in making BTC into a store of value, because a store of value isn't susceptible to such short term fluctuations in value. This is primarily because those few are only interested in continuing the profits. As long as profits are the end result, BTC is no different than most of the multinational corporations that people on this forum deride. Look at the never ending parade of ideas to "increase the value of Bitcoin". This illustrates my point. The idea is not to stabilize Bitcoin it is to increase it's value.

[twiifm]

OK I just read that zero hedge article.  Theres no way to know whether or not Putin has $40B in a Swiss Bank account.  I couldn't find any articles that theorized how he would have amassed this fortune.  I'm curious to know if anyone have any links.  The only source I found is attributed an interview where some guy claims Putin "controlled" 37% of the oil company Surgutneftegaz and 4.5% of natural gas monopoly Gazprom.  The $40B is the price of the stake -- NOT cash.  Putin brushed this off as rumors when asked about it.

http://www.bloombergview.com/articles/2013-09-17/vladimir-putin-the-richest-man-on-earth

But regarding rich people parking their money in BTC.  How did they become a billionaire in the first place?  Maybe they founded a company and hold stock, or maybe they are some type of dealer.  The point being, these people wouldn't view money as simply cash.  Makes no sense for them to hold cash beyond the amount they need for operational expense.

If we assume that these rich people view money as investments.  What motive would they have for holding large amounts of cash?  They could diversify their portfolio in stocks, bonds, commodities, real estate & cash.   The only reason for holding cash is for liquidity.  BTC has little liquidity so it's not a good substitute for cash.

Also, the main incentive for using Swiss Banks is because Swiss Banking laws allow for secrecy.  Can the US govt freeze Swiss Bank accounts?  I don't know their banking laws enough to say. 

Can any govt freeze your BTC account?  If they can't then you have a legitimate case for using BTC to hide money from govts.  That means Karpelles can steal your BTCs and runaway to non-extradition countries

If Putin does indeed have a Swiss Bank account of $40B, and he's worried about the US .gov freezing it.  I don't see why buying BTCs solve his problem.  Wouldn't he buy gold and hide it in a vault in Siberia?

[jonald_fyookball]

the greed of the community will force it to maintain it's investment vehicle status.

Care to explain this argument?

The only difference I see between 'investment vehicle' and 'store of value' is volatility.

Edit: and longevity.  But I don't think that is in question.

It's volatility keeps it from being a store of value, keeping it unpredictable. I guess the term "community" is a bit much. The greed of the few is what keeps BTC in this long term status. Most have no interest in making BTC into a store of value, because a store of value isn't susceptible to such short term fluctuations in value. This is primarily because those few are only interested in continuing the profits. As long as profits are the end result, BTC is no different than most of the multinational corporations that people on this forum deride. Look at the never ending parade of ideas to "increase the value of Bitcoin". This illustrates my point. The idea is not to stabilize Bitcoin it is to increase it's value.

I don't think there's anything to worry about.  Volatility will continue to decrease as adoption widens.  Volatility is actually caused by TOO FEW
big speculators being allowed to push the price around wildly.  More traders means higher liquidity and lower volaility.

btw, look the anonytroll is back, and he's up to 4000 anti-bitcoin posts. nice.

[smooth]

If Putin does indeed have a Swiss Bank account of $40B, and he's worried about the US .gov freezing it.  I don't see why buying BTCs solve his problem.  Wouldn't he buy gold and hide it in a vault in Siberia?

Gold is not safe. The smart money is being very careful about whether gold may be vulnerable to severe disruption of 90% of its value.

Bitcoin will eventually replace gold as a globally recognized “store of value”. Gold prices will go down 90-95% to the levels supported by the use in production as “reservation demand” for gold would essentially disappear. http://blog.oleganza.com/post/67872772342/bitcoin-and-gold

Also, leaders often want their money outside their own country (or at least portable) in case they decide to relocate. Bitcoin provides extreme portability, especially if you want to move it on short notice. Gold does not. A billion dollars in gold is weighs roughly a ton.

[Peter R]

So you're basically agreeing with me, BTC would not be a good idea because it is not a store of wealth. The situation you're speaking of is a fantasy right now. Could the future hold that very situation, well of course it could...

The only point we appear to be in agreement on is that no one can predict the future with certainty.  But I think you do believe you can predict the future, otherwise you would also agree that bitcoin is useful as a store of value.  

Consider Billionaire Bob.  For simplicity sake, Bob has exactly $1 billion in US treasury bills and no other assets.  He is vocal in his support for small governments, is concerned about US unfunded entitlements and its effect on the dollar's reserve status, and was recently an innocent victim of a politically-targeted IRS probe.  He knows skeletons can be found in any closet.

Bob wants to maintain his wealth 10 years into the future.  He analyzes the situation and concludes the following probabilities:

P(lose all money) = 5%
P(not lose all money) = 95%

To simplify the math, assume the treasuries pay zero interest and inflation is zero (unless the dollar-collapse event occurs).  10 years out, Bob's wealth has expectation value and standard deviation:

<net worth> = 0.05 x (0) + 0.95 x (1000) = $950 million
stdev = sqrt(0.05 x (0 - 950)^2 + 0.95 x (1000 - 950)^2) = $218 million

Now Bob discovers bitcoin.  He sees that bicoin's success is more likely if either of his two fears come true (the USD collapses or confiscations of private wealth increase in frequency).  He calculates that if the event he fears happens, that bitcoin is likely to be 20X as valuable.  If the event doesn't happen then he doesn't care about the price of bitcoin as he was just using it for a hedge anyways.  

He moves 5% of his wealth into bitcoin.  10 years out, Bob's wealth has expectation value and standard deviation:

<net worth> = 0.05 x (20 x 50) x + 0.95 x (950) = $953 million
stdev = sqrt(0.05 x (20 x 50 - 953)^2 + 0.95 x (950 - 953)^2) = $11 million

In other words, Bob can decrease the variance of his wealth 10 years out with little change to its expectation value by employing bitcoin as a store of value.  

You can repeat similar analyses using all sorts of probabilities and assumptions and add all sorts of complexities, but I have never found a rational case where it is not wise to store at least a small portion of your wealth in bitcoin.  If you can think of one and mathematically argue your case, please let me know.  

I believe this simple analysis illustrates my point.  Bitcoin is useful as a store of value.  

[dead_bit]

So you're basically agreeing with me, BTC would not be a good idea because it is not a store of wealth. The situation you're speaking of is a fantasy right now. Could the future hold that very situation, well of course it could...

The only point we appear to be in agreement on is that no one can predict the future with certainty.  But I think you do believe you can predict the future, otherwise you would also agree that bitcoin is useful as a store of value.  

Consider Billionaire Bob.  For simplicity sake, Bob has exactly $1 billion in US treasury bills and no other assets.  He is vocal in his support for small governments, is concerned about US unfunded entitlements and its effect on the dollar's reserve status, and was recently an innocent victim of a politically-targeted IRS probe.  He knows skeletons can be found in any closet.

Bob wants to maintain his wealth 10 years into the future.  He analyzes the situation and concludes the following probabilities:

P(lose all money) = 5%
P(not lose all money) = 95%

To simplify the math, assume the treasuries pay zero interest and inflation is zero (unless the dollar-collapse event occurs).  10 years out, Bob's wealth has expectation value and standard deviation:

<net worth> = 0.05 x (0) + 0.95 x (1000) = $950 million
stdev = sqrt(0.05 x (0 - 950)^2 + 0.95 x (1000 - 950)^2) = $218 million

Now Bob discovers bitcoin.  He sees that bicoin's success is more likely if either of his two fears come true (the USD collapses or confiscations of private wealth increase in frequency).  He calculates that if the event he fears happens, that bitcoin is likely to be 20X as valuable.  If the event doesn't happen then he doesn't care about the price of bitcoin as he was just using it for a hedge anyways.  

He moves 5% of his wealth into bitcoin.  10 years out, Bob's wealth has expectation value and standard deviation:

<net worth> = 0.05 x (20 x 50) x + 0.95 x (950) = $953 million
stdev = sqrt(0.05 x (20 x 50 - 953)^2 + 0.95 x (950 - 953)^2) = $11 million

In other words, Bob can decrease the variance of his wealth 10 years out with little change to its expectation value by employing bitcoin as a store of value.  

You can repeat similar analyses using all sorts of probabilities and assumptions and add all sorts of complexities, but I have never found a rational case where it is not wise to store at least a small portion of your wealth in bitcoin.  If you can think of one and mathematically argue your case, please let me know.  

I believe this simple analysis illustrates my point.  Bitcoin is useful as a store of value.  

You're math is pointless because it is based on assumptions. I suppose in the end it simply comes to the risk that one is willing to stomach. Watching an asset lose 50% of it's value in one month multiple times in a two year period would bury that asset in any real world market.

Do I think that bitcoin is worthless, no not at all. I think quite the opposite. But it is not a store of value because there is no track record to prove your assumptions on. The volatility gives it some amazing short term potential though, which is why Bitcoin has become what it is.

[Peter R]

You're math is pointless because it is based on assumptions.

And this shows you never even took the time to read my post.  I said the results appear to hold for all sets of rational assumptions I've come up with to date.  In the example above, Bob implicitly assumed that the chances that bitcoin goes to zero was 95%.  Even with these conservative assumptions, bitcoin was still a useful store-of-value tool for Bob that helped him to reduce risk. 

Please, find a set of reasonable assumptions where it wouldn't be wise for Bob to move at least a small portion of his wealth into bitcoin.  Argue your case mathematically.  

[jonald_fyookball]

Deadbit, what do you mean by "short term" in this context?  I want to be clear what you mean exactly. What time frame are you referring to?

[dead_bit]

You're math is pointless because it is based on assumptions.

And this shows you never even took the time to read my post.  I said the results appear to hold for all sets of rational assumptions I've come up with to date.  Bitcoin is a store-of-value tool that can reduce risk.  

Please, find a set of reasonable assumptions where it wouldn't be wise for Bob to move at least a small portion of his wealth into bitcoin.  Argue your case mathematically.  

Ok if I bought in a few months ago at 800 - 900 USD I would now be at a 50% loss. Is that a store of value? No, it's not. So if Putin had invested his 40 million, or whatever number because it really doesn't matter, he would have lost half his personal assets. This is not the first time it has happened. If you look at historical data, if you came in when BTC was the most popular you're getting destroyed. Now if you were in from the beginning, like the gold owners back in the 90s, then yes you're up.

The only winners right now are the original players. They have a store of value, the rest of us have a volatile investment tool.

Now I guess we could take all that and fudge it and say "If you look at BTC since it's inception" then yes, BTC is the smart choice. I will admit that I'm going off of early Decemberish time frame when I feel that BTC was truly beginning to become popular.

Deadbit, what do you mean by "short term" in this context?  I want to be clear what you mean exactly. What time frame are you referring to?

Days? Maybe a few weeks at most. Short term is a bad word for what I'm trying to explain. I apologize.

[Peter R]

What I've noticed through my work, and more so now through bitcoin, is that a subset of the population has trouble thinking in terms of probabilities.  These people want to classify everything in boxes: "yes it will work," and "no it won't work."  But thinking in terms of probabilities is powerful.  For example, I showed above how Bob could still use bitcoin as a store of value even if he assigns a 95% chance to it that its value goes to zero.  

I've had customers ask me "Peter, is this gonna work?" To which when I was younger I would reply with my honest assessment of the probabilities: "I give it a 70% chance."  But what I noticed is when that 70% bet fails, I would often hear back "Peter, you said it would work."  

So now, when someone asks me the chance of success, I say "oh about 30%."  And if they ask me the chance of failure, I say "oh about 30%"  If the customer sees the problem, then I tell him what I really think.  Otherwise it is better for both of us if he thinks that P + !P < 1.  

[Peter R]

Ok if I bought in a few months ago at 800 - 900 USD I would now be at a 50% loss. Is that a store of value? No, it's not.

This is the sunk-cost fallacy: http://en.wikipedia.org/wiki/Sunk_costs

Billionaire Bob moved a portion of his wealth into bitcoin as a hedge to reduce the variance of his wealth moving forward in time.  He could have had his assets siezed and the dollar-collapse event could have happened.  The fact that it didn't doesn't mean that the hedge was unwise.  In fact, if he reanalyses the situation from today moving forward, he may conclude that he should actually now move more wealth into bitcoin.  

If you buy fire insurance on your house and it never burns down did you waste your money?

[Littleshop]

Putin is probably a bad example.  Putin has no problems with corrupt governments seizing private wealth ...

Are you referring to the Cyprus hair-cut? He tried his best to help Cyprus. Russia was ready to give loans to Cyprus. But the EU officials bullied the Cypriot officials to not to accept them.

That is so not true.  Russia would not have ever bailed out for more than
what was already done.  Russia is known for writing off uncollectable debt but not for actual giving out billions to overseas private banks.  

[smooth]

Ok if I bought in a few months ago at 800 - 900 USD I would now be at a 50% loss. Is that a store of value? No, it's not.

Incorrect. Other recognized stores of value are real estate, stocks, and gold. Those have all suffered 50% draw downs at times.

The definition of store of value you are using is not the generally accepted one. If you pick your own definitions you can support almost any argument.

http://en.wikipedia.org/wiki/Store_of_value

[jonald_fyookball]

You're math is pointless because it is based on assumptions.

And this shows you never even took the time to read my post.  I said the results appear to hold for all sets of rational assumptions I've come up with to date.  Bitcoin is a store-of-value tool that can reduce risk.  

Please, find a set of reasonable assumptions where it wouldn't be wise for Bob to move at least a small portion of his wealth into bitcoin.  Argue your case mathematically.  

Ok if I bought in a few months ago at 800 - 900 USD I would now be at a 50% loss. Is that a store of value? No, it's not. So if Putin had invested his 40 million, or whatever number because it really doesn't matter, he would have lost half his personal assets. This is not the first time it has happened. If you look at historical data, if you came in when BTC was the most popular you're getting destroyed. Now if you were in from the beginning, like the gold owners back in the 90s, then yes you're up.

The only winners right now are the original players. They have a store of value, the rest of us have a volatile investment tool.

Now I guess we could take all that and fudge it and say "If you look at BTC since it's inception" then yes, BTC is the smart choice. I will admit that I'm going off of early Decemberish time frame when I feel that BTC was truly beginning to become popular.

Deadbit, what do you mean by "short term" in this context?  I want to be clear what you mean exactly. What time frame are you referring to?

Days? Maybe a few weeks at most. Short term is a bad word for what I'm trying to explain. I apologize.

The US dollar lost 40% of its value too against the Euro from 2002 to 2005...and 50% by 2008.  Gold fluctuates wildly too over the years.  

Yes bitcoin fluctuates more cause it is younger with smaller market.   That doesn't necessarily mean there's a problem.

[dead_bit]

Ok if I bought in a few months ago at 800 - 900 USD I would now be at a 50% loss. Is that a store of value? No, it's not.

Incorrect. Other recognized stores of value are real estate, stocks, and gold. Those have all suffered 50% draw downs at times.

The definition of store of value you are using is not the generally accepted one. If you pick your own definitions you can support almost any argument.

http://en.wikipedia.org/wiki/Store_of_value

I concede and I see your point. I'll file what I've learned away for the next time.

[jonald_fyookball]

there is still PLENTY of time to be a bitcoin winner.  The price can increase many multiples from where it is now.

[Lauda]

Ok if I bought in a few months ago at 800 - 900 USD I would now be at a 50% loss. Is that a store of value? No, it's not.

This is the sunk-cost fallacy: http://en.wikipedia.org/wiki/Sunk_costs

Billionaire Bob moved a portion of his wealth into bitcoin as a hedge to reduce the variance of his wealth moving forward in time.  He could have had his assets siezed and the dollar-collapse event could have happened.  The fact that it didn't doesn't mean that the hedge was unwise.  In fact, if he reanalyses the situation from today moving forward, he may conclude that he should actually now move more wealth into bitcoin.  

If you buy fire insurance on your house and it never burns down did you waste your money?

Nice argument sir. You're correct.

If you invested a lot in gold before the price collapsed, is that a store of value?
Stop looking at bitcoin the wrong way, this can happen with just about anything.

[twiifm]

@ Peter R

That analysis has so many flaws

(1) You assume that Bob has only 2 choices (BTC yes or no) when he could diversify his portfolio in many asset classes

(2) Standard deviation is determined by using historical data not random numbers projected into the future

(3) Probability isn't randomly calculated like that.  5% lose all money vs 95% not lose all money?  Say what?  

(4) I think someone else defined "store of value" = low volatility.   I'm not sure how you are defining "store of value".  Sounds like you are saying BTC is a store of value because it could go to x20 or not.  This sounds like a "speculative" bet not a "store of value" bet.  You are speculating that demise of USD will drive up BTC price.  

(5) Buying BTC is not a hedge against USD.  That's not how hedges work.  A hedge is when you take trade AND you also take the opposite of that trade to mitigate your risk.  The easiest way to hedge is using options.  But there is no options market on BTC so the point is moot

"but I have never found a rational case where it is not wise to store at least a small portion of your wealth in bit coin"  

How about in the case the price crashes and you lose your money?  If you have the assumption BTC will forever go up in price then by all means invest.  But don't claim that the price can't crash or even go to zero.  

[dead_bit]

Ok if I bought in a few months ago at 800 - 900 USD I would now be at a 50% loss. Is that a store of value? No, it's not.

This is the sunk-cost fallacy: http://en.wikipedia.org/wiki/Sunk_costs

Billionaire Bob moved a portion of his wealth into bitcoin as a hedge to reduce the variance of his wealth moving forward in time.  He could have had his assets siezed and the dollar-collapse event could have happened.  The fact that it didn't doesn't mean that the hedge was unwise.  In fact, if he reanalyses the situation from today moving forward, he may conclude that he should actually now move more wealth into bitcoin.  

If you buy fire insurance on your house and it never burns down did you waste your money?

Nice argument sir. You're correct.

If you invested a lot in gold before the price collapsed, is that a store of value?
Stop looking at bitcoin the wrong way, this can happen with just about anything.

I'm enjoying vodka on my last day off and I'm lacking in the ability to really articulate what I mean. Better to concede.

@ Peter R

That analysis has so many flaws

(1) You assume that Bob has only 2 choices (BTC yes or no) when he could diversify his portfolio in many asset classes

(2) Standard deviation is determined by using historical data not random numbers projected into the future

(3) Probability isn't randomly calculated like that.  5% lose all money vs 95% not lose all money?  Say what? 

(4) I think someone else defined "store of value" = low volatility.   I'm not sure how you are defining "store of value".  Sounds like you are saying BTC is a store of value because it could go to x20 or not.  This sounds like a "speculative" bet not a "store of value" bet.  You are speculating that demise of USD will drive up BTC price. 

(5) Buying BTC is not a hedge against USD.  That's not how hedges work.  A hedge is when you take trade AND you also take the opposite of that trade to mitigate your risk.  The easiest way to hedge is using options.  But there is no options market on BTC so the point is moot

"but I have never found a rational case where it is not wise to store at least a small portion of your wealth in bit coin" 

How about in the case the price crashes and you lose your money?  If you have the assumption BTC will forever go up in price then by all means invest.  But don't claim that the price can't crash or even go to zero. 

This is a bit more what I was leaning towards.

[jonald_fyookball]

@ Peter R

That analysis has so many flaws

(1) You assume that Bob has only 2 choices (BTC yes or no) when he could diversify his portfolio in many asset classes

(2) Standard deviation is determined by using historical data not random numbers projected into the future

(3) Probability isn't randomly calculated like that.  5% lose all money vs 95% not lose all money?  Say what?  

(4) I think someone else defined "store of value" = low volatility.   I'm not sure how you are defining "store of value".  Sounds like you are saying BTC is a store of value because it could go to x20 or not.  This sounds like a "speculative" bet not a "store of value" bet.  You are speculating that demise of USD will drive up BTC price.  

(5) Buying BTC is not a hedge against USD.  That's not how hedges work.  A hedge is when you take trade AND you also take the opposite of that trade to mitigate your risk.  The easiest way to hedge is using options.  But there is no options market on BTC so the point is moot

"but I have never found a rational case where it is not wise to store at least a small portion of your wealth in bit coin"  

How about in the case the price crashes and you lose your money?  If you have the assumption BTC will forever go up in price then by all means invest.  But don't claim that the price can't crash or even go to zero.  

I would argue that buying BTC is in fact a hedge against USD.  Many people have used Gold as a hedge in the same way.
Since BTC (and Gold) are priced in USD, you are in effect "taking the other side of the trade".  On the one hand,
you hope your USD holds its value.  But if it doesn't, your BTC increase. 

[Peter R]

@ Peter R  That analysis has so many flaws...

The analysis was hugely simplified to illustrate the benefit of hedging using simple math.  I explained that in the post.  

I also showed that even if you assign a 95% probability to the value of bitcoin going to zero, it can still be useful as part of a wealth-preservation strategy. 

[twiifm]

I would argue that buying BTC is in fact a hedge against USD.  Many people have used Gold as a hedge in the same way.
Since BTC (and Gold) are priced in USD, you are in effect "taking the other side of the trade".  On the one hand,
you hope your USD holds its value.  But if it doesn't, your BTC increase. 

Gold isn't used as a hedge against USD.  You are thinking of rotation.  When investors rotate or re-allocate their funds on the belief of rising or falling prices amongst different asset classes.  A lot of investors rotate from equities to gold & vice versa. 

"Taking other side of trade" is literal.  Its being both long & short on a trade simultaneously.  Normally your initial position is long term and your hedge is short term.

[jonald_fyookball]

The word hedge can be used more loosely (i.e. hedge your bets).

From Investopedia:

Definition of 'Hedge'

Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract.

[smooth]

A slightly better word than hedge is diversification. Diversification is valuable even if the asset you are diversifying from has higher expected return. In fact that is always the case, otherwise you would allocate 100% to the one asset with the highest expected return.

[jonald_fyookball]

True.

I think the distinction here is the  negative correlation.

Using twiifm's strict definition of opposite positions on the same instrument,
there is 100% negative correlation.

However, there is still strong counter correlation for a denominated
asset (Gold or Bitcoin).

[twiifm]

@ Peter R  That analysis has so many flaws...

The analysis was hugely simplified to illustrate the benefit of hedging using simple math.  I explained that in the post.  

I also showed that even if you assign a 95% probability to the value of bitcoin going to zero, it can still be useful as part of a wealth-preservation strategy. 

That's not how probabilities work though.  You didn't show anything except you made up some random numbers and drew conclusions from them.

All you said was if you invested 5% of your portfolio in BTC today it could return 20X or zero.  You came up w 5% because you believe thats an appropriate amount of risk attributed to random probabilities 5% vs 95%.

Buying BTC is not a hedge against demise of USD.  If you think USD will fall then you should short USD.  If you think BTC will rise then you should long BTC.  There is no correlation as a trade

It's actually hard to price USD without being paired to something.  Its easier if you compaired BTC to gold or some other commodity so you can analyze the prices in USD.  Throw up 2 charts and see if there is correlation or not.

I think the only reason you believe there is a correlation of BTC & USD is because the propaganda of BTC is anti-Central Banking.  BTC pumpers always talk about demise of fiat money.  Gold pumpers say the same thing to pump gold price.

[jonald_fyookball]

its not just propoganda though...look what happened to BTC during cypress.

if the USD falls, it will be the financial news of the century,
and it is quite likely there will be a massive interest in bitcoin.

[smooth]

I think the only reason you believe there is a correlation of BTC & USD is because the propaganda of BTC is anti-Central Banking.

If there is no correlation then it is still useful for diversification. Negative correlation would be better, of course, but zero correlation makes his argument valid as well.

In order to argue that it isn't useful for diversification you would have to show it has perfect correlation.

[twiifm]

its not just propoganda though...look what happened to BTC during cypress.

if the USD falls, it will be the financial news of the century,
and it is quite likely there will be a massive interest in bitcoin.

That's due to a bank run.  Had nothing to do with failure of Euro.  People were worried they couldn't get their money out of the banks if banks became insolvent.

The reason there was a crisis in Cyprus is because their debt is denominated in Euros and ECB didn't bail them out

[jonald_fyookball]

People were worried they couldn't get their money

EXACTLY.

[Siegfried]

@ Peter R

That analysis has so many flaws

(1) You assume that Bob has only 2 choices (BTC yes or no) when he could diversify his portfolio in many asset classes

(2) Standard deviation is determined by using historical data not random numbers projected into the future

(3) Probability isn't randomly calculated like that.  5% lose all money vs 95% not lose all money?  Say what?  

(4) I think someone else defined "store of value" = low volatility.   I'm not sure how you are defining "store of value".  Sounds like you are saying BTC is a store of value because it could go to x20 or not.  This sounds like a "speculative" bet not a "store of value" bet.  You are speculating that demise of USD will drive up BTC price.  

(5) Buying BTC is not a hedge against USD.  That's not how hedges work.  A hedge is when you take trade AND you also take the opposite of that trade to mitigate your risk.  The easiest way to hedge is using options.  But there is no options market on BTC so the point is moot

"but I have never found a rational case where it is not wise to store at least a small portion of your wealth in bit coin"  

How about in the case the price crashes and you lose your money?  If you have the assumption BTC will forever go up in price then by all means invest.  But don't claim that the price can't crash or even go to zero.  

Bitcoin is the only asset class with its extraordinarily useful attributes. In terms of portability, security, spendability, transferability, and divisibility, Bitcoin is miles better than gold, gems, real estate, rare art, or any other asset I can think of.

[Littleshop]

Buying BTC is not a hedge against demise of USD.  If you think USD will fall then you should short USD.  If you think BTC will rise then you should long BTC.  There is no correlation as a trade

Says the NYC financial industry.  They want to keep you paying in their court. 

To say that Bitcoin is not a possible hedge against the dropping dollar means you do not understand Bitcoin. 

[Kiwigoeswest]

Lol, V Putin can easily holds his assets in one of the Russian based banks. He even open account in a bank that was sanctioned and now this bank said they are going to operate in rubbles only. China and Russia are about to topple dollar and they are likely to promote yuan and rubble.

[Siegfried]

Lol, V Putin can easily holds his assets in one of the Russian based banks. He even open account in a bank that was sanctioned and now this bank said they are going to operate in rubbles only. China and Russia are about to topple dollar and they are likely to promote yuan and rubble.

Putin was not the best example. A better one would have been an oligarch who has to fear not only U.S. sanctions but Putin himself.

[Peter R]

Buying BTC is not a hedge against demise of USD.  If you think USD will fall then you should short USD.  If you think BTC will rise then you should long BTC.  There is no correlation as a trade.

Twiifm: "I'll show those greedy bitcoiners.  I'm gonna short BTC/USD but I'll diversify by going long USD/BTC since there is no correlation.  Mu ha ha ha."    

[kingscrown]

i doubt he understands BTC or cares about it.

[Peter R]

Lol, V Putin can easily holds his assets in one of the Russian based banks. He even open account in a bank that was sanctioned and now this bank said they are going to operate in rubbles only. China and Russia are about to topple dollar and they are likely to promote yuan and rubble.

Putin was not the best example. A better one would have been an oligarch who has to fear not only U.S. sanctions but Putin himself.

Yes, Putin just happens to be in the spotlight in a way that will get other elite thinking about the likelihood of their own wealth being seized.  

But I wouldn't actually say he's that bad of an example either.  Putin can continue to hold his ruble assets in Russian banks.  But I believe a lot of other financial assets could still be targeted.  This is over my pay grade, but I think USD moved into Russian banks could be frozen by sanctions affecting the bank's access to the SWIFT network, correct?  If you don't have access to SWIFT, I think you are limited to trading physical US $100 dollar bills and old US treasury bearer bonds (which the US stopped selling in 1982 "because their anonymous nature made them a haven for tax evaders").  

[jonald_fyookball]

Well probably above my pay grade too, but I'll give my 2 cents anyway as I always do, lol.

SWIFT is mostly just a protocol to help banks find other bank's identities and format payment orders, it is not needed when big money is involved because the central banks have relationships with and can talk directly to other central banks.  If US sanctions Russia, I think not being able to use SWIFT codes would be the least of Putin's problems.  

[Peter R]

Well probably above my pay grade too, but I'll give my 2 cents anyway as I always do, lol.

SWIFT is mostly just a protocol to help banks find other bank's identities and format payment orders, it is not needed when big money is involved because the central banks have relationships with and can talk directly to other central banks.  If US sanctions Russia, I think not being able to use SWIFT codes would be the least of Putin's problems.  

Say a bank in London wires $100 million to a Russian bank.  And then the Russian bank wires $100 million to a Swiss bank.  How does each bank confirm that the "wire" was real?  Is there some way to confirm each wire with the Fed?  Or do they just have some trust system?  Can a bank wire the same money to two different banks?  Who checks for double spends?  I suppose the underlying asset is a claim on several pieces of paper, but no paper actually moves, correct?

The more I learn the less I know...

[jonald_fyookball]

Well probably above my pay grade too, but I'll give my 2 cents anyway as I always do, lol.

SWIFT is mostly just a protocol to help banks find other bank's identities and format payment orders, it is not needed when big money is involved because the central banks have relationships with and can talk directly to other central banks.  If US sanctions Russia, I think not being able to use SWIFT codes would be the least of Putin's problems.  

Say a bank in London wires $100 million to a Russian bank.  And then the Russian bank wires $100 million to a Swiss bank.  How does each bank confirm that the "wire" was real?  Is there some way to confirm each wire with the Fed?  Or do they just have some trust system?  Can a bank wire the same money to two different banks?  Who checks for double spends?  I suppose the underlying asset is a claim on several pieces of paper, but no paper actually moves, correct?

The more I learn the less I know...

Haha, great question and I am far from an expert.

My understanding is that there are various clearing houses that manage the balance sheets between banks, and those clearing houses are in turn accountable to the central bank of their respective countries.

[Peter R]

Haha, great question and I am far from an expert.

My understanding is that there are various clearing houses that manage the balance sheets between banks, and those clearing houses are in turn accountable to the central bank of their respective countries.

Thanks Jonald, that's my understanding too.  But I don't have a good handle on exactly who those clearing houses are or how they operate (I thought the big clearing house was SWIFT but I really don't know).  So I guess if the US knows that Putin has say $2 billion in Bank X, then with sufficient influence they could tell the clearing houses not to "clear" certain funds, or cut off Bank X completely. Why not? 

[bryant.coleman]

That is so not true.  Russia would not have ever bailed out for more than what was already done.  Russia is known for writing off uncollectable debt but not for actual giving out billions to overseas private banks.  

From what I've heard Russia offered billions of $$$ to Cyprus for having a naval base in the island. The Cypriot politicians were worried that if they did so, then they'll be kicked out of the Euro Zone. So instead, they stole the money from their citizens' bank accounts.

[jonald_fyookball]

Haha, great question and I am far from an expert.

My understanding is that there are various clearing houses that manage the balance sheets between banks, and those clearing houses are in turn accountable to the central bank of their respective countries.

Thanks Jonald, that's my understanding too.  But I don't have a good handle on exactly who those clearing houses are or how they operate (I thought the big clearing house was SWIFT but I really don't know).  So I guess if the US knows that Putin has say $2 billion in Bank X, then with sufficient influence they could tell the clearing houses not to "clear" certain funds, or cut off Bank X completely. Why not? 

Yeah it's funny how "no one" really knows how it all works.  Even the people at the local bank branch who work for the bank don't know.  I'm sure it could be easily researched with all the info that's online today, but isn't it funny how uneducated we are about the global banking system that we all have historically put our trust in ?

[OROBTC]

...

Great thread, Peter R, thanks for starting it.  Many great comments too (Melbustus, smooth, jonald_).

If Putin has over, say, $5 billion in net liquid assets, then he would qualify as a "Giant" (defiinition of which I will leave for another time).  Giants think differently than we mortals do.

"Three gets you five" that if Putin DOES have $5 billion or more (who really knows) then he would likely be smart enough to be diversified to some degree.  He would already have some decent amount socked away in different venues and in non-correlated assets (at least to some degree).  Bitcoin would be a suitable place for perhaps 1% of Putin's purported wealth.

I am some four orders of magnitude less wealthy than Mr. Putin *may* be.  Yet I have 1% in BTC, some 11% in gold and some invested in our bearing import business way down there in Peru.  In the spirit of one comment above:

Diversification, fishez!

[twiifm]

It depends if they are branches of the same bank or different banks.  

Each country have their own clearing and settlement systems like CHIPS and Fedwire in US

SWIFT isnt a clearing house.  Its a network so the wire goes to the correct recipient

If Putin has an account in US bank and he commits some kind of fraud then theoretically his account could be frozen.

Kim Dotcom had his account frozen in New Zealand from FBI raid.  But Putin is president of Russia so I doubt the US could get anywhere close without a war breaking out

[Beliathon]

Ok if I bought in a few months ago at 800 - 900 USD I would now be at a 50% loss. Is that a store of value? No, it's not.

Nope, that's uhh, not how that works at all, actually. You should probably learn what the words mean before you attempt to use them in an internet debate. Jus' sayin'.

Sometimes I feel like I'm in an episode of a bad reality TV show: "BITCOIN FORUMS: A CLASH OF STANDARD DEVIATIONS ALONG THE BELL CURVE."

[Peter R]

Yeah it's funny how "no one" really knows how it all works.  Even the people at the local bank branch who work for the bank don't know.  I'm sure it could be easily researched with all the info that's online today, but isn't it funny how uneducated we are about the global banking system that we all have historically put our trust in ?

Lol, and then people claim that bitcoin will fail because it is too confusing.  Is it possible to invent a simpler global monetary system than bitcoin?

[smooth]

Lol, and then people claim that bitcoin will fail because it is too confusing.  Is it possible to invent a simpler global monetary system than bitcoin?

It may not be. Globally coordinating anything is hard.

[Peter R]

Lol, and then people claim that bitcoin will fail because it is too confusing.  Is it possible to invent a simpler global monetary system than bitcoin?

It may not be. Globally coordinating anything is hard.

Yes.  Good point Smooth.  Bitcoin is a simple and transparent p2p electronic cash system but we don't yet know if it can become a global monetary system. 

[SolarGalaxa]

Seriously? The US does anything it wants without repercussions. Instead of targeting foreigners (whoever they may be), uh, maybe legalize and tax marijuana and gambling and watch the billions roll in?

[bryant.coleman]

Seriously? The US does anything it wants without repercussions. Instead of targeting foreigners (whoever they may be), uh, maybe legalize and tax marijuana and gambling and watch the billions roll in?

The current round of sanctions against Russia are completely toothless. Almost none of the Russian politicians have their bank accounts in the US. IF they indeed have the same, then they must be stupid beyond belief.

[Lauda]

i doubt he understands BTC or cares about it.

I think that he has better things to do than to read about Bitcoin, for now.
His advisers should have told him about the great advantages of it though.

[Littleshop]

That is so not true.  Russia would not have ever bailed out for more than what was already done.  Russia is known for writing off uncollectable debt but not for actual giving out billions to overseas private banks.  

From what I've heard Russia offered billions of $$$ to Cyprus for having a naval base in the island. The Cypriot politicians were worried that if they did so, then they'll be kicked out of the Euro Zone. So instead, they stole the money from their citizens' bank accounts.

The loss was huge.  They got money from Europe ( more billions ) and still had to haircut their own citizens.

[bryant.coleman]

The loss was huge.  They got money from Europe ( more billions ) and still had to haircut their own citizens.

They didn't got any monetary grants from Europe. All the EU did was to re-structure their debts, i.e to transfer the debts to European banks with more flexible terms. On the other hand, Russia was offering them grants.

[R2Pleasent]

Bitcoin could be useful in this situation, but not for the whole $40B.  Putin could put $2-3 Billion into Bitcoin for safety.  Any more than that provides rapidly diminishing returns on all fronts:

- Price to acquire Bitcoin will become far too high
- Exposure to a highly volatile asset is not acceptable on such a large sum; Bitcoin could lose most of its value for a variety of reasons
- Bitcoin is vulnerable to an attack by government if there is enough incentive

The first two points are extremely obvious.  The last one, not so much.  But realistically, if Putin injected $40B into BTC, it would make him by far the largest stakeholder in the currency.  With no investment into hashing power and securing the network, the US government could overtake the network at a fraction of his investment and demolish the system.

Putin would instead be more advised to put $2-3B into Bitcoin, $500M into Litecoin, and spend $500M on mining hardware (spread out through ~2 years).  This would allow him to invest up to $5B into the system effectively. 

Of course, someone of Putin's status likely has many other ways to store $40B+.  If he believes the Swiss banks will work against him, he should retrieve his money ASAP and find a more secure place to invest.

[Lauda]

Of course, someone of Putin's status likely has many other ways to store $40B+.  If he believes the Swiss banks will work against him, he should retrieve his money ASAP and find a more secure place to invest.

What happens if he nukes those banks in return? 

[vqp]

- Better ideas?

Of course you have to buy them off-exchanges. Ask Snowden, he might know a few bitcoin kings.

[vqp]

Putin is probably a bad example.  Putin has no problems with corrupt governments seizing private wealth ... as long as it is the corrupt private wealth seizing government he controls.  For the rich who don't control nation states the risk is more real.

In the end it turns out that AML laws are good for bitcoin. At least for its price.

[Littleshop]

The loss was huge.  They got money from Europe ( more billions ) and still had to haircut their own citizens.

They didn't got any monetary grants from Europe. All the EU did was to re-structure their debts, i.e to transfer the debts to European banks with more flexible terms. On the other hand, Russia was offering them grants.

http://en.wikipedia.org/wiki/2012%E2%80%9313_Cypriot_financial_crisis#Request_for_EU_intervention_and_agreement

Sure they did.  They got 10 Billion Euros from the EU. 

[bryant.coleman]

Sure they did.  They got 10 Billion Euros from the EU. 

They got € 10 billion in loans from the EU, They will have to pay back this amount in the near future.

[smooth]

http://www.nytimes.com/2014/04/27/world/sanctions-revive-search-for-secret-putin-fortune.html

[bryant.coleman]

http://www.nytimes.com/2014/04/27/world/sanctions-revive-search-for-secret-putin-fortune.html

lol... in the 16th century they searched for Atahualpa's gold. And in the 21st century they are searching for Putin's treasure. The first one was a disaster... and I think that the second one will also parallel that.

[Peter R]

http://www.nytimes.com/2014/04/27/world/sanctions-revive-search-for-secret-putin-fortune.html

This new ZeroHedge post is related to the link Smooth provided above: http://www.zerohedge.com/news/2014-04-27/quest-find-putins-billions.  It is an interesting look at the links between Putin, the Russian Oligarchy, and the vast wealth that is likely held hidden in a complex web of connections.  

It sounds like tomorrow the US and EU will implement the next round of financial sanctions against certain oligarchs loyal to Putin.  For example, the ZeroHedge article claims that Gennady Timchenko, whose net worth is estimated at $15.3 billion (#61 on Forbes' Billionaire List), may be singled out.