110 sats \ 5 replies \ @elvismercury OP 18 Oct 2023 \ on: _Broken Money_ book club, part 2 bitcoin
Lyn compares bank runs to a game of musical chairs (pp 74-75) -- when people start to doubt whether the bank is solvent, they withdraw their money; as more people withdraw their money, the less solvent the bank becomes, and the more other people withdraw their money. In this way a lack of belief in the bank's solvency becomes self-fulfilling, and it's really important to adjust your beliefs before others do.
How do these forces play out wrt btc? Given that btc is a good of pure abstraction, does it make sense to consider things like the price implosion from $69k to $15k to be a 'bank run' in the belief in btc as a credible money?
I think that as much as we would like to think of BTC as an independent entity, it is not entirely uncoupled from conventional assets at this point in time. Hence, if something devastating were to happen to the macroeconomic environment, traditional assets like stocks will take a hit, and along with it, Bitcoin. A price drop in Bitcoin will not necessarily mean that people are losing faith in this trustless digital money.
Also, this year, something just clicked in my mind - and I want to live the Bitcoin Standard as some Stackers do here. It will be a tall order for me because I am based in Asia and can’t receive my salary in BTC as of now. But selling fiat to buy BTC is such a worthy ideal to work towards, so I will start my journey by buying gift cards from Bitrefill. I guess what I want to say is that if we spend sats to save spend invest share in our everyday lives, we then remove ourselves from the clutches of the fiat system and have no reason to be bothered by any price implosion of Bitcoin xP
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I guess what I want to say is that if we spend sats to save spend invest share in our everyday lives, we then remove ourselves from the clutches of the fiat system and have no reason to be bothered by any price implosion of Bitcoin xP
And yet that decision -- to dive more deeply into a btc economy -- is still a function of believing that it's a sensible thing to do, which in turn is based on a host of factors. But it's not like believing in the laws of physics, right? Or do you think that it is? Is it a pure determinism play for you?
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Great question! I don’t think it’s like believing in the laws of physics - those are immutable. Whereas the blockchain technology governing Bitcoin is cast in stone and won’t mutate and throw curveballs at us Bitcoiners, diving deeper into a BTC economy requires a leap of faith. Things like trust in my ability to get paid in Bitcoin, trust that the merchants who accept Bitcoin payments will only increase with time (Thank you, Ferrari!) etc. but I think it’s about making a choice at the end of the day. Once we decide to live the Bitcoin Standard with conviction, we are determined to overcome all challenges associated with it, come hell or high water
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I'm nitpicking but I think she made an error with the analogy. An individual bank's bank run is like a game of musical chairs but a fractional reserve banking system - which she describes very clearly - is more like a house of cards.
A fractional reserve banking system is like a game of musical chairs; it functions for a while but if something ever stops the music, it call fall apart quickly.
It's more like a house of card-like games of musical chairs lol
Given that btc is a good of pure abstraction, does it make sense to consider things like the price implosion from $69k to $15k to be a 'bank run' in the belief in btc as a credible money?
This is interesting. When bitcoin's price decreases, is the market pricing entries in bitcoin's ledger like a failing bank's ledger? When the cards begin to fall in a fractional reserve system, the price of legitimate ledger entries (gold say) tend to appreciate.
When people panic withdraw from bitcoin's ledger, what do they perceive are bitcoin's liabilities?
An alternative take: maybe we're only seeing the price of sub-ledger bitcoin (as held on exchanges) decrease during bitcoin's "bank runs." It's hard to wrap my arms around that, but I could see that being true.
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An alternative take: maybe we're only seeing the price of sub-ledger bitcoin (as held on exchanges) decrease during bitcoin's "bank runs." It's hard to wrap my arms around that, but I could see that being true.
Interesting idea -- separates the pricing mechanism btwn on-exchange and off-exchange btc, like they're two distinct type of conceptual entities. Not sure what implications that has, but I'm going to noodle on it.
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