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Fama: Bitcoin is Dead (Promarket/Capitalisn't)www.promarket.org/2025/01/30/nobel-laureate-eugene-fama-predicts-bitcoin-will-become-worthless/
1568 sats \ 35 comments \ @denlillaapan 18h econ
I used to listen to the Capitalisn't podcast a lot... but Zingales' Italian accent, and Bethany's soft-minded wokey shit eventually was too much for me.
Haven't followed them for years. So apparently a few days ago they had Eugene Fama on, and they discussed Bitcoin. WOOHOOO. (#863751). Here's the episode:
https://www.capitalisnt.com/episodes/why-this-nobel-economist-thinks-bitcoin-is-going-to-zero-with-eugene-fama
Cryptocurrencies are such a puzzle because they violate all the rules of a medium of exchange
This is pretty stupidly said, given that there are no "rules" of a MoE. What exactly is it that bitcoin is violating? Gravity? God? What some wise-ass economist once said from their cushy ivory tower?
This bit is all true, old, or irrelevant. It'd be better if BTC/USD didn't jump around as it does (#875436), but now that's the case... and whether it's useful as currency (i.e., technically functions) is a separate issue to that. 1
(put differently, imagine bitcoin never deviated from the dollar... I know, insane, and how would that be achieved, but let's ignore that... that just means bitcoin is a stablecoin, and there is no further gain from trying to bootstrap an improved currency system.)
Fama continues to say that the probability of bitcoin collapsing to zero within a decade is a 100%! For someone well versed in efficient markets—literally the father of the EMH, the guy famously skeptical of the very existence of bubbles; it's pretty insane of him to say that this thing is a bubble. Nevermind its ATH, nevermind its 16y Lindy. Like, come on dude. I know for a fact that you're better than this. In fact, in the very episode itself you lay out the counterargument to saying that bitcoin is a bubble destined for death:
Can you spot [financial bubbles]? I can’t. My definition of a bubble is very simple. It’s something that has a predictable ending. If you can’t predict when it’s going to end, you’re just using this word loosely.

The persistence of Bitcoin poses a challenge to established economic principles. “I’m hoping it will bust,” Fama said, “because if it doesn’t, you have to start all over with monetary theory.”

This is absolutely correct. Bitcoin breaks all the models. Bitcoin definitely challenges a lot of established wisdom in monetary economics, and its existence/flourishing definitely undermines a lot of what mainstream/legacy economists think they know about the wonderful world of money.
All over the episode, Fama is doing a great job taking apart preconceived notions of bubbles and whatever "intrinsic value" (#836811) is supposed to be.
...and then he pretzels himself into estupidez unworthy of a Nobel Laureate:
  • "It’s only digital gold if it has a use. If it doesn’t have a use, it’s just paper. Not paper, it’s air, not even air."
  • "Gold has many use cases"
  • Bitcoin's collapse is close to 100%... "I still believe in monetary theory, though. I may be wrong."
yea, no shit.

... but he was being a total joker: "Luigi made me put a term limit on it. I’d take 10 years because I’m 86 years old. The likelihood that I’m going to have to pay up on this one is pretty low."

Plus, reading the transcript you can just ignore Luigi's comments. They're really asinine—amagad, Bitcoin uses energy! oh no, there isn't smart programming...

tl;dr, smart people ridiculing bitcoin. It's not even the "then they fight you" stage.

Over and out

Footnotes

  1. "On Price and Output Volatility: How Bad is Bitcoin’s Flaw?" The Daily Economy, Dec 20, 2021: https://thedailyeconomy.org/article/on-price-and-output-volatility-how-bad-is-bitcoins-flaw/ ↩
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134 sats \ 22 replies \ @Undisciplined 18h
Does "fixed supply" annoy you as much as it's beginning to annoy me?
I know that's how "supply" is used when we talk about "money supply", but it's not the same as the "supply" in "supply and demand".
The stock of bitcoin may be more or less fixed, but there's nothing fixed about people's willingness to part with it. Price, therefor, is still driven by both supply and demand.
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105 sats \ 21 replies \ @denlillaapan OP 18h
yup, 100%.
I hadn't really considered it, easily keeping the two concepts (stock vs flow) apart but @Scoresby's post the other week really illustrated to me that this terminology confuses more than it illuminates.
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63 sats \ 20 replies \ @Scoresby 17h
You rang?
I am sure that I have contributed to this confusion quite a bit. Indeed, I find that I'm am still confused (although hopefully not about the terms any longer -- thanks to you and @Undisciplined).
Unfortunately, I'm stuck on this idea of Voskuill's that selling a coin does not decrease its price.
If a trade increases the supply of one item in the trade, it must also increase the supply of the item on the other side of the trade.
If you dump fork coin for bitcoin your trading partner is dumping bitcoin for fork coin. And if you dump fork coin for dollars, your trading partner is dumping dollars for fork coin.
The result from the position of those who think trading increases supply is that each side of the trade decreases the price of the thing they are selling. But how could both things decrease in price (in terms of each other) simultaneously?
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41 sats \ 19 replies \ @denlillaapan OP 17h
one way we can see that this isn't a paradox or that there's a flaw in the logic is this:
if, because for every buyer there's a seller and thus "selling a coin does not decrease its price," how could (relative) prices ever move?
How is it that BTC/USD was 101,500 this morning and is 96,000-something now? every single trade that moved the price up, down, sideways and then down during the day had symmetrical buyers and sellers on each side.
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17 sats \ 2 replies \ @Undisciplined 17h
The original confusion reminded me a lot of studying Newton's 3rd Law for the first time and not understanding how any movement can happen.
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64 sats \ 1 reply \ @Scoresby 17h
I like this analogy!
The apple is pulling on the earth as hard as the earth is pulling on the apple.
But the apple moves because F = ma and the Earth's mass is relatively much bigger than the apple's. For one-sided acceleration to occur, there must be a difference in mass.
Selling btc for dollars exerts the same sell pressure on btc as the person selling dollars exerts on dollars.
But the price of btc goes down only if fewer people want btc and the next offer to sell btc at that level of dollars doesn't have a buyer. For a price change to occur, there must be a difference in buyers.
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37 sats \ 15 replies \ @Scoresby 17h
How is it that BTC/USD was 101,500 this morning and is 96,000-something now?
Wouldn't it be that the price has moved because people want less bitcoin than they previously held (or more of something else)?
When these holders of btc wanted to acquire something else they had to look longer/harder/offer more btc to find people who were willing to trade with them.
The trades themselves don't move the price. The change in people wanting bitcoin moves the price.
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137 sats \ 14 replies \ @denlillaapan OP 16h
...but they display that wanting less/more by acting in the marketplace, ie making trades
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29 sats \ 3 replies \ @kepford 18h
I just love seeing "smart" people predict bitcoin's death. Its beautiful to watch pride and laziness be exposed.
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62 sats \ 2 replies \ @denlillaapan OP 18h
indeed. We need more updates on Bitcoin is Dead; been no entries since Aug 20 last year
https://bitcoindeaths.com/
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0 sats \ 0 replies \ @kepford 18h
Bitcoin exposes you.
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0 sats \ 0 replies \ @kepford 18h
The utter laziness of those that have attained status is often breathtaking.
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29 sats \ 1 reply \ @SimpleStacker 18h
Unfortunately, I think Fama is just becoming a bit ridiculous in his old age.
Plenty of academic articles using traditional monetary models have demonstrated that something like Bitcoin can exist and trade at a non-zero exchange rate, i.e. this one: #734528, or this one: #745057
Saying it poses a threat to economic principles is undermining his own profession (and mine), and I won't tolerate it!
Mainstream economics has many problems, but the existence of bitcoin is not one of them.
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30 sats \ 0 replies \ @denlillaapan OP 18h
precisely.
He's just done for. We appreciate his work, and the articles he wrote in the 1970s-1990s were excellent. What he says today is emphatically not what we measure his contribution to humanity for :)
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24 sats \ 0 replies \ @kruw 13h
Excellent takedown. Thanks for the high effort post.
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24 sats \ 0 replies \ @SwapMarket 17h
This dinosaur can't tell Bitcoin from "all the cryptos". Entering the mining business with sole purpose of corrupting Bitcoin blockchain is prohibitively expensive nowadays, and the economic incentive will be to strengthen the network instead of destroying it (turning your mining rigs in an expensive pile of rubbish).
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18 sats \ 0 replies \ @Aardvark 18h
I hate people that predict bitcoins death. It's exactly why my dumb ass thought it was dead years ago because of lack of research.
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0 sats \ 0 replies \ @Solomonsatoshi 17h
'Cryptocurrencies are such a puzzle because they violate all the rules of a medium of exchange'.
The usually considered 'rules' (or fundamental requirements) are that a monetary system provides MoE, SoV and a unit of account.
Bitcoin provides all these although unit of account is difficult where Bitcoin price relative to goods and services is volatile. Bitcoins MoE ability is also compromised mostly by the direct and sly obstructions put in place by the legacy fiat operators- tax reporting/collecting requirements and threats from banks to close businesses fiat banking if they accept Bitcoin...under the pretext of KYC/AML.
Bitcoin certainly does not violate all the rules- as it is far superior in SoV, adequate(bar obstruction) in MoE especially with LN and being inherently digital/online Bitcoin has advantages in terms of MoE use online and globally compared to fiats antiquated, inefficient and expensive payments/settlement channels, and even unit of account viability will improve as Bitcoins relative value becomes more stable as it logically will as market value increases.
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0 sats \ 0 replies \ @Solomonsatoshi 17h
'Eugene Fama has a long-term consulting arrangement with Dimensional Fund Advisors.'
He made his name/career theorising upon fiat monetary systems and principles- Bitcoin does present an asymmetric alternative to fiat money and while it does demonstrate volatility is also has provided SoV- incredible SoV.
The fact that Bitcoins use as a MoE has been hugely if slyly obstructed by the legacy fiat operators is overlooked by Fama. How he can call himself a Libertarian while ignoring extensive and explicit money market obstruction by the fiat money operators is a mystery.
Fiat money is an explicitly rigged market with the price and issuance dictated by central banks. It is a government imposed monopoly within its respective jurisdictions.
The fiat operators have slyly and effectively obstructed Bitcoins ability to be used in competition with fiat as follows- The combination of tax reporting obligations making use of Bitcoin as a MoE effectively impractical and the threat by banks to withdraw banking to businesses who dare offer Bitcoin as a MoE results in significant obstruction of Bitcoin as a MoE.
It is true that not being widely used as a MoE is a problem, and that the growing accumulation of Bitcoin under institutional custody further degrades Bitcoins potential for use as a MoE, but this does not make Bitcoins demise certain.
However even if only or largely used as a very liquid SoV Bitcoin has proven to be in high demand. It seems very unlikely that fiat debasement will cease anytime soon so the logic for people to hold Bitcoin remains.
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0 sats \ 0 replies \ @nitter 18h bot
https://xcancel.com/timevalueofbtc/status/1764665643104931882
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