Is Bitcoin worth anything? – Politico

How risky is investing in digital assets? Ongoing defeat The cryptocurrency markets are destined to renew this debate.

It is not just a matter of individuals and money managers, but also of national policy makers, who are trying to figure out how much protection we offer retail investors.

The easier it becomes for enthusiastic investors to invest their money in bitcoin and other cryptocurrencies, the more Americans will have access to investments that have made some people a great deal of money — but the more they will be exposed to the uncertainties of an entirely new and highly volatile asset type.

This year, much of the political debate centered around the idea of ​​an instant site Bitcoin ETFs. Several large asset management firms have applied to the SEC for permission to list these funds, which would invest directly in Bitcoin and could be bought or sold just as easily as publicly traded stocks. But so far, the SEC has rejected those bids, quote Lack of regulation in the market and “potential for fraud and manipulation”.

The debate took on a new dimension last month when Fidelity Investments, one of the world’s largest asset managers, announced that it would soon allow participants in its 401(k) plans to invest some of their retirement savings in Bitcoin. On Wednesday, that led to Sens. Elizabeth Warrenand D-Mass. And Tina SmithD-Mn, to send sincerity a letter Challenge the decision, citing Labor Department guidance warning of the risks of such a move, and questioning whether Fidelity’s other activities — which have been involved in crypto mining and offering crypto investments to institutional investors — create a conflict of interest.

The problem is how inviting crypto is to the mainstream of the investment world right now. Retirement accounts represent huge pools of investment capital that can power the cryptocurrency markets – but they are also among the most “vanilla” investment products available, are highly accessible and are strictly regulated to protect the consumer. They are not supposed to be easy ends to break.

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If I get to the heart of the matter, the question here is whether people who invest in Bitcoin will – politely – get the hoses.

So now seems like a good time to check out a fierce internal debate about the true value of Bitcoin.

As it happens, Fidelity’s digital asset group has been one of the leading proponents of the view that Bitcoin, in particular, is too valuable. outspoken risk analyst Nassim Nicholas Taleb He was among the most prominent promoters of the view that he is not.

That’s why there is a short section titled “The Lindy Effect and Bitcoin’s Anti-Break Recipes” in the middle of a recent 25-page research paper by Fidelity digital assets Caught my eye.

The January paper outlines the view that Bitcoin is outperforming other digital assets. This particular section argues that Bitcoin’s longevity relative to other cryptocurrencies makes it “Lindy,” or likely to persist—and that the various shocks Bitcoin has endured (price crashes, exchange hacks, etc.) its fragility.”

what Report He doesn’t say that both the “Lindy effect” and anti-fragility are the pet concepts of Talib, who became world famous when his 2007 book “Black Swan” warned of the need to prepare for unexpected catastrophic risks just as the global financial crisis was unfolding.

Fidelity’s use of these concepts was remarkable because last summer, Taleb made a splash in crypto circuits with paper spontaneously. She argues that Bitcoin is a bubble and aims to show that its true value is – frankly – “0”.

The rise of one of the world’s largest asset managers and one of the biggest intellectual celebrities in finance has released duel statements that tell you everything you need to know about why Bitcoin is so controversial, and so confusing even for experts.

Bitcoin advocates tend to act as if it were a solid investment (for a path This is the wave of the future), while skeptics tend to act as if it were clearly a flashing red light (from a path The unsupported default “currency” is just a scheme).

The Fidelity-Talib debate offers a window into why it is so difficult to know the answer.

Taleb is the rare celebrity who initially expressed enthusiasm for bitcoin before deducing it was bullshit in said paper, which he posted on Arxiv.org, an online repository of scholarly articles.

Boston-based Fidelity is where doctors and lawyers park their retirement savings. It has nothing to do with the arrogance of maverick hedge fund managers, not to mention the subversive spirit of online cryptocurrencies. But the company moved earlier than other giants to crypto, in 2018, when it was Accommodation Its own digital asset collection.

Without naming a student, the Lindy section of the Fidelity Report scolds him for resorting to his favorite concepts to advance his case regarding the value of bitcoin.

In his research paper, Talib argues that the price of bitcoin is too volatile to be used as a currency and that competition between fiat currencies along with traditional financial instruments provides enough opportunities to hedge against inflation. He also argues that for Bitcoin to have any value now, it must be immune to any possibility that it will succumb to hacking or other attacks at some point in the future – but it is impossible to rule out the discovery of some vulnerabilities. He concludes that the blockchain is a neat invention with little practical value, and that Bitcoin amounts to a “revenue-free bubble.”

Taleb also cites his favorite concept of “Lindy” to refute the idea that bitcoin is like digital gold: precious metals like gold have been valuable for thousands of years, so by Lindy’s law we can expect that they will remain valuable for centuries to come. On the other hand, Bitcoin is likely to be replaced by a new technology, as a new technology.

Fidelity’s paper uses this idea to serve its own point of view. The paper considers digital assets to be valuable, and notes that Bitcoin is Lindy’s choice by digital asset standards, where it was first invented and is still around. Things happen quickly in the cryptocurrency world – thousands have been launched in several years, and the vast majority have been fiascos. So according to crypto standards, Bitcoin he is Lindy, although this may mean little in the period of human history.

The Fidelity paper also lists the dozens of attacks and shocks that Bitcoin has survived so far, arguing that the network is “break-proof” — also the title of a 2012 student book, which he cites in his anti-Bitcoin paper — sufficiently demonstrated that. It will remain strong against shocks in the future.

In the months since Taleb’s statement was first published, bitcoin nearly doubled, before losing all those gains, and then some, but the lack of a true crash seems like a point in Fidelity’s favor. In fact, the market price of cryptocurrencies He fell By 80 percent or more three times, just to recover.

The fact that inflation remained high while the price of Bitcoin fell sharply seems like a point in favor of Taleb, whose paper cast doubts about its value as a hedge against rising price levels.

Before the recent spat over Fidelity’s 401(k) plans, I asked both camps about their competing views.

The authors of the Fidelity paper, Chris Kipper and Jack Neurotter, assured me that their use of the Fidelity anti-fragile was not intended as a response to a student. They swore they weren’t “trolling,” as I suspected, though they were certainly familiar with his white paper. Kuiper mentioned that people in Bitcoin circles used to call the dismal document the “black paper.”

A student told me he hadn’t seen Fidelity, but said he’s not buying the anti-fragility argument. “If I have a dollar every time someone tells me something is anti-breaking, it is not,” he said, “I could own the entire Bitcoin stock.”

It doesn’t buy the argument that Bitcoin is Lindy either. “Technical utopia is not Lindy,” he said. “The New Obsession is the complete opposite of Lindy.”

Taleb said he’s not an advocate of the current banking system either. He was confided that he was working on a paper about the deficiencies in the custodian’s banking services, but refused to speculate when it would be published.

In the meantime, rhetoric about the value of bitcoin will continue to bounce from here, and our expectations of who will argue, where and how will be constantly challenged. This is because cryptocurrencies defy easy classification, and our old denominations don’t always hold up well in the new online spaces that we increasingly live in.

  • As cryptocurrencies approach the traditional market, it becomes a bigger and bigger deal when they are takes a shower Like the one that took the weekend.
  • Turns out you can be kicked out of the metaverse for do macarena.
  • Treasury is punishing service Help the North Korean hackers hide their tracks.
  • Senator Kirsten Gillibrand and the cryptocurrency industry is unlikely, But it’s getting increasingly narrowallies.
  • Crypto-skeptic economist Nouriel Roubini helps develop digital dollar.

Stay in touch with the whole team: Ben Shrekinger ([email protected]); Derek Robertson ([email protected]); Constantine Kakays ([email protected]); and Heidi Vogt ([email protected]).

Ben Schreckinger covers technology, finance, and policy for POLITICO; He is an investor in cryptocurrency.

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