The horizon is not so far as we can see, but as far as we can imagine

Bitcoin Is Reactionary Money

This is only the second time I’ve written about Bitcoin. I have friends who have done very well off it, and Bitcoin’s fans are fanatical about it. This post will probably get more hate than everything else I’ve written combined.

The reason they’re fanatical is that it’s made many of them filthy rich, for doing nothing but being a first mover and HODLing (holding.)

Bitcoin’s original selling-proposition was a good one: peer-to-peer money; cut out the middleman. This is something which needs to be done, because the middlemen regularly abuse their power by shutting people they don’t approve of out of the system. This is true on the national levels, with sanctions, and true on the individual and corporate level. I remember when Visa, Matercard and PayPal all cut off Wikileaks, for example (long before 2016). They regularly cut access off from companies selling legal goods they don’t like (for example, various nootropics, or soft-porn.)

So a way of getting past these gatekeepers, whether sovereign or corporate, is needed, as those gatekeepers regularly abuse their power.

The problem is, to quote Stirling Newberry, that the bitcoin is the worst way to do something necessary. It has massive transaction costs, in terms of energy, and thus is bad for the environment. But, as money, it is reactionary money: it was designed to have 21 million bitcoins max, with less produced over time (halving rewards).

What this means is it vastly rewards early-movers. The sooner you got in, the more money you made. The people who made the right decision in the  past, control the future, much as the families who were rich in Florence in the 15th century are rich today.

This would be great if making one important decision good for yourself meant you would always make good decision in the future that were also good for other people. Money is power and people with more money have more power. Bitcoin creates a new power bloc: those who got in early.

There’s no reason, however, to assume one good decision for yourself means you will make future good decisions that are also good for other people. (At the extreme end, Genghis Khan says hi, and so does every other successful conqueror. So do the people who crashed the world economy in 08, but got bailed out.)

Bitcoin is deflationary: it gains value over time (assuming it doesn’t crash). Deflationary money is not good money. It restricts what can be done with it, rewards dead money (people who just sit on what they have), and empowers (again) people who won the past, not people who are doing good things in the present.

There is also the matter that bitcoin isn’t acting like money. It’s acting like a speculative resource bubble, which is because it is a speculative resource bubble. Making bitcoin is called “mining” for a reason: it was modeled after gold, except that unlike gold, you can’t find more of it once it’s done. It was designed to be GoldPLUS, for people who want to win once and be secure forever.

Its other great feature (which is fool’s gold) is that it can be used to bypass government restrictions. Or so fools think, since it’s a blockchain and every single transaction is recorded. Do NOT use bitcoin to pay for anything the government might one day want to track you down over. Use cash or a cryptocurrency engineered for privacy.

The question here is what’s going to happen when BTC is mostly mined out (mining the last block may take quite some time but it will be mined out before that. Twenty-one million coins can be mined, of that 18.5 have been mined.)

What happens to the value when the first mover advantage is gone? When it’s “mined out?”

Well, that depends on if there’s a genuine use-case. Is it a functional peer-to-peer payments system which lets you bypass both censorship and high fees? Right now, bitcoin is slower than many normal transactions. When mining ends, fees are expected to go up (since miners currently subsidize them while mining) and it isn’t actually anonymous money: in fact, given the ledger that permanently records every transaction, it’s almost perfectly engineered to be a totalitarian technology.

That said, what I see possibly happening is that it does stick around. Paypal is bringing it online, for example. Most people don’t hold much BTC in this future, they simply use BTC as a transaction medium, renting it, in effect, from the big HODLers. The lightning network also promises to speed up and cheapen transactions, there can be fixes to the transaction issues.

The other possibility is that once it’s no longer possible to get rich, we find out this is a bubble and a ponzi scheme. The first movers who were smart enough to cash out along the way do great and the bubble bursts. (If I were a big HODLer I’d hedge: cash out about half and buy off-chain assets, keep the rest in case BTC sticks around as infrastructure.)

Much of this depends on legal status and institutional support. Contrary to what a lot of BTC maximalists think, BTC can absolutely be shut down if enough big governments decide to do so. Set the forensics on the transaction chains and make its use illegal, subject to penalties or even jail time and yeah, that will destroy much of the value. It’s only a store of value if you can turn it into real world goods. If you can’t, it’s just a digital asset, worth less than a high level MMORPG character.

All that aside, the main issue is, again, that it’s reactionary money, intended to create a new class of winners who are then protected by the fact that they got in early enough, by the design of the coin itself.

It’s why BTC worked: because it was designed to create a protected asset class that rewarded first movers. The utopian stuff is overstated (because of the ledger). BTC is a greed project dressed up in idealist clothes, which doesn’t mean many people don’t genuinely believe its utopian promise. (Much as big capitalists constantly say how wonderful capitalism is for everyone and how they deserve to be rich because they make life better for everyone.)

All that said, I like a lot of BTC people I know and if it’s something of a scam, well, it’s not one-one hundredth as bad as what Wall Street does every day. In a world where almost all fortunes are illegitimate, based on scams or hurting other people, BTC at least gave some people outside the usual class a chance to get rich or make a bit of extra money.

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Week-end Wrap – Political Economy – February 7, 2021


Explosive Growth, Vaccines And Covid Variants


  1. Hugh

    Bitcoin is a metaphor for our times, not thought through, unproductive yet energy intensive, and sold on hype.

  2. StewartM

    Ian Welsh:

    They regularly cut access off from companies selling legal goods they don’t like (for example, various nootropics, or soft-porn.)

    Oh, it doesn’t even have to be that.

    As someone who has sent small sums of money overseas using money transfer services, you log in to find your account blocked for no apparent reasons–and you will be informed that that they won’t and can’t (by law or regulation) tell you why your account was closed. They will point you to their TOS which you’ll read and say “but I didn’t do any of those things” to no avail. If you already have money in that account, it will take months for you to get it back. For some people running businesses, that can be thousands of dollars temporarily impounded; I’ve read some of the forums and it’s the same story.

    Same goes with the $10,000 reporting limit. That limit was set in *1970* (Bank Secrecy Act) and that amount should be over $66,000 today in inflation-adjusted money. I would propose that what needs to be done is that the current limits should be adjusted for inflation from the time of the Act, and moreover a de minimis appraisal should be imposed on the evaluation of any purchase or transfer (i.e., the smaller the purchase or transfer, the less scrutiny and more leeway it should receive). For minor purchases or transactions there should have to be an obvious and glaring violation of the law and/or TOS to stop the transaction and/or close the account. Apparently what they do now is based on the merest suspicion; I have no idea why my account was closed but the transaction was probably not even $100.

    Meanwhile, big criminals can move around tens of millions with no problem.

  3. Mark Pontin

    @ StewartM:

    Have you checked out a non-US bank like HSBC or Barclays?

    I’m told that you can arrange — without being a big criminal able to move around tens of millions — to have your money in an account overseas and nevertheless draw upon it with a regular ATM card.

  4. StewartM


    I was using an online service for its convenience (I live in a small town in Appalachian, so there is no local branch of these banks anywhere close). The account I had did have an international ATM card and I had used it for years with no problem, it worked both domestically and internationally, and was cheap…until there was a problem.

    And it’s hard to know what you should avoid doing when you are not told what you did that triggered the account closing.

  5. anon

    I’m not buying Bitcoin. There are too many risks there is a high probability it will crash. I wish I had bought into it a decade ago. Just like GameStop, I decided not to buy when it became mainstream news. At that point it is too late to make a killing. Only those who got in early were massively rewarded.

    I have been modestly rewarded with a few stocks in renewable energy, EV, and pharmaceuticals that I bought before they became the stocks that everyone was recommending to buy. I look for stocks I can buy when the price is still low enough to buy a lot of shares. If the prices goes up like it has for Tesla and Bitcoin, you’ve become a lot wealthier by doing nothing but holding onto the stock or cryptocurrency. There are better investment opportunities than Bitcoin still out there for amateur investors. It just requires research and some good intuition.

  6. nobody

    Bitcoin’s other fatal flaw (as if it needed more) is that it has a built-in performance limit of six transactions per second. No matter how much energy is wasted by miners/transaction processors, Bitcoin will never be able to support more transaction throughput than what is needed to support a medium-sized mall.

    Bitcoin is an elaborate work of fictitious hype that will never have any utility as a widely-adopted currency.

  7. GlassHammer

    Bitcoin didn’t interest me because the basic requirements for it are abundant energy, subsidies to sell the energy at a massive discount, and a stable grid.

    Even if the rig to mine it was cheap the rest of what is required isn’t.

  8. Mark Pontin

    StewartM wrote: ‘The account I had did have an international ATM card and I had used it for years with no problem, it worked both domestically and internationally, and was cheap…until there was a problem.’

    Interesting. How recently did this change occur?

    It would, after all, be a logical move as conditions in the US grow shakier for TPTB to take measures to lower capital flight and evasion of such increasingly scanty tax collection as the US manages. Also, logical to not tip off the general US population that such measures were being undertaken.

  9. regular guy

    i like cash. that bit stuff don’t interest me none.

  10. Chiron

    Some conspiracy says bitcoin was created by the CIA to fund their operations, maybe there is some truth in that since China is already launching its official bitcoin, the digital Yuan, other countries may soon follow.

  11. js

    I don’t know that it gave anyone the ability to make money outside of the usual class in a way Wall Street doesn’t. Afterall you can make decent returns in index funds in the stock market in the last decade. Just it’s not get rich quick and quit your job type money. But you could have made that with the right stock picks (say Tesla). And how is that any different than picking bitcoin at the right time?

    The sad thing is how much working people see playing the financial/currency markets as the only game in town, how much work has come to be seen as a suckers game that will always be stacked against one (and in a pandemic maybe kill one). How noone really believes in anything even remotely actually productive anymore because all the returns for work have been taken by the 1%, but all just playing the markets. No work is not always productive either of course, there are plenty of BS jobs and we could all probably work less than we do, but if we were to rate things of actual social value it would be higher up there.

  12. Chicago Clubs

    >There are better investment opportunities than Bitcoin still out there for amateur investors. It just requires research and some good intuition.

    What it requires above all, like every good outcome in this shithole world, is luck.

  13. S Brennan

    The Hill put this out in an article and it worth noting as several commenters here, [3, I think], got it right while the vast majority of Bernie nice but, really “blue no matter who” Biden/Harris supporters were DEAD wrong:

    “Eradicating a disease like this [SARS II aka Covid-19] is not the right goal. Controlling it and becoming better at treating it is far more doable, and worth the cost,” said Abraar Karan, a public health expert at Harvard Medical School and Brigham & Women’s Hospital in Boston.”

    Yep, all of Fauci’s bullshit and we return to where we were in March/April 2020…

    Early treatment with dirt-cheap, known, well tested, well tolerated anti-virals is the most effective way to bring the ICU/death rate down. Vaccines will have to be updated yearly [fine for the wealthy] but not, for the 3rd world…foreign or domestic.

    And as for our “green” jet-setters, those that spread the disease across the globe and from city to city, a yearly vaccine is reasonable since, once again, endless-globalism/mass-migration is seen as a vital necessity by our NYC/DC/SValley/Sea-Tac/LA overlords. Look forward to more catastrophes caused by these private-jets* circling the earth. Each one of the jets burns more hydrocarbons per 2 hour flight than a family of four does in a year and as a special bonus, brings disease unchecked from one country/city to another. What’s not to like?

    Fortunately, since the installment of Biden/Harris, all the government/NGO bans/prohibitions by the FDA/NIH/AMA on known, well tested, well tolerated anti-viral’s have been lifted.

    Yeah, a few extra hundred thousand had to die in order to help Biden/Harris cross the finish line but…if you want an gotta break a few Too bad about grandma but, seriously, more than a few commenters here wished older people dead so…no crocodile tears please. The killing of hundred-thousands of elderly and brown-skinned people through the manufactured consent created by the vilification of one man is astonishing.

    *actually, taxpayer funded jets as they are ALL corporate tax write-offs, only simpletons own jets outright.

  14. Hugh

    Still drinking that dirt cheap bleach, SB?

  15. kråke

    Bitcoin isn’t money.

    Reactionary? Sure. But it’s not really fungible, is it?

    I guess superficially, it could seem that way; but bitcoin is more like bauxite than it is gold.

  16. different clue

    I still think eradicating the coronavid virus is the goal to reach, before it becomes too late.

    Obviously the pharmaceutical industrial complex would like to culture coronavid as a permanent disease, needing multibillion dollar rounds of re-vaccination and re-re-vaccination every year for decades and decades and decades.

    One wonders why Fauci supports that same goal.

  17. different clue

    Those people who reject the concept of crypto currency for various reasons might well wish to write a pledge and make a public show of taking it in public.

    ” I will not buy, sell, hold or accept crypto, and I will not tolerate those who do.”

    The No-Crypto Pledge of Honor.

  18. StewartM

    Mark Pontin

    Interesting. How recently did this change occur?

    Scouring back through my emails, very early in November.

  19. StewartM


    Yep, all of Fauci’s bullshit and we return to where we were in March/April 2020…

    SB, there’s a reason why there’s no Taiwanese, or New Zealand, or Vietnamese variant of CoVID-19. That’s because when you ‘just let it rampage’ and don’t take mitigation measures you create a big petri dish for new variants to pop up, some of which could be more transmissible or more deadly than the original (we now can now proudly announce we have a US variant too, thanks to Trump). Moreover some of the treatments that work against the original might not work against the new versions.

  20. 110th Street

    ain’t takin no bit shit at popeyes chicken. gold toothin it bitches. spoonie gee and the treacherous three

  21. S Brennan

    DC, to your remark “[o]ne wonders why Fauci supports that same goal [of enriching pharma]”.

    When Fauci’s name emerged in December of 2019 as the leader of the US SARS II response…I knew we were in trouble. Nobody here seems to recall that Fauci was central to the disastrous response to AIDS. In fact, Fauci was still promising an AIDS vaccine as recently as 2019 and…it failed alongside all his other “highly touted” efforts.

    Fauci has a forty year record of failing and then backstabbing his way upward. If people weren’t so obsessed with “getting Trump” Fauci’s pharma record would be exhibit #1 in the USA’s record of putting incompetent hacks who willingly put profit before all…including national security.

    Fauci has the blood of over a half million in the AIDS/HIV epidemic and…it was the same story, putting the magic bullet of a vaccine over anti-virals and early treatment. I wish the “blue no matter who” crowd, those who ensured the White House would be occupied by Shiton Astik [D] for 12 years would do their due diligence on Fauci. Name me one other health official that regularly had protesters at his door forty years ago? Remember when Fauci threw the opening day baseball? That throw is vastly superior to Fauci’s fifty year record of medical disasters.

  22. zot23

    I think the real value of bitcoin is that it introduced the masses to the idea of a blockchain and has made that technology more acceptable. It’s now “on the shelf” as they say to be used if it fits in some future circumstance.

    My guess is that some genius figures out a structure for a new digital currency that uses blockchains, is fungible, and can perpetuate with not-for-profit transaction fees (think of craigslist here.) The money folks will hate it, but if everyone else starts using it anyway, it becomes the standard anyway.

  23. Stirling S Newberry

    Assange still pursued:

  24. different clue


    Cash ( coins and bills) already does what you say someone will eventually figure out how to make blockchain money do. So I will use cash where these features are needed. I will be a very latest blockchain-adopter and only if forced.

    In the meantime, I stand on my cryptocurrency pledge.

    I will not use cryptocurrency. And I will not tolerate those who do.

  25. different clue

    Here is an article illustrating an aspect of the absolute black void evil which is BitCoin.

  26. Sam


    This is not what Bitcoin is. Bitcoin is not BTC. Bitcoin designed to allow micro payments from ground up but some scammers took it and turned it into a Ponzi scheme as we today.

    I believe that autistic man Craig who self pro-claimed himself as Satohsi behind the idea. I’ve read everything of him. His knowledge and wisdom can’t be faked as most people claim. He is lying sometimes to make things bigger as it seems, but I believe in him.

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