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"In the long run, we are the creators of our own destiny. But if we look at it from a short-term perspective, we are the captives of the ideas we create. We can only hope to avoid it if we recognize this danger in time. – Hayek The road to slavery"
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Hello everyone, recently, many readers and friends in the circle often send a message to ask Tide's views on BTC's bull market next year and its value. I remember being in contact with BTC when I was still studying in the UK many years ago. In order to prove that BTC is a Ponzi scheme, I also asked dozens of BTC studies for communication engineering students. The final title is "Bitcoin-New financial fraud". Finally got the A- grade. Looking back now, it was still too young, and the computer used to sell the hard drive.
For the analysis of BTC, there have been many articles in the currency circle, and this topic has always been a long-lasting topic in the currency circle and chain. Every believer or entrepreneur has a judgment on the value of BTC. Zhuge Liang's "Teacher's Watch" is just as important. Therefore, for the political correctness of the coin circle, I plan to use this economic knowledge and investment banking experience to explain the future value of BTC. If there is ambiguity, please pat.
table of Contents:
One. What is currency?
(1) Commodity currency
(2) National currency
(3) Bank currency
two. What is Hayek and Keynes fighting for?
(1) The origin of money
(2) Endogenous and exogenous nature of money
(3) Which of the three major functions of money is the most important
three. From point-to-point cash to value storage tools
(1) Point-to-point payment is only the starting point
(2) BTC's road to value-added tools
(1) Half the bull market, don't be self-sufficient.
(2) The institution entered the market, Huang Yuyi dreams.
(3) Set the mainstream, stay away from garbage.
One. What is currency?
The source of money in economics textbooks is written as follows: Human society is first exchange of goods. If people who grow corn want to replace the rest of their corn with sheep, they must find a person who raises sheep while carrying corn. . Therefore, the efficiency of barter exchange is very low, but with the development, the production of materials is rich, the goods that need to be exchanged are becoming more and more, and gradually become one of the intermediate media of transactions, that is, the prototype of the currency. There are many commodities in history that have done this kind of medium cattle, shells, salt, iron, copper to the final gold, silver, because precious metals have the advantages of being separable, scarce, and easy to carry.
The development of currency from commodity currency to today's libra currency, central bank digital currency, bitcoin, its basic characteristics are also separable, scarce, easy to carry, all have the same three functions of currency, payment, accounting unit, stored value tool, but Along with the development of blockchain technology and the popularity of the pass-through economy, the functions of various digital currencies in the future are not the same. In order to distinguish the various digital currency values, we first popularize the concept of three currencies in modern economics:
(1) Commodity currency
The commodity currency (also known as: metal currency) genre is a currency definition dominated by Hayek's economic thinking. He believes that money is the product of market transactions and competition. The origin of this definition is also a description of the coins made of gold, silver and other precious metals in the gold standard era. The precious metal itself can be used as currency, as well as the banknotes under the gold standard. Before the dollar is decoupled from gold, The dollar in the Bretton Woods system can be considered a commodity currency because every $35 can be exchanged for one ounce of gold.
As a means of payment, money has greatly improved the efficiency of commodity trading, making social division of labor and professional production more detailed, and at the same time improving economic efficiency. The commodity currency theory considers that among the three major functions of money, the means of payment (transaction medium) is the most important, and that the accounting unit and the stored value instrument are two secondary functions attached and derived. In the era of commodity currencies, the enemy in front of the world’s economies is deflation, not modern inflation. Because the annual production of gold can't match the economic growth, the most troublesome problem in each country at that time was that "pork has been cut again."
Economists in the commodity currency school generally believe that inflation inflation caused by excessive credit currency will eventually lead to the collapse of the current monetary system. The provision of limited commodities such as gold will re-play the role of currency, which is also the case for many BTCs. Investors feel that the future value of BTC will continue to grow as a theoretical basis. At present, Europe, Japan and other developed economies that respect Keynesian economism have entered the era of negative interest rates, but they have no effect on the economic stimulus. They can only passively increase government fiscal expenditures to balance the economic downturn caused by the sluggish private sector investment demand. The model of relying solely on interest rates and deposit reserves to regulate the financial cycle has gradually become ineffective. Excessive increase in M2 and flooding of water flooding currently seem to be unable to effectively guide the currency to the real economy. The result can only be an increase in asset prices. The wealth gap has increased, social unrest, and finally stagflation (development stagnation, inflation), asset bubble burst and other results.
(2) National currency
Economists of the National Monetary School generally believe that money is the product of law, a transaction settlement tool formulated by the government, and money is not a product of market competition. The main function of the currency emphasizes the accounting unit and the stored value function. This doctrine was mainly proposed by John Maynard Keynes in The General Theory of Employment, Interest, and Money, and he is also a representative figure in the national currency school. Keynes believes that the national currency has always existed and its history has exceeded 4,000 years. The modern national currency is gold, silver, or the monetary unit under the gold standard. The transformation of its form is endorsed by the government, and the government or issuer. A certain amount of coinage tax is charged when converting the original gold into currency.
After the industrial revolution, the industrial production capacity of developed countries increased substantially, the market's commodities were abundant, and the total output value increased. However, because the total amount of money issued did not grow with economic development, the consumption and production capacity of the social family sector was out of touch with the hands of ordinary people. Not so much money to consume large-scale growth of goods, this phenomenon also laid the economic depression that began to spread from the United States in 1929 to the world for decades. After this incident, the countries reflected on Keynesianism, and then the macroeconomic governance framework of each country basically followed the ideas of Keynes’s big government and big banks. The big government means that the government’s participation in economic activities will gradually increase, for example, state-owned Enterprises, infrastructure investment represented by the state, etc., large banks refer to increasing the central bank's rights, the central bank can support the government's fiscal expansion, maintain the stability of monetary and financial, and characterize the national economy.
In the case that Keynesianism gradually took the lead, financial repression spread, and the symbolic event was the adoption of the Glass-Steagall Act by the US Congress in 1933, also known as the Banking Act of 1933. It is to strictly separate the investment banking and commercial banking business, strengthen the control of commercial banking activities, and maintain financial stability by enhancing government intervention. Everything that happened has also laid the foundation for the collapse of the Bretton Woods system, and the formal withdrawal of money from the gold. After many years, the monetary system of the mainstream countries in the world has entered the era of statutory banknotes. Interested friends can look at the assets released by central banks. The balance sheet, in just a few minutes, you can know the amount of 'gold' in this national currency.
(3) Bank currency
The bank currency theory is based on an extension of the concept of the national currency. The main representative of this concept is Hayman Minsky, who compares different forms of currency to a pyramid. At the top is the central bank’s debt, M0, and the middle layer is The bank's liabilities (deposits) are M1, and the bottom line is the non-bank institutions and individual liabilities (loans), ie M2. The settlement between banks is carried out through their deposit accounts in the central bank. For banks, the reserve deposit in the central bank is the base currency. For ordinary individuals and enterprises, the deposit in the bank is currency, but anyone Or the institution can create currency through debts, for example, I deposit 50,000 and borrow 30,000 from the bank, then my actual assets are 80,000 yuan, which is the currency created through debt, the total amount of this currency. This is the total amount of socialism that is often mentioned in the news.
In the bank's monetary system, the central bank provides clearing services for bank transactions, and the central bank plays the role of the lender of last lenders to provide liquidity support to commercial banks. In the financial news that we usually pay attention to, MLF, SLF, PSL in the central bank's package of currency instruments. , TMLF, etc., are used to provide liquidity to commercial banks without adjusting the benchmark interest rate and deposit reserve. However, banks are still commercial institutions. The loans they create are the liabilities of enterprises and individuals. These liabilities are likely to be not repaid. If a large-scale overdue will result in a serious economic crisis, this is what Minsky discussed. Financial instability "Minsky moment" warns of overheating and over-currency.
two. What is Hayek and Keynes fighting for?
(1) The origin of money
Hayek believes that the origin of money is caused by the demand for transaction payment. From the transaction of goods to the transaction of commodities in the process of social development, the form of the transaction medium is determined by the consensus of the parties and the market at that time, and has nothing to do with the government. . However, the national currency represented by Keynes believes that when the earliest currency was born, it was decided by the highest power controller or the government what is the currency of the valuation. At the same time, the government decides which payment method to accept in its own trading behavior and also provides the currency indirectly. The government endorsed. Will the ultimate form of digital currency development be a combination of commodity currency and national currency? If a currency can be recognized and endorsed by various economies around the world, and its value can be agreed by the trading market, then Hayek and Keynes can also shake hands in heaven.
(2) Endogenous and exogenous nature of money
In the commodity currency era, the value of all currencies is supported by gold, and the supply is determined by the output of gold, so the increase in currency is exogenous. In the modern national currency era, although the creation of money is affected by some external environmental factors, the currency is internally generated by the central bank, and the economic activities of the banks and non-bank sectors are closely linked, so the increase of the currency is endogenous. At the same time, the era of commodity currency confrontation is deflation, and it is believed that excessive money supply will eventually lead to asset value bubbles and economic collapse. The national currency era is confronted with inflation. It is believed that proper inflation can effectively stimulate economic development. Once the economy enters deflation and the economic growth rate declines, the entire country’s economy will collapse due to the growth stall, just like riding a bicycle. Once the ride is too slow, the bicycle will fall easily.
(3) Which of the three major functions of money is the most important?
Commodity currency considers payment means to be the most important. Extension refers to the quantity theory of money. It believes that the quantity of money is proportional to the general price level, and the relative price between commodities that determine resource allocation has nothing to do with money. The national currency believes that the currency's bookkeeping unit and stored value instrument are the most important, because the bookkeeping currency plays a role as a benchmark unit in economic activities such as trading, arbitration, and contracts in the market economy. The monetary economy described by Keynes is "the decision of money to enter people's economic behavior, thus affecting the efficiency of market allocation of resources, and thus the fluctuation of the real economy." It is the function of this special accounting unit that makes money a kind of storage. Value means, its liquidity is higher than other assets.
In fact, many of our friends have confused the stored value and payment function of the currency. As a stored value tool, the increase in money means that we have more wealth, but the increase in payment means does not mean the increase of wealth. Suppose that there is no change in total social goods and services. Only the tools for payment have increased, and has the wealth of the whole society increased? Obviously there is no. Therefore, the simplest solution to the economic problems encountered by most countries at this stage is that helicopters throw money, but in the end, they have not changed the wealth of society as a whole, but have increased more payment tools and increased the bubble of more assets. Only.
three. From point-to-point payment to value storage tools
(1) Point-to-point payment is only the starting point
In the same year, BTC's white paper defined it as a P2P decentralized payment system. It has become a well-known asset target so far. Aunt may not know Huang Xiaoming, but definitely knows Bitcoin. So many people are curious, why many years ago, many big V stressed that BTC is a decentralized payment system, and then the world to engage in blockchain ATM machines, encouraging businesses to use BTC settlement, emphasizing its payment function, but now many Big V also emphasizes the function of its value storage tool? According to our previous chapters, there are three functional systems in a currency, namely, payment, accounting, and value storage. When the initial BTC market value is small and the network is very insecure, only the more people use BTC to pay, can guarantee the security of the overall network, in order to make it achieve greater value discovery. And at that time almost all of the big V were pure Hayek believers, they believe that the currency focus function should be the payment function.
With the growth of the blockchain industry, BTC has become a bottom-level original asset of a multi-billion-dollar industry. Although its price fluctuates, it is indeed the cornerstone of the real industry. It is observed in the industry's closed economic cycle. In fact, it can be found that the mining of BTC is like gold mining in the commodity society. The mainstream currency is equivalent to the first layer of value assets derived from BTC. Similar to the service providers and producers of traditional society, the market is full at this stage. The digital currency is equivalent to the commodity producer of the commodity society. The commodity can disappear, it can be sold badly, and the odd goods can live, but the purchasing power of gold will not change.
(2) BTC's way to the stored value tool
BTC mining is a deflation model. Under the deflation model, when its long-term value is discovered by people, the payment function of a currency itself will be tilted toward the function of the stored value tool. This is a phenomenon in which the payment tool infers money and drives out good money. At the same time, it is also a phenomenon of good value storage tools to drive out bad money. For example, when a country has multiple currencies at the same time and can trade, when the price between the currencies is fixed and the actual commodity value deviates from the price, the currency with higher actual value will be collected by the people. Bad money with lower actual value is flooding the market. Therefore, from the perspective of value storage tools, BTC is the trend of good money to drive out bad money. Most retail investors and investors will not easily hand over BTC in their hands, because after ICO's madness, most BTCs It is worthless to hold the talents and find that they have used the good money in their hands to exchange the bad money in the market. This is why many big V have repeatedly advised retail investors to “take the BTC in their hands”. In the future, BTC will formally move from payment tools to value-based value-adding tools and become one of the indispensable targets in the world assets system map. From this year on, we can slowly find that many mainstream financial media have silently added the BTC price index behind the daily stock market, bond market and commodity futures prices. The traditional market is slowly awakening, with the EU restarting. QE, after each country enters the era of negative interest rates, BTC's value-for-value tool will also lead to a bright future.
Half the bull market, don't be self-sufficient.
The economics tutor of Tide Benko is one of the economics representative scientists. It is expected that economics believes that “when market owners agree on an asset expectation, the present value of the asset value in the market should be reflected in the expected "Price" is like a house. No matter what the original value of the house is, when the five buyers think that the house is worth 1 million, the market value of the house should be 1 million. If everyone expects to halve to bring a bull market, the current price of BTC should already be the expected price, so the market has always been in a state of long and short game, the law of the market is always 28 principles, when 80% of the people When I think that the bull market is coming, it may be that the other 20% of the people make money. Rational thinking halved the bull market is caused by the halving of the expectations of the funds into the price increase, or the crocodile whales use the halving cycle to raise the price, and then guide the funds and the media exposure caused the BTC to enter the bull market? In other words, the current market value of BTC is $150 billion. If you increase it by 10 times, how much money will you need to enter? So where do these funds come from? Who will be handed over to the BTC in their hands after they buy it?
The institution entered the market and Huang Yuyi dreamed.
Recently, the news that the mainstream currency has plunged 20% a day has been reprinted by major financial media. The main reason is that the trading of the BAKKT exchange is bleak, and the institutional investors are expected to burst into the market. As a perennial financial institution investment banker, Tide Brothers poured cold water on the insiders half a year ago. My years of experience can tell you that institutions cannot enter the currency circle so quickly.
The first reason : the fluctuation is too large, the traditional institutional funds are raised, not the lottery winnings. The investment style of many years and the investment of investors have led most investment institutions to be risk-averse, preferring only 7% per year. The income is not willing to fluctuate too much.
The second reason : even in the traditional securities, futures, and options investment fields, there are also big fish eating small fish. Capital is originally chasing interests, not to pick up, not to be the savior of digital currency. Most of the chips are smashed by giant whales. Just a disappearing Nakamoto has a million BTCs. How dare to ask which investment institution dares to take over the investment performance that he has accumulated for many years?
The third reason : the development of quantum computers, government policies, and the blackouts in the circle have a great impact on the present value of digital currencies. Before the government clearly expresses its support, the organization will not enter the market at the risk of violating the rules for large-scale investment. of.
The value of BTC has grown from a pizza to a maximum of 20,000 US dollars. The accumulation of consensus during this period is the result of countless retail investors and countless believers, not the result of institutional investors entering the market. Blockchain technology itself carries the color of financial freedom. A group of people who advocate financial freedom are counting on the investment institutions that represent traditional centralized finance. It is a paradox. The value of the mainstream digital currency in the future will still be based on the consensus support of countless retail investors, supporters and believers. After the financial liberalization has been deeply cultivated, the institutions will not be so mysterious that the rivers are unattainable, and individual investors are The organization has the same investment rights and transparent information.
Go to the mainstream and stay away from garbage.
From the perspective of the financial cycle, after the credit is given first, the first-time winners have the opportunity to use the resources. It is like the real estate industry that can give priority to providing real estate as a mortgage in the past period of financial plus leverage, and finally use the procyclical self. Strengthened to occupy a large number of other social resources. In the small cycle of the currency circle, it is a reason. Now, the development of the DEFI project, which uses the mainstream digital currency as the collateral for the loan business, is booming. If the real market enters the bull market because of certain factors, then the digital currency with the priority of borrowing will be held. Some people will get more returns in the bull market, and investors holding garbage coins may watch the bull market drift from their own eyes. So don't ask Tide what coins are worth investing. Go to each DEFI project and see which currency has the highest mortgage rate. You can get the answer. Don't imagine that you can cast a hundred times. Now the market is unlikely to happen. .
At the time of writing, the mainstream currency blood flowed into the river, and I heard that a friend finally lost 30 million of his 17-year bull market in this plunge. Reasonably distributing his cash flow and diversifying investment is a lifelong learning knowledge. The degree of cognition of wealth determines the margin of one's wealth. More wealth represents more social responsibility and family responsibilities. I hope that the small partners of the article really love life and stay away from leveraged investment. Make a lot of money, don't forget to split a part of the diversified investment, buy a good house, buy a good car, and have a good baby. Finally, I wish everyone a happy National Day.
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John Maynard Keynes, The General Theory of Employment, Interest, and Money, 2017 Edition
Feriedrich Hayek's Road to Serfdom 2016
Peng Wensheng's "Progressive Financial Cycle" 2017 Edition
David Hume, "Monetary Theory" 2009 Edition