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Bitcoin’s Difficult’ Past: Exponential Network Growth Powered By Perfect Competition

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Bitcoin’s ‘Difficult’ Past: Exponential Network Growth Powered By Perfect Competition

by Hass Mccook 

 

Reviewing the difficulty changes in Bitcoin’s history demonstrates that the practice of mining is near-perfectly competitive and is becoming increasingly so.

As of the date of this writing, block 737,000, Bitcoin is almost two-thirds into its 366th difficulty epoch. A difficulty epoch is a period in which 2,016 blocks are added to Bitcoin’s ledger, ideally in 20,160 minutes, or 14 days. If the epoch ends in less time, the network adjusts the difficulty of successfully mining a Bitcoin block upwards to regain a 10-minute block cadence, and vice versa. The entire history of Bitcoin’s difficulty is shown in the graphic below (you may need to zoom in — it’s quite a huge graphic).Figure one: Historical Difficulty Changes Since Inception

Figure one: Historical Difficulty Changes Since Inception

In total, 15 epochs, around 4% of all epochs, experienced no difficulty change. These just so happened to be the very first 15 epochs where basically just Satoshi Nakamoto, Hal Finney and a few dozen other people were mining. Of the remaining 351 epochs, 283 (77.5% of all epochs) would see a difficulty increase, with 67 epochs seeing a difficulty decrease. We will delve into these periods of decrease later in this piece.

Toward the end of 2009, Nakamoto made a plea to the greedy, opportunistic Bitcoiner community to not mine with their GPUs. And I quote, “We should have a gentleman's agreement to postpone the GPU arms race as long as we can for the good of the network. It's much easer [sic] to get new users up to speed if they don't have to worry about GPU drivers and compatibility. It's nice how anyone with just a CPU can compete fairly equally right now.”

Bitcoiners being the greedy opportunists that they are (this, by the way, is great for Bitcoin, as it drives all innovation) broke this gentleman’s agreement, and the GPU mining era would commence, and eventually, so too the ASIC mining era, but more on that later.

Figure two: Difficulty Vs. Price, Log-Log Scale, 2009. Here we see that Bitcoin doesn’t even have a market price, and difficulty is stable for the entire year, save for one large jump at the commencement of the GPU mining era at year’s end.

In 2009, the average difficulty increase was 0.966%, with a standard deviation of 3.865%. Obviously, since bitcoin didn’t have a market price in 2009, profitability calculations are moot, but if you didn’t add any CPU or GPU power, for the year, if you were earning 1 BTC at the start of the year, you would earn 14.39% less, or around 0.8561 BTC, by the end. Obviously, this assumes the miner has 100% absolute uptime, and doesn’t lose income thusly (highly unlikely, but let’s be generous!).

2010 To 2013: The GPU Mining Era

Summary Difficulty Statistics: 2010 to 20132010

In 2010, we witnessed bitcoin acquire a market price for the first time in its history, as well as its first exponential “price rip” upwards. Aside from one difficulty drop in May (before Bitcoin had a market price), we saw 32 difficulty increases with an average of 22.85%, and a standard deviation of 15.54%. If you were earning 1 BTC per hashing unit on January 1 of that year, and didn’t spend any more money on additional GPUs, by December 31 you were earning 99.98% less, or about 19,178 sats instead of a whole coin. Rough.

Figure three: Difficulty Vs. Price, Log-Log Scale, 2010
2011

2011 wasn’t much better for the miners than 2010, where if you were earning 1 BTC per hashing unit at the start of the year without adding to your GPU fleet, you would be earning 97.81% less, or about 2.19 million sats — technically over 100 times better off than you were in 2010, at least!

2011 saw bitcoin’s first mega-pump, with price increasing about 100 times from $0.30 to $30 in the first six months of the year, before taking a 93.3% bath back down to $2 by November. One difficulty drop was experienced during the 50% price drop between February and April, with the other eight drops for the year occurring during “bath time.” There were 21 increases throughout the year. The average difficulty adjustment was 11.96%, with a standard deviation of 16.96%.

Figure four: Difficulty Vs. Price, Log-Log Scale, 2011
2012

2012 was an interesting year, as it was the first time that the industry would ever experience going through a block reward halving. While you could fetch around $7 for a bitcoin in early January, a Valentine’s Day massacre nearly halved the price, and price was consistently down 30% to 35% from the January high until the middle of the year. This resulted in five difficulty drops in that six-month period. A doubling in price from June to August saw healthy difficulty increases again, with no drops in difficulty to be witnessed until “The Halving” in late November, which saw two consecutive difficulty drops to end the year.

There were 20 increases throughout the year, and seven drops, with the average difficulty adjustment being an increase of 3.26%, with a standard deviation of plus 6.04%. You would be earning 59.11% less on December 31 if you hadn’t invested in any new hardware for the year. Not too bad compared to previous years.

Figure five: Difficulty Vs. Price, Log-Log Scale, 2012
2013

Aside from a 9.46% drop in difficulty in late January, 2013 would be an “up only” year thanks to two mega-pumps, the first a near-20-timeser, going from $13.22 at the start of the year to $229.47 on April 9, and a 17-bagger from early July until early December. Alongside the solitary difficulty drop to start the year, there were 30 positive adjustments, averaging 17.16% with a standard deviation of plus 8.34%. Similar to 2010, your 1 BTC of earnings on January 1 reduced to 292,156 sats if you didn’t add any GPUs to your farm, a 99.71% drop. However, as of the end of 2013, nobody would be adding any GPUs to their farms (aside from shitcoin miners of course!), as the age of the ASIC was now upon us.

Figure six: Difficulty Vs. Price, Log-Log Scale, 2013
2014 To 2020: The ASIC Mining Era

Summary Difficulty Statistics: 2014 to 2019
2014

Despite the collapse of Mt. Gox starting the longest bear market in the history of Bitcoin, with the high watermark of $1,134.39 not to be passed again for the final time until April 2017 — a full 1,218 days later (trust me, as a November 2013 first-time buyer, I lived it and was counting the days!). 2014 was yet another seemingly “up only” year for difficulty, with 28 increases, and two small decreases of 0.73% and 1.39% to round out the year. The average difficulty change was plus 10.9% with a standard deviation of plus 6.57%. If you didn’t add any ASICs to your farm in 2014, your 1 BTC of earning power was slashed by 96.86% to 3.14 million sats.

Figure seven: Difficulty Vs. Price, Log-Log Scale, 2014
2015

Even with Mt. Gox being dead for almost two years, the “Goxxings” just seemed to keep coming, with price bouncing between $300 and $150 for most of the year, with all five of the difficulty drops occuring in 2015 coinciding with sharp 30% to 50% drops in price over a short time period. ASIC manufacturers were still feeling out the space and perfecting their art, as shown in the graphic below from the Cambridge University SHA256 technology tracker. This meant that the average difficulty change for 2015 was only plus 3.31% with a standard deviation of plus 4.62%. Still, if you didn’t add any rigs to your farm, your 1 BTC of earnings on January 1 was cut by almost 60% to 0.403 BTC.

Figure eight:. Source: Cambridge University SHA-256 State of Technology Tracker

Figure nine: Difficulty Vs. Price, Log-Log Scale, 2015
2016

2016 was one of the most special years in mining history, as it witnessed a halving as well as the release of the AK-47 of mining rigs, the Antminer S9, which would enjoy profitable service for six years up until the very recent major price drop witnessed in May 2022.

Price growth for the year was sluggish, save for the last few months which saw substantial growth, and the goxxings would still continue during 2016 despite the exchange collapsing more than two years prior. All of this would result in 22 difficulty increases, and five drops, three of which occurred prior to the halving.

The average change was plus 3.93% with standard deviation of plus 4.93%, resulting in a reduction of BTC income of 47.36% for the year.

Figure 10: Difficulty Vs. Price, Log-Log Scale, 2016
2017

2017 saw two major events, a 20-times run up in price throughout the year, and the resolution of “the blocksize war” toward the very end of the year. I obviously cannot do justice to the blocksize war in one paragraph, so I will quote the blurb of Jonathan Bier’s seminal March 2021 book “The Blocksize War: The Battle Over Who Controls Bitcoin’s Protocol Rules”:

“[The Blocksize War] was about the amount of data allowed in each Bitcoin block, however it exposed much deeper issues, such as who controls Bitcoin’s protocol rules.”

The ultimate resolution was the creation of a new fork of Bitcoin, known as Bitcoin Cash (BCH), which could also be mined using the SHA-256 protocol. Huge increases in the price of BCH toward the end of the year were enough to coax miners away from mining the Bitcoin network and mine on the BCH network on three occasions after its launch in August, with a small drop in July taking the tally to four downward adjustments for the year.

There were still 23 increases for the year however, and with an average change of plus 6.16% with standard deviation of plus 6.15%, these changes resulted in a reduction of income of 82.06% for the year. More mining rig manufacturers would enter the game this year, but no dramatic improvements in rig efficiency were achieved.

Figure 11: Difficulty Vs. Price, Log-Log Scale, 2017
2018

2018 saw much more competition in the ASIC hardware space, with rig efficiency almost doubling. Rigs were becoming so efficient, having an 80% drawdown in price over the year did little to stop hash rate growth.

There was an average change of plus 3.59% with standard deviation of plus 7.31%, across 23 difficulty increases, a drop in July when bitcoin’s price was at about $6,000, and four drops which occurred during the final price capitulation from about $6,000 to about $3,000 late in the year. The end result was a reduction of income of 64.09% for the year compared to your start-of-year earnings.

Figure 12: Difficulty Vs. Price, Log-Log Scale, 2018
2019

After the brutal bear market of 2018, traders saw a relief rally that took the price from $4,000 at the start of the year to about $13,000 mid-year. Aside from five minor negative difficulty adjustments of less than 1% in the first half of the year, and two drops in the second half of the year when bitcoin would return to a price of $6,000, there were 19 increases. The average change of plus 3.06% with a standard deviation of plus 4.49% resulted in a reduction of income of 55.42% for the year.

This was mainly driven by even more competition and efficiency gains in the ASIC hardware market as opposed to chasing price-cost arbitrage, with the 2019 fleet of new rigs being more than twice as efficient as their 2017 peers. 2019 was also the first year we saw modular mining techniques at large scale, where miners would essentially turn shipping containers into portable ASIC farms, and simply ship them to the world’s cheapest power sources. The large drop in difficulty in late October was more likely from Chinese miners physically migrating to cheaper hydroelectric power sources due to the wet season, than a miner capitulation over a small drop in price. This would become far more apparent in the migrations of 2020.

Figure 13: Difficulty Vs. Price, Log-Log Scale, 2019

Summary Difficulty Statistics: January 1, 2020 to May 10, 2022
2020

The most difficulty drops in Bitcoin history would happen in 2020, with 11 drops, some of previously-unseen magnitudes, occurring throughout the year, for different reasons. Despite the “COVID-19 everything crash of March 2020,” the substantial hash rate drops witnessed in April and late October would mostly be the result of Chinese miners physically migrating from Xinjiang province (which is coal heavy) to Sichuan province (which is hydro heavy) during the wet season, and then back at the conclusion of the wet season. The profit on offer was so great as a result of much cheaper power that it was worth it for miners to simply pack up, move and establish themselves elsewhere, despite the associated risk and downtime. Of course, the halving of May 2020 would result in two consecutive drops of 6.39% and 10.24%.

Mining techniques and rigs would continue to improve, with firmware service providers like Braiins.OS providing miners with software that dramatically increased the efficiency of their rigs and was easy enough to use by mining enthusiasts. Immersion-cooled mining would also start being used by various operations as a way to further increase efficiency and reduce downtime and maintenance costs.

The average change of plus 1.06% with standard deviation of plus 7.74% resulted in a reduction of bitcoin-denominated income by 24.91% for the year. Considering that the price of bitcoin would grow by four times in 2020 however, this would start a period of time where home and collocated mining started to look more appealing to a far wider user base due to the seemingly irresistible cost-price arbitrage on offer in a booming market, seemingly protected from competition, at least temporarily, due to the COVID-induced global supply chain issues afflicting the market.

Figure 14: Difficulty Vs. Price, Log-Log Scale, 2020
2021 To Current: China Bans Bitcoin And The (Near) Instant Recovery 2021

2021 was the year mining “hit the streets,” with colocation companies booming despite long lead times for delivery, hardware prices were going through the roof (in near lockstep with the price). Mining companies were still migrating for the cheapest power. They were going public at a rate of knots, and corporate treasuries were collateralizing their bitcoin in interesting ways. Just some of the mania you would expect to see during a meteoric bull run. To top it all off, there was a huge blackout in China which caused a near 15% negative difficulty change, then, only a month later China totally banned Bitcoin mining, causing four consecutive negative difficulty changes of 19%, 5.6%, 38.8% and 5%. This meant that anyone who was already mining saw a huge temporary bump in profits, and would be forgiven for thinking, “Whoever isn’t considering getting into mining right now would be stupid!”

But if you’ve stayed with me up until this point, you know how this story ends. Good times are short, and are always followed by cripplingly hard times for miners. These times would come soon. Those saying the Chinese hash rate would not return for months or years were selling the most picks and shovels, but return it did, mostly within three months, and all of it by the end of the year.

There were 19 increases, and seven drops — five of which were related to China, the other two small and within tolerance. The interesting statistic to look at is the standard deviation, and while difficulty averaged a change of plus 0.5%, its standard deviation was 10.9%. So, if you were in the game at the start of the year, you performed stellarly, and only had your income reduced by 12.33% for the year. However, if you were one of the unlucky ones who started in late July 2021 (or later), you had 12 changes for the rest of the year (11 of which were positive), and an average of plus 4.61%, meaning you’d lost about 77% of your income by the end of the year, with the bitcoin price going south, quickly. Again, if you were already established, 2021 was a fantastic year. For everyone else, buying bitcoin would have been the wiser option. 

Figure 15: Difficulty vs. Price, Log-Log Scale, 2021
2022

We are 10 difficulty changes into 2022 — seven increases and three drops. Despite a 20% crash in price since the last difficulty change, it is predicted that the upcoming difficulty change will be a drop of around 1%. Of the ten changes so far, the average change was plus 2.44% with a standard deviation of plus 3.39%, resulting in a reduction of income of 21.89% year to date, but I predict it will be a reduction of 50% by year end. Home miners beware!

Most interestingly, 2022 saw Intel enter the mining game, forming a large partnership with green miner GRIID, and word that even oil-and-gas giants Exxon Mobil and Conoco Philips had started flare mining using mobile, containerized mining solutions. Even with bitcoin’s price being in the doldrums, competition has been getting stiffer and stiffer.

2022 has seen more COVID-19 supply chain issues clearing, more innovation in mining firmware and techniques and, with what looks to be yet another protracted bear market for price, will see a flushing out of over-leveraged or low-margin miners, as we have witnessed in previous bear markets.

Figure 16: Difficulty Vs. Price, Log-Log Scale, 2022 to Date
Conclusion: Bitcoin Mining Is Perfectly Competitive

The nature of competition in Bitcoin mining is near perfect which means miners will work extremely hard to have the most efficient operation, and indeed, the most efficient supply chain. It also means that they are ready and able to physically go wherever is required to achieve this. Mining is not easy, and for a home miner, is akin to panning for gold in 2022 — it sounds far more glamorous and rewarding than it actually is! There are better ways to pique your curiosity about mining than spending money trying it out yourself (read: going short spot-Bitcoin in hopes you’ll earn more by mining versus going long spot-BTC) — but you will never hear this from the people selling picks and shovels!

Bitcoin mining has been able to absorb most of my time and intellectual capacity for eight years, yet I have never even turned on a miner in my life. When it comes to mining, it’s best to leave the bread to the baker, as they are most capable of identifying, assuming and managing the risks. The history speaks for itself: When it comes to hash rate and difficulty, “number go up” harder, faster and more consistently than price, and while this is great for Bitcoin, it is terrible for those looking to compete in what is a perfectly competitive space.

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Tim Moseley

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The love of God and a lump of bread

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The love of God and a lump of bread

When the Privy Councillor of Medicine died, his sons began to sort out his estate. In a glass display case, which the old doctor had guarded like a shrine, they found, among other treasures and mementos, a strange object: a gray, shriveled and bone-hard lump – a dried-up piece of bread.

Perplexed, they asked the old housekeeper. The housekeeper told them that the doctor had once been seriously ill during the famine years after the World War. The acute illness was accompanied by a general state of exhaustion. Strong food was necessary – but rare. An acquaintance sent half a loaf of bread. Good, wholesome bread, which he himself had received from a foreigner friend.

At that time, the teacher's little daughter was sick in the neighboring house. The medical councilor therefore sent the bread to the teacher's family without eating it himself. But even they did not want to keep the bread. The old widow over there under the roof in the emergency quarters needed it more. She passed it on to her daughter with the two children in the puny basement apartment. She remembered the sick medical councillor who had recently treated one of her boys without asking anything in return.

"We recognized it at once," concluded the housekeeper, "by the stamp stuck on the bottom of the bread, showing a colorful little picture." When the Medical Councillor held his own bread in his hands again, he was shaken beyond measure and said, "As long as there is still love among us that shares its last piece of bread, as long as I have no fear for all of us helps; This bread has filled many people without a single one eating it."

This story makes tangible the power of love: "The love of God has been poured out into our hearts through the Holy Spirit who has been given to us." (Romans 5:5) And this love is palpable in our four walls: this good, loving spirit is blowing. No, our houses are not gray concrete, it is rather living space for the good spirit of God. But the spirit also breaks many a space and frame. Because this love can be experienced through our heart attitude beyond all borders: We do not only keep what we have for ourselves, but give others a share of it – so that something remains!

And so, once again, and in the midst of us, in the here and now, a miracle happens: a feeding of thousands – three thousand employees and over six thousand people entrusted to us – they are fed.

I wish this miracle for all of us again and again.

 

Tim Moseley

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Are you being scammed?

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Are you being scammed?!

 

by Marc Lichtenfeld, Chief Income Strategist, The Oxford Club

Are You Being Scammed?!

 

Protect Your Wealth When You're Vulnerable

A few years ago, a family member got sick. In addition to her physical ailments, her mental clarity nose-dived. I not only was worried about her health but also was very concerned she'd be vulnerable to fraud, as there were caregivers in her house.

But even healthy seniors fall prey to increasingly sophisticated financial abuse and fraud.

 

 

It turns out there is a physiological reason for this.

According to a UCLA study, older people have less activity in the part of the brain that is responsible for what is known as "gut feeling." Oftentimes, it is that gut feeling that tells a person when someone is not trustworthy or something doesn't seem right.

As we age, these changes in our brains can cause us to become more trusting and focus on positive thoughts and memories, making us more likely to help someone out or believe that a windfall is within our reach.

Fortunately, this family member and I have a very strong relationship, and she trusted me to look after her finances while she recovered. We signed a power of attorney for her accounts, and I let her advisor know I was monitoring things for now. Importantly, I let the advisor and the relative know that my brother also had access to the information.

I trust my brother completely. I shared this information because I wanted the family member and the advisor to know that there were no secrets – because secrecy is one of the signposts of fraud.

In many of the scams that target older people, the victim is told to keep what is happening quiet. They are forbidden from telling their spouse, children, advisors, and friends.

Sometimes the threat is that the senior won't receive the funds they've been promised or get out of the supposed trouble that they are in.

Those threats can escalate to physical violence or harm to their family, though I've never heard of someone who was physically hurt in a scam by someone they didn't know.

If you are ever told to keep a financial transaction a secret, run – don't walk – away. I've never met a legitimate financial advisor, salesperson, or anyone involved in a real financial opportunity who insisted on secrecy.

The same goes for a representative from a government agency. If you have a real problem concerning the IRS, Social Security Administration, FBI, etc., they will not insist on secrecy either.

In fact, just the opposite is true. They will often encourage you to get help from a professional, such as a lawyer or accountant.

Furthermore, if you have a relative who fell for a scam, you may want to have them assessed by a doctor for dementia or Alzheimer's.

According to a study published in Annals of Internal Medicine, "Low scam awareness in older people is associated with risk for developing Alzheimer's dementia or mild cognitive impairment in the future."

So it's not just a matter of not being smart. Lots of intelligent people fall for scams. In fact, sometimes we're shocked that someone so sophisticated could be duped by what seems like an obvious fraud.

But as we age, our bodies change. And that includes our brains.

Simply being aware that the chemistry shift in your brain may make you more trusting of others can help you keep your guard up and question things that sound too good to be true.

 

New Opportunities Are Emerging For Citizens of The World.

Freedom and democracy may appear to be struggling to stay alive in America, but there may be a knock-out punch ready to be released. The evolution of the blockchain-enabled metaverse is going to enable the 'Citizens of the World' to gain their own Freedom by democratizing power and creating a new world with new rules, new players, and new opportunities. For 99.99% of us, the metaverse will improve our real-world lives through the democratization of power and opportunity.

Along with the major long-term trend of society towards decentralization and smaller-scale organizations, there are new opportunities developing to help 'Preparers' in the cryptocurrency sector. Businesses are beginning to issue their own Crypto Coins that can be traded on Cryptocoin Exchanges.

Markethive.com for example will be releasing its HiveCoin (HIV) in the coming weeks. It has tremendous upside potential that is outlined in a Video by Founder Tom Prendergast, "Entrepreneur Advantage…".

Not only that, if you go to their website and register as a FREE Member, you will be given 500 HiveCoins for "FREE" along with access to several Earning Opportunities and online tools to increase your HiveCoin balance.

Be sure to check it out today – Markethive.com

Markethive

Tim Moseley

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Extreme dollar weakness today overcomes sel ling pressure in gold:

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Extreme dollar weakness today overcomes sel
ling pressure in gold:

103.80 was and continues to remain an important price level of technical resistance for the U.S. dollar index. The dollar index has flirted with this price point on three occasions, first occurring at the end of 2016 and then again during the first quarter of 2017.

According to Investopedia, the U.S. dollar index (USDX) measures the value of the U.S. dollar relative to a basket of foreign currencies. The USDX was established by the Federal Reserve in 1973 after the dissolution of the Bretton Woods agreement. The index measures dollar strength or weakness against six primary currencies and was updated in 1999.

The chart above is a weekly Japanese candlestick chart of the dollar index. It begins at the end of 2016, with the dollar rising to a high just shy of 103.80. This is the first occurrence of dollar strength resulting in the index trading over 100 since the end of 2002.

This can be seen in a monthly Japanese candlestick chart of the dollar index below (chart 2). What followed after the dollar surged past 100 at the end of 2016 was a dramatic decline in value from 103.779 to a low of 88.08 during the first quarter of 2018. This represents a price decline of 16% during that year. From 2018 to the first quarter of 2020, the dollar index increased in value until it reached approximately 104, the second occurrence of the index reaching this level and then declining significantly immediately thereafter.

At the beginning of 2021, the dollar had fallen to approximately 89 before finding technical support and resuming a multi-year climb to a higher value. Dollar strength continued and breached this significant technical level 2 weeks ago. The dollar index traded to just above 105 during the week beginning May 9. However, last week the dollar index opened at approximately 104.70 and closed at approximately 103.20. Today the dollar index continued to spiral to lower pricing losing 1.04%. As of 4:55 PM EDT, the dollar index is currently fixed at 102.105.

The decline in the U.S. dollar over the last two weeks has given gold significant tailwinds moving the precious yellow metal higher. Gold futures basis the most active June 2022 contract is currently up $9.90 or 0.54% and fixed at $1852. Gains in gold value today were 100% the result of dollar weakness in conjunction with selling pressure from market participants. The screenprint of the Kitco Gold Index above was taken at 4:12 PM EDT and shows spot gold fixed at $1853, a net gain of $6.30. On closer inspection, dollar weakness contributed $17.20 in gains while selling pressure resulted in a decline of $10.90.
 

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

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What Warren Buffett Gets Right About Bitcoin

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What Warren Buffett Gets Right About Bitcoin

by Joakim Book 

 

Warren Buffet’s most recent critique about Bitcoin is its lack of “producing” anything, which actually proves its monetary properties and usefulness as money.

Before I exited academia, I trained as a financial historian. I looked at balance sheets in dusty, old archives and I investigated what banks were doing in Victorian Britain; I ran fancy statistical analyses on 19th-century stock prices to see if they behaved like modern portfolio analysis suggests stock prices should; and I looked at how money operated and how monetary regimes changed over time.

In all my reading, nothing annoyed me more than established economists with equation-filled whiteboards and paper models arrogantly declaring that some feature of money and banking was defective. With zero knowledge of the past, academics often stood up from their endowed university chairs and proclaimed that money could not be private, financial markets would disintegrate without regulators, and banks could not operate without governments backstopping them.

Strange, I thought, looking at the historical documents in front of me. They clearly used to …?

Buffett’s Monetary Misadventures

When you say things that are directly contradicted by reality, historical or present, you should probably just stop doing that. But when you’re 91 years old, the fifth(-ish) richest person on the planet and carry a reputation as the greatest investor of all times, different rules apply. With cameras pointed at you and hungry newspaper fanboys praising your every word, you can get away with nonsense that otherwise wouldn’t fly.

Take Warren Buffett’s latest musings on bitcoin, from his company Berkshire Hathaway’s latest annual meeting on May 1, 2022:

 

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“If the people in this room owned all the farmland in the United States and you offered me a 1% interest in it […] and said ‘pay us a bargain price of $25 billion dollars,’ I’ll write you a check this afternoon.

“If you tell me you own 1% of the apartment houses in the United States, and you offer me… uh… so I would have a 1% interest in all the apartment houses in the country, and you want, whatever it may be — another $25 billion or something, I’ll write you a check. It’s very simple.

“Now, if you told me that you owned all of the bitcoin in the world and you offered it to me for $25, I wouldn’t take it, because what would I do with it? I have to sell it back to you one way or another! Maybe they’re the same people [who sold it to him], but it isn’t going to do anything.”

This particular accusation is old and Buffett himself has repeatedly levied it against gold: the yellow metal can’t be valuable and must be a poor investment since it doesn’t produce any yield, return or interest — “It doesn’t do anything but sit there and look at you.” For bitcoin, being an improved version of gold, we can understand that this busy nonagenarian simply recycled his gold rant. Buffett continues:

 

“The apartments are going to produce rental [income] and the farms are going to produce food […] and that explains the difference between ‘productive assets’ and something that depends on the next guy paying more than the last guy got.”

 

Bitcoin is all a scam, a circus, according to Buffett: “There’s no more money in the room, it’s just changed hands — with a lot of maybe fraud and costs involved […] Basically: assets, to be of value, they have to deliver something to somebody.”

Let’s unpack this.

What Holds For Bitcoin, Holds For Other Monies Too

It is amusing how opponents of bitcoin levy arguments against it that apply equally well to all other monies: You’re not persuasively attacking or denouncing bitcoin by stating that it has features of other well-functioning money; or refer to practices in bitcoin that regularly occur also in the currency at the top rung of the monetary ladder. 

It is too expensive to transact with bitcoin!

Yes, for the times when block space has been congested and network fees high — but even then, properly considering bitcoin as a first-layer settlement media rather than a censorable third-layer fiat digital entry, it’s probably cheaper than the legacy system (Bitcoin is comparable to Fedwire, not Visa). With financial hedging and price-level uncertainty, the resource-cost debate of fiat versus hard money has clearly come out against the fiat dollar.

Bitcoin is used by criminals and money-launderers!

Yes, to a surprisingly small extent — but more importantly: so is the dollar. The features that make a money good for us well-behaved and law-abiding citizens also make it a good money for criminals. Criminals want anonymity, transaction privacy and reliable settlement just like the rest of us — and they want to tap into the most accessible and liquid monetary network that provides those things. All monies are for enemies.

Bitcoin wallets can be hacked and funds lost!

Yes, and so can bank accounts and credit cards in the fiat world — or plain old cash if you physically lose it, or if you’re mugged on the street, or suffer the flash kidnappings that Brazil’s new fiat fast-payment system enabled. Not to mention the perfectly legal extortions that fiat banks routinely engage in: insanely slow payment mechanisms, blocked transactions, overdraft charges and below-inflation interest rates. (Source)Bitcoin Doesn’t Produce Anything

 

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“The gold and silver money which circulates in any country, and by means of which the produce of its land and labor is annually circulated and distributed to the proper consumers, is, in the same manner as the ready money of the dealer, all dead stock. It is a very valuable part of the capital of the country, which produces nothing to the country.” – Adam Smith, (1776)

Buffett’s main concern with bitcoin (and gold) is that owning some doesn’t “produce” anything. To be of value, assets have to “deliver something to somebody” in his view.

If we had a look at Buffett’s fiat wallet, would we not find cotton-and-linen bills with U.S. presidents on them? If we peeked into his bank account, would there not be fiat digital entries sitting there, not “producing” anything? Bitcoin is a way of holding money that isn’t an investment — it’s a refusal to finance commercial banks’ assets or the Federal Reserve’s seigniorage-yielding assets, both of which emerge when individuals hold their notes or deposit funds with them. Even while doing nothing, producing nothing, the institution of money is crucial to any society more complex than a self-sufficient household. Wrote Ludwig von Mises 

“Money, in fact, is indispensable in our economic order. But as an economic good it is not a physical component of the social distributive apparatus in the way that account books, prisons or firearms are. No part of the total result of production is dependent on the collaboration of money, even though the use of money may be one of the fundamental principles on which the economic order is based.”

Long ago, monetary economists established that money, a non-interest-bearing asset, provides its value to individuals through acting as a hedge against the uncertainty of the future — the transaction possibilities that may emerge down the line but that we can’t predict or appraise right now. We give up the potential return we could have earned had we invested that money in some venture that “produced” something — grain, dividends, interest — in exchange for the convenience of having ready cash for transactions not yet made.

Buffet’s company, Berkshire Hathaway, holds north of $100 billion in bank deposits and short-term Treasurys, explicitly to protect the company against unexpected expenditures and allow it to take advantage of future investments. Dissonance, anyone?

From John Maynard Keynes to Mises to Carl Menger and further back through the history of erudite economists, money is crucial to the facilitation of trade while not producing anything on its own. Its purpose isn’t to produce “something to somebody.” Instead, money has the strange property that it is acquired not to be consumed or used, but to be given away in future transactions.

If we were a little snarky with Mr. Buffett, then, we could ridicule his claim that he has to sell bitcoin “back to you one way or another” by once more pointing to the dollar bills in his pocket or the cash balances his company holds. Those don’t “do” anything either; to procure anything real with them, they must be sold back to others — others from whom, collectively speaking, he once acquired them. 

… And What About Those Apartments?

If the above ironies and own goals weren’t enough, there is something strange going on with the examples that Buffett picked in illustrating his argument. Farm and farmland is hard to argue with, as plants literally grow more plants — though not automatically, and not without considering assistance from farmers, machines and fertilizers.

Apartment buildings and real estate, however, are a different story. Manhattan condos don’t spin off little apartment babies that grow into valuable real estate in the fertile soil of a housing boom. Certainly, owning some would let you rent them out to other people who in turn benefit from what the statisticians at Bureau of Labor statistics would call “shelter services” — or, in case you own the house in which you reside, using some creative accounting in the consumer price index calculations they result in “owners’ equivalent rent.” 

At the end of a given number of real estate transactions there are, per Buffett, “No more [apartments] in the room, it’s just changed hands.” Does that mean apartments have no use and no value?

But here’s the awkward point for Mr. Buffett: Bitcoin, just like other monies, can only provide a profit for its owner if it’s rented or sold to somebody else at a future (higher) price. Apartments, owned outright, can only recoup their cost of investment by selling them to another buyer at a higher future price. In Buffett’s example, he rents them out (possibly to the same nondescript collective of people from which he hypothetically purchased them), a service that must be sold at high enough a rent to cover costs and repairs — an income stream, economically speaking, equivalent to a high enough sale price, spread out over time.

To be valuable in a free market, any good, service or asset must “deliver value to somebody.” The fact that we might not be able to tell what that value is does not automatically undermine it as an asset in some objective sense. For its viability, bitcoin does not require Mr. Buffett's understanding.

In whichever version they emerge (academics, central bankers or as one of the richest men alive), angry, old men incessantly yelling at clouds, are rarely persuasive. Saying things that are instantly undermined by reality, or history, makes for poor presentation.

In this case, however, Warren Buffett was surprisingly correct about bitcoin and its monetary properties.

The fact that an item’s only feasible use is to be sold back to the community at a later stage is almost definitionally what money is — an item you acquire not to use, produce or consume, but to give away later. Money, unlike farmland or dividend-paying stocks, doesn’t equate to earnings for its owner.

Instead, it allows us to navigate transactions in an uncertain future. Like the quotes from Mises and Smith illustrate, we’ve long known how the seemingly wasteful use of costly money improves the overall economy’s operation.

Perhaps Mr. Buffett didn’t realize it, but he just denounced bitcoin by accusing it of having monetary properties. Hurray!

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Tim Moseley

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Gold’s big 1800 test on the radar next week as stocks’ steep selloff intensifies

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Gold's big $1,800 test on the radar next week as stocks' steep selloff intensifies

With the U.S. stock market still at risk, should gold be trading higher? Analysts see next week as an important test for gold as markets debate the effects of the Federal Reserve's oversized hikes.

Gold is ending the week with its first weekly gain in five weeks as the precious metal finally saw renewed safe-haven demand on concerns over inflation and economic growth. June Comex gold futures were last trading at $1,841.40, up 1.8% on the week.

Going into next week, the steep selloff in the equity space might not be over as the S&P 500 is now 20% below its all-time highs posted in January.

"During the last few weeks, we saw the stock market selling off and gold going along with it. But then we got a short-term peak in Treasury yields, which opened the door for gold to behave as a safe haven," OANDA senior market analyst Edward Moya told Kitco News. "The U.S. stock market is still at risk. We could see one last major plunge. And we'll probably see gold's safe-haven [properties] being tested once more. Selling exhaustion should be settling soon."

Markets are concerned whether inflation and growth can react quickly enough to the Fed's interest rate hikes, said CIBC World Markets chief economist Avery Shenfeld.

If that is not the case, the Fed would be forced to step up its already aggressive tightening schedule, Shenfeld noted. "That's the one-two punch that the equity market is now fretting over: higher rates that lower equity multiples, coupled with a recession that crushes earnings. If, instead, a smaller dose of Fed medicine, and consumer resistance to higher prices, brings an earlier cooling, the recession risks would be significantly diminished," he said.

2022's $1 trillion crypto wipeout: 'necessary cleansing' of excess speculation just like dot-com bubble – Bloomberg Intelligence

Expectations of steeper rate increases are again rising, warned DailyFX strategist Michael Boutros.

"Markets are having to reprice Fed's outlook on rates. There is doubt that 50bps at this level of inflation would be enough. If the Fed's 75bps hike is readjusted again, it will be a headwind for gold. Gold is stuck sideways as we wait for that story to flash out," Boutros told Kitco News.

The idea that the Fed is making a policy error by acting too slow is becoming more common, he added. "They need to slam on the break and accelerate rate hikes even faster. At this point, they are already late," Boutros stated.

This is why gold is in a tough spot and could be at risk of a further selloff below the $1,800 an ounce level, especially if there is a close below the $1,791 level.

"With what we are seeing in the equity market, you would expect gold to catch a bid. We did this week, but the rally was unimpressive. From a technical standpoint, we are at risk of testing the lows. The $1,781 level or deeper is still on the table," Boutros noted.

Investors should gear up for a sideways price action until gold can move above the $1,895 an ounce level, he pointed out.

Moya was more optimistic looking further out, with economic growth concerns remaining one of the main stories for the rest of the year. This narrative should weigh on the U.S. dollar index, which has been recently trading near 20-year highs and limiting gold's upside.

"We've seen weaker economic data in the U.S. this week. Even jobless claims went up. All expectations are for data to deteriorate. There should be some pullback for the dollar," he said. "It should be good news for gold. We should see gold hold $1,800 through the next week. But more downside movement in equities could break that."

Moya sees the Fed slowing down once financial conditions tighten enough and credit spreads widen. And this should not be too far out in the future.

"That's starting to happen. If the stock market drops another 5% lower, volatility will spike higher, and credit markets will force the Fed into a less hawkish stance of 25-basis-point hikes. And that's not too far away. It should be good news for gold," Moya said.

Next week's key data releases are flash PMI and personal spending. "Consumer spending is projected to weaken. The FOMC minutes are likely to be dated as we already heard Fed Chair Powell and other FOMC members after the May meeting. Flash PMI will be important, especially if we start to see if data get closer to contraction territory," he outlined.

Next week's data

Monday: U.S. manufacturing PMI

Tuesday: U.S. new home sales

Wednesday: U.S. durable goods orders, FOMC meeting minutes

Thursday: U.S. GDP Q1, initial jobless claims, pending home sales

Friday: PCE price index
 

By Anna Golubova

For Kitco News

Time to buy Gold and Silver on the dips

 

 

Tim Moseley

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Markets at risk of waterfall event’ this is how gold would perform Lobo Tiggre

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Markets at risk of ‘waterfall event’, this is how gold would perform – Lobo Tiggre

Lobo Tiggre, of The Independent Speculator, claimed that the market selloff is not yet over, and that gold will do well in this environment. Tiggre spoke with David Lin, anchor and producer at Kitco News.

“My concern about a near-term ‘waterfall event’ in the broader markets… is higher now than it has been since 2021,” said Tiggre. “I don’t want to be putting any more cash at risk right now… I sold everything.”

When it comes to gold, Tiggre suggested that the precious metal is resilient in the face of bond-buying and a stronger U.S. dollar.

“People are dumping stocks, they’re buying bonds, even though the Fed is going to be selling because there’s fear in the air,” he explained. “So to see gold still holding 1,800 [USD] in the face of these headwinds tells you something.”

He also commented on the U.S. dollar’s recent performance against gold, “The reality is that the dollar only appears strong. The mayor is still in the glue factory, the dirty laundry hamper is still the dirty laundry hamper. Anybody going to the store, anybody paying rent, they know that their dollars are worth less on their way to perhaps being worthless… [To] the degree that, you know, gold is trading more directly with the dollar, I’m actually a dollar bear.”

Tiggre’s macroeconomic outlook is grim. He said that uncertainty, high inflation, and an economic slowdown will affect markets.

“Nobody really knows what’s going to happen, not even me,” he admitted. “We could be in a recession right now with high inflation… And to think that the Fed can just, you know, raise rates and cure inflation so easily, I think it’s a fantasy. It’s not going to happen.”

To find out Tiggre’s outlook for gold mining stocks and uranium, watch the above video.
 

By Kitco News

For Kitco News

Time to buy Gold and Silver on the dips

 

Tim Moseley

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DeepMind is speeding toward artificial general intelligence AGI

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DeepMind is speeding toward artificial general intelligence (AGI)…

by Jeff Brown, editor, The Bleeding Edge

 

DeepMind is speeding toward artificial general intelligence (AGI)…

 

Google’s artificial intelligence (AI) division DeepMind just came out with another incredible development. It seems like these breakthroughs are coming nearly every month now.

This month DeepMind released a “generalist agent” for the very first time. It’s called Gato. And Gato is one of the world’s first multi-modal, multi-tasking AIs.

Here’s what that means…

We have talked about all kinds of different AIs in The Bleeding Edge. The one thing they all had in common is that they are each optimized for a single task.

For example, DeepMind’s AlphaFold predicts the folding of proteins. Meanwhile, Miso Robotics’ Flippy turns burgers on the grill. And, of course, there are many other AIs trained to master a specific task.

What sets Gato apart is that it mastered many different tasks. In fact, DeepMind trained the AI to do 600 different things.

Here’s a look at just a few of them:

 

Gato in Action

Source: DeepMind

 

Here we can see a sample of what Gato can do. It can operate a robotic arm designed to pick, sort, and categorize objects. It can manipulate and organize building blocks. It can notate the objects it “sees” in an image or video. It can play different video games.

Gato is also skilled in natural language processing. It can understand human language and even engage in conversations.

So Gato has learned to do many, if not all, of the tasks that the other AIs can do. That’s remarkable. If we think about it – even humans might struggle to be good at 600 separate things. 

And get this… On a relatively small training set, Gato was able to achieve an expert level score on 450 out of the 600 tasks that it learned.

And what’s so exciting is that the number of tasks is arbitrary. If Gato can learn 600 tasks, it’s just a matter of scaling the training for it to master 60,000 tasks.

What we are looking at is the natural evolution of AI. We are moving from single-task AIs to more general, multi-tasking AIs that can do all kinds of things. This is the next logical step toward artificial general intelligence (AGI).

AGI is when an AI is indistinguishable from a human and is empowered with “superhuman” capabilities. It can think, understand, learn, and apply its knowledge to solve any problem – just as we humans do – but in a fraction of the time and on any subject matter at all.

This latest development from DeepMind signals that we are rapidly moving towards that eventuality. It’s a little bit frightening to think about how fast AI is advancing.

The implications are profound. Everything changes when we have AGI. We can’t even predict what the world looks like with AIs that can think and act independently.

How Gato develops over the next 12 months will be very telling.

 

 

New Opportunities Are Emerging For Citizens of The World.

Freedom and democracy may appear to be struggling to stay alive in America, but there may be a knock-out punch ready to be released. The evolution of the blockchain-enabled metaverse is going to enable the 'Citizens of the World' to gain their own Freedom by democratizing power and creating a new world with new rules, new players, and new opportunities. For 99.99% of us, the metaverse will improve our real-world lives through the democratization of power and opportunity.

Along with the major long-term trend of society towards decentralization and smaller-scale organizations, there are new opportunities developing to help 'Preparers' in the cryptocurrency sector. Businesses are beginning to issue their own Crypto Coins that can be traded on Cryptocoin Exchanges.

Markethive.com for example will be releasing its HiveCoin (HIV) in the coming weeks. It has tremendous upside potential that is outlined in a Video by Founder Tom Prendergast, "Entrepreneur Advantage…".

Not only that, if you go to their website and register as a FREE Member, you will be given 500 HiveCoins for "FREE" along with access to several Earning Opportunities and online tools to increase your HiveCoin balance.

Be sure to check it out today – Markethive.com

Markethive

Tim Moseley

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Gold posts solid gains for the week as market participants focus on the economy

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Gold posts solid gains for the week as market participants focus on the economy

Gold prices closed higher on the day and the week resulting in solid gains. As of 5:50 PM, ET gold futures basis most active June contract is currently up $3.90 or 0.21% fixed at $1845.10. Considering that gold futures traded to a low this week of $1785 and closed near the highest value this week of $1848.60 gold had a good week.

Gold pricing had been under pressure for the fourth consecutive week before this week’s trading activity resulting in defined technical chart damage with gold breaking below its 200-day moving average last Thursday, May 12. This week’s low occurred on Monday, May 16 when gold prices hit a low of $1785, and traded to a high of $1825 before closing above its opening price on Monday and above Friday’s closing price at $1813.60. On Tuesday gold traded to a higher high and a higher low than Monday, even though gold closed fractionally lower than its opening price. On Wednesday gold traded to a lower low and a lower high than Tuesday’s price action but that all changed on Thursday.

Thursday’s price action moved gold solidly higher opening at $1816 and closing at $1841, above its 200-day moving average of $1837. Although today gold had only a small gain it opened and closed above its 200-day moving average which on a technical basis is significant. If gold can maintain pricing above $1837 on a technical basis, we can derive that gold prices are now back in a solid long-term bullish demeanor.

The recovery in gold this week was based upon market sentiment shifting their attention from the recent and future activities of the Federal Reserve in regards to their tightening monetary policy in which they have raised the Fed funds rate by ½ a percent at this month’s FOMC meeting which follows the quarter-percent rate hike they enacted in March. Recent statements by Chairman Powell indicated that they will get more aggressive when he said that he is open to raising rates well above the Federal Reserve’s interest rate target for normalization which is been set at approximately 2%. This was interpreted as a more aggressive monetary policy in an attempt to stop inflation from spiraling higher.

Statements from the Federal Reserve before this week were indicating that they believe that inflationary pressures had peaked and using the most recent numbers from last month’s CPI inflation index is the validation of that assumption. The CPI index came in at 8.3% for April, below the 8.5% rate that occurred in March.

It has been the tightening of the Federal Reserve’s monetary policy which has resulted in a tremendous selloff in U.S. equities which continue through this week taking all three major indices into a defined tailspin with seven consecutive weeks of price declines.

However, gold had been selling off for the last four consecutive trading weeks based upon anticipation of much higher interest rates to stave off inflation. However, this week we have seen a clear and defined reversal of market sentiment as investors are now clearly focused on the reality that inflation has not peaked and is most likely continuing to move higher and the prolonged risk-off market sentiment has shifted market sentiment from the higher yields of U.S. Treasuries to the safe-haven asset; gold

By Gary Wagner

Contributing to kitco.com

Time to buy Gold and Silver on the dips

Tim Moseley

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US congresmen write Zuckerberg to act against Slovak users of facebook

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US congresmen write Zuckerberg to act against Slovak users of facebook
                                         from Czech alternative web

US congressmen wrote Zuckerberg a letter to take action in Slovakia against supporters of Putin and Russia on Facebook
US Congress decides who should be deleted and blocked on social networks in Slovakia ?

Today, American congressmen are already writing public letters and intervening against the internal affairs of another "sovereign" country.

A total of 5 members of the US House of Representatives Intelligence committee, headed by committee chairman Adam B. Schiffem wrote an open letter  to Facebook chief Mark Zuckerberg to crack down on Slovak citizens who glorify Russia, Vladimir Putin and spread alleged Russian disinformation on his social network. It is said to pose a huge threat to the security of the US and its allies.

In the letter, five Democratic Party congressmen call on Zuckerberg to increase the number of Censors in Slovakia, that is, in their words, “fact checkers” for verifying and deleting Russian disinformation and posts that express sympathy for Russia, Russian officials, the Russian army, etc.and also to launch an investigation into who publishes this information on Facebook .
These congressmen are Adam B. Schiff
Mike Quigley
Peter Welch
Sean Patrick Maloney
Jason Crow

Slovakia is officially an American colony with everything ? The civil rights of Slovaks to opinions on Facebook are controlled by US congressmen…. And the prime minister of Slovakia Eduard Heger still thanks them? Is this normal?

Slovak prime minister Eduard Heger  already sent his thanks to US congressmen also saying that this is result of a common truth-seeking effort and wrote also "It is highest time for as many people as possible to be clear about the values and to be able to navigate correctly in the complexities of the contemporary world."

Member of Slovak parliament Luboš Blaha from political party SMER has already responded to the intervention and wrote  an open counter-letter to Zuckerberg. 

Yes, it is obvious that Americans are afraid of massive anti-American sentiments in Slovakia among the ordinary population. Anti-American signs are beginning to appear, according to our information, everywhere, in all cities, and the police do not have time to blur the letters " Z " appearing in hundreds of cases. It is something like a form of” Zorro Avenger " protest against censorship and against American aggression in Ukraine, against the American nationalization of political and media processes, against the deployment of American occupation forces in Slovakia with the assistance of the government, which part of the Slovak public and especially the opposition calls treasonous.
Facebook is powerful in Slovakia. It is the most used social media platform in the country, with approximately 2.7 million active members, which is approximately 49% of the Slovak population.

Slovakia is very important for the US Congress from the logistical point of view of supplying weapons to Ukraine. It is a country that shares a border with Ukraine, and this makes Slovakia an extremely important vassal for the United States, so important that the US Congress is straining to eliminate resistance and opposition in Slovakia, including the criminalization of representatives of the strongest opposition party.

                    Thank you for reading

                                                     Margaret
 

Tim Moseley

The Artist that came out of the Winter