Saifedean posted this video over 2 years ago and I’ve yet to see any notable Bitcoiner refute his hypothesis on a podcast or debate Saifedean about it. Why? Did I miss it?
Would love to see someone like Lyn Alden, James Lavish, Larry Lepard, Parker Lewis, ANYONE talk with Saifedean about this. I think it’s the biggest elephant in the room.
Again, who’s going to buy the bonds?
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Recently the largest purchaser and holder of USTreas is tether. They are larger than some of the biggest sovereigns at this point. They will purchase treasuries with the cash that gets deposited into tether and collect the interest while they pay 0% out. They buy BTC with the interest.
If there is pressure on the USDT peg it will directly impact US treasures.
Who is going to buy the bonds, indeed. Ultimately, bitcoin as a protocol is positioned to act as the issuer of a widely accepted, immutable, permissionless money. The market is going to compare that money against other money technologies, like government issued treasury bonds.
If the risk-adjusted appreciation of the bitcoin market outcompetes the risk-adjusted yields of traditional government bond markets then bitcoin will attract capital that has historically been allocated to bonds.
There really is no practical world where the two systems coexist. Government issued bonds would have to set their rates to match Bitcoin’s annual appreciation. Even at bitcoin’s worst 4 year performance, you’re looking at 2-year / 10-year treasuries needing to be priced at 10%. Probably closer to 20-25%. Absolute economic chaos would ensue if that happened.
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18th largest holder of US Treas
The push to get counties into US dollar tokens is a push to keep the bond market solvent.
Right. Tether doesn’t fix the reality that Bitcoin is better money, which causes its reservation demand to continue to outpace that of USD tokens and USD bonds.
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I think demand of USD tokens will be less than demand for BTC. It's going to get messy at some point. USD tokens allow the govt to extend the life of the dollar a bit longer through native 0% interest rates.
USD tokens and their purchase of USTreas specifically Tether is the biggest story in tradfi nobody talks about.
Tether generated billions in revenue simply from treasury interest payments with like <100 employees.
Thanks for posting this. I’ve not heard this and just listened. I find the logic sound. Would love to hear a counter argument.
One nitpick - this scenario would be disinflationary (inflation but slower rate) not actually deflationary (negative rate).
It would be deflationary because as the bonds mature, the principal is paid out and the debt is cleared.
I’ve thought about it this. Probably the best counterargument is just that bitcoin is still too small to matter to fiat inflation/deflation/whatever. We’re still the fly on the elephant’s back.
This will change, and when it does, Saif’s smooth transition seems very plausible, and hopeful too. It’s contra “the system must collapse” which is a terrible message.
The idea that bitcoin puts competitive pressure on fiat to “get more hard” makes a ton of sense.
