Gn Purple Nostrum World 🤙
Shitposting from a fake account on Nostr. Caught me off guard 😂
Don’t underestimate the enemy.
lol
Storing energy and being backed/redeemable for energy are two different things.
Yes, the term backed is the important part. Bitcoin is the commodity, it is the bearer asset that needs no backing. It uses energy to mine, and one could argue that energy sets the floor price. But it doesn’t “back” it.
Common misconception. By definition it is backed by nothing, but it doesn’t need to be backed.
The dollar is backed by nothing. Bitcoin doesn’t need to be backed.
It’s fun to watch 😂
My typical 58 sat zap had been showing 1 cent. Now it shows 2. I guess 58 sats is my unit of account now.
They come in the meat packaging from your butcher
Will do! The more I learned about the current financial system the more bitcoin seemed so simple and made sense. No doubt being trained in all of this really helped you too.
There could be a number of reasons why the free market, or the Fed would decide 10% is too high. Could be that the issuer has become more creditworthy/less risky. Or in the case of when the Fed decides, it’s about making the cost of money cheaper to have a more liquid economy.
As for you 2nd question, the price of bonds and the coupon rate have an inverse relationship. If the price of the bond goes up, then the coupon rate goes down and vice versa. And the reason is bc the coupon (the fixed stream of income) doesn’t change. So the coupon is fixed, the price goes up, that means now you are getting less of a percentage from the face value of the bond.
Anytime. It took me way too long to learn these basics about bonds. I had no idea where to find this info 😂
Yep, I think we are pretty much saying the same thing. The important thing to understand is that what you are buying is fixed income. The coupon does not change. The market or the Fed can change the coupon rates, but that’s only if the bond is sold. Once sold it has a new price with the same fixed income, so the coupon rate has changed.
I shared this thread on the other app bc it’s very important to understand the basics of bonds to understand what happened this weekend, and to understand what happens in the financial system in general. If you don’t understand these basics then you’re missing out.
What are Bonds?
Think about bonds as “fixed income.” You literally loan money to the government to receive a fixed amount of income every year.
So if you loan $100 to the govt at a yield (coupon rate) of 10% then what’s fixed (the coupon) is the $10 a year that the govt pays you. That’s a fixed stream, every year the govt is paying you $10.
Now if the “free” market decides that 10% is too high, and you want to sell your bond in an auction let’s say you can sell your bond for $110 now. Well the stream of $10 a year remains fixed (coupon), but the YIELD (coupon rate) has now gone down. Bc $10 from $110 is less than the original 10%. Price of the bond went up, the coupon rate went down.
And if less ppl want your bond then you’d sell it for a loss for say $90. And the coupon rate would go up.
The coupon rate normally has to do with how creditworthy (trustworthy) the market perceives you.
Higher coupon rates are cheaper bonds (as we discussed), so 3rd world countries normally have cheap bonds with high coupon rates bc there’s a higher risk involved for the lender.
1st world countries normally have expensive bonds with lower coupon rates bc they are perceived as creditworthy.
Risk is a big factor as rates rise.
I hope this helps you get started in understanding bonds if you’ve been wondering how they work. Obviously this is a very small definition but a great place to get started. Hope you enjoyed 🤙
Congrats if this is yours. And if not, cool statement 🔥