BTC End Times?

In January, Moldbug spake prophetically:

Bitcoin dies in two very simple steps.

1: A DOJ indictment is unsealed which names everyone on Planet Three who operates, or has ever operated, or perhaps who has ever even breathed on, a BTC/USD exchange, as a criminal defendant.

The charge: money laundering.

On May 15, Under the headline US Government Begins BitCoin Crackdown, Zero Hedge reported that:

Many people use Dwolla, a PayPal-like payment network, to send dollars to their Mt. Gox accounts. They then use those dollars to buy Bitcoins. On Tuesday, Dwolla announced that it had frozen Mt. Gox’s account at the request of federal investigators. It’s the first federal action against the currency.

And, by the way:

Sen. Chuck Schumer (D-N.Y.) described Bitcoin as an “online form of money laundering”

Outside in doesn’t share Moldbug’s BTC prediction, but the projected narratives don’t diverge much for some time. By attempting to stamp out Bitcoin, USG rapidly converts it into an overtly subversive revolutionary currency*, used only by those in explicit (though covert) antagonism to the regnant global economic regime. The test then begins.

*Typically, reactionaries don’t like revolutions, but that’s because revolutions are typically democratizing. When the neoreaction gets to watch a spontaneous right-wing revolution unfolding, against the democratized or ‘political’ economy, I suspect that they’ll quickly recover their natural sympathy for it.

ADDED: The greatness of Peter Thiel on display (via, and as anticipated)

May 16, 2013admin 20 Comments »
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20 Responses to this entry

  • Foseti Says:

    It’s worth being specific about what USG is doing and why it’s doing it.

    USG will shut BTC down not because it believes BTC is a threat to USG (though it certainly is) but because BTC will be used to buy drugs and/or fund terrorism.

    I believe an alternative savings vehicle would hugely help our cause. I also believe it’s nearly impossible to create one that won’t be used to buy drugs or fund terrorism. That’s the real problem. Unless BTC can solve that problem, it will fail.

    [Reply]

    admin Reply:

    ‘Money’ that can only be spent on politically-approved items isn’t money, but ration coupons. Even EBT cards are subverted, so the administrative dream of intrinsically well-behaved currency is a non-starter. Does that mean BTC will be crushed? That depends on whether it can be crushed. I have my doubts.

    [Reply]

    Handle Reply:

    I’m curious to see your “‘crushed” criteria.

    What we need is a function that simulates bitcoin market dynamic counterfactuals given various USG efforts. In my mind I see a graph with $USD the unit on both axes. The X axis is “USG anti-bitcoin annual budget” and the Y axis is “BTC Market Cap” (currently around US$12 Billion).

    I imagine this curve as being very elastic – asymptotic towards the X axis – a little USG effort brings BTC activity down a lot, but never completely eradicating it. I think you imagine this curve as being rigidly inelastic for a long time, until finally hitting its catastrophic inflection point somewhere “way out there” – like the shape you get if you google “graph arctan(10-x)”

    Government short of North Korea can rarely “crush” anything completely. Nor does it care or need to.
    At some point the marginal transformation of resources into results in any field cannot justify increased expenditure vs other fields (unless you do air traffic control, apparently).

    But mild effort with rare, but highly publicized, negative consequences for an individual, and that results in significant discouragement and intimidation of law-abiding people, is high return on investment. Look at Derbyshire, Richwine, Watson, etc. The Cathedral really only needs to do that kind of thing once or twice a year to suppress millions of people. Worked for Stalin too, but he always produced confessions. Crude and dispensable – none are needed today.

    Threat yields Analysis, Planning, and Request for Resource Allocation which Produces Capability that yields Intelligence which leads to Investigation which supports Prosecution which provides Deterrence which is Power.

    And Money is different from drugs or hatefacts. Money is a bubble which requires mass adoption or at least itinerant willingness to be genuinely “current”. So even a merely ok amount of discouragement could be sufficient.

    [Reply]

    spandrell Reply:

    What if its used to buy Cathedral-approved drugs and Cathedral-approved terrorism? There’s plenty of that too.

    [Reply]

    Posted on May 16th, 2013 at 2:29 am Reply | Quote
  • Nick B. Steves Says:

    I suspect that they’ll quickly recover their natural sympathy for it.

    Hey that’s why I love The Who’s Won’t Get Fooled Again. What’s not to love…

    [Reply]

    Nick B. Steves Reply:

    BTW current Mt. Gox trading price $115.01/BTC … about where it’s been for most of the last week.

    [Reply]

    Posted on May 16th, 2013 at 3:41 am Reply | Quote
  • Handle Says:

    Foseti is right, and I’d only add the rationale of “avoiding taxes” as the one, especially in the age of Obamacare, 1099’s for everything, and Federally-permitted internet sales taxes, that USG will use to go after normal users, even as the higher agencies and departments focus on exchangers.

    Here’s the market irony – there are at least half a dozen ‘prviate’ betlway-bandit companies right now which, following obvious market incentives, are investing significant resources into rapidly building better Bitcoin busting ‘scalable solutions’ in anticipation of an eventual order from the government.

    Hey, there’s still something like $50 Billion in unspent stimulus money, and since we aren’t spending it on stopping sequester furloughs, might as well invest in some IT capability.

    [Reply]

    admin Reply:

    Some things just aren’t doable, even with US$50bn. Among them is politically docile ‘money’ that actually behaves like money. If people are happy with their Fedgov approved-consumption vouchers, then the appetite for free currency disappears. If not, not.

    [Reply]

    Handle Reply:

    We need to be clever about creating a structure or framework for getting some resolution in this debate – if it’s possible. What are the burdens of proof, who bears them, what does it take to change our minds, etc.

    This, (I guess, I hesitate to put thoughts in the minds or words in the mouths of such great ones as these), is the quick summary of the overlapping positions of myself, Moldbug, and Foseti.

    1. Bitcoin isn’t a big deal to USG yet.
    2. But it could be. People will use it to buy drugs, launder money, fund terrorism, evade capital controls and regulations, and avoid taxes. Just like they used to do with Swiss accounts, and like they do today (to a much greater extent than with Bitcoin) with the shady-banking sector (Liberty Reserve and Costa Rica, I’m looking at you).
    3. People used to think the Swiss would always hold out against USG pressure too. Boy, were they wrong. People used to think that the Halawa networks were too dispersed and informal to be tamed. The last thing they heard was the distant buzzing of a drone and the whistle of a hellfire. “Money Seeking Missile”.
    4. These things will only be tolerated up to a point. The shady banks are also not long for this world. At least, they won’t be able to enjoy access to the global financial system much longer.
    5. When and If Bitcoin becomes a big enough problem for the US, it’ll be time to act. It takes a long time for USG to make up it’s mind and grab its balls and actually decided to do something against anything. But when it does, it hits hard. People are definitely already thinking about and preparing for this contingency.
    6. $50 Billion could fund the criminal law division of the Department of Justice for 250 years.
    7. You get a lot of prosecution for that kind of money.
    8. And you don’t need that much to really scare most people.
    9. If most people are scared, you don’t have an alternative currency. It won’t “die”, but it’s a question of degree. At a stagnant low level, I claim it’s obscure enough to not be “current”. There is plenty of trading in commodities, and some people hold them to preserve value, but “currency” they ain’t.
    10. And that’s how “Bitcoin Dies”. As soon as it become relevant, it will be made irrelevant.

    [Reply]

    admin Reply:

    There’s too much (great stuff) here to respond to in one spasm. You’re right that a structured debate would provide discipline, although the market sets the frame for us automatically.

    I’m not sure that the BTC topic is separable from wider questions of government competence and Cathedral prospects. We’re agreed the BTC can’t, strictly speaking, die — i.e “go to zero and stay there”. That’s technically and economically impossible, or at least requires an exotic form of state intervention beyond any yet seriously discussed. The NSA could buy up all Bitcoin? But then, they’re still being mined. The algorithm is extraordinarily robust.

    So whatever happens to USG going forward, Bitcoin will be out there, waiting, along with the drug mafias, terrorists, rogue states, and other scary things. Nothing gets resolved anymore. That’s what the Cathedral means: there’s no resolution to anything. Winning is too cruel to be allowed, and as Moldbug has explained, settling problems isn’t in any agency’s bureaucratic interests — it’s bad for career prospects. The incentives point to endless festering, which can easily be spun as humanitarian delicacy (or nuance), bringing more liberal applause, more jobs, more resources … So it all just builds up. That’s the context.

    I really don’t see USG ‘dealing’ with anything — do you? What was the last thing it dealt with? Its competence decays every year. Scandals used to be something like ruthless conspiracies. Now people just ask: What the hell were they trying to do? It’s slapstick government, and it’s in no one’s real interests for it not to be. If “it hits hard” where are the defeated enemies? (I’m not seeing any.) The only people it really gets to push around are the domestic middle-class dupes who pay for its ineffective flailing. … OK, I’m rambling. Here’s the test: let’s try to agree on a list o five serious policy challenges (other than Bitcoin) that USG might conceivably resolve over some time span to be mutually agreed. I don’t think it will solve any, ever, although some might get solved for it by accident, and despite its ineptitude (e.g. energy independence). I think USG is done. Its problem solving days ended decades ago. If Bitcoin becomes a ‘problem’ it will fester too. Then, when the time for opportunistic infection comes around, it breaks out …

    Nick B. Steves Reply:

    I’m as identified to Mt. Gox as I am identified to my Credit Union. Dwolla AND Mt. Gox both. They both got my NJ-issued photo ID. Mt. Gox wanted a utility bill as well. The “Verify” was already onerous and would have discouraged “Money Launderers”. Japan based Mt. Gox has been passing the Astroglide to USG for at least 6 months now. I don’t see what this changes, except taking away the least friction USD exit, i.e., Dwolla, from Mt. Gox. There are many others. They just cost a bit more.

    Nick B. Steves Reply:

    By barring one exit (Dwolla), they seem to have propped up the market. BTC on offer have fallen from ~170k to ~150k in the last 24 hrs. Who’s gonna sell if they can’t their USD out?

    [Reply]

    Schlarlach Reply:

    Brilliant. I mean, that’s the direction things need to go, yes? Alternatives to fiat currency shouldn’t fail or succeed based on the ease with which one can exchange them back for fiat currency. Put your Bitcoins into precious metals . . . or precious plants.

    [Reply]

    Nick B. Steves Reply:

    I never really thought about that, but yeah that would work. They can’t shut down the commerce side. What’s gonna stop the “money launderers” from buying physical gold and then selling that?

    Does USG really want to turn a bunch of law-abiding citizens into scoff-laws? To treat financial regulations like we treat speed limits?

    Nick B. Steves Reply:

    ‘Course the gold sellers would need to accept BTC… But AFAIK bitpay is shouldering a lot of this on the legit side. Of course that adds more friction to what is supposed to be frictionless… As much as paypal? I dunno.

    Nick B. Steves Reply:

    Mt. Gox total sell offers down to 144k at this moment. BTC are REALLY fast and easy to take out of Mt. Gox and into a wallet or other exchange. My suspicion is that people are taking them off to find other exchange methods. With Mt. Gox on partial lockdown we may not be able trust their price as THE “official” trade price for much longer. I”m going to start paying more attention to BTCe and bitstamp. Bitstamp’s volume appears to be roughly half of Mt. Gox’s in the last 24 hrs.

    [Reply]

    Posted on May 16th, 2013 at 8:47 am Reply | Quote
  • Vladimir Says:

    admin,

    That’s what the Cathedral means: there’s no resolution to anything. Winning is too cruel to be allowed […] settling problems isn’t in any agency’s bureaucratic interests — it’s bad for career prospects. […]
    I really don’t see USG ‘dealing’ with anything — do you? What was the last thing it dealt with? Its competence decays every year.

    Is this impression a result of USG’s truly diminished ability to fight and exercise control — or merely of the fact that it has no serious enemies left? It seems to me that USG’s most recent enemies have been destroyed with utmost efficiency and ruthlessness; it’s just that unlike those from some decades ago, they were so puny and feeble that it didn’t require any impressive exertion on USG’s part.

    Now, your remarks about bureaucratic sclerosis are certainly true. However, a good comparison (as in so much else) would be the Brezhnevian Soviet Bloc. There was a horrible bureaucratic sclerosis and dysfunction in this system, and nothing ever got done in an efficient and pleasant way — but if you tried any serious opposition against the system, you would be crushed instantly and ruthlessly, as it happened collectively to the Czechs in 1968 and individually to countless dissidents throughout this period. A political system can keep an efficient immune system against internal destabilizing forces for a very long time, even after it becomes otherwise hopelessly dysfunctional and sclerotic.

    The key difference is that the Brezhnevian system eventually capitulated to a superior external power, but USG has no such competition. And while it’s certainly getting more Brezhnevian as time goes by, I see no reason why any organized serious opposition against it in the foreseeable future can expect anything but a Prague Spring of its own.

    [Reply]

    admin Reply:

    It’s a confusing picture. For sure, the Cathedral globally overwhelms the planet to an almost farcical extent, penetrating the most minute tics of political correctness into the unlikeliest of places, and installing the ideal of universal democracy as sole criterion of legitimacy in the souls of its few remaining challengers. Even the Chinese seem to think they have to pay lip-service to it, perhaps in large part due to the legacy of Western-influenced democratic doctrine inherited from the pre-communist Republican period (‘democracy’ evokes Sun Yat-sen). USG’s command of raw military power on a colossal scale is also undeniable.

    On the other hand, which enemies has it “destroyed with utmost efficiency and ruthlessness” since WWII? Not the North Koreans, not the Vietnamese communists, not the Sandinistas, not al-Qaeda, not the Taliban, not the Iranians, not the Latin American ‘Bolivarians’ … The Soviet Union dismantled itself. The Iraqi military was destroyed, but that was just a displacement target for the real enemy (energized Islamic radicalism), so I’m not sure whether it counts as much. USG’s ability to impose its will concretely, i.e. in a way that furthers practical national interests, seems to have declined in perfect concert with its ideological mesmerization of the world. US-hegemonic globalization operates like a machine ensuring the controlled collapse of Occidental power, transferring it automatically — and relatively smoothly — to more efficiently organized societies.

    If we go Moldbug on the question, and treat the only ‘real’ enemies of USG as right-wing governments (Marcos, Pinochet, Rhodesia, the RSA …) then for sure, they’ve gone. This only deepens the puzzle, though, because it suggests that USG can only demolish tractable regimes — those disposed to be friendly — and thus weaken its effective influence with every ‘accomplishment’. The Moldbug analysis begins to look quite plausible: this isn’t foreign policy as it has ever been understood before, but rather domestic religious neurosis projected outwards onto the global stage. Systematically eliminating right-wing pro-American regimes isn’t “efficiency and ruthlessness” but extraverted self-flagellation.

    [Reply]

    Posted on May 17th, 2013 at 6:39 am Reply | Quote
  • fotrkd Says:

    The added Peter Thiel article puts the action against MT Gox in a much more positive light:

    Asked about yesterday’s action against Dwolla Gallippi said much of the coverage was wrong and once you looked at the actual warrant it was clear it was a very specific problem of non-compliance – “the shell company was not licensed to do what it was doing.”

    Further, MT Gox is probably the major problem for BTC right now. It’s crap and bloated beyond its capabilities. Anything – including USG creating a market opportunity – that can lead to more competent exchanges should surely be welcomed? They’re going to try to regulate, but that’s just part of constructing the system, isn’t it?

    Interesting that “Joining Founders Fund is ‘Mad Max’ Keiser’s Heisenberg Capital – a London-based fund focussed on Bitcoin investments.” Keiser’s stated on RT awhile back that BTC needs an exchange with a ‘market-maker’ and that he was looking to get involved. There was a discussion on another post about the extent the left were embracing bitcoin – Keiser will generate a lot of interest from that direction. Interesting.

    [Reply]

    Posted on May 17th, 2013 at 10:31 am Reply | Quote
  • Bull Market in Bitcoin? | The Reactivity Place Says:

    […] been stably around 170k &plusmin;10k for many weeks. Since Tuesday, it has been dropping, as I mentioned over Nick Land’s yesterday. Now it has tumbled to about 113,000, which is the lowest I’ve ever seen. In fact, […]

    Posted on May 17th, 2013 at 6:27 pm Reply | Quote

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