How Are Bitcoin, Tethers And Dollars Linked? Interview With RealVision President Travis Kimmel

The relationship between Bitcoin and Tethers and between Tethers and dollars creates fierce discussion on social media. RealVision CEO Travis Kimmel considered the issue in a thoughtful Twitter thread last week.

He describes RealVision as “simply the best source of financial information and news on the planet.” Forbes editors, of course, may disagree with that.

To promote the discussion on the current state of crypto, I asked Travis if he would have answered a few questions about it and he agreed.

John Navin: What is the relationship between Bitcoin and Tether? Why has this become important?

Travis Kimmel: In my mind, this is more of an open question than something about which I have a strong answer. Tether has been used for some time now as a dollar equivalent within the Bitcoin ecosystem, and what many investigative minds would like to know is what backups value the dollar-per-lead.

In a world where we have proof of reserves, and those reserves fit established norms, Tether would cease to be such an interesting topic of conversation.

Navin: On your Twitter thread you said you would like to see “the situation with Tether being cleaned.” What do you mean by this?

Kimmel: As a fan of crypto and DeFi in general, what I would like to see is a framework for how we think about and stablecoins (in general, not just Tether) and an established set of practices for auditing their reserves. In my view, establishing some common practices here would strengthen the overall integrity of the crypto ecosystem.

Navin: You said that “the Bitcoin ecosystem clearly identified goals.” Could you explain what you mean by that?

Kimmel: This can be a bit hyperbolic insofar as there is a claim of consensus in the ecosystem. But in terms of the prevailing narratives within space, the goal seems to be to create a well-distributed financial system that goes beyond borders and nation-states.

Navin: You mentioned your belief that the current financial system is not very well understood by most people. What do you mean?

Kimmel: The common view that the Fed is “printing money” lacks finesse. More economy is happening here – quantitative easing might be more appropriately described as “the future conversion of stored funds with a zero to zero cash element.” Yet the ongoing narrative here is that the Fed prints money without restrictions, which is not entirely accurate.

Navin: Could you describe your thoughts about those who believe Bitcoin is a inflation hedge? Are they wrong?

Kimmel: It’s hard to say so early on. So far it has been a hedge of inflation, but in my opinion there are some quirks that make its long-term performance an open question.

One of these quirks is the need to “fund the network” by meeting the electricity costs of miners (who receive BTC for mining, and have to sell for fiat in order to pay their electricity bills fiat). This could, over time, create a lightweight gunwale for prices.

Navin: You use the term “print Tether” in a discussion of potential “alt dollar” bidders. Could you talk about that dynamics in the crypto world?

Kimmel: Until we can know what Tether supports, it is unclear whether Tether is simply an unrestricted form of fiat itself. When governments issue debt and increase the money supply, this debt is underpinned by their ability to tax their citizenship to pay back the debt.

This system is limited by the market’s view of the government’s ability to compensate for that promise (which affects interest rates). When Tether increases the money supply, it is not entirely clear what limits that increase.

The claim is that a dollar of assets supports every lead, but as we are dealing with the world of money, it would be ideal to take a “trust but check” approach. We need to find out how to do the “check” part so that everyone can have a reasonable understanding of the dynamics at work.

Navin: You said “What’s particularly curious in this case is that using a flawed mental model of the current financial system to create another is likely to alternate … well, unintended consequences.” For example?

Kimmel: If someone thinks the Fed can print money in an unlimited way, then one might think that another money system should be allowed to do the same.

Since I don’t think the Fed’s actions are money printing, and I also think that unrestricted money printing can have negative externalities (like really explosive asset price appreciation), this leads me to wonder how much explosive price appreciation Bitcoin could be due to a lack of system constraints.

Navin: You have a philosophy degree? What is the connection between that type of study and the complexities of the cryptocurrency world?

Kimmel: Philosophy is a great way to become a disciplined thinker. Because the world of finance is infinitely complex, it requires a level of rigor that many other fields do not. Philosophy is excellent training!

I have no positions in these investments. No recommendations are made one way or the other. If you are an investor, you would want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment adviser.

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