How much Bitcoin should you have as a minimum?

Someone asked me, “How much BTC do you think is enough for someone who works hard but doesn’t make a large amount of money?” Contrary to appearances, this is a difficult question to which I don’t have a simple answer, as it has too many variables, age, geographic location etc. So I will offer a modular answer to it.

If we try to step back as much as possible, we can come up with a few points for reflection.

1) Save rather than speculate

First of all, always keep in mind the usual warning: Never take the risk of investing/speculating with what you can’t afford to lose entirely (for example, taking out a mortgage on your house to invest everything in a single system, be it Bitcoin or something else, is obviously too dangerous).

Let’s also not forget that Bitcoin has only 13 years of history and no one can predict everything that could happen in the next 10 years (I’m not talking about scams by other “crypto” projects selling dreams, but critical flaws in the network itself, or even the Internet, changes in regulations in your country etc).

Also, even if the exchange rate doesn’t collapse to zero, BTC may just lose 50% of its price against the dollar for a year or more, as it has done in past fluctuations. Will you have the reserves to last through the winter…?

In short, whatever your budget, anticipate that all your BTC are worth zero, at least temporarily!

A healthy approach is to look at your BTC savings as a piggy bank in which you put a little bit regularly, an amount you can do without without without realizing it.

An example I sometimes give is the price of a pack of cigarettes. A smoker who consumes a pack a day spends about $250 per month, which literally goes up in smoke. One can imagine that putting aside (in BTC for example) $250 per month would not be a real problem for this person.

A quick calculation shows that for a BTC savings of $250 per month started 4 years ago, the total amount spent would be $12’250 and the current value of the bitcoins thus obtained would be about $47’750.

WARNING: The purpose of this example is NOT to say “the price always goes up and what happened historically is bound to happen again”! It is simply an EXAMPLE to illustrate that “throwing away” the equivalent of a pack of cigarettes a day CAN under certain conditions be a profitable bet.

Thus, we are no longer talking about a final total sum in the future, but rather a recurring sum related to the present. This is a change of perspective that makes all the difference.

It makes the original question obsolete, or on the contrary more useful, by changing the angle with which we look at the purchase of BTC.

Note: this example works just as well with non-smokers who play the lottery once a week.

2) World population and Bitcoin limit

The amount of BTC per person is another way (a bit fanciful, I grant you, but interesting nonetheless) of looking at the issue. If we remember that there will only be a maximum of 21 million BTC (that’s 2,100,000,000,000,000,000 satoshis, a satoshi being the smallest denomination of BTC) ever put into circulation and that there are 8 billion people on earth, that’s an average of 262,500 satoshis per person. If you hoard more than 100 francs of BTC today, you have already accumulated your share of the global planetary mass. It is still very early.

Let’s take the opposite view: there are today 56 million millionaires on earth, that is people who own the equivalent of $1’000’000. That represents 1% of the world population. If they decided to share all the BTC, that would be about 37’500’000 satoshis per person. That’s about CHF 15,000 per person at the current price. For CHF 15k you can have what the 1% of the planet can’t afford.

Another way of looking at it is that if all the millionaires in the world wanted to own 50,000,000 satoshis (half a BTC) there would never be enough to satisfy them all.

3) The Bitcoin standard

Another angle of calculation is the potential equivalence between gold and BTC. If we divide the total mass of gold on earth (about 175,000 tons, at $61,000 per kg) by the maximum number of BTC, we arrive at a theoretical price of $508,000 per BTC.

If we imagine a future where Bitcoin has become a means of storing and exchanging value on the same level as gold today, with reserves in central banks etc., or even a “BTC standard” similar to the pre-Bretton-Woods gold standard, we would have to own 2 BTC to be a “millionaire”.

4) Melting like an ice cube in the sun

The most painful way to calculate is simply to save to protect oneself from inflation.

Today, we hear about frightening rates exceeding 6 to 8%, and doing nothing, i.e. keeping your savings in cash, is equivalent to watching them melt ineluctably… For reference, €100 will have lost half of its value and will have a purchasing power of €50 in 10 years if inflation remains above 6% by then.

Unfortunately, no non-risky investment can effectively protect your savings. You need an investment that brings back more than the inflation, and at these rates it implies a non-negligible risk. Moreover, not everyone has access to this kind of return.

If we go back to the price of a pack of cigarettes per day, and we hope that the BTC price will appreciate a little on the long term, or at least not go down by 6% per year, we can hope to “protect” part of our savings against the fatality of this metaphorical ice cube melting… Always keeping in mind the other points discussed above, starting obviously with rule number 1.

5) Millions for two pizzas

A final angle of reflection is the episode of the famous “pizzas” of Laszlo. As a reminder, in 2010, when Bitcoin had almost no price and no media coverage, one of the very few participants in the network offered 10,000 BTC for anyone who would provide him with two pizzas (about $30). At today’s price, that’s a lot of money, but at the time it was the first transaction in which a physical good was purchased in BTC, and it started the Bitcoin economy as we know it today.

It is possible that the price of BTC will rise to the point where $30 invested today will also be worth millions in 12 years. It’s just as possible that it won’t. Nobody knows, of course.

But one thing is certain: people who hear this story today and say to themselves “if only I had known about Bitcoin back then and bought 10,000 BTC for $30…” don’t realize that $30 back then seemed as insignificant as it does today.

Today, $30 will buy you 75,000 satoshis. Whether we’ll ever see Bitcoin’s price rise into the millions, so that 75,000 can transform a life, is impossible to predict. But it’s small enough that it’s not dramatic if you lose it, and it’s easy to put aside in regular savings, if you feel like it.

Zero, or more

So when asked the question “how much BTC do you need to have at least?” you understand that there is no easy answer. For some like Warren Buffet, it is “zero”, for others like Elon Musk it is “more than zero”…

The only possible answer is the advice I give to my friends: the most important thing is to learn and understand. Only then can you answer your own question, depending on your finances and your confidence in the protocol and its ecosystem.

So I encourage them to invest a little bit, according to their means (a student doesn’t have as much cash to lose as a private banker), but enough so that it makes them want to learn how it works, read about how to own it properly, educate themselves on how to protect their savings carefully, educate themselves on why Bitcoin was invented, how money in general works, inflation, central banks etc.

Owning a few satoshis allows you to become familiar with the technology, culture, financial mechanisms of this unique system. And as you learn, you may want to expand your position. (Or not. But you’ll know why.)

And who knows, maybe if you hold on to them for a few years, those few satoshis will finally be worth a little more than two pizzas?

Questions? Comments? Find me on Twitter @ZLOK

Bitcoin pizza 2.0

A little bit of history, as the middle class is about to get crushed by inflation.

In May 2010, Laszlo Hanyecz famously paid 10,000 bitcoins in exchange for two pizzas ($35).

Today, 12 years later, these 10k BTC would be worth $400,000,000.

If you are thinking “too bad for him, I don’t care” or “I’m convinced by Bitcoin already” you can stop reading. Have a sunny day! :)

However, if you are among the many people who say “if I had known at the time, I would have bought 10k BTC myself…” this is for you.

Hindsight is 20/20, but in reality you would NOT have invested in Bitcoin even if you knew about it. You know about Bitcoin now and you are still not investing $35 in it today.

Back then, it was still relatively easy to buy from early adopters, and it’s even easier to get into BTC today.

So, if you missed the $35 opportunity of a lifetime in 2010 why is it that don’t you invest $35 in Bitcoin today?

Short answer: unit bias.

Back in 2010 Bitcoin was worthless because 10k BTC was equivalent to $35. Today, Bitcoin is too expensive because 1 BTC is worth $40k.

But this is the wrong way to look at it.

You can buy a fraction of a BTC. The same way you can buy 5 grams of gold, not necessarily a full 12 kg bar.

1 BTC is divisible in 100,000,000 satoshis.

At current exchange rate, $1 gets you approximately 2,500 sats.

In other words, 1/10th of Laszlo’s pizzas (or a cappuccino) would cost you the same amount (“10k”) as in 2010, but in satoshis instead of full bitcoins!

In 12 years, people may or may not look back and ask incredulously “10k sats were worth $4??!!” No one knows for sure where it’s going. Like no one knew in 2010 (especially not Laszlo).

But those who say today “I would have invested…” do have a 2nd chance.

Today, just like in 2010, a tiny gamble on the future will cost you the price of a couple of pizzas. Gambling a relatively small amount like $35 today is the same as the same dollar amount 12 years ago (it could be argued it’s an even smaller gamble taking into account inflation).

If in 12 years these satoshis are worth zero, will have cost you a few bucks over a decade.

IF — and it’s a big IF — in 12 years 1 satoshi is worth $1, you won’t be saying “if only I knew then”… because you do know today about the potential risk and reward of such a gamble.

As the usual disclaimer goes: Never invest what you can’t afford to lose. But that’s the point: can you afford to lose 2 pizzas today, to save generational wealth for your family tomorrow?

Law of Conservation of Energy applied to tomatoes and Bitcoin value.

This seems to be one of the sources of misunderstanding, from nocoiners (the honest ones at least).

“If you buy Bitcoin, you have nothing to show, except Bitcoin. And Bitcoin’s only use is being sold back for real money.”

For example, this tweet:

Unlike when you buy a tomato which you can eat or transform or resell, you can’t eat Bitcoin, nor make sauce with it. So, it seems you would *only* buy it to resell it.

But Bitcoin is not a tomato, nor is it gold, even. It is unique because it is its own category.

Compare it with the Swiss Franc. It has no actual use in the US, yet it is valuable and useful every day in Switzerland. Most people don’t *buy* CHF, they get it as payment from doing business or as salary for example.

But some US people do, for traveling in Switzerland.

CHF becomes for them a commodity, a product they buy with their US$. Like a tomato. Which they will later use as money.

It’s not forex trading. Nor speculation. It’s definitely not a Ponzi.

When they come back home they will sell them back for US$.

Still not forex trading.

The mechanism is exactly the same as forex trading. Which is for profit only, but the context is different.

If the exchange rate is lower when they return, they didn’t “make a bad bet”, neither was it a “good investment” if the rate is higher.

Some traders *are* speculating on forex. For them, the goal is to make a profit.

But their business doesn’t necessarily imply that *all* currency exchange is only for profit speculation.

“But CHF can be used to buy stuff! Bitcoin can’t!”

As I said, Bitcoin is its own category. Money is only one part of it. To take another angle, it is also comparable to gold.

There is gold speculation and trading, but also many people around the world are using gold for saving.

And not many people buy food or make their own jewelry or cables with bank-bought 10 grams ingots…

When you “buy” Bitcoin, you are not buying the representation of something else, you are exchanging one source of value (eg US$) into another. You have something to show for it.

Bitcoin *is* the product, and the cash, and the real estate. Bitcoin *is* the value.

Some places on Earth still use salt as money and store of value. Salt in my cupboard isn’t money, yet it *does* represent the cash spent to buy it.

Like in thermodynamics, value is transformed.

Going back to the tomato. When the sun’s energy & rain water transform into tomato flesh, they don’t exist separately anymore, but the tomato wouldn’t exist without them. The farmer who harvested it spent time and effort. They also transformed.

The end product has a value.

We can’t say the tomato merchant is a speculator, or a scammer, or a gambler. Their business is to sell tomatoes to others for a profit yet it’s not a Ponzi. And the buyers are not considered scam victims.

Merchants are not Ponzi scammers. Neither are savers. Nor speculators.

“Yes but the end-user can eat it! No one can eat Bitcoin!”

Sure, but the merchant didn’t eat anything. They merely bought to resell.

“Yes but they bought a real thing, not thin air like Bitcoin!”

Actually, they bought sunshine, water, time, and labor (+ farmer’s profit).

The value of the tomato is not the original seed. Are any of these elements still visible? Yet they transformed into that transmissible item and its value.

The merchant doesn’t need sunshine and the end-user doesn’t want water.

This tomato is not a Ponzi. Neither is Bitcoin.

As for the “everyone cashing out” argument, it can of course be applied to fractional reserve banking at the mercy of a bank run. If 20% of the money in the bank was requested to be withdrawn by their customers the system would collapse.

But it’s even simpler than that:

If no one wants to eat tomatoes suddenly, there will be some people invested in the tomato business (producers, merchants…) who would lose money. Maybe go bankrupt. Tomatoes are still not a Ponzi.

And as for the “$600 B is a 100% imaginary number”.

2019 world tomato production was 37.38 million mT.

How can we calculate the total value of this business? Should we use market price at sale, or price of seeds + sunshine + water + work-hours?

Say $600 B entered this tomato market, merchants would obviously not keep the US$ in cash as collateral, but instead would pay their bills & expenses.

US$ value has been *transformed* into tomato value.

Does it mean “tomatoes have no value because there is no collateral cash”?

To sum up, many nocoiners are dishonest trolls, but it seems some are genuinely confused by the unique nature of Bitcoin.

You may dislike speculation, its dematerialized nature, and ignore people who suffer from hyperinflation, but it’s still transformed value, not a Ponzi.

Bilan – Pourquoi Bitcoin? Un peu d’Histoire

L’actuelle pandémie du coronavirus COVID-19 provoque chez certains comme une impression de déjà-vu. On se souvient vaguement d’avoir assisté à des mesures d’urgence internationales similaires, une situation de crise qui s’est terminée par une fuite en avant pendant près d’un siècle, et une géopolitique mondiale façonnée sur une succession d’incidents. Si on ne veut pas répéter aujourd’hui les mêmes erreurs, l’échappatoire se trouve peut-être à la croisée de la technologie, la finance, et la politique.

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Le Temps – L’attaque à la clef anglaise

Deuxième volet d’une introduction à des principes fondamentaux. Dans mon billet précédent, je mettais l’emphase sur le poids de l’erreur humaine. La sécurisation technologique court-circuitée par la faiblesse de l’individu.

Et l’individu en question c’est très souvent nous-mêmes. Il est donc important de savoir de quoi il en retourne et de prendre (et garder) les bonnes habitudes dès le début.

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Le Temps – Cryptomonnaies: Pas de panique

L’arrivée de nouvelles technologies apporte avec elles leurs lots de nouveaux dangers. Tout va trop vite, on s’y perd, on angoisse… La hi-tech fait souvent peur quand on ne la maîtrise pas. Certains profitent de la confusion.

En février 2016, des hackers ont braqué numériquement la Federal Reserve Bank de New York à travers le réseau interbancaire SWIFT. Ils y ont passé des instructions de transferts pour un total de près d’un milliard (!) de dollars US provenant du compte de la Banque Centrale du Bangladesh.

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Hacker Noon – ‘Bitcoin Bear Market Diaries’ Volume 13 Yves Bennaim

«  Yves Bennaim is a Swiss Bitcoiner who has been in the game since 2011. He is also the founder of @2B4CH, a Swiss think tank assisting private and governmental bodies in understanding Bitcoin & Blockchain technologies. You may also know him from some of his articles in both English and French.  »

April 1st 2019

Bilan – Les dangers des Blockchains privées

Récemment, tout le monde ne semblait jurer que par la fameuse Blockchain, en ignorant (parfois volontairement) que celle-ci n’est que la moitié d’un système délicat fonctionnant en binôme, et que sans la décentralisation de son crypto-actif elle n’est au mieux qu’un grand registre très lent et à la maintenance lourde. Puis on est naturellement passé aux Blockchains privées et à autorisation (“permissioned”), et des grands noms comme IBM ou JPMorgan Chase se sont positionnés comme leaders autoproclamés à l’avant-garde de cette nouvelle solution quasi-magique, facile à faire avaler aux curieux un peu trop optimistes.

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Bilan – Vous avez spéculé sur Bitcoin, et après?

Il y a bien eu un éclatement de la bulle spéculative, mais c’est un phénomène classique à tous les marchés et les technologies émergentes. Et pour Bitcoin, ce n’est pas la première ni la dernière.

On a annoncé la mort de Bitcoin un nombre incalculable de fois depuis sa création il y a dix ans, et pourtant sa valeur intrinsèque continue de convaincre un nombre de plus en plus important de gens au quatre coins de la planète.

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Bilan – Crypto: le leadership de la Suisse en péril

«  A l’origine du think tank 2B4CH, Yves Bennaïm se montre sévère: «Zoug s’est autoproclamé “Crypto Valley”. C’est du bluff car la Suisse n’a jamais été à l’avant-garde. Ce sont des avantages en matière de discrétion, de taxation et de facilité administrative qui ont joué. Mais en matière d’ouverture à la cryptoindustrie, d’autres places sont bien plus intéressantes.» (…)

«Nous vivons les débuts d’une industrie qui va bouleverser l’économie, comme internet l’a fait à la fin des années 1990. Les pays qui marquent des points disent ceci: on ne sait pas encore à quoi l’avenir va ressembler mais nous nous engageons à soutenir les entrepreneurs de la crypto et garantissons que nous ne ferons pas machine arrière», analyse Yves Bennaïm.

En Suisse, en revanche, l’incertitude reste totale. «Essayez de parler de cryptomonnaies avec un banquier genevois. C’est comme si, à la fin du siècle dernier, vous évoquiez le potentiel du courrier électronique avec un postier et que celui-ci concentre son attention sur le format futur des enveloppes», déplore le même observateur. (…)

Yves Bennaïm évoque une piste pour faire évoluer le cadre législatif: «Des cantons comme Zoug, Neuchâtel, le Tessin et Genève pourraient former une alliance capable de faire comprendre les priorités aux autorités nationales.» »

Mary Vakaridis
3 septembre 2018 – Lutte contre la contrefaçon : Des montres marquées au fer rouge de la Blockchain

« Le luxe est clairement un bon secteur d’application, beaucoup de gens en discutent», confirme Yves Bennaïm, fondateur de 2B4CH, un laboratoire à idées suisse focalisé sur les applications de la Blockchain. Ce dernier évoque également l’industrie pharmaceutique, en lutte contre les copies de médicaments. (…)

Blockchain est le mot à la mode, mais ce qui compte réellement est de savoir quelle chaîne de blocs est utilisée par tous ces projets», prévient l’expert Yves Bennaïm. Ce choix de celle à la base du Bitcoin – la plus utilisée, la plus décentralisée et donc sûre – «est judicieux; contrairement à une chaîne de blocs maison, il permet d’éviter que tout ne s’écroule si la société fait faillite ou si ses serveurs s’arrêtent», explique celui qui se présente parfois comme un crypto-évangéliste. »

Pierre-Alexandre Sallier

Bilan – Malte s’approprie l’industrie de la Blockchain mondiale

Où se place la Suisse, au palmarès des nations les plus engagées dans la révolution des technologies de Bitcoin, la Blockchain, et plus généralement des crypto-actifs?

Selon une étude publiée par Morgan Stanley, la Suisse ne se trouve ni dans le top 5 des volumes d’échanges les plus importants, ni dans celui des pays où sont établis le plus grand nombre de marchés d’échanges.

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Bilan – “Musique d’avenir” – Construction d’une Bitcoin-Nation (3e partie)

Le but de cet article en trois parties est d’offrir le recul nécessaire pour une vision globale des transformations à venir, bien plus révolutionnaires pour notre société que la spéculation autour de nouveaux titres et des nouvelles monnaies.

Ceci est le dernier volet de cette série, dans lequel j’explore les spécifications et le cahier des charges que la Suisse devra adopter pour mettre en œuvre cette “Crypto Nation Switzerland” dont parlait en janvier le Conseiller Fédéral Johann Schneider-Ammann dans son discours à St. Moritz.

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Bilan – “L’arbre qui cache la forêt – Construction d’une Bitcoin-Nation (2e partie)

Dans la 1ère partie de cette série sur la fameuse “Crypto Nation” du Conseiller Fédéral Johann Schneider-Ammann, j’entamais une réflexion sur la manière dont la Suisse entra dans le XXe siècle en dématérialisant l’argent à travers les services de la Poste. L’expérience nous montra que cette évolution, mise en place relativement simplement, eut un impact en profondeur, et transforma la monnaie et la société tout entière.

Dans cette 2ème partie, j’examine les fausses questions qui se posent quant à la direction et les mesures à prendre pour apprivoiser l’avenir de ces technologies, à un niveau national.

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Bilan – “Comme une lettre à la poste” – Construction d’une Bitcoin-Nation (1e partie)

Dans son discours à la “Crypto Conférence” de St. Moritz en janvier dernier, le Conseiller Fédéral Johann Schneider-Ammann espérait que “dans cinq ou dix ans, personne ne parlerait plus de “Crypto Valley Zug”, mais de “Crypto Nation Switzerland”.

Belle formule, qui a fait couler de l’encre et glousser les enthousiastes. Mais qu’est-ce que cela signifie précisément? Et comment construit-on cette “Crypto Nation”? Quels fondements incontournables constituent une telle “Crypto Nation”, et quels effets de mode doit-elle éviter?

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Bilan – Bulle des ICO, le début de la fin

Amusante ironie, à peine le Canton de Genève publiait-il avec optimisme son “Guide: Initial Coin Offerings (ICOs)”, Bilan titrait justement “ICO, investissement perdant?” et jetait un froid en se penchant sur les chiffres réels de cette mode spéculative et plutôt creuse.

Il ne faut évidemment pas mettre à la poubelle toute la révolution crypto, qui est bien là pour durer. Mais comme d’habitude, pour 1 projet innovant il y a 1’000 arnaques parasites. C’est une évolution organique, darwinienne et antifragile. On doit donc rester vigilant, et ne pas jeter le bébé avec l’eau du bain.

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Bilan – Pourquoi les banques suisses doivent adopter Bitcoin

Le 10 juin prochain, le peuple suisse votera sur l’initiative “Monnaie Pleine” pour décider qui des banques privées ou de la Banque Nationale doit créer le franc suisse.

Comme ont pu l’observer le Vénézuela et le Zimbabwe entre autres, l’émission de la monnaie par l’état n’est pas la panacée, et cette votation met justement le doigt sur la même question qui a été à l’origine de la création de Bitcoin: quelle valeur peut-on donner à une monnaie si elle est créée depuis rien, et n’a pas de contrevaleur physique?

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Bilan – La Blockchain, cure miraculeuse de tous les maux

On vous le rabâche sans arrêt depuis des mois, dans tous les médias et plateformes socio-politiques, la Blockchain va résoudre tous les problèmes de la planète, guérir toutes les maladies, et stopper les conflits et les guerres. “Blockchain” est devenu le mot à la mode dont à peine 1% des gens qui le clament avec enthousiasme comprend les bases théoriques.

La semaine dernière, alors que se réunissait à Londres le Comité Technique ISO pour la standardisation de la Blockchain et des Grands Livres Distribués, au sommet “Consensus 2018” de New York, des milliers de participants étaient quant à eux coincés dans une queue de plus d’une heure pour obtenir leurs badges d’accès.

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Bilan – La valeur de Bitcoin? Des cerveaux frais de bébés

Les quolibets continuent de pleuvoir contre Bitcoin, et ils rivalisent tellement de créativité et d’exagération, qu’on se croirait sur la Canebière de Marcel Pagnol.

Cette fois, c’est Charlie Munger, le nonagénaire milliardaire et associé de Warren Buffett chez Berkshire Hathaway, qui s’emballe dans un entretien lundi avec Yahoo Finance.

Il y explique que son absence de valeur intrinsèque peut entraîner une spéculation artificielle “anti-sociale, stupide et immorale” comparable à “gagner beaucoup d’argent en trafiquant des cerveaux de bébés fraîchement récoltés”.

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Bilan – Dérives marketing: les différences entre Ripple, les ICOs, et Bitcoin

En exposant la semaine dernière les tentatives infructueuses par Ripple de faire lister leur crypto-monnaie (XRP) sur les plateformes Coinbase et Gemini, Bloomberg mettait en lumière plusieurs problématiques très intéressantes, qui aident à mieux comprendre d’où vient la valeur à un crypto-actif, et pourquoi Bitcoin maintient sa position de leader.

Ripple (la société) aurait donc proposé des sommes conséquentes à deux (au moins) des plus grosses plateformes d’achat et vente de Bitcoin, pour convaincre celles-ci de proposer Ripple (la monnaie) à leurs utilisateurs. En soit rien d’illégal, car il s’agit après tout d’entreprises privées qui négocient entre elles la compensation d’un service commercial. Mais cela met le doigt sur le mécanisme de valorisation de certains crypto-actifs et leurs méthodes de marketing à la limite de la manipulation de marchés.

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