A Cryptocurrency Website Changes Its Data, and $100B in Market Value Vanishes
wsj.com
wsj.com
Now, if the % change is more or less, I guess that indicates how many market participants have their own value estimates of each currency.
I can obviously understand not wanting to list massive outliers in an average, but at the same time there isn't realistically a way for them to "safely" adjust which exchanges they include in the averages.
No matter what, it's either going to cause big sudden jumps in either direction, or they can "smear" it across some time, which (in my opinion) would look really bad as it would imply sustained increase or decrease.
Giving advance notice should be expected of them, but I honestly don't know if they gave one or not, and I don't really think that many people would have read it if they did.
Especially since they have a widely used API that many people use, and I'm assuming some trading bots as well.
https://www.bloomberg.com/news/articles/2018-01-08/bitcoin-r...
this is a very solved problem in financial markets: you source quotes from a set list of contributors, ditch a set number of the highs and lows and average rest, possibly weighted in some way, e.g trade volume.
Tom knew full well that it was impossible for a single guy to move the fix - go too high or too low and your submission gets chucked out. In the range, as 1 of 12 others, you aren't going to have a meaningful impact.
The only way of moving it is to get all submitters (or at least lots of them) to submit high or low fixes in your favour. But a cartel like that is never going to work:
1) It means revealing your positions to your trading counterparties and competitirs - not good 2) Others could be the other way round to you, and want to submit fixes against you 3) Even in those heady days of loose standards, setting up and running a cartel would be logistically tricky
So - what to do? Well Tom had a great insight. he realised that athe interbank lending market was pretty illiquid and there was wasn't much mush actual trading to reference. Most banks were submitting "best guesses" and those guesses were based on broker screens like ICAP. The rationale was that ICAP saw all the flows, so ICAP know the levels, so it was reasonalble to base your submission on the ICAP screens (ICAP screens are used as a reference in all sorts of markets, they are the gold standard).
Now Tom also raelised that ICAP weren't seeing much flow either and that their prices weren't much better than guestimates. So - he basically bribed a couple of brokers at ICAP to bump the screens. And that way he'd effectively bump the whole market as everyone was basing their prices on them! (He bribed the ICAP guys by executing "wash" trades, back-to-backs, that have no economic rationale, but generate brokerage fees).
So, in short, yes the top & tailing averaging approach is pretty robust. But of course no system is completely infallible.
Compare the orderbooks of exchanges which have no fees for maker orders (like gdax, bitfinex) and are preferred by bots to those exchanges who do ask for a fee.
There was also a pastebin up earlier that showed how someone had found wallets on the blockchain that used their own hashes as passwords, and were potentially being used to funnel money around (security holes in exchanges potentially?) It was removed from HN; found it on Lobsters.
The trouble is that no one has really presented hard evidence, but a number of people I talked to who are developers in the regular financial sector do think it's highly probably that there is intentional manipulation. And with the blockchain being all hashes, numbers and mathematics, it also seems plausible that it's a system that can be gamed; or at least more easily gamed than regular fiat currency.
I hope that's considered obvious on HN.
The suggestion was that "cryptos" could be a suitable plural abbreviation for "cryptocurrencies" (unless it's typically used as an abbreviation for "cryptographies," which it doesn't seem to be). Anyway, I confess that seems likely to just cause more confusion.
Also, The market as a whole should get away with global averages and depending on one website to track everything. I wrote an article on it if someone is interested - http://coinsocial.io/2018/01/09/its-time-for-cryptocurrency-...
What makes their increase 'irrational'?
Also, a bet is one thing, but the get rich quick scheme going on in the market with new investors is another. I still hold some Ripple if that breaks any bias, and I think the correction was unavoidable.
Full stop. You are trading or investing - if the word "betting" passes through your brain, stop now. The public surge of interest in crypto currencies is a redistribution of wealth from retail speculators to professional speculators. You aren't betting on the technology, developer community, ecosystem, or adoption anymore. At this point, you are betting you aren't the last one to the party.
I am betting that my new relationship with be futile and bring me happiness. Doesn't mean I went to see bookie about it.
You can buy stocks with no expectation they will increase in value (or even maintain value) if the dividend yield is high enough. And stocks have value because of this - the assumption in any stock, even one currently without a dividend, is that eventually it will pay out some form of a dividend to its holders.
You may buy a stock hoping it will will rise in value, but that rise is predicated on the eventual delivery of cash via dividends or some other mechanism of distribution. Contrast that with say, Gold, where in fact it costs money to hold and there's no expectation it will ever generate any kind of dividend.
No one knows what going to happen tomorrow let alone in ten plus year.
My bet is: it all comes down to risk tolerance. In the long term some forms of investments have shown, historically, to be consistently less risky, or more risky, than others.
More to point: most studies show that you do best in investing simply by having money invested for long periods, and being diversified to mitigate secular risk. That wouldn't work in gambling.
It's impossible to assess, of course, but the true value of any equity is the net present value of the future cash it will generate for its holders. Full stop. Equity holders don't care about value in the business that won't translate into dollars coming out of the stock at some point in time.
Are you not then still betting that the stock continues to offer dividends / offers them at the same rate?
Cryptocurrencies like bitcoin don't generate an income. Therefore they shouldn't be increasing in value at all beyond the rate of inflation.
They should stay at a stable price adjusted by inflation +/- some volatility. If bitcoin suddenly increases in price there are only two possible reasons. Either inflation of USD is higher than expected (unlikely) or more speculation happens which drives up the volatility.
It feels better to own 200 of something you don't understand than 0.00159. But at the end of the day returns are returns and it makes no difference if you have 200 of a coin or 0.00159.
Birds, for example, don't really care how much you paid for those 3000 tonnes of wheat, only that there's a hole in one of the train carriages transporting it.
[0]: http://www.trustnodes.com/2018/01/08/trons-whitepaper-copied...
[1]: https://www.reddit.com/r/CryptoCurrency/comments/7oky82/just...
(search page for "buttcoinbanker" to find relevant comment)
So a "shitcoin" with a 9B$ market cap? We really are living in a brave new world of financial disruption...
https://signalvnoise.com/posts/2585-facebook-is-not-worth-33...
It's worth almost 17 times more than that now. Market cap is not a perfect metric because it doesn't capture the depth of the market willing to buy but coins don't make that any different.
It's an absurd metric made worse by the fact that more coins are issued every 5 mins. If price remains the same virtually all coins will go up in marketcap regardless.
What company issues new shares every single day?
The valuation of a company is determined based on its financial performance and, ultimately, by its ability to generate cash for shareholders. (Keep in mind that, unlike cryptocurrencies, companies generate profit for their owners just from their daily operations).
That overall valuation drives share price. Equity investors consider how valuable they think a company will be in the future and back into a price they're willing to pay per share from there.
Market cap is a meaningless metric for crypto since nobody would ever want to buy all the Bitcoin in the world and hold it for ten years. What would be the point? It won't generate cash flow during those ten years, and it almost certainly won't be worth more in ten years - with one person hoarding all the Bitcoin in the world nobody could use it for any transactions and people would lose interest.
Case in point, nobody talks about the market cap for USD or other currencies. It just doesn't make sense for assets that are only valuable as a medium of exchange.
The Dogecoin network can handle 4.5x more traffic than the Bitcoin network, meaning the satire cryptocurrency is a better technology at being a currency than bitcoin is.
> $100B in Market Value
When the market price of an assets drops, it loses market value.
A good analogy is comparing the advertised price of a used car versus what you actually get for it. You might think it's worth $5k, but there's only 1 person who wants to buy it and they're only willing to pay $4k, so it's actually worth $4k, not $5k. It doesn't matter if someone else sold theirs for $5k.
It's a metric, one as "untrue" as an average or median. It's not a contract, and you won't get that if you change the market, which selling and buying does.
I don't think that means we shouldn't use it as a metric to use to get information from for comparisons. And I don't think that it's bad journalism to say that the market cap dropped by $100B when it did, even if that doesn't equate to $100 billion being burned.
This is true regardless of whether we're talking about Bitcoin, stocks, metals, houses, chickens, or seashells.
Most of these stupid market movement predictions are equivalent to astrology and only exist because WSJ and others have nothing interesting to say. The daily market fluctuations are pretty much random, and this has been proven many times over.
It is used like a unitless measuring stick, not a prediction on what you can get if you sold.
And I'll argue that it does it's job fairly well. It's difficult to "game", and can help give you some information about an asset. It doesn't say everything, it can't tell you if it's stable, or if it's being used or not, or if it's a scam. It's just a tool, a metric, something that you use with a bunch of other tools to get an idea of the ecosystem.
I would be happy to "rename" it to a unitless value that doesn't imply a "total worth", but that ship has sailed, and it's not going to be possible, so we have what we have.
I don't think anybody is claiming the number on Coin Market Cap is the actual market value because it is simply a metric derived from aggregating across multiple, very volatile exchanges.
EDIT: ok i saw your comment below, and it seems you are arguing, albeit very aggressively, that daily market fluctuations are random and cannot be attributed to an actual event, such as this one?
https://www.investopedia.com/terms/m/marketvalue.asp
Market value definition:
> obtained by multiplying the number of its outstanding shares by the current share price
The reality of selling has nothing to do with it. It's just a math equation.
Also investopedia isn't exactly a high quality source.
In the stock market, if a company has ten million shares at $100 each we say the company is worth a billion dollars, even though that $100 price is only the most recent transaction. We say that because if price times quantity didn't match what the overall market thinks the whole company is worth, the price would quickly correct until it did.
"Market capitalisation or market cap is the market value of a company's issued share capital – in other words. the number of shares multiplied by the current price of those shares on the stock market."
Net worth is the same concept. Jeff Bezos net worth is calculated based on how much his assets are theoretically worth based on current fair market prices. He doesn't have to sell all his assets to determine his net worth.
People don't like the "lost $100B in market value" part, but it is accurate since market value is calculated on paper.
Market value is exactly what the parent asserted it is, and the source of truth for that is your bank. If you are long 500k shares of AAPL and the quote is $100 - your bank will not consider you to have $50mil liquid assets. They know(and you should to) that starting to unwind a position of that size will decrease the market value a considerable amount.
Maybe an example will help you out here.... Let's walk through that AAPL example. You are sitting on 500k shares.
Step 1: Order 100,000 shares sold at market.
Step 2: Observe your average sale price is more likely to be $90-95 than $100.
Step 3: Order another 100,000 shares sold at market.
Step 4: Observe your average sale price is more likely $90-91 than $90-95.
Steps after this: same result, diminishing prices resultant from your sale(s).
See a trend here? The market value of your assets is decreasing based on the market's perception of value, not on the mechanical formula investopedia fed you. Your unloading of shares is going to decrease the perceived value, which decreases the price you can sell them for.
tldr; investopedia's advice on markets is barely more accurate than urban dictionary's advice on word meaning.
So as crazy as it sounds $100B in market value can be erased by a drop in the market price of an asset. But don't confuse that with $100B actually being lost or investors realizing $100B in losses. But in any event the title of the article is accurate.
Apple traded 21,583,997 shares today. Aggressively selling 500,000 shares (less than $100 million dollars worth) might move the market in this stock by perhaps 1%, certainly not anywhere near 10%.
"Market value" doesn't mean squat if you've no buyer in front.
But, market value means the market price * total assets. So, market value is erased when market prices drop and created when they rise. How you interpret a ride or drop in market value is up to you.
It's just like saying my house was appraised at $300k. That doesn't mean you will get an offer at that price, but it's not accurate to say that the appraisal value isn't $300k unless you find a buyer at that price. The appraisal price and purchase price are separate.
An aggregator changed its reporting methodology. Coinmarketcap is a price aggregator, not a market. All of the markets are unaffected, it just happened that the markets that got removed from the aggregator are the ones that had the highest prices. But they're still there. You can still trade on them the same as before.
It's certainly not bad journalism, this is how all sorts of assets are reported on. Market Cap isn't a perfect metric but it's pretty good and keeps us from saying things like "AMZN is down 50%" when they do a stock split.
In the sense that yesterday if you summed up what all the individual holders saw when they checked their accounts you'd get $200b and today if you did the same you'd get $100b then $100b did vanish.
If 10% of stock holders are able to cash out without changing the price significantly, market cap would be an inaccurate measure, but not that far off.
If, on the other hand, only 0.1% of holders of some token are able to cash out without significantly affecting the price, the value they think they have just isn’t there (to a much larger extent than the case above).
To use an extreme example: if I issue 2^100 tokens, and manage to get a couple of orders in an order book with a mid (and “last trade”) price of 0.1 cent, and this price goes to zero, did 1.268^27 dollars of market value just vanish, or were the holders of this token misinformed?
The inherent inaccuracy of market cap value is inversely proportional to liquidity: the less liquid the asset, the further away from reality market cap value is. And these tiny tokens are some of the least liquid assets in existence.
If I buy 100% of bitcoin, I've got nothing. Nobody will be interested in a token that can't be used for anything any more.
Your point is moot. That ship sailed 100 years ago.
Imagine two different sets of digital objects: AlphaCoins and BetaCoins - they're identical in the say way physics professors say "imagine an infinite frictionless plane". Both have a 1000 in circulation.
Both are worth $10 each.
Both have a market cap of $10,000 US Dollars.
But the market for AlphaCoins is "thin" (small changes in supply and demand make for really big price swings).
There's a run on the market and everybody wants to sell off their coins.
After a day's trading:
AlphaCoins price is $3 / coin.
BetaCoins price is $9 / coin.
For goods and services you'd call this the price elasticity of demand (You can change the price of medicine and people will keep paying it b/c without it they'd die - it's inelastic - the same can't be said for a snack bag of cheetos).
To me, this is the article's argument. That while these terms describe the same things across markets there are some big differences not captured in simple "market cap" comparisons.
Maybe a better analogy is two all you can eat restaurants (identical, yadda yadda) but at one you can use your full set of dining implements and at the other you can only use a fragile toothpick to eat your food with - and all anyone can write about is how the quantity of food in both places is the same.
Can an economist or serious financial person please tell me what this term is called?
If you tried to liquidate the same amount (denominated in USD) in NEM and LTC you'd see much more price slippage in LTC than in NEM.
Note that the same would happen if everybody started dumping their wealth in whatever form: shares, real estate, and fiat money, even hard bills. What we call value is just the promise that somebody, at some future moment, will be willing to exchange what we have for something else (food, goods, houses, or of course any other different store of value). If everybody is trying to get rid of something, the value of that something just drops to zero.
until of course you can take a loan collateralized by the asset. Or get/sell some CDS/future/option based on the asset - that way you can even work with amounts larger than the market cap.
[1]: http://money.cnn.com/2017/10/26/technology/business/amazon-e...
With a bit of help from the taxpayers: http://www.dispatch.com/news/20180105/amazon-makes-list-of-l...
So, 0.14% of their workforce.
"Amazon likely has about 700 workers [in Ohio alone] receiving food stamps, more than 10 percent of its Ohio workforce"
"Oh, Father. You're so wrong. Let me explain.
[Puts and empty water glass on his desk]
Life, which you so nobly serve, comes from destruction, disorder and chaos. Now take this empty glass. Here it is: peaceful, serene, boring. But if it is destroyed
[Pushes the glass off the table. It shatters on the floor, and several small machines come out to clean it up]
Look at all these little things! So busy now! Notice how each one is useful. A lovely ballet ensues, so full of form and color. Now, think about all those people that created them. Technicians, engineers, hundreds of people, who will be able to feed their children tonight, so those children can grow up big and strong and have little teeny children of their own, and so on and so forth. Thus, adding to the great chain of life. You see, father, by causing a little destruction, I am in fact encouraging life. In reality, you and I are in the same business.
It's a good idea - people will act selfishly instinctively, so if you can align that to make it good, then everything works.
Of course, we know raw capitalism doesn't work (e.g: monopolies break it). So our systems have all sorts of hacks to try and fix it. The problem is that so many of the richest people just focus on breaking those fixes and finding gaps to exploit to avoid creating value for society.
Currently, a lot of the groups in power across the world are actively trying to make more of those gaps they can slip through, and remove the layers of fixes we have put in to support the people that are not helped by that simple system.
Yes, it's good for people to want to make money in a capitalist system, assuming the system is perfect and that there is no way to break it is to ignore reality.
No, it's not; that's an after-the-fact rationalization.
I mean, we were a few centuries into the feudalism-capitalism transition before anyone started even talking about property rights in those terms in general, at least another century before capitalism as a system was even described (and by it's critics, not it's supporters), and I think several decades later till this excuse was cited specifically as a justification for capitalism as such.
Capitalism was created, incrementally over time, because rich merchants decided to use their wealth to force feudal overlords to cede progrrssively more power and influence to the rich merchants. Not as a manner to harness greed for the public good. Just as a matter of greed, pure and simple.
My point was that, while that may be the aim of the system, it's not inherent to it - you are backing up my point by saying that it was not always used that way.
No that's completely false. Capitalism is the replacement (and logical continuation) of feudalism, after its collapse, as a system of social stratification. Saying that is trying to validate your thinking and ignoring the history of the matter.
My point was that, while that may be the aim of the system, it's not inherent to it - you are backing up my point by saying that it was not always used that way. (You may argue it still doesn't, although I'd say it does at least to some extent).
The GP was talking about essentially scamming people.
I don't think your assumption is true.
My, how the world was improved by ruthless optimization and margin squeezing, centralization of commerce and retail, concentration of wealth, buying of legislators, invasions of privacy, etc.
I love games, but this emerging trend is boring, and worrying in equal measure. Games have shown so much positive potential, and I’ve been defending their value for a couple of decades at least. Now... I’m really worried, st least in the near-term, and I don’t know if I can still support them in the aggregate.
“To get rich. In what way? Dishonestly if they can, honestly if they must.
Unfortunately people tend make value assessments that I think are horrible, and that causes entire industries to pivot in ways I don't like. For example, I love Nintendo's $60 games that come with plenty of content and no microtransactions. I don't like "free" smartphone games that do the opposite.
However, huge numbers of people have determined that getting nickel-and-dimed with thousands of dollars in microtransactions is something that adds value to their lives. I certainly don't think I have any right to object to their conclusion, except in the way that I'm already objecting: by refusing to spend any money on microtransactions. It just stings a little that I'm quickly finding myself in the minority.
It sounds like you're going through something similar with respect to the cryptocurrency market.
"Whales" - the term for those spending thousands - although few in numbers, are the ones accounting for most of the profit.
https://modelviewculture.com/pieces/the-whales-of-microtrans...
marketing was born with competition, you need marketing, because you are not the only one good at what you do
marketing is anything and everything you do, to influence others, to achieve your objectives .. this does include the product design and features .. or in other words, the features you chose to include in your product
marketing is not bad, and is not a waste
marketing is not, in my opinion, more important than the skills required to create a product, but it is definitely very important ... because simply put, you are not the only "skilled" one in the market
nah. while not always bad, most of the time it looks like a prisoners dilemma
Building a brand is a skill many artists don't excel at. It requires similar people skills to being a salesman. Often they have to rely on dealers, gallery owners and store owners who have the people skills to do retail and wholesale more successfully. The situation is somewhat mirrored in tech with the schism between programmers and CEO/investor/founder type personalities.
In the niche I work in, some people got lucky and became 'famous' in a kind of underground video way on Instagram and Snapchat. These days it's starting to resemble a more traditional art market.
Separately, CMC delisting some Korean exchanges is actually probably a good thing since prices in Korean Won have been trending 20 to 30% higher than crypto assets priced in USD or EUR. It was creating a lot of weird market conditions. A correction in price isn't a bad thing.
Cryptotokens work particularly well because of pseudonymity, a very receptive audience and exchanges that will happily provide a stage for just about anything as long as they get a little cut.
Competition between similarly inflated tokens make success and failure a matter of storytelling quality. The legend doesn't even have to personally convince anybody, but it should lend the sock puppet buys some plausibility.
If I would join an ICO I would probably not spend more than a few hundreds of dollars on it. Something I wouldn't worry about losing.