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Definitely. When prices are going up up up and the money is flowing freely, few really question what economic value is being created. But now that it's obvious to even the fools that they can lose money, they're going to have to figure out what valuable service these companies can provide to regular folks.

When I contrast this with the end of Bubble 1.0, the biggest difference I see is the lack of actual use. 2000 was an incredible bear market, especially in tech. Even good startups died, and the ones who weren't creating value died quickly. The Internet, though, still had hundreds of millions of daily users. Things like email and the web browser and downloadable MP3s made people's lives better, and they weren't giving them up.

But who uses Bitcoin for anything but speculation and maybe some light financial crime? As best I can tell, approximately nobody. The NYT tried using it for daily life back in April and it was a bust. [1] The few major online retailers who offered to sell you things in it have removed it again. Even major Bitcoin proponents admitted it was terrible as a currency.[2] And as far as I can tell, none of the zillion other coins have significant real-world use either.

I think there's truly nothing to sustain an "industry" here. Valuations are going to drop to (and probably below) whatever can be justified by cash flows, which in turn is based on economic utility to people outside the bubble. If that number isn't zero, it's at least very, very small. So as you say, this is only the beginning of the end.

[1] https://www.nytimes.com/2018/04/16/nyregion/new-york-today-l...

[2] e.g., https://avc.com/2017/08/store-of-value-vs-payment-system/

You're forgetting one major use: actual crime.

Black-market drug sales probably won't be too affected by the crash, they already had a network before Bitcoin.

But ransomware! Oh man, that's nowhere near as easy nor as profitable without a high-value cruptocurrency. If the crypto crash ALSO took out ransomware developers, that's two birds with one stone, as far as I'm concerned.

Randomware doesn’t care about the exchange rate. They just funnel cash through crypto’s because it’s a simple way for them to take digital payment. In the down market they can’t cash out as many dollars per bitcoins, but the victims also get way more bitcoin for the same amount of dollars.

A low valuation might affect coinminer malware though.

They need payment providers, that are easy enough for an average joe to use. That may be harder to get

Are bitcoin payments somehow easy for the average person to use now? Seems unlikely.

Learning how to properly use paper money was something I learnt at age 7. Debit card at age 15. Credit card at age 23. Bitcoin at age 31. Bartering hides with the natives at age 90.

They do care, though, that Bitcoin has non-crime use. If the crash means that speculation drops significantly (which I expect to be the case) then it could be a reasonably quick slide to where "bitcoin" in effect means "crime dollars". That in turn means that a lot of exchanges will shut down due to low volume and regulatory pressure. There's little point to using Bitcoin for ransom if your victims have a hard time getting money in and you can't get your ill-gotten gains out.

> But ransomware! Oh man, that's nowhere near as easy nor as profitable without a high-value cruptocurrency. If the crypto crash ALSO took out ransomware developers, that's two birds with one stone, as far as I'm concerned.

That'd be great, but so long as there is some nominal value in cash to some cryptocurrency, wouldn't ransomware just ask for the same amount of underlying money? That is, just increase the number of coins required for ransom? The big benefit in cryptocoins for ransomware isn't the increasing value, but the fact there is no intermediary that can turn off accounts or rollback transactions.

I guess that's true, as there's no alternative means of getting paid. But the downward spiral in price perhaps make ransomware a less attractive occupation now.

The downward spiral in price will only result in you having to buy more units of currency to pay the same dollar amount of ransom.

It's the same with the dark markets. It's not like dealers are suddenly going to charge less money for drugs now just because the intermediary transaction currency is worth less.

iTunes gift cards or the like seem to be more popular than cryptocoins it seems.

Banks are much happier to deal with you when your source of income is "The Apple Store", instead of a crypto exchange.

My community has quite a few businesses that gladly take bitcoin, at whatever valuation. Unfortunately when the price is on the upswing people don't want to spend it because it'll be more profitable to hold it, and when it's holding steady they don't want to spend it because they feel it could take off at any instant, and if it's crashing they don't want to spend it because that would lock in their losses and they'd rather wait for it to recover.

Hopefully one day it will stabilize enough to be worthwhile as a currency. We're certainly not there yet, but it's improving. Despite the spectacular fall in values, this isn't as severe a crash as has happened before, percentage-wise.

Do they list the prices in bitcoin, or do they just use a payment gateway that lets them charge USD from bitcoin users?

I wouldn't hold my breath on the "stable currency" part. Actual stable currencies are actively managed by people with expertise and major resources. At best I think Bitcoin will end up following its design of being deflationary, which history shows leads to hoarding. But I think it's more likely it will either drop to near zero or continue wild price swings.

My previous company (AirFox) did an ico, we had a bank account, and we sold everything. We also did KYC/AML for all purchasers. Most of the USA firms did.

However, the SEC also just settled with AirFox for selling unregistered securities, so that didn’t exactly go as planned!

If the settlement was for less than you got from the ico it may have been worth it.

250k fine, 15m raised... https://decryptmedia.com/2018/11/29/exclusive-airfox-ceo-say...

lol

They have to return investors' funds. Fine is on top of that. https://www.sec.gov/news/press-release/2018-264

Well if one or two investors died due to a heart attack from the bear market... that's net win anyway.

That sounds like as good a business plan as any in the cryptocurrency field.

Why would you go along with a scam like that?

TenX converted a large portion of their ICO proceedings into USD, see under "Finance" https://blog.tenx.tech/tenx-transparency-report-q2-2018-98bb...

I'm not sure that's quite true. All the ones I'm familiar with had bank accounts to pay wages, rent etc. And they also seem to have been able to change crypto to fiat. I opened some fiat-crypto accounts and it wasn't that hard - you have to scan your passport etc.

Yeah any business can create a bank account, but no bank is going to let you just dump $30M in the account without accounting for where it came from. You’d need a relationship with both the bank and the regulators before doing the ICO, which almost none of them had, especially early on.

Reading the news about Danske Bank, the reality seems to somewhat disagree with you. Some banks a very happy to deal with shady money, as long as there’s _a_lot_ of it.

Also in the news: Many drug dealers are suffering because they used all their drugs. And many liars are suffering because the believed their own lies.

> Lol that makes it sound like they had a choice.

They could have simply kept their assets in stable coins, like Dai, Tether, etc..They could also sell into USD on exchanges that allow you to trade USD (e.g. Kraken). Another option would have been to open a hedging short position on say, Bitmex. There's lots of ways they could have cashed out, effectively.

>They could have simply kept their assets in stable coins, like Dai, Tether, etc..

To turn into dust?

>They could also sell into USD on exchanges that allow you to trade USD (e.g. Kraken).

And trust Kraken then.

>Another option would have been to open a hedging short position on say, Bitmex.

and trust bitmex then.

There are no scalable options to cash out $10m to a bank and sleep well. You could cash out into some "stable coin" only to wake up to it costing $0.04 (hello nubits). Tether is no safer in that matter.

> To turn into dust?

Oh, you mean the 'dust' that is worth exactly $1 at this moment, where Ethereum has lost 90% of its value? That dust?

> And trust Kraken then.

Yep, the exchange that's been trustworthy and operated seamlessly since its inception, sure. And still does.

> There are no scalable options to cash out $10m to a bank and sleep well. You could cash out into some "stable coin" only to wake up to it costing $0.04 (hello nubits). Tether is no safer in that matter.

You may not sleep perfectly, but you'll sleep a lot better than if you're holding it in crypto. And that is my point. And if you wanted to use Dai, you could actually sleep perfectly. Dai has held up perfectly well, and you can hold it off-exchange.

Past performance does not indicate future results.

The most common disclaimer in finance, but equally applicable to all things in life.

That is a nice sounding meme, but it has little basis in reality. What is the probability that microsoft is going to go bankrupt 1 year from now? If your answer is "a very low probability" then that means that past performance does indeed indicate future results.

That statement is legal disclaimer that refers to a lack of guarantees because that is, in fact, the reality of the market. Probability is not an argument against it.

However, if you would like to discuss probabilities then the history of the crypto market only reinforces the trend of failure as discussed in this thread.

That's a cute saying, but let me know when you park your money in a bank that opened yesterday.

I don't see your point. It's a common legal statement to explain that there are no guarantees. Are you arguing that you can in fact guarantee what the market is going to do?

No, i'm arguing that you are not making any kind of point by saying that. What is your statement intended to prove?

I would feel totally safe parking my money in any FDIC insured bank regardless of when it opened.

> There are no scalable options to cash out $10m to a bank and sleep well. You could cash out into some "stable coin" only to wake up to it costing $0.04 (hello nubits). Tether is no safer in that matter.

Gemini, Coinbase?

Only if you did KYC on every single customer.

Tether has long been suspected of being a complete and total fraud, a wildcat currency propped up by mere promises, not proof, of backing cash.

Exchanges have also been suspected of manipulating prices to liquidate future positions, there’s literally a twitter account dedicated to force liquidated Bitmex position.

When every player is operating in bad faith it is very hard to come up with a legitimate way to protect yourself other than not participating.

> Tether has long been suspected of being a complete and total fraud, a wildcat currency propped up by mere promises, not proof, of backing cash.

Those suspicions have always been extremely poorly grounded.

> Exchanges have also been suspected of manipulating prices to liquidate future positions, there’s literally a twitter account dedicated to force liquidated Bitmex position.

Not by anyone serious. Sure, people get liquidated all the time because they don't have enough maintenance margin. The risks are very clearly defined, and all you have to do is read them.

> When every player is operating in bad faith it is very hard to come up with a legitimate way to protect yourself other than not participating.

There is no evidence that the major exchanges are operating in bad faith. And even if they were, what is your point? My point is that they could have neutralized the currency risk of their assets. And that point is absolutely true.

> Those suspicions have always been extremely poorly grounded.

I am really quite ignorant on the issue, but they seem to me like reasonable suspicions when Tether’s purported “audits” are anything but.

They no longer claim to provide audits.

The fact of the matter is the market continues to value Tether at $1, despite having multiple alternatives. So, even if it is the case that Tether is insolvent...it was still a much better investment than leaving the money in regular crypto. QED.

Markets also valued beanie babies highly for a while. Pretending that markets are purely rational is going to get you hurt.

If the case is that Tether is actually insolvent, then history gives us a very good example of exactly what’ll happen once the run starts.

> Markets also valued beanie babies highly for a while. Pretending that markets are purely rational is going to get you hurt.

My point isn't that the market is rational or perfect. My point is that they could have hedged.

Almost impossible to do when the markets are rigged.

I believe for a while Bitfinex would let you wash trade with your own account, that’s how poorly run these markets were.

There's no such thing as a stable coin. Only coins that haven't crashed yet.

USDC, PAX all backed legally, will always be worth $1.

*Always until the backer goes bankrupt

Except the next iteration of these things will use stablecoins

Do you burn cleancoal to mine stablecoins? Like militaryintelligence is fightingforpeace? Yeaaaaah.

No, nobody does that. There is no mining involved

None of your crypto comments are coherent, I can tell they are intended to be cynical but they also dont make sense

Let me coherently explain it for you so you're not so confused: "stablecoins" is a oxymoron. Like "military intelligence" or "fighting for peace" or "clean coal". Get it now?

http://tmbw.net/wiki/Oxymorons,_Paradoxes,_And_Contradictory...

Actually, when 2 opposing militaries are more or less equal, the most likely outcome is peace. When they are drastically unequal is when war becomes likely.

Unless you're talking about some board game like "Risk", I believe the causes of international war and peace are a little more complicated and nuanced than the "more or less equality" of their militaries, if that could be even objectively measured or absolutely known. Do you really think "military inequality" was the root cause of WWI and the Civil War?

Now what was it you were saying about "stablecoins"...?

There certainly seem to be a lot of charlatans who flippantly throw incoherent terms like that around as if they had any meaning, even though they're utter nonsense, don't you think?

https://cryptonews.com/news/usd-133m-stablecoin-basis-is-rep...

USD 133m Stablecoin Basis is Reportedly Closing Down

The well-known stablecoin project Basis is shutting down operations and returning what is left of the funds they raised to investors, The Block reported citing undisclosed sources with “direct knowledge of the situation.”

The shut-down reportedly follows regulatory problems, although details are sketchy at this point. According to sources, an announcement had to be made by Basis some time Wednesday evening. As of press time Thursday morning, no such announcement has been made.

Basis did not respond to a request for comment.

But a lot of other people commented, for example:

TwitBot @vasilipoupkine1; Replying to @AriannaSimpson: I’m kinda pissed they are blaming US Govt instead of their frankly utterly nonsensical stable coin design. Algorithmic stable coin is a nonsensical concept. There is no law, though, that somehow prohibits it. Lame.