On the Looming Bitcoin Bubble
prestonbyrne.com
prestonbyrne.com
For instance, he congratulates himself on predicting a Bitcoin price collapse in his September 2017 essay, which is a time at which the price was only $3000, far less than half of what it is now. (His thoughts on the ICO madness fared better)
That said, he is right that the Tether/Bitfinex situation is relevant to the current price runup, though the fact that tether has only about 2% the total market cap of Bitcoin needs to be also taken into account.
A few things:
- The scales of the first bitcoin bubble and the last one are very different. The last one created, literally, billions of value for the holders.
- A defunct bitcoin exchange can not "create" billion of dollars of wealth. That does not make any sense. People who bought early and sold when the price appreciated didn't make money from an exchange who went bankrupt but from people who bought higher.
- Bitfinex seems to be doing fine from a price perspective. The premium is gone. The AG doesn't seem to be interested in driving them out of business but rather regulating them.
- The era of the single exchange is gone. Bitfinex is a key player but there is no player holding the whole market. There is also an active off-line trading market.
- A bubble is usually the result of a FOMO-consumer market.
Some people are going to hate crypto and that's fine. But my guess is that crypto will stay here for longer and will mint more millionaires.
From Coinmarketcap, Tether volumes are regularly second only to Bitcoin's , and many exchanges who have difficulty getting fiat banking arrangements, make use of it, to get funds into an out of their exchanges.
Loss of Tether would be a very serious blow to those exchanges.
So what's the risk? Well Tether's original proposition was that it was 1:1 backed with actual US dollars held in specific isolated accounts.
What we know now is that they "lent" $850 million to Bitfinex, to cover for funds that Bitfinex no longer has access to as their banking partner (crypto capital) has taken those funds and not delivered them to the appropriate customers.
There is now the risk that iFinex (who control both Bitfinex and Tether) could be technically insolvent, unless they can somehow cover that loss, or get their frozen/missing funds back...
There seems to be a sizable amount of confusion about the difference between insolvency and illiquidity in the tether-watching community.
The fact that they loaned out funds to Bitfinex means that their balance sheet is fine (they are solvent), but if everyone redeemed their tether tomorrow, they would have to delay the payout, which is a liquidity issue.
In short: Liquidity issues are solved by capital injections (loans or equity sales, much like the BFX LEO), but solvency issues are not.
If Bitfinex can't cover the loss, they're insolvent. If everyone redeemed their Tether, it's not a delay it's "you're not getting all of your money back"
As Bitfinex's finances are far from transparent, it's not clear if they're insolvent or not...
What it literally created was billions of vapor for the holders because ~100% of that “value” was entirely make-belief.
sell (stocks or other securities or commodities) in advance of acquiring them, with the aim of making a profit when the price falls.
——
In what way exactly is bitcoin helping to “short global financial system”?
And yeah. No amount of belief can make bitcoin into a viable currency.
In that sense, there's nothing special about bitcoin. It's just another shared delusion, just with fewer believers. As long as there are believers, there is value. The stronger the belief, the greater the value.
What value beyond speculation does bitcoin have?
You could have said the same for LTCM and government had to bail the market out!
It's been over 10 years since Bitcoin came out and it's still here. It'll still be here long after most loud detractors (and supporters, for the matter) have moved on, whether it's $1 or $1 million per BTC.
But, that's part of the reason holders have a vested interest in holding, and thus available supply on the market is restricted, and the price remains high. Game theory keeps the chain alive.
- moving money illegaly (even if some of it is with good intent)
- speculation
And yes. It’s not just the most loud detractors who’re moving away. The loud and not-so-loud supporters are either moving away or never starting the actual support (e.g., look up why Steam stopped accepting bitcoins).
No one knows if crypto is going up, down, or sideways. But he does make cryptocurrency haters feel good inside.
[0] https://prestonbyrne.com/2018/09/08/100-ether-revisited/
The bear case article the author links to spends 2/3 of its effort railing against Ethereum and ICOs. It's doesn't even lay out a proper bull case for Bitcoin itself. Instead it sets up a few Bitcoin-will-replace-the-state strawmen.
Bitcoin has a long history of being dismissed by those who don't understand it economically, technically, or both. The new article adds little to the discussion.
The switch to believe in its value happens suddenly in many people. It is difficult to make sense out out of its price movements. I am skeptical of any advice trying to rationalize its price movements.
Do your own diligence on how it works, your risk tolerance and stay long.
If they really were confident in their predictions they'd have every incentive to sit there quietly and become wealthy.
It shows that all those revolutionary blockchain projects over the past few years have amounted to basically nothing, the killer app still isn't there and BTC is as wild as ever.
- Tether Bitfinex mess
- Binance hack of over $400m worth of bitcoin
And today we witness cryptocurrency price surging all over the board, with bitcoin hitting $7000.
bitcoin sees a $1000 increase in 2 days.
yes thread lightly everyone, what goes up must come down eventually
And go back up again. Probably higher.
This is how the markets work.
https://www.ccn.com/stolen-bitcoin-moved-spiders-web-binance...
Time will tell if that holds true of course.
Personally, I think their professional handling of the hack is partially responsible for the recent surge in investor confidence.
Hacks will happen. Binance is far from perfect. But the way they prepared for, and handled the hack is to be commended IMHO.
https://www.binance.com/en/support/articles/360028031711 https://www.binance.com/en/blog/333497959022997504/Binance-S... https://www.binance.vision/glossary/secure-asset-fund-for-us...
When someone does a bank heist USD doesn't get devalued
This is a bad comparison. If a bank experiences a sizable heist, their stock price will probably fall because shareholders eat dirt before depositors. Such explicit seniority doesn't exist in the cryptospace, however, so depositors would probably eat dirt alongside the exchange.
As a supporter of the technology and more recently less so of the community that shamelessly keeps making outlandish predatory claims it still blows me away that HODL'ers can still be found on HN...