$7.6B in crypto long positions liquidated in 1 hour as Bitcoin plunges to $52k | Hacker News Reader

$7.6B in crypto long positions liquidated in 1 hour as Bitcoin plunges to $52k

theblockcrypto.com

54 pointsawb96 comments

It’s interesting and a little surprising to me that people selling almost $8 billion in BTC found ready buyers such that the market clearing price only dropped 10%. That’s a lot of money to move, and implies that a lot of other people saw this as a chance to buy a dip.

I think these were futures contracts?

Alternatively it could be as simple as lots of people having a crap execution strategy. I’m sure there are thousands of people who just have orders in the book that got swept and others with simple python scripts that “buy the dip” with no concept of risk or stop loss. The question is whether those people need to get out of their positions in the next few days causing a further drop or whether they can hold in which case the price will stabilise and eventually continue to run up.

You're assuming that there actually was $8B in transactions. It's possible that there was $800M in transactions and $7.2B in tape painting.

Yes, for someone whose prior has been: “The price will crater and most people will lose interest”, I think that the thousands of hours of developer time and institutional interest is probably starting to pay of in terms of more mature markets.

I still have problems with the idea that people are able to pick the correct winners. When the blockchain finally gets its killer mainstream app, why not do a new ICO on a restarted blockchain instead of a billion dollar wealth transfer to early adopters?

Because all of the money and users that you hope use your killer mainstream app have to come from somewhere - a brand new blockchain makes your app that much harder to launch.

In addition, your killer mainstream app may only be useful inside of an existing ecosystem. Ex: Uniswap is pretty useless if you don't have any assets that people want to trade.

I think Bitcoin’s biggest strength (and weakness) is hype and FOMO. If another coin comes along that gets more attention (see Dogecoin), you’ll see the Bitcoin community try to discredit for the same reasons that Bitcoin is currently dissed for right now.

Or look at it this way, 8 billion gives you a lot of buying power if you're going 10x+ long. How much of this market is propped up by these speculators

This is the reality of leveraged trading.

If you've put up your crypto as collateral on a loan, which you used to buy more crypto (defi), and the price of the asset backing your loan drops below threshold it gets auto liquidated by the holder and your loan is cancelled out. It is automated in all cases with triggers and varying thresholds.

Majority of these are 75-85% ratio which means if btc dips 15-25%, all of those providers liquidate the asset to cover.

Btc has also been holding at 60k for a while while alts are enjoying a rally as they tend to do when everyone leverages their btc gains via the aforementioned to buy into alts.

I'm surprised it didn't crash further but I guess the defi bubble wasn't as big.

> Majority of these are 75-85% ratio...

How do you know that?

It could be up to 100k in a week, could be down to 20k or anything in between. I honestly have no idea which one is more likely and wouldn't be surprised by any price, high or low. I'm also very skeptical of anyone who claims to know what's happening in the cryptocurrency market and why.

Zero to infinite. Good arguments all around.

If governments decide it’s a threat I imagine it’ll go to near zero. Much to my personal shock that doesn’t seem to be happening.

Bitcoin seems to be approaching the realm of "too big to fail." A trillion dollars disappearing overnight could very well precipitate an economic crisis, and no democratically elected government wants to take the blame for that kind of eventuality.

I'm not contradicting you, and I don't think bitcoin will be banned, but the US total stock market capitalization is 49T and 1T capitalization of bitcoin world wide is not an issue.

I use those figures to decide on the future price of bitcoin, in case governments actually addopt bitcoin, so a future, very unlikely ~50X increase in bitcoin price is not enough for me to put money into it.

I've missed my chance and a very unlikely future 50X increase in price is not worth the risk, imho.

I don't like cryptos for multiple reasons, a lot of which could be fixed in the future.

But we're way over the phase where governments would ban it, on the contrary, I think bitcoin is a last resort fix for the immense global debt.

My wild theory is after elites load up on bitcoin(and also a lot of ordinary folks) governments would change bitcoin to bitcoin 2.0 and completely crash other forms of fiat currency, wiping the huge fiat currency debts in the process and also shutting up all the people who want anonimity in bitcoin(because they would lose a lot of money otherwise).

Governments have banned many things, wildly popular things, even in democratic nations.

While I agree popularity reduces risk, some Governments have banned alcohol for years, or how about even banning certain types of securities (2008 crash)?

To say it is not the same is moot, for, the point is things get banned, popular or not.

China and the US will never give up monetary policy, it's one of their most powerful economic tools.

I know, and it's just one of my tinfoil hat theory, but the fact that they haven't banned it already, or the USDT on some obvious money laundering issues, just fules my paranoia that taking over the future dominant crypto is more beneficial than just banning it now.

Basically doge is going to the moon (to 1dollar at least) thanks to elon, and rune is the best defi protocol.

Other than that...

Yet some random idiot who put $2k into coinx 2 years ago will feel brilliant the rest of their life for their incredible, deep conceptual $3M achievement. That idiot now has tremendous economic power to further spread the entropy for many years to come. The effects of crypto are going to ripple through time.

What I hate about Bitcoin is that I have absolutely no idea if this is 1) a good dip to buy, or 2) the start of a much bigger crash. Everything I understand about the topic and the world at large tells me it should be #2, but in retrospect it always winds up being #1. Am I passing up free money today? Or am I smart not to gamble in such an obviously rigged game? Will I look back years from now longingly and wish that I had bought, or smugly and glad that I didn’t. I have absolutely no indication one way or the other. Source: played around with crypto a lot 5-6 years ago, got out of it, and could retire today if I had held.

Spread your chances. Buy some now, buy some again later when it crashes even further. If it doesnt crash further, at least you profited from the current dip.

You conveniently left out the scenario where it continues to crash, and OP looses money twice by following your recommendation. It's a casino.

I do like an amended version, which is to buy some now and then unconditionally buy some later, also known as dollar cost averaging.

Just like any forex market.

Sure that makes sense, but why? By that I mean, if I'm evaluating stock in a company, or a commodity, I can reason about the investment in terms that I understand, or at least convince myself one way or the other enough to not lose sleep over it even if I lose money. But crypto? I've got nothing. Total shot in the dark. Completely blind. I can make arguments either way, and both seem equally valid, and both based on pretty much no reliable data. Not looking for an answer here, just venting really.

How is that different from the stock market ? Maybe you have 'more ideas' but that would not prevent you to be wrong. In both case nobody can predict what will happen next

The difference is that stocks can be "valued" whereas crypto and other assets that lack a revenue stream can only be priced.

And that "value" can also go to 0.

Interestingly, some crypto assets do have revenue streams. Ex: uniswap has an optional cut that their governance token can take of fees, and their fees aren't minuscule ($5M over the past 24 hours). Other assets like Ethereum can be staked in return for mining rewards - I suppose this is more difficult to reason out as a revenue stream since it is a mix of inflation and transaction fees.

Yeah it "can" be valued but we can also see that it doesn't really seem like valuations are connected to actual company value

I like to think of the valuations as lower-bounds.

There are people out there who will pay for discounted income streams, and they put a pretty good floor on prices. There are people out there who will pay for book value when prices drop too far, and they provide a (different, weaker) floor on prices. There are people who will pay for brands and memes and so on, and they provide different floors again. And then throw in different discount rates, different projections of the future, different tastes, you get the picture.

None of these lower-bounds provides the price. If I have a company that just holds $1 in a bank account at 0% interest, an income-based valuation says it's worth $0, and a book-value based one says it's worth $1, so it's worth at least $1. But if I have a goose that lays $100 bills every day, it's worth a lot more as an income stream than it is in book value (as a goose.)

There are some things that provide upper-bounds. When prices are too high, companies should issue stock and (incidentally, not as a goal) drive the price down -- this is "raising money cheaply". But in practice this is usually a pretty weak force. The bitcoin equivalent (mining) might be stronger because there are more market participants on the supply side.

Anyway, with interest rates at zero, high savings and lots of spare time and boredom, the income- and meme-based lower-bounds are causing prices to do interesting things.

They generally are. The prices are related to the earnings. The current P/E ratio of the S&P500 is about 2x the historical average of the past 200 years. High, yes, (which is driven by low interest rates), but definitely linked to an underlying value.

In other words, the price of a company is the present value of its future earnings. There is some speculation on what future earnings will be, but generally the valuation is about 20x last year's earnings, right now it's about double that.

If a company earns profits it can pay it out as dividend, or it can accumulate it as cash and gain equity.

Bitcoin doesn't have such a thing. There's no profit that bitcoin makes that gets paid out to its owners in dividend. And the price increases aren't related to its profits, either, it's really pure speculation, no different from tulip mania.

Bitcoins potential technical uses are real, but have no real world use case so far after 13 years. There's no killer app. And if there was, it still does not require bitcoin to have a trillion dollar market cap to function. The blockchain can function just fine at a fraction of it. You can write data to the blockchain with a millionth fraction of one coin, a tiny fraction of a cent.

As a store of value sure it has proved itself across what is a very short span of time in human history, but only because its speculative. It's not an argument that its a good store of value. In the end, its only based on a mutual fashionable agreement. Technically you can fork bitcoin and create infinite tokens. The scarcity is akin to every human on earth being an alchemist and and being able to make infinite variations of a gold metal, slightly different, and us artificially choosing on one (the first one) being valuable, and the rest not. For now... and then claiming it to be a good store of value. Time will tell. In any case, there's nothing but FOMO/speculation driving bitcoin valuations atm.

But at least if a stock goes down, there will be some reason you can point to after the fact as a cause. So you can at least make a hypothesis, test it, and see how it turns out. You might be wrong in any number of ways, but there's usually going to be some traceable logical connection between events that happen that you can get information about afterwards (sales go up, sales go down, etc.) and the effect on the price.

With crypto, I don't have that same sense. I buy, it goes up, I'm a visionary genius. I buy, it goes down, I'm a fool. I can't really point to any reason why either scenario happens, no testable hypothesis. Other than a very few events, like the coinbase IPO, that is.

Is that true over short time periods for stocks though? I get the sense that publications / news media can come up for reasoning on why a stock went up or down after it occurred, but I'm not convinced it's truly causation in most cases, but instead just correlation that they came up with.

In general, I think trying to reason about assets over short periods of times typically comes down to emotions rather than fundamentals. Over longer periods of time, fundamentals can start to have some affect.

For crypto, I do think there is a narrative that can be pointed to for the run up over the past year - a mix of defi projects that are actually getting traction, scaling solutions for Ethereum allowing it to catch up to demand, and a general inflation scare that drives interest in fixed supply assets not controlled by a central party.

You have a sense of a company's prognosis and the industries they operate in.

Bitcoin is a bunch of hope, hot air, and hubris. I suppose you could say it's an industry of its own, but I think it's harder to project than, say, the tech industry.

I agree, I think at the end of the day, every asset gets 100% of it's value based on speculation. Though it may not be obvious.

Let's say that a stock has value because of some combination of: 1. The underlying's earnings/cash flow, and 2. Speculation (I want to buy stocks that I think other people will want to buy)

But if you think about it, #1 is also just speculation. Because at the end of the day, you are risking $X to make $Y. You are placing a bet that tomorrow, some other people will come to value this stock (perhaps based on earnings) higher than you do today.

So basically, speculation has always been a thing and there are enduring assets whose price is more or less agreed to be entirely based on speculation and speculation alone (e.g. gold).

> #1 is also just speculation. Because at the end of the day, you are risking $X to make $Y. You are placing a bet that tomorrow, some other people will come to value this stock (perhaps based on earnings) higher than you do today.

Some people buy stocks for dividends never expecting to sell them, and not especially worried if the price goes down after they buy. I guess the projection of dividends coukd be called "speculation", but I don't think that's what you meant when you used the term.

Other things that don't quite fit include bonds, especially short-term government bonds. If held to maturity, it's a stretch to say the value is a social construct in a meaningful way.

(Non-meaningful phrasings abound of course -- by some definitions my monthly rent is speculation, because law and order and property are social constructs and I'm betting on society not changing its mind on them, but again I don't think you were making that sort of facile point.)

The stock market is backed by over a century of use and ownership in a profitable company, so we can at least assume it will trend upward. Bitcoin is backed by the idea that it will be more valuable in the future, we have no idea if a permanent crash will occur.

https://en.m.wikipedia.org/wiki/Greater_fool_theory

S&P500 did about +100% over 5 years. Bitcoin did about +11500% over same 5 years (would have been over +13000% before this crash).

A 10% retracement to a price level Bitcoin was at 1-2 weeks ago is not a crash.

Retail traders' emotional reaction to volatility really skews their perception. Professional traders are aware of this and take advantage.

As others have said stock is ownership in a company, whereas cryptocurrency doesn’t represent ownership in anything other than the scheme itself. It takes a hell of a lot for a publicly traded stock to go to $0.

The market is manipulated certainly, but that is not a justification for tech companies and developers to create crypto currencies to pump and dump.

Also the markets are regulated from registering trades by CEOs in advance to insider trading laws. Though far from perfect it’s no reason to waive a white flag and open the flood gates to unmitigated scams. And the only times it appears coin scams have resulted in any legal action and liability is under the guise of the existing securities laws.

Buy a ticket, dont put in much. Adjust over time. I think the foolish point of view is to look at it as black and white. And whatever you do, don't rob yourself of participation in a meme, fun is not a zero sum game.

I regret every time I invest in being smug.

There are other considerations too. Like buying into a tech that's largely backed by dirty energy.

Because fiat money isn't backed by a trillion-dollar, oil-guzzling military-industrial complex?

You need fiat money to purchase food and shelter

So if the US scrapped USD in favor of bitcoin, we wouldn't need the army anymore? This argument never makes sense to me.

That’s how bubbles work. IMHO, the best case scenario for crypto is that they are the web companies of the 2000s, so there’s a chance some of them will become an amazingly profitable investment, while most will go the way of pets.com. And that’s the best case.

if you legitimately have no idea, then you don't have any more information than the market does. why would you trade at all?

Cause you might regret your decision in 10 years. Not participating is a decision just as participating is.

I don't. But the 'what if' game keeps me up at night sometimes. Buying and holding BTC isn't as far-fetched as guessing the right lotto numbers. Even smaller-scale stuff, like if I had taken half of my vacation fund and bought BTC 6 months ago, which would have been a pretty acceptable risk (it's all gravy and already set aside), that would be a non-trivial amount of money to me. What if I could max out my kid's college funds just by making a few different decisions? That's the kind of thing that gets me.

Of course, you can always do better. And it is good to try to improve. But it sounds like some unreasonable expectations are sneaking into your thoughts. Like it or not, you are only human :)

For me, meditation and practicing self-compassion helped with stuff like this.

If you don’t have any thesis beyond “hey, it could go up,” then you are gambling. That doesn’t mean you’ll lose, sometimes gambles pay off.

You should no more feel bad about not having won gambling on btc than you do about not having picked the winning lotto numbers last week.

Old trading wisdom: there is more room for it to go up than down.

That’s true of everything.

Yeah but based on what? That everyone decides to buy Bitcoin?

You could say that about any commodity, like a stock. How is it valuable info though, a predictor of future performance?

Most people look at the stock-to-flow chart as the leading indicator. https://digitalik.net/btc/

I buy $15 worth of bitcoin every 2 weeks, so $30 a month. I'm not comfortable investing any more than that. So far this has worked out really well for me because I never invest more than I'm comfortable losing, and therefore feel immune to crashes.

> Or am I smart not to gamble in such an obviously rigged game?

This can not be understated. Everything about “crypto currencies” and NFTs are a complete and total rig job. It’s not even hidden by the large SV capital, simply justified on the basis that...so what it’s the same thing the markets or art collectors have always done.

Instead of backroom dealings, it all takes place in chat rooms and discord servers. I’ll admit as somewhat of an artist I thought I’d submit my work to a “invite only” NFT marketplace and sure enough I get a DM from one of the most prolific and successful artists shaking me down for Bitcoin in exchange for the invite promising me a minimum amount in monthly NFT sales. Of course thinking that was a potential scam, I inquired about the pay to play and was not only told how the whole thing works from the founders down to these “anonymous” NFT collectors on Twitter run by the marketplaces themselves, and to confirm it I posted a tweet immediately liked by one such profile (to put in perspective the profile had bought an NFT from Musk’s partner for I think around $750k).

I never sent the Bitcoin on the basis of being disgusted with the whole thing, which in hindsight makes me a complete moron. Everyday as I see “artists” thanking the anonymous Twitter account for changing their life with a purchase of their NFT or how they are in tears because they can pay their student loan off...I consider giving the discord art submission, dm, and tweet to the news media...but then I realize they don’t care they probably are in on it too, or at least would calculate the amount of money on ad revenue and clicks they would lose if they exposed this scam and they could no longer write daily stories about NFTs.

You can definitely make money, just always remember it is a repeat of the gold rush and just marketing to poor people about life changing opportunity and gold so plentiful you can just pickup nuggets as large as your head, all you need to do if move to their town and buy their shovels. If you have no morals about it the better bet is to tell them you aren’t much of a digger but one hell of a shovel salesmen with a wink.

For me it’s not a question of either or. In or out.

I limit my exposure to 10%. Hate crypto or not, it’s earned its right to be treated as a legitimate investment class. The reason to diversify are due to the exact same reasons you’re expressing. If I were to liquidate my positions, I’d do so over a period of time rather than all at once - likely keeping some exposure.

IMO, if you’re investing in any equity trying to “time it,” or get rich quick, you’re taking as big of a risk as having exposure in crypto to begin with.

All crypto coins are fundamentally the same thing, easy to create or fork, and not backed by anything permanent like a government, so the value of them should approach zero over time. There's nothing supporting BTC's price, and I'm of the mindset there are shenanigans occurring to keep it afloat.

Easy to copy the coin, hard to copy the network effect.

I see the network as a key problem here--the miners will go wherever the grass is greenest, the network isn't permanent. If a coin were to pay them more or suddenly crash, they'd shift their rigs pretty quickly. Same problem Uber and Lyft have.

Which coins have gone from popular to no longer mined?

You can say the same thing with most trading cards but there always seems to be some second hand market that no one understands.

Trading cards have different qualities and actual scarcity though--X number of one card is made, and X is quite low. Crypto is one of thousands of references to imaginary numbers held in a distributed data structure.

At current scale of operation and amount of money changing hands Im surprised we dont hear about rival groups hiring mercenaries to disrupt competitor mining operations. Couple millions should be enough for a team to go in, burn down a warehouse full of mining gear and blow up a substation or even full power plant for good measure.

generally, people don’t want to risk going to jail

> and not backed by anything permanent like a government

I agree with the overall point, but I'd add that the difference is the degree of permanence.

Not all governments are so permanent, and some are arguably less permanent at the moment than the big crypto schemes.

In addition, let's not forget for many of the original BTC enthusiasts, the purpose of BTC wasn't for it to be an asset class, but rather:

- A direct challenge to the dominance and reserve currency status of USD and the government and agencies that back it.

- A medium of exchange that the US government could not control.

These anarcho-capitalist goals have been greatly diminished as BTC becomes more of a regular asset class.

Anecdotally, I've heard many small scale investors (portfolios in the 5-10 million range) who are happy about these changes in BTC.

I'm waiting for a Tether collapse to create my long position, but I'm starting to feel like Michael Burry in the Big Short: the market can remain irrational for a long time.

They have a deadline in about a month to reveal what exactly their "reserves" are comprised of, could be the moment.

Did anything changed about tether having to reveal anything about their reserves?

This has been going on for years, and it seemed that nobody was able to force them to prove anything.

It's part of their recent NY settlement:

https://www.bloomberg.com/news/articles/2021-02-23/crypto-ex...

>New York officials, who originally began investigating Bitfinex in 2019, will receive quarterly reports on composition of Tether’s reserves for the next two years. The companies will end all trading activity with New Yorkers.

That starts in about a month

Thanks!

There's nothing in the article that suggests that tether will be closed if they are not backed up 100%, so I guess it won't make any real change even if they are not.

Didnt they already had dates set for publishing Audit results in January? and then without revealing anything they obtain a settlement? Show you the scale of money and what it can do. At $Trillions being printed per month they can buy anything.

If/when Tether collapses people will escape it en masse into bitcoin and ethereum.

Paradoxically, it can lead to the prices in crypto shooting up, not down.

Have puts on all of the miners and Microstrategy.

Months out, enough time for Bitfinex to get curbstomped by the DOJ, CFTC, or NYAG.

Also enough time for them to expire worthless.

Which expiration date and what price? When I checked last time they seemed pretty expensive.

Serious question: why does a reduction in hash rate lead to a loss of USD pricing? That's analogous to pricing USD based on the number of lights on at the NY Federal Reserve at 10pm on Tuesday. I recognize hash rate moves these markets, but seriously, why?

>why does a reduction in hash rate lead to a loss of USD pricing

it doesnt

Value of Bitcoin is a matter of belief. There’s absolutely no way of putting a justified price tag for the coin (at least for now).

It can be that people just thought others might think the China news would be bad and therefore decided to sell. In speculative market you are all the time trying to guess what others are thinking.

Nothing a healthy 5 billion USDT injection can't fix, just wait a few days.

https://www.zerohedge.com/markets/bitcoin-crashes-much-15-am...

Maybe the hash rate isn't related...

Seemed inevitable.

I first found out about Bitcoin in 2017, but didn't have time to fully understand the technology, so I brushed it off as a curiosity and moved on. I heard about it again in November at the start of the price increase, but upon further analysis decided not to invest due to the fossil fuels required to secure the network (I extend my thanks to Stephen Diehl for his thorough and nuanced introspection of the technology).

I feel sorry for those who have lost money at this time, but I am thankful to have had the foresight to avoid this inevitable price crash.

Remember folks: If the price goes up, that’s good. If it goes down then you can buy more at a discount, which is also good.

It’s a great system where nothing can go wrong.

Is this sarcasm? Any investment can go to 0, or go down and stay down.

If you’ve been in the game 30 minutes and you don’t know who the patsy is, you’re the patsy

Said the people laughing at those who bought in at $20k in 2017/18

Said the people laughing at those who bought at the $30 peak in 2012...

Quite.

If you put $1 a day in since the Big Bang Theory Bitcoin episode aired on 7 December 2017, which is a fair date for when it reached the popular conciousness (13.84 million watched that episode in the US), and bought at the open every day, you'd have converted $1220 into $8600.

Predictable angry comment about the stupidly large ad on this site for eToro: apparently my thumbs are too fat to close it, when do I get my complimentary dialling wand?

So fat in fact that it opens the ad no matter what I do, only to be told that eToro is not even available in my country.

So not only do I see a massive ad that makes the article hard to read, I can’t even close it, and it’s for a product I can’t buy.

I hate this, and everybody involved in implementing it should be ashamed of themselves.

What's interesting about this is I could see it coming a few days ago. Funding rates on FTX were super high, so you could see people were getting reckless with leverage leading up to this.

FTX?

Its a crpyto exchange

It's a crypto derivatives exchange serving non US customers.

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