Crypto crash deepens, stocks slip

I understand that people feel like there's something fraudulent going on with crypto. Given the sheer density of fraud and scamming surrounding crypto, it's hard to argue with that. But trying to make one's argument seem more concrete by picking the name of some well-known class of fraud and blithely using it to describe crypto in general is counterproductive. It muddies the waters, and makes it more difficult to have an organized discussion by removing clarity from the language we have to discuss these things.

The urge to do so should be resisted for the same reason that we should resist the urge to try and make arguments involving statistics seem more authoritative by just guessing at numbers when we're not sure of them. False precision is, well, false.

Unfortunately, miners benefit from the current artificial limitations. Which demonstrates an inherent issue with crypto currency, miners and users have very different goals yet only miners get a vote.

If there's one thing I love most about the technology behind bitcoin, it is the permanent, public, unalterable ledger of every purchase I've ever made and every purchase I'll every make, and who I gave the money to. I'm super excited about the complete lack of personal financial privacy that Bitcoin's blockchain enables! /s

https://uniswap.org/docs/v2/protocol-overview/how-uniswap-wo...

https://github.com/bitclout/core

I'm betting my ass of that cryptocurrency in a different way might be the future of fiat BUT from the countries themselfs.

I'm not sure why anyone in the long run would trust a system which is controlled by some totally unknown and new individuals who invested in some cryptocurrencies.

There is no need at all to assume that the crypto technology is limited to btc and other current cryptocurrencies.

If $SPY was 40% up since last month, would that be normal? ETH is still currently higher than its value from April 19th.

Cryptocurrency market is extremely volatile. This isn't that far from normal.

Also, maybe BTC is not like SPY but more like TSLA.

This results in outsized volatility, as it is still a developing market. 1T for a global currency is very small.

We'll see how it behaves at 10T.

SPY is highly diversified though. The crypto market is known to move in tandem w/ BTC swings.

A 40% swing may seem large compared to SPY's usual 1-2% swings, but consider that other crypto coins frequently swing by 10-50%. For example, MATIC was up some 47% just yesterday. The reality is that crypto is highly volatile; it doesn't make sense to compare its volatility to ETFs or REITs or other conservative vehicles.

Some analysts were even expecting a correction, saying that a BTC drop to 30k would still be within expectations...

Hmm, yes it is different. Cryptocurrencies are very-very volatile. In the last weeks, it wasn't uncommon to have 25% change in either direction within 24 hours for most top currencies. Stocks are less volatile.

With that said, the current nose-dive isn't over yet, so I'm not saying there won't be a crash, I'm just saying that comparing stocks and cryptos sounds to me like comparing apples to oranges.

Would you consider being reduced to last month's price a crash?

They are only both massively down if you cherry-pick the absolute peak as your point of comparison.

Stocks are not a Ponzi scheme because funds from early investors are not flowing to fresh investors. There is the actual value created by a company together with its future prospects and assets that combine to determine a stock price.

Crypto meanwhile has the backing of whom and what assets?

https://en.wikipedia.org/wiki/Duck_test

So you have the non-existent assets, bag holding, difficulty getting out and the promise of above average returns.

If I put my money into my saving account then I can get out at a clearly stated time, there is no expectation apart from very little interest and I am reasonably sure that the government will bail out the bank if the bank fails.

In between there are a spectrum of investment options, property is a good investment asset and you actually have a property made from things like bricks and glass as the 'store of wealth'. Yes it might be difficult to get out if there is a property crash. But it is not a ponzi scheme even if it has some characteristics of one.

With Bitcoin, you have a cryptographic string. You can't make anything with it, it's not interesting to look at, it doesn't pay dividends or coupons and you almost certainly don't have any debt denominated in it. The only reason to hold it is the hope someone else will buy it from you for a greater price in future, and the only reason to believe they might want to do that is a claim that it's a "store of value" based entirely on the profits earlier holders made selling it to new ones.

It may not literally be a Ponzi scheme, but the dynamics are the same.

But it is by definition not a "ponzi scheme" or "scam".

https://openknowledge.worldbank.org/handle/10986/19358

https://openknowledge.worldbank.org/handle/10986/19358

This in itself is a meme - "All criticism is ignorance!"

Bitcoin is not a ponzi or a pyramid scheme, that's true, but it has aspects of both, with its declining emission and stacked rewards for early adopters.

And Bitcoin is for settlement now is it?

That's interesting, and a massive deviation from its original intent (see the white paper) as well as all the other purposes it's been ascribed over the years.

The truth is that bitcoin is an instrument of speculation. Little else.

What is that even supposed to mean?

Time to report bitcoin pricing with decibels?

I suppose another logarithmic scale would work here as well: Richter scale; scaled so these "corrections" are in the middle of the scale. Then we could about a "magnitude 5 on the bitcoin Richter scale" correction, etc.

(I wanted to say back in 1999) - a lot of smart people are invested in dot-com startups: Kleiner Perkins, Sequoia, Hummer Winblad. These aren't greedy VCs -- it's their job to make returns for institutional investors who are often pension funds or charitable endowments, so if it a "Ponzi" then they are fools. I'm sure Hummer Winblad's investment in Pets.com will work out great.

2. I literally don't know what this means. If it drops below 10, and you bought at 50k, you have an 80% loss. This might indeed induce "some nervousness".

3. Bitcoin is, per the title of the whitepaper, "A Peer-to-Peer Electronic Cash System". You don't have to read very far into the whitepaper to understand that being a currency is 100% the stated objective. As you pointed out: it has failed miserably at that.

4. No... if this is a "Ponzi", then _on average_ there are more fools than smart people. Smart (or lucky) people are in fact a requirement of a successful Ponzi scheme... where else would the money go?

Because my opinions are not vacuous to me.

https://www.macrotrends.net/2497/historical-inflation-rate-b...

That's not how it works. You need to destroy the local economy first. For example, repossessing land of productive farmers and shutting farms down causes famines. If the local economy wasn't destroyed people would rush and start exporting their local products to markets that actually value them. You would end up with a lot of inflation but not Zimbabwe levels.

I recently read up on Venezuelan capital controls and honestly the only thing that came to my mind is that the politicians there want to destroy the currency as much as possible as if a functioning currency were the spawn of Satan that must be prevented at all costs. I'm personally surprised it takes that much to destroy a currency. You pretty much have to be actively evil to get to Venezuela levels.

Given enough care currencies can recover from pretty much anything as long as the local economy stays alive and relationships with foreign countries are being maintained. The only thing that cannot be recovered is the lost potential and time of all the individuals that make up the country.

You can exchange your local government currency for services and goods. With Bitcoin you first have to convert them into a local government currency and then buy services and goods. This only works because those local government currencies exist in the first place. I'll pull this out of nowhere and say that 95% of the value of Bitcoin is derived from government currencies by that I mean the reason Bitcoin is valuable is that you can exchange it for government currencies.

The other 5% are services and products that you can purchase with Bitcoin directly. That portion needs to grow if Bitcoin wants to become a "legitimate currency" but if everyone abuses the currency by hoarding it and doing nothing with it then it might as well not exist.

I'm not sure what "legitimate value" means in this context, but the most terse way I can think of to answer what I think is the spirit of your question is that currencies can be used to pay taxes and so there is an inherent demand, if geographically limited, for them; since you have to pay taxes, it makes sense to settle debts denominated in that currency because you have a use case for it going forward. This inherent demand creates stability--and yes, everyone loves to talk about hyperinflation but at the same time hyperinflating currencies are usually those of governments who are not long for this world!

If you want to go further, I would submit that a modern currency is one where the supply of it can be controlled in response to other economic factors, and my personal position is that that control turns crashes and depressions into dips and recessions. But this is an opinion, and reasonable people could disagree. (Though candidly--in my experience, few who do, are.)

Cryptocurrencies instead function more as commodities, and as they have few enough actual uses that are not by and large self-contained ones that require a certain amount of willing participation for them to have value at all (whereas gold is pretty and doesn't corrode, you can eat wheat, etc.) they are functionally inherently speculative vehicles. They lack any sort of external stabilizing factor because nobody needs them and so as a "legitimate currency" I can't see why anyone would ever tack on the phrase "legitimate currency" to that sort of virtual porkbelly.

The goldbugs believe that is insufficient as a basis and we should all go back to gold standard where it was backed by a promise of a government to give you an amount of gold (or further back, was just made out of that gold).

The crypto people believe even that is more basis than needed, and as long as people can agree it has value, and they all agree with each other that bitcoin has value, then it can be a currency.

The stock market 4Xing in a year would be quite historic

nothing? (yet)

Fixed monetary supply might be one thing in theory, but fixed credit supply is the death knell to an economy. And the two are usually complimentary. Monetary supply can fill in the potholes of weakening credit supply when the latter contracts - and it inevitably will when the private issuers that generate those debt contracts pull back in a recession. If you have your hands tied to some constrained supply like gold or bitcoin, like what happened to the central banks after World War I and into the Great Depression, you end up backed up against a wall.

That said there is certainly something that's personally appealing about an asset that's guaranteed to maintain the supply side of the equilibrium. As an investor you only have to consider demand. But for any kind of widely used currency that backs an economy it's going to be problematic.

This just isn't an accurate portrayal of any of the serious criticisms of Keynesian economics.

>It got us out of the Great Recession and it’s been 12 years. Maybe the consequences haven’t fully manifest, but another Great Depression would have been guaranteed hell.

It feels like an unfair argument you're having because of course the opponents' whole argument is that the consequences haven't manifested AND that they would be far more dire than a continuation of the Great Recession / another Great Depression. As wealth gaps widen, as inflation rises, as our debt grows, it's possible to see a worse future ahead than one where we continued into a depression.

In hindsight, we all know the problems which led to the fall of various empires (Roman, Mughal, etc.) but if you lived at the time, this same argument could be made against you for sounding the alarm: "Yeah, maybe it's better to not constantly expand our Empire and rely on mercenary soldiers who have little loyalty to a place they've never even been to, but can you imagine the hell if we lost the war against the Gauls??" (forgive me if I mangled the history there).

I am mostly talking about Europe. The Eurozone basically makes fiscal stimulus impractical even though keeping it alive absolutely requires it.

Every time I hear people talk about Keynesian economics ruining everything I am thinking "no such thing happened". QE fills bank reserves, interest rates drop on their own, banks never lend out money, stock market goes up without any actual investment, there is unemployment caused by the macroeconomic structure of the economy, investors are flooding governments with their money by buying bonds, inflation remains stubbornly low, trump cuts corporate taxes.

The fact that things are reversing in the US is a good sign for the US economy as a whole. Biden is actually doing the fiscal stimulus that the economy was asking for decades. There may be a short term crash in the future but it's only going to get rid of the unproductive part of the economy to make everything ready for more long term growth.

Meanwhile Europe will be stuck forever if the Eurozone doesn't resolve its structural problems.

Wild prediction: this BTC crash pops the USDT bubble, cratering crypto in general. TSLA holders (frequently BTC/doge buyers themselves) begin to panic sell, triggering an ARKK bank run. ARKK implosion sparks wide selloff of big tech stocks (essentially their holdings) which depresses the S&P (where tech is the main driver of growth). Everyone is now forced to be conservative; cost to borrow skyrockets; demand chills, and coupled with supply chain disruptions and high commodity and materials costs, some businesses begin to fail. New homeowners who went for broke to buy at the top of their market are immediately underwater, and some of them are now losing their jobs. Fed is now between a rock and a hard place - needs to raise to interest rates but also needs to encourage spending - what to do?

Anyway, there is my daily dose of doom-and-gloom, and I have a vague understanding of any of it, so enjoy.

2 - If you believe the worst allegations, then Tether is artificially propping up the value of Bitcoin. In the event of a run on Tether, Tether may be forced to sell thousands of Bitcoins abruptly onto the market to get cash.

3 - The fallout of a true worst case scenario for Tether could lead to crypto being reclassified in order to fall under all the relevant financial regulations that banks and the traditional finance sector are subject to.

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Let's say I decide to make NerdBucks. I offer to sell you n NerdBucks for n dollars, 1-to-1, and tell you I will always buy those NerdBucks back at the same price. This is how NerdBucks get "pegged" to a dollar -- if someone will always buy the currency for a given rate, it will then always be worth at least that much.

Now, you might say, "Okay, what's from stopping you from selling a billion NerdBucks, and when people try to sell them back to you, you just refuse?" Well, normally nothing (outside of litigation, but that is a rabbit hole I'm not going to talk about here). In theory, though, I could have a bank account that I publish the amount of inside it, to show you I am prepared to buy every single NerdBuck back in a worst-case scenario.

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Going back to Tether: The issuing body of Tether has suggested they are holding reserves of USD equivalent to USDT in circulation. If you look at some of the other articles linked in this thread [0] you can find deep-dives that suggest they are lying, and in fact have been using USDT as a way to print money.

They are relying on the hope that more people will buy USDT than come calling to cash in. That is fundamentally the same hope that a Ponzi scheme relies on.

[0]:https://medium.com/@bitfinexed/bitfinex-and-tether-is-unaudi...

Here's a good write up of the recent disclosures and the bag of shit that is Tether's reserves: https://www.mymoneyblog.com/tether-stablecoin-risk.html

"Instead of 100% risk-free, short-term, liquid assets, Tether is less than 7% risk-free, short-term, liquid assets. Commercial paper? Backed by whom exactly? Fiduciary account? At which remote offshore bank owned by a third-party? They could be pointing to a half-eaten sandwich and calling it collateral."

The senior management of regular banks in many countries are often required by law to deny that the bank is in jeopardy right up until the moment they close the doors, as a way to prevent bank runs.

Because crypto is distributed, every holder is a bank manager, and must deny or minimize problems with the currency in order to maintain sentiment and prevent runs.

This for me is one of the biggest problems with Bitcoin - it incentivizes the holders to become engines of disinformation.

I think blockchains (esp. programmable ones) have or will have significant real value in making markets more efficient and transactions lower friction, but right now blind speculation is driving 99% of the market. IMO while this brings lots of useful funding to speed along development, it could also endanger the true purpose of the tech.

Those sort of comments you mention started creeping in, but now that is the mainstay, in every individual crypto community. I dont care that they are speculation vehicles, but pretending you are changing the world just grates. And the constant calls to HODL, which used to be humourous, are now just so much propaganda.

I have no holdings there to speak of, so it is a non issue for me.

e: Take a look at this https://www.reddit.com/r/EtherMining/comments/nfppnv/120_rtx...

There are countless people like that

Not to mention that BTC-specific ASICs are a big reason there is a chip manufacturing squeeze. Millions of completely useless, power gobbling devices.

https://www.bitmex.com/app/perpetualContractsGuide

Throughout the last week of price declines the rates have stayed positive meaning longs were still paying shorts, implying continuous buying pressure, likely by those trying to time a bottom. But after this mega nuke the leveraged long traders got liquidated. When you clear out leveraged traders it becomes harder to move the price as fewer will be liquidated accelerating price changes. To summarize, retail investors lose in crypto because they take big risks with small money with big leverage and the big boys with big money then flush them out and the crypto lifecycle begins again making the whales richer and more capable of manipulating the market the next time.

Spot me an invite? :)

So naturally, ideally, I want to completely opt-out of their system. So far in human history, we never had an alternative, but now we do. Bitcoin price in fiat may go up or down, but I believe the Bitcoin network will keep ticking with the same mathematical rules and same transparency today and in 100 years from now.

There are some very cool things like decentralized lending/borrowing, exchanges, cross-chain swaps, synthetics, etc. These protocols are revenue generating (via fees) and are actively used with billions in volume.

99% of crypto will die off, but the small part that survives could be the backbone of a very robust internet-native financial system.

Whether these DeFi primitives will ever be plugged into TradFi systems remains to be seen, but if nothing else, the ability for these protocols to easily interop is a huge win over existing systems.

Even if everything uses stablecoins and all "altcoins" are ignored, there is still value here.

Going back a day shows that the fees were on the order of ~3 eth per block (https://etherscan.io/blocks?p=300) whereas now they're averaging around ~20eth per block.

In other words ETH holders are very motivated to move their tokens right now, and the amount they're paying to do so reflects this.

For example, to deposit into a maker vault, a 50 gwei transaction would cost somewhere around 100$, it now costs like 2-3k$ just to execute a single transaction.

I still wish to see more interest in technical discussion of Bitcoin here. Like the new BIP proposal expanding the scripting capability of the protocol. I don't know what percentage of BTC discussions on HN are in either bucket, but I hope at the very least it would be 50/50. Don't you agree?

1:1 human relationships are unstable as it is, think about a 300M individuals megasocial group where everybody is interacting with everybody and constantly adjusting.

The Fed is like the doctor who fills up the patient with cortisone and throws away the thermometer to avoid reading the temperature

We need ups&downs, love&hate, forest fires and rebirths. Anestetyzing the whole process makes me wonder what are we even thinking

BTC mimics nature as opposed to the Fed which mimics the arrogance of man.

Note how far my comment was modded down - no room for humour if you have had your 'money' wiped out.

You can't tease religious people either. I once sat next to a girl at work who was seriously Christian. I jokingly asked if she believed in Father Christmas one slow Friday afternoon and the looks I got from my colleagues who knew what I was doing and how morally wrong my teasing was!

It is the same with the Bitcoin religion. You quickly learn not to question it.

I also consider The War Against Terror to be a religion.