Federal Court Orders BitMEX to Pay $100M over Illegal Crypto Trading
cftc.gov
cftc.gov
I am personally situated in Ontario, Canada, and getting more and more anxious by the day as seemingly every major legitimate derivatives trading platform with any volume is banning Ontarians from trading.
Kraken, Bitmex, Okex, and Huobi all won't even look at me simply because I have a personal address inside Ontario.
I can trade on their spot markets with them, sure... but the fees are MUCH higher than that of derivatives markets and my bot isn't THAT good to swallow a 0.3% trade cost when it's essentially performing high frequency trading. A fee of 0.075% however is manageable.
Binance still allows me to trade derivatives, and I can't figure out how or why. They don't have any legal authority to allow Ontarians to trade afaik, and they're the absolute largest derivatives trading platform on the planet right now.
I tried setting up a corporation in the UK back when Bitmex originally banned Ontarians, but when I went to register that corporation as a trader with Bitmex, they demanded to know the identity of all of the owners of the corporation, and if any of them resided inside Ontario then they wouldn't work with that corporation as well.
(the bot was originally setup to trade on Bitmex as they had the most liquidity at the time, but that has dwindled significantly ever since they banned Ontarians and all of the USA from trading in October 2020)
I don't have millions of dollars in my pocket, so I don't have the money to jump through legal loopholes by registering shell corporations and paying representatives to act as proxy owners in non-banned jurisdictions.
I'm not doing anything wrong imho. I'm not risking my life savings or going to crash the cryptocurrency market with my derivatives trading ways or whatever the Ontario government is trying to protect me from?
I am just another guy trying to make a buck like everyone else on this planet. Why is my government trying to prevent me from doing so at every turn? I just don't get it?
What are my options if/when Binance decides to ban Ontarians as well?
Vote with your feet.
I've got a large family and a massive network of friends here in Ontario, however.
I grew up here, I can't move.
I've considered getting dual citizenship in another country, but that isn't exactly cheap or problem free either.
And I don't think the estonia e-residency is enough to satisfy regulators/crypto-exchanges that are serious about KYC.
Someone else’s id and rental agreement is though, for this purpose. These are either directly purchasable on a DNM (darknet market), or something you can ask for
Woooorst case you need to deep fake live on webcam, this is consumer grade tech even open source now
Acquiring and using the ID This might violate laws
Anyway.
VPN from the expected country all the time, or Tor+RDP (remote desktop) from a compromised computer close to the postal code of the ID which can also be found on an RDP DNM
Hacker. News.
Or buy a Caribbean citizenship and circumstance that generates a utility bill.
(El Salvador has plans for easy crypto entreprenuer citizenship but they might lose international support over authoritarian moves.)
You don't want to.
Not the same thing.
It's all about priorities.
[edit: not sure why you are being downvoted, your answer is transparent and reasonable ...]
Unfortunately you need trust in this situation. A trusted friend with a company you don't own paying taxes in another country, taking a cut and sending you the profits very frequently would be my choice. I did just that for friends a few times (for tax reasons though), sometimes holding out the money for a long period of time while they moved to more favourable tax jurisdictions.
You can setup a contract between his foreign company and your canadian company and send invoices - albeit that won't afford you that much protection if he decides to run away with the money (hence why you want to transfer the money frequently).
I wouldn't trust a stranger with this, to avoid getting scammed but there is an entire industry around frontmens and some players should be reputable enough to be trusted.
Unfortunately I don't know anybody well enough who lives outside of any of the banned jurisdictions to trust them with hundreds of thousands of dollars worth of crypto currency.
If I get caught lying, Bitmex can literally liquidate all of my positions and essentially steal my money. Not sure about the others but I imagine it's the same. They're all trying to save their own skin, they don't care about me at all.
Not saying it's a bad idea, I just don't see how it would be any different than the UK corporation I already setup.
The key here is the definition of "legal ownership of an entity", which - while most people tend to believe they're identical - is not the same as "actual control of an entity".
I'm saying that being the legal owner of a company and having actual control of said company are really not the same thing.
There are a number of ways to achieve this, all of which are very dependent on your personal context.
But to be practical, I'll give you an example: a member of my extended family runs a construction company.
For all intents and purposes, he completely controls the company: what it does, what the money generated is used for, etc...
However, he does not own it: as seen from the govmt's perspective, his ex-spouse does.
For reasons I am not going to get into, he could not own both this construction company and other businesses he controls without running into some issues.
What he did: he divorced his wife and through the divorce, he gave her full ownership of the company.
The facts that:
- they still live as a couple
- they love each other
- they trust each other with their lives
- the wife has zero interest in sticking her nose in the company's business
There is a reason why so many business names in the Anglo-Saxon world have the word "trust" in them.
This is just an example, there are many other avenues.
Another thing you might want to consider doing:
- raise capital thru the UK company
- use said capital to fund the bot to operate on a larger scale
- remain one among many shareholders (preferably a minority one), most of which aren't based in the jurisdiction that's giving you a headache.
- just be the salaried COO and single employee of said company, where all other shareholders know fully well that the day they try to wrestle actual control from you, the tech to run the bot only lives in your head ...
- when BitMex asks for company owners, just provide them with the truth.
What? Most people aren't trying to make a quick buck by rent-seeking in a system based on massive electrical waste.
Myself? I cut my work hours recently so that I can live now instead of dreaming of someday. I spend my free time enjoying my life, not trying to figure out who to exploit.
That's also an option.
Which has the added benefit of the now not being an apocalyptic hellscape just yet.
I get it, I could be doing something much more productive with my life.
The money this bot makes isn't for myself if that's any consolation. Not most of it anyways.
I have big plans to use the money generated to help the poor.
I live very frugally, exclusively shop at thrift stores, drive a 20 year old car that I fix myself, and am frustrated with all of the homelessness I see in my city.
In my eyes, this bot is the only way I can stand to make a real dent in that pressing issue. All I know how to do is code.
My cryptocurrency of choice is Stellar actually, it doesn't use any electricity hardly whatsoever to keep it's blockchain safe.
Not all cryptocurrencies are hell-bent on destroying the globe. Some of them actually try to solve real problems.
That's probably what billionaires tells themselves as they rocket to outer space.
Everyone who wants to be rich says this exact line even though you don't need a lot of money to help the poor. Do you currently volunteer for shelters, charities or soup kitchens? If not, why do you think that will change when you get more money?
It’s not clear to me why building a derivatives trading bot leads to exploitation but whatever floats your ideological boat I suppose.
...rent-seeking in a system based on massive electrical waste.
With that as the core assumption, the exploitation would be anyone who relies on the environment (everyone, then), I'd think.
The accusation here, right or wrong, is that this is what crypto and the bot are ultimately doing.
Note, this may have you reaching for questions that start with "How is this any different from..."
Is there a term for someone who stretches language in such a way for rhetorical purposes?
I can see why it's an effective rhetorical trick, since it forces people to debate whether the behavior is bad enough to fit the definition of exploitation, or whether it's not sufficiently bad. By having this debate we've already implicitly accepted their premise that something bad is going on.
Yes. Isn't it?
Isn't the electrical waste something bad?
I happen to think that flying overseas for a holiday wastes a lot of energy. I could label this a "massive energy waste". Then as a corollary I could label people taking those trips and people facilitating those trips as "exploitative" actors. But these are mere debating tricks even though it's all vaguely accurate given the words I've chosen and the framing I've picked.
The root problem to all of this is an untaxed externality.
A lot of crypto currencies use a lot of electricity that wouldn't have been used otherwise. A portion of that electricity that was used will be non-renewable energy.
> I happen to think that flying overseas for a holiday wastes a lot of energy. I could label this a "massive energy waste".
Yes, people taking over seas vacations instead of staying home also wastes energy.
Oh, you've taken on less work hours to enjoy your life? Maybe others are able to view that as a waste. Quit stretching things so much that you paint __everyone else__ as a threat or enemy.
I didn't say I didn't waste energy, I didn't say I was an angel, I was merely pointing out the fact that two wrongs don't make a right. "It's ok for bitcoin to waste electricity because people flying internationally waste electricity too" is a pretty weak argument.
Call it waste or whatever else you want to, the fact is, crypto currency uses a ton of electricity that wouldn't be used otherwise. Sure you can go on weird tangents if you want but it is a simple fact that seems silly to ignore.
Similar scenario: I take up arms to aid the king and in turn ensure stability and peace for society. The land I'm given as compensation allow my lineage to live as nobility for centuries. Is that ethical?
I'm making hyperboles not to discount your logic but to show an extreme and try to pinpoint where the limit is. For what its worth, I'm saving quite aggressively and live very modestly for the sole purpose of increasing my leisure, perhaps to retire early. So I am obviously not making this argument as a way to bash FIRE practitioners. I am genuinely curious about the ethical implications of compounding rewards for legitimate sacrifice. Of course someone who works hard in their youth without consuming should be able to retire earlier without guilt. Though I think Warren Buffett is on to something in his disdain for dynastic wealth.
It's easy to argue it's unethical by invoking utilitarianism. Unfortunately that also means basically anyone with a white collar job in the first world are unethical, which I'm not sure most people would agree. Other than that I can't think of any convincing for why that's unethical.
Imho society should be liberal in letting people acquire and enjoy their wealth, and strictly limit the passing down of wealth to prevent dynasties and having someone's opportunities decided by their parents' means. This would solve a lot of compounding problems. However, people are generally pretty terrified of not being able to let one's own kids inherit the entire fortune and sharing it with other random kids too. We'll likely continue along those lines for a long time coming, whatever your stance on ethics doesn't stand a chance against family bonds and their voting power.
That will never happen, as I explained in a sibling post:
>there would be an imbalance of labor demand compared to supply. This will cause prices to go up, which will make it less attractive to stay "retired" and more attractive to start working again.
I'm not sure what you're alluding to with this, but if it's "well if everybody goes FIRE society will collapse", then you're wrong because it will never occur (due to the economic mechanisms discussed earlier).
>but the ones that just want to perma-vacation on society's economic margin are what annoy me
Sounds like you're annoyed if people aren't being productive when they can be. After all, what's the difference between being 100% productive for only 50% of your working years (ie. FIRE), and being 50% productive for 100% of your working years? What's your opinion on people engaging in non-productive activities (eg. watching TV, playing sports, reading books), taking time off, or taking a "easy" profession? Are you against them as well? Or are they fine because they put in a token amount of work?
Bonus: I suggest reading this guy's blog for unexpected outcomes https://news.ycombinator.com/item?id=26543527
If you contribute enough productive value (as determined by the free market, paid in some asset), why does it matter when you retire? I'm sure there is some endgame where we stop funding our consumption economy to the same degree we are now, but is that a reason to work until you can't anymore?
You can only kick up your feet if you've done enough "economic output" in the previous years, it's not a free lunch. This is coupled with the fact that most retired persons do invest and contribute capital. It's not at the same level as Mark Cuban, but does it really matter if you only invest a million vs 700 million+?
And who pays for the benefits the elderly (or as a matter of fact, the whole society) enjoys? Amenities, welfare, health insurance, etc. - taxpayers, exactly the demographic (before 65 - healthy & able-bodied) FIRE is encouraging to stop working, thus avoid paying income taxes.
Are you also against people being frugal because that causes them to pay less sales taxes?
“Industry, thrift and self-control are not sought because they create wealth, but because they create character.” - Calvin Coolidge
Contrary to popular belief, taxes are supposed to benefit society (at least that is the intent & purpose). I agree this is not the case for corrupt countries, but if everyone just retired early or sat at home mining coins, where will society end up?
https://beunsettled.co/blog/is-the-fire-movement-really-the-...
...that haven't been realized yet. As you draw on your reserves, you'll be forced to realize those gains and pay taxes on them, making this a non-issue.
>willingly "unemployed" in your productive years to "enjoy life" and "freedom"
Ah yes, because the goal of life isn't to enjoy it, it's to be as productive as possible! Freedom is overrated anyways!
>as the crypto miners trying to avoid taxes.
Are miners known to be tax dodgers or something?
>but if everyone just retired early or sat at home mining coins, where will society end up?
"retired early": there would be an imbalance of labor demand compared to supply. This will cause prices to go up, which will make it less attractive to stay "retired" and more attractive to start working again.
"sat at home mining": same thing that would happen if everyone decided to gold mine. eventually there would be a saturation of miners and it won't be profitable anymore, causing people to exit.
You might be able to take out small amounts strategically to avoid the 40k threshold.
I may be mistaken, but isn't FIRE telling people to live off 4% of their investments forever? If the goal is 1 million, that is exactly 40k.
The math works out perfectly to leech on society - and (this is just a hypothesis) possibly causing S&P 500 ETFs to inflate as these FIRE "retirees" promote their methods online, creating a feedback loop and illusion of ever-increasing stock market boom for the last 10 years
Most people aren't trying to make a quick buck by rent-seeking in a system based on massive electrical waste.
On the reals though, casual moral condemnation of particular economic activity is usually indicative of insufficient self-reflection.
Something that provides value (liquidity) can’t be rent-seeking.
Likewise the electricity isn’t waste since it enables something people value (bitcoin).
You're an in an extremely risky market, from both a regulation perspective (they might shut you down/you might lose a lot), and from a perspective of all the scams and lack of transparency exists in crypto.
You can either try to become political, or move on to less risky markets. If you're just here to make money, move on and try something that doesn't carry this insane regulatory risk.
EDIT: I guess you meant transparency of exchanges? In which case yeah, I would agree.
You still need a way to exchange from and to traditional fiat but that should not be too hard to do. For the most part you can use IOU fiat so they can stay on the ledger ("blockchain").
well you're not the subject of the regulation either, it's the platforms which offer financial products to customers. And even if you might not incur any significant financial risk, derivatives trading, just like any other complex financial instrument is regulated because we have more than enough experience with (systemic) distortions on financial markets and huge losses being incurred by consumers of such services.
Who is “we”? Do you know who writes the legislation regulating financial markets? And you trust those people?
Big career changes get more difficult with every year you get older. Plus: if it involves moving into any adjacent subject area, doing it now and not in three to thirty months when it all blows up, you won't be competing with thousands of guys wearing the same exact Jack Wolfskin jacket and trying to move from fantasy finance to the real thing.
And if you don't share my pessimism: if I'm wrong and cryptocurrencies go mainstream, you also be out of luck because it'll become interesting to those teams of hundreds of Harvard & MIT quants.
And, of course, you might get to do something useful. At least in comparison to ending up being blamed for bonfires of both money and forests.
I read somewhere the comment that people like that are already there, and they have been reveling in the fact that simple arbitrage strategies that are otherwise obsolete in the rest of the financial world, are still quite lucrative with crypto.
Ok, Huobi and FTX are competitive and you can negotiate with them.
And all of the above are obscenely expensive relative to legacy exchanges.
You can buy daily BTC/ETH which is delivered at 4pm, and the fee is a flat $5 per coin (so ~0.01% at the current BTC price). BTC is traded in 0.01 increments and ETH in 0.1 increments.
Caveat is that only wire deposits are accepted, so the wire fees plus network fees (if you withdraw your coins) can raise this cost substantially if you only trade small amounts.
Made that mistake…
Venezuela has a very basic paper-only id card.
Thanks.
You need to work on your alpha then, that should be your priority
Why not find something else to do besides automating crypto derivatives trading?
Seriously those exchanges and trading platforms are set up to take advantage of n00bs like you. Don't be a sucker.
I'm truly bothered by the fact that all of them are seemingly happy to comply with the laws of governments in regard to it citizens. So as soon as my country bans crypto (which is close to inevitable) - Binance will happily strip me of my income. For no reason, really.
Pushing me, a non-criminal and mostly() law-abiding citizen to turn to money laundering schemes.
technically every working citizen here is a criminal
This is something US regulators weigh so I was wondering if you do too.
Can you provide some context for people who's not in the loop?
1. Africrypt - 3.6B USD, founders disappeared (https://www.bloomberg.com/news/articles/2021-06-23/s-african...)
2. Bitfinex 36% haircut hack (https://www.reuters.com/article/us-bitfinex-hacked-hongkong-...) - not to mention being in bed with Tether for a long time.
3. MtGox... the list goes on.
The question that was asked was:
>> They [BitMEX] have consistently been by far the shadiest and scummiest 'exchange' around.
> Can you provide some context for people who's not in the loop?
Your examples show some negatives of cryptocurrencies, but none of them have anything to do with BitMEX and therefore don't answer the question asked.
Edit: Downvoting doesn’t make me less right
I don't get that allegation. My understanding is that Bitmex is effectively a cryptocurrency casino.
You can only deposit and withdraw Bitcoin. After depositing you could make bets on the price of various things against the house, then withdraw your winning or losses.
It's not like banking services, nor is it like an exchange-- you couldn't deposit Bitcoin and withdraw a different cryptocurrency or US dollars.
>You can only deposit and withdraw Bitcoin. After depositing you could make bets on the price of various things against the house, then withdraw your winning or losses.
I disagree with the "cryptocurrency casino" characterization. Do you think CME is operating a "USD casino" by offering cash-settled futures?
What underlying economic purpose is served by Bitmex? I don’t exclude the possibility of such a purpose eventually but it is silly to pretend the two cases are both currently economically useless.
1. CME has futures for much more than just commodities. They have futures for S&P 500, interest rates, and cryptocurrencies (lol)
2. The daily volume for corn futures is 350,000 contracts[1]. Each contract corresponds to 5,000 bushels, which means 1.75 billion bushels worth of corn are being traded daily. On the other hand the US only produces 14.18 billion bushels yearly, and the world only produces 44.64 billion bushels[2]. Given the large disparity between trade volumes and actual production, I doubt most of the trading activity are from people "who needs to hedge the underlying commodities".
[1] https://www.cmegroup.com/markets/agriculture/grains/corn.htm...
[2] https://www.worldofcorn.com/charts/world-corn-production_21....
Maybe someday we’ll have a recession caused by excessive leverage in corn futures but so far the activity you mentioned has seemed fairly harmless while producing much liquidity.
You cannot transfer physical commodities through digital means. Stocks and money can be transferred digitally. When you want to sell your commodity you do not send it to a central depot that stores all corn. You tell people that they can buy your corn and you deliver it when the commodity future reaches its expiry date. Thus, there is no commodity trade without futures. That excuse doesn't apply to financial assets.
(Requirements for qualifying as an ECP:
(1) Entities with $10 million in total assets; (2) Entities with a guarantor that is an entity which has $10 million in assets; (3) Entities with a net worth of at least $1 million and are using the swap to hedge a commercial risk; (4) Individuals with "amounts invested on a discretionary basis" that exceed $10 million, or $5 million if the individual is using the swap to hedge a commercial risk; (5) An entity who meets all of the following conditions: (i) all of its owners are ECPs; (ii) it and its owners have, in the aggregate, $1 million in net worth; (iii) it is entering into a "swap"; and (iv) it is using the swap to hedge a commercial risk.
)
The whole financial system is based on risk management. Options and other derivatives are fundamental tools to that extent. Here is a simplified example: you have two products A and B. You toss a coin: on heads A returns $100 otherwise $0 and B does the reverse. What is the expected value of A or B? What is that of A and B together -- do you want to re-evaluate A or B now? That is what options give you. And there is no such thing as the house kicking you out if you have any advantage. Which casinos do.
So comparing casinos and selling or buying options is fundamentally flawed. If you go in and start selling or buying with no idea what you are doing, well yeah you are doomed. It is like asking a 5 year old to fix a jet engine. It might manage to do so, but guess what is most likely to happen.
Any serious broker will get you through a bunch of questions to allow you to trade options or even basic stocks. And they will offer assistance etc. That is something you should blame some platforms with. They are not blameless. But they are not casinos or lotteries.
But serious people spend time modeling etc before even thinking of placing a trade. They don't walk in and buy a next day expiration contract... Which is something that a lot of people entering for a quick buck do. I am sorry but at some point we need to say to the patient "ok, you want to kill yourself, go ahead but don't damage your family."
There are other industries that the casino metaphor better fits: gaming (EA aka most hated company) and lotteries (aka state theft/extra tax) are some.
It's not reasonable to compare the service to a US retail stock brokerage. You could compare it to the sort of CFD platforms that are popular in the UK, but those services (at least as retail offerings) are unlawful in the US in part because they're very far towards gambling on the gambling/investment spectrum.
Besides, I wasn't complaining that bitmex is a casino. I'm pointing out that the specific casino-ness of their operations (that it's purely bitcoin in and out) undermines the argument that they were providing banking or exchange services to criminals.
I’m surprised that it’s “only” $100m given that they are continuing to pursue criminal charges against the founders.
https://blockworks.co/bitmex-agrees-to-settlement-up-to-100m...
Gox was a ridiculously amateurish affair run by a french pimply php hacker and manga lover teenager.
Bitmex is in a slightly different league.
But if they have $1B-2B worth of trade volume daily and they charge a 0.1% fee per trade, wouldn't that mean they're generating $1M daily in revenue? From that, wouldn't it be reasonable to assume they have profits accumulated to pay the fine?
It's not. The parent commentis talking about the liqudity of the market as a whole (ie. what would happen if 100M worth of bitcoin was sold at once)
>An exchange with 0 fiat on/offramps and no cash in the bank could still trade billions of USD worth of cryptocurrencies a day.
It would presumably have millions of USD worth of crypto in their wallet (since they charge trading fees). They can take the crypto and dump it into the very liquid bitcoin market to turn it into cash.
A Chinese defi site just got hacked for $600m today.
Today's USD trading volume was $193M while USDT was $5.2B. USD trading volume is a rounding error against USDT volume.
100M USD is more than 1/2 of the entire day's trading volume of BTC against real dollars.
My understanding is the CFTC doesn't take Tethers.
There is a lot more volume than you probably know about it.
> 100M USD is more than 1/2 of the entire day's trading volume of BTC against real dollars.
This statement is false and what I'm reacting to. There is literally no way to measure it. For example, I could take USD, sell it for Mexican Peso's and buy BTC because there is a arb opportunity where I get more peso's for my USD and BTC happens to be less expensive on this Mexican exchange that I'm dealing with. In that case, you don't see the USD volume at all.
The point I was making is that the vast majority of the liquidity is synthetic, not real USD trading. Both the regulators imposing fines and the electric companies only accept bona fide fiat.
I think there's a big shortage of real liquidity.
> This statement is false and what I'm reacting to. There is literally no way to measure it. For example, I could take USD, sell it for Mexican Peso's and buy BTC because there is a arb opportunity where I get more peso's for my USD and BTC happens to be less expensive on this Mexican exchange that I'm dealing with. In that case, you don't see the USD volume at all.
There is, because there's only USD:BTC, equivalents make it look worse.
Re: MXN that's MXN volume. USD:MXN and MXN:BTC. Not the point I'm making. And I do believe Coinlib captures all major foreign currency trading pairs, the JPY and EUR are both included. If you have other data I'm happy to look it over but from where I'm sitting...
I'm not claiming its 60% of all fiat liquidity just all USD.
* Bitcoin mining is an efficient market and there are no profits
* Bitcoin miners sell all of the bitcoin they mine
These assumptions aren't exactly realistic but over the long run they should actually be close enough to the truth. Given those assumptions, at current market rates then an extra $41,121,180 has to enter the markets each day to keep prices stable, assuming buy/sell demand is otherwise equal.
More than that wanting to enter, prices go up, less, prices go down. Leaving aside price manipulation by Tether, Binance etc (THIS is a big assumption, but the exercise is still valuable I think).
So, the fine is only 2.5x the daily excess needed to keep prices stable. Shouldn't have a giant effect.
(You may wonder, if no profits, what are the miners doing? Essential the bitcoin network is an organized effort to take capital, acquire coal, and burn it. Contrary to "store of value" claims, literally all money invested into bitcoin either gets burned up, or goes to pay someone who entered bitcoin previously. It's an entirely negative sum game, with guaranteed capital losses in aggregate. However, this added $100 million is not a meaningful amount in view of the actual scale of energy burnt each year to run the network. It might be a meaningful amount of Bitmex's capital, but likely this won't wreck them on its own.)
I’m in fact more inclined to the view that prices aren’t sustainable and will collapse and fraud has propped it up.
You still need a $42 million a day outflow to satisfy miners if they are all selling. But this money could be coming from balances on exchanges etc rather than new entrants. So yes, seems stable until suddenly it becomes clear the reserves aren’t there and money people believed is real, isn’t.
There is, for example, a vast gulf between the amount of money people think they have on Binance and the amount of money that actually exists on Binance. One of these days they’ll to Mt. Gox…
Attributing a phenomenon to some high-level concept with no attempt to explain how the observed characteristics of said phenomenon can be causally linked to a concrete, specific instantiation of said high-level concept is, depending on the context, more commonly called a "superstition" or a "conspiracy theory".
It's also probably a maximum on net new money entering the market with stable prices, come to think of it. Though I'm inclined to agree with your view that actually the markets are net negative, being held aloft by Tether/exchanges, and will be vulnerable to a swift collapse when the money runs out.
I'm just not sure $100 million is the amount to do it.
1. If you buy a bitcoin, and sell it, the money can only come from a new purchaser. Bitcoin generates no yield on its own
2. However, the network costs a fair bit to administer and this scales with price. At $40,000 per bitcoin this costs $40,000 * 900 * 365 = $13.14 billion per year.
You can imagine a simple thought experiment. Suppose miners sell all 900 coins a day, and there are 100 trades happening apart from the miners. (This is NOT accurate, but the idea doesn’t change if there were 1,000,000 trades)
* The 100 non miner trades simply trade $40,000 for a bitcoin, back and forth, ad infinitum. You can see there is no wealth generated, it is merely a shuffling of wealth. This is the purported “store” aspect. As long as people want in, you may find someone to trade.
* Meanwhile, 900 people come up to the miners with $40,000 each. Each person hands the miner $40,000. With that, each miner goes to the open market, purchases coal, and burns it in a fire pit.
I think when people think of bitcoin as a store of value they think somehow capital has entered into the market. But it hasn’t. 100% of entering capital is immediately used to burn coal.
Anyone who wants out has to compete for the limited supply of new money entering.
Could an individual cash out their bitcoin for millions? Absolutely, there’s enough new money entering to allow for them to swap places with someone.
Could Satoshi cash out billions and billions in bitcoin? No, absolutely not. There isn’t the requisite amount of new money entering, and the miners need most of it to burn coal.
This is obviously a simplification but I think it is instructive.
When you go to a casino to play Poker, as condition to play you must pay chips every hand called a "rake". When you and everyone else walks out of the casino while there may still be winners there will likely be more losers, and the total is negative. The casino has some of your money. That's a negative sum game.
With mining bitcoin is equivalent to the casino scenario. Except instead of the casino keeping the money as profit, it's using that money to buy energy. Then you add onto that the exchanges taking a fee on top of that.
Bitcoin is short term capitalism driven to extremes. People are worshipping money because it earns a return in the financial world. When money earns a return in itself people will "quit" the real world to live in the financial world. They will even destroy the real world through mining if that is what it takes to be accepted into the financial utopia.
The store of value story doesn't hold up for me though. Fiat is actually a better store of value (this isn't necessarily a good thing by the way) because debts and tax obligations force people to both accept it as income and use it for spending. If we assumed 0% inflation then acquisition of money is basically the same as indebting someone else, forcing them to work for your benefit. If billionaires were immortal it would not be unimaginable that they could withhold their money for entire lifetimes forcing people to be unemployed for their entire life and yet the obligation to work for the money would persist long after the death of the worker. How could this possibly make sense?
A store of value is effectively a promise that someone else will give you your money (or good or service) back in the future plus compensation for the costs of parting with the money (inflation, opportunity cost, friction, a desire to make a living). We already have these and we call them bonds. The difference is that you aren't forced to accept bonds as legal tender. The reason why this system is fair is that it is voluntary. Nobody has to buy government bonds if they don't want to.
It feels to me that Bitcoin isn't an alternative to the current system. It is an extremely overexaggerated parody of our current system. Consider that there have been thousands of "tokens" and the vast majority of them don't even share a tiny bit of similarity with the hundreds of complementary currencies that were created during the great depression. Those complementary currencies were specifically designed to avoid recessions and poverty within regional communities.
When you say "absolutely legit" what exactly do you mean? That they clearly have anti-money laundering programs in place?
Or do you mean they are "absolutely legit" in the sense that they created a foreign entity that shouldn't be held to U.S. anti-money laundering laws?
They are absolutely guilty of what they are accused of here - they allowed US persons to trade in violation of US futures laws. They were trying to play the "we block US IPs, therefore we block US persons" card, which is laughable enough that they were never going to fool anyone serious.
Is it? What are your sources?
I also very much doubt that selling USD 100M worth of crypto over the course of a couple of months will have any sizable effects on the markets.