Bitcoin Price Falls Below $35,000 in Tandem with Stock Selloff
wsj.com
wsj.com
Hope the author got a kickback for that ridiculous quote.
I think the subtext of this particular response to your question is also that Tether is a buck wild part of the cryptoasset ecosystem, being the people in whom the most trust has been placed, even though they have been repeatedly demonstrated to be lying and have obvious and severe conflicts of interest, and it's just a crazy rabbit hole and systemic risk that ought to be discrediting to the ecosystem as a whole. But time and again cryptoasset folks will roll their eyes and say, "This again?"
I'm frankly not interested in taking the time to cite any of this, but if you throw Tether into the HN search, there are many, many credible takedowns of Tether.
* At least, this is how I interpret "store of liquidity," liquidity isn't something you store? It's the property of a marketplace to execute trades readily and at a low cost? So this may be some jargon from the cryptoasset community with some alternative meaning.
And Bitcoin is pretty liquid, at the moment if you market sold $5m million dollars worth of bitcoin on bitstamp you'd drop the price by about 1% and bitstamp is by no means the largest exchange. Obviously not being quite as bone headed as making bulk market order would do better.
... now, how much VTI shares can you sell right now? None. The major equities markets are closed. When the markets are open, sure big equities indexes are very liquid, but many single stocks -- even fairly large ones it would be pretty hard to move $5m in an instant without crushing the price.
If you have $3000 in stocks and you want need $100 you can sell the stock and then buy it back on your next paycheck. But unless your account is over a certain size, you can only do this so many times in a specified period.
Since this restriction doesn't exist with crypto, you can sell and buy back the same crypto 1000 times in a day if you want to (and many bot operators do this)
I suspect there's a huge churn of "we bought nth-generation kit, the old n-1 generation stuff is worthless scrap silicon" in that sector, especially with things like BTC-specific ASICs that won't do well on newer hash lagorithms.
Why did they become so valuable? Because people believed in the bigger-fool theory, somebody would be paying even more for the tulip-bulbs you just bought. Or if not more, at least the same price. So you could keep your wealth in a very liquid inflation-protected financial instrument called tulip-bulbs.
Isn't that much what has happened with Bitcoin?
If your meaning instead was that the US dollar is backed by something (e.g. "labor/production"), then I'd argue this is incorrect. In economics, when X is backed by Y, it means that there is a guarantee that X can be converted for some known amount of Y. This is not the case for the US dollar although it's true that in practice, it does behave a lot as if.
The American work ethic has so far backed this up, but yeah there is always a risk that this will not be fulfilled - ex: "The great resignation"
So bitcoin's "promise" is their marketing? "The next internet, currency, etc."? I will be careful with this, since the last 2 crises (dotcom and mortgage securities) were similar empty promises hyped by the rich - i.e. lies.
USD can be used to pay your taxes.
The victims are the last people to put USD into the crypto system, the fraudsters the ones who set it all up and collect the USD.
The deception is that BTC is a currency, or an asset, or a technology, or indeed anything other than a complicated way to pay early entrants with money from later players.
Do you understand tulip bulbs pretty well too?
(emph mine)
Looking what just about any two bit shyster crypto "exchange" invests into marketing belies that statement.
As an example: crypto.com blew 700M $ for the naming rights of the former Staples Center.
That's apart from the cash they blow into Formula 1.
While you are right that Bitcoin doesn't have a formal marketing team the industry as such is blowing billions into marketing.
So you are completely wrong, USD has value because of the US government, not because of the 'greater fool'.
Similarly the value of gold can go up or down much faster or slower than the value of oil for instance.
But with gold or oil there is much more "intrinsic value" than with Bitcoin. It seems to me that Bitcoin has zero intrinsic value. You need a bigger or as big a fool to get your money back. Not saying that Bitcoin might not be a good investment, but currently it is down 31.65% in a month. It is not a good "store for money".
Fool me once, shame on you. Fool me twice shame on me :-)
https://www.google.com/search?q=bitcoin+rate&rlz=1C1CHBF_enU...
self-custody of a hard money cancels risky credit
https://en.wikipedia.org/wiki/Money_burning
Smart/rich people are always betting on potential gains on the market - i.e. they are always searching for the next best investment, they key is to find out where that money is going to be parked next.
> The Fed can influence the money supply by modifying reserve requirements, which generally refers to the amount of funds banks must hold against deposits in bank accounts. By lowering the reserve requirements, banks are able to loan more money, which increases the overall supply of money in the economy. Conversely, by raising the banks' reserve requirements, the Fed is able to decrease the size of the money supply.
https://www.investopedia.com/ask/answers/07/central-banks.as...
Have a look at the following:
> Open market operations (OMO) refers to the Federal Reserve (the Fed) practice of buying and selling U.S. Treasury securities, along with other securities, on the open market in order to regulate the supply of money that is on reserve in U.S. banks. The Fed purchases Treasury securities to increase the supply of money and sells them to reduce the supply of money. The objective of OMOs is to manipulate the short-term interest rate and the supply of base money in an economy. By conducting open market operations, the Federal Reserve can achieve the desired target federal funds rate by providing or removing liquidity to commercial banks by buying or selling government bonds from or to them.
https://www.investopedia.com/terms/o/openmarketoperations.as...
> The Fed buys U.S. Treasuries and other securities from its member banks and replaces them with credit. All central banks have this unique ability to create credit out of thin air. That’s just like printing money.
> ...
> The Fed can also reverse the effects of quantitative easing (QE). It does this by selling Treasuries and mortgage-backed securities to its banks. The Fed removes dollars from the banks' balance sheets and replaces them with these securities. What happens to the dollars? They vanish. In other words, they go back into thin air, where the Fed got them in the first place.
https://www.thebalance.com/is-the-federal-reserve-printing-m...
Another insight you can get from these articles: the Fed buys US Treasuries from the US government, also with money from thin air. So it's not really possible for the government to go bankrupt or for treasury interest rates to skyrocket, because (1) the government can always raise more money by issuing treasury bonds, (2) the Fed serves as the treasury buyer of last resort, and (3) the Fed will buy the bonds at whatever interest rate it likes. Since it's the Fed's job to keep the economy stable for the US government, it will always do this if the government needs it to.
As evidence that this structure can work, check out Japan, where national debt is currently over 250% of GDP... but interest rates are extremely low. Because Japan's central bank serves as the treasury buyer of last resort, and keeps interest rates low in service to the government.
Demurrage currency is designed to have a stable money velocity. Regular currency can simply stop circulating. I. e the fed has no control over money that is being stock piled.
I suppose the similarity depends on to whom the printed money goes?
Financial assets can disappear from a balance sheet when it becomes clear they will never be paid. That's what happens when a debt is written off. Similarly when stock drops and is marked to market.
These assets are essentially predictions of future income. Sometimes that income never materializes. The promise was broken or the prediction was over-optimistic. People discover they're not as rich as they thought.
For a cryptocurrency, the only expected future income is from other people buying when you sell. If other people aren't there to buy at the price you expected, your prediction is just wrong.
It's also the case that money velocity can always slow to a crawl. If it reaches a point where people figure they are more likely to keep value by just holding the money instead of investing it into something due to falling asset values, that can overcome even the desire to beat inflation. It's all very situational, but sometimes money doesn't get invested, or at least the rate at which it changes hands slows down due to a lack of good investments in the system.
1. The Fed: Thank you for providing resources to answer the 1st part of the question.
2. The rich: For the people who sold off stocks or real state at its peak, where are they going to park that cash next, if not speculative assets?
Those taking the money out may have liquidity needs elsewhere due to expected Fed actions, or may have lost confidence that the asset will appreciate at the rate needed to justify the investment at higher interest rates.
Just my speculation. It's interesting to think about!
Are you sure? All the stocks that got bumped during covid are now down/or on their way to pre-pandemic levels. Even FAANGs that were supposed to fuel the stay at home trend: Amazon, Netflix (-20%). Crypto might be next...
Somebody is making a killing, where will that gain go next?
There's only "more money" if you look at one side, and only one side, as "the savvy speculator" who is always looking for a new place to park the money.
The question still remains, where are they going to park these profits?
This is still true when we're talking about institutions. Some institutions profit and others lose. Cathy Wood's record is far from perfect and she is losing big time right now.