$130B wiped off crypto markets in 24 hours
cnbc.com
cnbc.com
If you look at a 5 year chart of the BTC value, it's still super insane high and it's been going down hard once before (summer 2021). If I were a crypto fan I'd just tweet HODL like every previous time.
I find this funny, my tech stocks portfolio has gone down 10% since the beginning of the year. I do monthly investing, so that's a loss compared to my average price over time.
In contrast, I bought ETH at around $20 USD, and it being at $2000 is still quite a good outcome for me.
Who knows.
More so explain to me how the USD is less of a Ponzi scheme when it is the super wealthy banks/institutions that are getting zero interest loans allowing them to make even more money while at the same time devaluating the currency.
https://www.ceicdata.com/en/switzerland/official-reserve-ass...
I hadn't considered how many reserves have probably shifted to euros since the euro, that's actually a big deal for the US. Anyway...
It’s value is in how robust it’s value it is. It isn’t robust at all and has lost 30% or more of its value since the start of the pandemic if you look at commodities.
I plugged it into Wolfram Alpha and it showed some solutions. Some go up to infinity and some go down to zero. So the first guy was right after all!
USD has inherent value, it's the only currency where you can pay taxes in, and if you want to do business with government or government employees - who are ever only paid in USD - you must accept USD.
Even something like gold with no value production - whose price is quite stable because of that by the way - has value because people want it for jewellery and industry.
“Most” is the key difference: a share of Tesla is fractional ownership in a real business which has proven capable of selling real products which people want. Some fraction of that is definitely speculative but far from all of it, and there's no reason to think that the value would decline to zero under any feasible economic situation.
A Bitcoin, in contrast, has no value other than what you can convince someone else to buy it for. Nobody needs it to conduct business, it's trivial to set up competing blockchains, and the deflationary model is designed to make you profitfrom everyone who starts buying later despite not having created any new value.
I don't know, I pay my taxes in EUR, I live in EU. But I get your point. Moreover, USD is the most dominant coin in the world. Even outside USA, a lot of people depend on it.
1. Immutability
2. Limited supply
3. Censorship-resistance
4. Independence of governments, nations, banks, institutions, corporations
5. Accessibility
You can also pay your taxes in crypto in many countries.
The dollar’s inherent value is very weak and not really tangible.
It’s 2022 and people still don’t get that.
The currency of a nation has inherent monetary value because it is backed by the state; the details of what that means will vary from jurisdiction to jurisdiction, but except in states undergoing massive crises, you can still be sure that if you hold their currency, you have something of value and can transact business.
Bitcoin is backed by nothing but other people holding Bitcoin.
As for the attributes you list:
1. Immutability is a double-edged sword. There are legitimate situations where you want mutability.
2. Artificial scarcity of a digital thing is only beneficial if you are among those holding large amounts of it.
3 & 4 (basically the same). This is both a huge negative for many people, and only true until those institutions' policies, laws, regulations, etc catch up with Bitcoin and either fit it within their existing structures or ban it entirely.
5. It's really not that accessible unless you're already fairly wealthy and digitally savvy.
Independence, you are very much dependent on the internet, miners, etc. Yes, you can use the tool to avoid detection of a nefarious state actor. But you'd be breaking the local law, willingly and knowingly. That's a risk. At one point, police are going to recognize these sweet 'lil Ledger and Trezor hardware wallets. Furthermore, if a large local economy would collapse, like say in my case EUR, it'd take Bitcoin with it. I admit, it makes sense to avoid currency in small economies in crook countries, but you're choosing for your own benefit instead of the state you live in.
Accessibility, since a lot of people use mobile smartphones, they cannot sync the blockchain to it. Many are dependent on third party like exchanges. Hardly independent of corporations.
Immutability, you can lose your private key and be done with it. If I lose my bank card, I can disable it and just get a new one. With NFTs, these depend on a third party resource. Which depends on USD or EUR or whatever in order to be paid. These also depend on authority of whoever made the blockchain or smart contract.
You didn't mention anonymity, because Bitcoin isn't. Yes, it takes effort, but it can be anonymized. The reason it supposedly doesn't happen is 1) if you are investigator and know a vulnerability to do so, you're best to keep it private for reuse 2) you apply parallel construction instead. But specialists who can do this exist. Its just that they're expensive, so they only go after big fish not Pablo who sends some Bitcoin from El Salvador to USA.
> You can also pay your taxes in crypto in many countries.
(It is called cryptocurrency, not crypto, but yes you can recognize cryptocurrency proponents by the way they call their asset.)
No, I cannot, as Bitcoin is not a currency. I have to pay my tax in EUR.
> It’s 2022 and people still don’t get that.
This kind of straw man is useless.
1. Immutability - clearly a negative feature, no way for humans to manage transactions and correct mistakes.
2. Limited supply - very bad for a "currency"
3. No censorship resistance in bitcoin, but ease of tax evasion due to exterritorial nature. IRS may find you easily but can't do anything. On the other hand oppressive regimes can both find you can prosecute you because in that case you are physically in the regime's country.
4. Dependence on a handful of anonymous guys in the non extradition offshore printing tokens to pump price with zero oversite. I pick governments. Also Bitcoins are not really independent from governments for the lawful citizens.
5. Zero accessibility after more than a decade in production.
Here is a very direct question:
How does BTC or any other currency protect itself from a goverment?
Imagine that a very big government decides to mine BTCs, will not they control the BTC if they have enough miners? And when I say a government controls imagine: slowing down mining, making it illegal, or limiting it in general population, forcing people to declare thei cryptocurrencies, putting a cap on how much one person can hold personally and forcing you to keep them in an official wallet ...
So how can a crypto currency be independent from a government. The government makes laws and as a citizen you are forced to follow them. Crypto cannot escape this, no matter the technology as the control is not technological, is legal, political and social. It is a social contract that I agree a technology can make it harder to discover some nasty business a citizen is doing, but that does not mean it cannot be control.
Don't get me started on corporations. Imagine Google or AWS decides to use his computing power to mine BTCs or whatever crypto. They will in fact control de market.
Please hypothetically prove me wrong with arguments.
This all already happened multiple times, but miners are so distributed across the globe that this has nearly no impact.
It’s also pretty hard for a country to spin up this much mining power, because it simply takes a lot of time to manufacture ASICs.
It’s also very expensive. $34B at the very least and rather $100B. https://gobitcoin.io/tools/cost-51-attack/
No country has this much free cash available for shenanigans like this, not even the US.
In assets there is can of course be inherent value (food, a sturdy house, land, etc.).
What value has a premium steak to a vegan?
If your house is on 0.5 acre of land and you add another acre it might great but if you had 500 acres of land and added another one you wound't even notice.
Why people tend to value diamonds more than water which is essential to live? If you receive two copies of the same magazine you like to read does the second copy holds some value to you?
The steak has calories and nutrients, regardless of who holds it (until it goes bad). Those are inherently valuable to any human being.
Your secondary point is about the law of diminishing returns, it’s a non-sequitur.
Water is inherently valuable for obvious reasons. Diamonds have inherent value in their hardness although that has little to do with their market value, that isn’t based on inherent value.
The magazine isn't inherently valuable. The information in it could be if one can decipher it. But additional copies of information don't make new information, so one or a hundred magazines, it makes no difference in inherent value.
"Inherent" implies independent of any individual buyer demanding it. Even if the buyer is federal govt.
Crypto currencies if anything are a bit like distributed pump and dumps, but at that point you're just talking about asset speculation.
Are you saying it’s inherent value comes from it being a protection racket.?
Bitcoin is better at laundering money than many fiat currencies but otherwise it’s only wide scale utility is a speculative investment asset that only increases in value if more people create demand for its limited supply.
Also, every ponzi scheme gives amazing returns, before it inevitably collapses. For example Madoff was able to give decent returns to his investors for 17 years! 'Number go up' is not a refutation of a ponzi scheme.
Guess which governments have the most of both.
This comment is a great example of how little bitcoin enthusiasts tend to understand about investing. One of this things is very much not like the others.
"Fiat currency" is virtually never used as an investment asset. Even in the FOREX market you purchases pairs of currency rather than just a big pile of dollars. In your 401k when you want to go all "cash" you very often end up choosing investment vehicles that track cash.
The entire function of a currency is as a medium of exchange, it only has value in the process of exchanging. It makes no sense, at the individual investor level, to 'hold' dollars.
If you don't understand how a fiat currency differs from gold and fine art then you absolutely should not be "investing" in bitcoin.
I think HN is going to need a good explanation for this. The value is intrinsic, and can go up without any activity happening... I think there are other fools scouring about here in the comments.
I think you need to explain this. In what way does bitcoin have any intrinsic value?
And how can this value go up without activity? A currency with no activity is literally worthless.
To some confident people, this is just a flash sale.
A friend of mine made a decent amount just tracking the tweets of Elon Musk and other coin influencers a few years ago.
Which ones would you say are not?
In the end all you're doing is buying electricity and converting it to bitcoin, anything above that cost is based on future costs when the rewards halve.
All this means you should never sell your bitcoins, which means it's a terrible currency
To any investor this should be the biggest red flag that you are in a Ponzi/pump and dump scheme. "You can't lose!"
And rather than you are "buying electricity" I would say you are buying used electricity, which is useless.
The red flag is you're buying something that's useless. The cost of a bitcoin may be correct, but doesn't mean it's worth the cost.
That is to say, very large amounts of new money are being lost.
^ No, I’m not a desperate idiot, I’m just testing my feelings in trading in general on $1k, to stay calm and not act crazy in a real investment situation
1. The world decides it's "tulips" at some point, and the value goes to 0.
2. The world decides it will be a major part of the financial system, and it goes to 500k or 1 million.
Basically, anything in between is just a probability calculation of whether it will end up at one end or the other.
The problem with this, though, is that the way proof of work works means that it is impossible that it will ever go to a million. The amount of electricity needed to protect the network is directly tied to the price of BTC. This is not just some small, inconvenient detail. It is inherent to how proof of work functions. So if it takes the electrical output of, say, Argentina to run Bitcoin now, it will take the output of China to run it when it's up around a million, and that obviously is untenable.
Other cryptocurrencies have seen the writing on the wall and are moving to proof of stake (not without other issues). But the politics of Bitcoin mining, and the few large mining groups, makes it hard for me to see how this happens.
> anything in between is just a probability calculation of whether it will end up at one end or the other.
There is some strong assumption you’re leaving out here.
But yes, with your point overall I agree, like in 10 years or something it doesn't seem workable without major changes. Wasn't that what lightening or side chains were supposed to do?
Any way, also, I don't own any crypto and I'm definitely not defending it. Feel free to correct me too if I'm mistaken, anyone.
If 1 coin costs $50,000, and you already own the rig, it's worth spending $49,999 on electricity to mine the next coin and you will make a profit. If you're rig can't do that, you're better off just turning it off.
Close, but not correct. As the price of BTC goes up, so does the expected reward for mining any given block, making it profitable to spend more electricity in pursuit of the rewards. This results in a net increase in electricity usage as everyone spends more in an attempt to capture the rising value of mining a block successfully.
In practice each miner is incentivized to spend an equal amount in electricity per block (at local rates) as the expected reward per block will net them. This results in a 51% attack being inordinately expensive, which was the point of the original design.
And thereby offsetting other inelastic demand for electricity, forcing them to count on non-renewables instead.
Bitcoin might be renewable if every single miner pinky swears to turn their rigs off the moment renewables stop over-producing, but come on, nobody believes that'll happen.
> Despite what the born-again eco-warriors have to say about consumption and the environment, Bitcoin can actually be an incentive for safe energy sources.
Interesting you've got to put an ad hominem in there about people who care about the environment. Probably not a good sign for the second half of this sentence, and it makes me wonder if you're representing other's positions in good faith.
Also, oops: https://e360.yale.edu/digest/bitcoin-miners-resurrect-fossil...
Sure, bitcoin miners will use cheap renewables if they're available. They'll also happily use whatever the hell is available too given the opportunity, since they need to use so much of the stuff. They're particularly notorious for driving up electricity rates locally as they turn previously abundant renewable hydro energy into a over-subscribed resource, requiring towns to import electricity from, yes, fossil fuel plants.
As the block reward goes down (and it is dropping), the rewards of mining also drop, so you have a reasonable argument that the power use is transitory until the block reward goes to 0. However, it looks like this may end up being made up with transaction fees because the transaction throughput of bitcoin is also really low.
Lightning and other solutions are supposed to fix the transaction throughput, but they have limitations.
> Every 2,016 blocks (approximately 14 days given roughly 10 minutes per block), nodes deterministically adjust the difficulty target based on the recent rate of block generation, with the aim of keeping the average time between new blocks at ten minutes.
So the changes are made at somewhat predictable paces, in this case roughly every 14 minutes, but the difficulty is adjusted based on demand. In other words, it's a little of both. Demand though will definitely affect the difficulty of the problems, but the demand is only updated every 2,016 blocks.
Only indirectly. More precisely the difficulty is based on supply of hashing power. If more people hash, the blocks will be minted faster and the difficulty will be adjusted higher at the next re-adjustment. It doesn't really matter if those blocks are actually full or empty, and in fact the system would continue to work if most of the blocks were empty and the trading happened off the chain in exchanges.
I say indirectly because the amount of hashing power on the chain at any given moment is driven by the expected reward per block minted. Nobody wants to run thirsty machines if the cost of electricity exceeds the expected rewards for successfully minting a block. So the number of machines online and is directly proportional to the value of bitcoin, which is driven by consumer demand.
Simply put, there's just no path forwards where Bitcoin retains it's value long-term. Other crypto is harder to grok (often intentionally so), but I suspect they'll meet a similar fate once the media attention blows over.
That is actually one of the strongest arguments, to my mind, for why some variant of a cryptocurrency will survive as a store of value. Gold kind of "organically" found its way into value almost precisely because it is backed by the physical laws of nature. Cryptocurrencies went up a level to be backed by the laws of mathematics.
Bitcoin is also a Schelling point.
Making gold has always been the holy grail of chemistry. It's only valuable because chemistry says you can't make it easily.
3. It continues to be used very little/nothing in the legitimate financial system while being used for blackmail, drug trade, crypto trade etc. Price $1000.
This is not how proof of work functions. Hash rate and price are not directly related, they are somewhat correlated because when the price goes up it becomes more profitable to mine. Bitcoin doesn't need more hash rate for the price to go up - the price is the independent variable and the hash rate is the dependent variable.
The whole point of proof of work is that it is proof that someone has spent the value in electricity validating a block.
As the price of bitcoin rises, naturally more and more miners will beef up their rigs (that is, spend more money in infrastructure and electricity) to mine BTC, because the rewards and fees are worth more. Note if they didn't do this, anyone could easily have a "free money" arbitrage play, and basic economics says that discrepancy in prices (i.e. the value of a BTC on the market and the cost to mine one) must be arbitraged away.
Think of it this way, if hash rate is independent of price, why does it take the electricity output of Argentina to run the network? It certainly didn't take that much years ago. The reason being that as BTC becomes more valuable there is more reward and thus more competition for miners to mine. As that happens, the hash rate will rise as more power is added to the network.
It's really not as simple as hash rate = price. It's more so that they are correlated in direction of change.
Why? I keep seeing this claim and it makes no sense to me.
Of course, they would beef up their rigs (spending commensurately more in electricity), and the required hash difficulty would go up to keep the mining speed at a block per 10 minutes.
Another way to think of it, is why do you think the electricity requirements of Bitcoin are now the output of Argentina? Years ago they were a teeny fraction of that. As Bitcoin became more valuable, the competition for mining increased, so the hash difficulty adjusted to ensure the new block rate matched the higher wattage miners were willing to put in to increase their hash rates.
There is a guaranteed deep correlation between BTC price and amount of electricity needed to run the BTC network. That is the way proof of work is designed to function. I.e the whole way it protects against a 51% attack. There is simply no getting around this.
""" If 1 coin costs $50,000, and you already own the rig, it's worth spending $49,999 on electricity to mine the next coin and you will make a profit. If you're rig can't do that, you're better off just turning it off. """
Note that this is how it worked for bitcoin startup five years ago once the first specialized bitcoin rigs came into being. When the price of electricity where they operated became too high, some startup shut out or just changed their operations to create value around BTC(email/photograph ID/validation on the blockchain or other stuff like that)
Seems to me like bitcoin could keep seesawing on the fringes of relevance for a while. And people still buy tulips and beanie babies, albeit not anywhere near the prices at their height.
Tulips are pretty flowers.
Beanie babies are cute toys that you can play with.
Bitcoin is a purely virtual financial instrument. It has no purpose other than to be worth money.
I agree that Proof of Work has a severe scaling problem; which is why I expect Proof of Stake to outcompete PoW (a token with lower transaction costs being inherently more desirable as a store of value). AFAICT PoS scales linearly: as the market cap goes up, the opportunity cost of locking tokens, and the mining rewards, both go up proportionally. It'll be interesting to see if BTC maxi culture sees the writing on the wall, or sticks to their guns to the bitter end; even if they're right that it's a better security model (I'm doubtful), it wouldn't be the first time that "good enough" won the market.
I suppose the biggest reason that we'll never see PoW vanish completely, even if carbon-taxed or outlawed by most states, is the massive capital outlay in ASIC mining hardware, which literally has no other use. There'll always be a desire to recoup that investment, and an incentive to foster "true believers" to maintain demand.
Where does this belief come from?
Dollars are also a major part of the financial system, at yet each dollar is only worth $1.
This depends on the value of bitcoin, true, but also the amount users are paying in fees and the reward era we are in (see https://en.bitcoin.it/wiki/Controlled_supply).
I would say that it's hard to credit the idea that Bitcoin is "the new gold" or any sort of safe haven asset. Just like the rest of crypto, it crashes when stocks crash, but harder. It's more like a high-flying tech stock.
A stable crypto-currency will not attract so much speculative investment.
0 - Which crypto currencies actually function as currencies is a matter of debate.
Maybe that will help me to better understand cryptocurrencies “investors”.
In practice that doesn’t make a difference because all the mechanics are the same as any other form of investment decision.
As far as whether treasury asset allocations are investing or not is largely in the eye of the beholder but companies very frequently prefer to hold “cash equivalents” beyond their immediate operational requirements. If a treasury buys us tbills that is both a traditional investment & a fx position (in that it’s a usd we are viewing preferentially over other currencies in our portfolio).
Stock is ownership in a business which creates value over time (shoes, tweets, cars, etc) which is captured in a variety of ways, like selling through retail or ads or whatever - without selling the stock.
This is why currencies, gold and the like are not investments. They do not, in and of themselves, create value. They may be good to buy/hold anyway though!
- Consider them currencies
- Describing the fact of holding positions on currencies for operational purposes as an investment
- Thinking that cryptocurrencies accomplish the second point
These things will not ever be real if we don't start using them as currencies. I came this close to proposing Monero transactions to a business partner after some banking problems but the market isn't looking good right now, too volatile.
I also remember seeing at least one artist accepting XMR for cryptocurrency-related art. Plenty of people were spending XMR on that person.
The CBDC idea might bring the best of both worlds.
So let's say I don't want to put my money into something that is only 1% backed (See the Greek dept crisis). I could store cash under my mattress, but that also has some major risks.
With a stablecoin like UST, you 100% own it. Governments can't confiscate it. It's 100% backed by the asset behind it (not talking about Tether here ;)). I do agree that it comes with its own set of risks, but some people might prefer that risk over the ones above.
Or maybe I'm a foreigner and want to keep some of my personal value in dollars, but don't want to do that in cash or at some local bank.
It's basically another option at your disposal. And as the market cap of those stable coins prove, lots of people prefer that.
So no, your statement is incorrect.
So in case of UST, as long as the Terra network is up, your coins are there.
What would it take for a government to take down the Terra network? I guess more than what it takes to take down the BitTorrent network. And last time I checked, I can still download any movie on there.
So a government being able to confiscate a wallet on a blockchain, seems very unlikely if you protect it well.
USD Coin has $42 billion, Binance USD has $12 billion, Terra USD $9 billion, Dai $8 billion, ...
you were saying?
This can technically happen with other currencies, of course, but they're so much larger and more stable that it's orders of magnitude less likely. You need a world-shaking catastrophe not to find someone willing to take USD because so many contracts are written in USD, and there's plenty of need to pay taxes or interact with government contracts and employees.
No, it's not. See wave after wave of stories about people thinking that crypto was anonymous only to be arrested for drug crimes and tax evasion.
I think the thing that's giving the regulators heartburn is the fear that this is looking like a massive bubble.
The limited throughput of the blockchain was always going to be a particularly bad problem.
But this is a just-so story, and would be hard to validate, given that there are going to be a lot of confounding factors.
I suspect it will drop another 20% though, back to mid 2020 levels. Fed will start to intervene if it goes beyond that, too many votes. Its like house prices in the UK, the government won't allow them to drop.
It's the same point above: this is what markets do. Investment strategies are risk management strategies. You can't just dump money into whatever is going up right now and then complain when it goes down.
Not exactly, so I'm not down 9% in my 529. I set target dates and my financial institution has shifted them to more stable assets based on that. I just checked and it's only 19% stocks.
As an aside, using a 529 for a tax shelter wouldn't work very well because of the penalties incurred if it is not used for education. 100% of the funds I have saved here are for tuition purposes -- I started doing this years before we had children.
But with a long enough pole and a firm-enough place to stand, you could move the world! <ducks>
It's true that's not captured in the headline, but this is a newsworthy crypto crash. It's not the first or the worst, but it's worth covering.
Retail is already all the way in. Institutions have mandates that restrict them to trading venues, types of instruments, jurisdictions (some can only invest domestically, and so cannot use foreign ETFs), and so on and so on.
There is a reason why MSTR was able to raise mountains of debt to buy Bitcoin.
It's all institutional money.
What did you get last month?
What do you thought the "N" stood for or you thought it was a placeholder so that acronym is not offensive.
Big Tech stocks have changed since FANG/FAANG was coined, the term doesn't necessarily relate to what was big and heading for explosive growth back then. "FAANG" is a noun that doesn't necessarily mean "Facebook Amazon Apple Netflix Google" any more
But did not say they were wrong and Netflix was actually the same as Bitcoin.
They edited it to another group to prove their point.
Which to be honest confirms the original implication, they are picking and choosing for politics.
OP point is clear to me, everyone can trash talk Bitcoin from twitter rote, but no one is actually thinking. How does it relate to the US equity market? The top comments are currently very uninspiring.
The idea behind FAANG was to create a catchy acronym for "high-growth, big-cap tech stock". At the time, maybe it made sense to stick Netflix in the acronym - but their business model was also radically different than it is now. It also wasn't really sustainable: Facebook, Apple, Amazon, and Google all own their "moats[0]", Netflix is just a middle-man that licenses content.
The FAANG business model is all about creating your own sovereign territory on the Internet through capex and licensing. You spend a lot of money building out the best tech platform possible, and then license that out to as many people as possible so you can take 30%[1] off of the top of every transaction ever. This also implies being "cynically inclusive": trying to onboard anyone and everyone, regardless of their absolute economic value as a customer or the company's ability to support them. 30% of pennies adds up across billions of individual publishers.
Netflix does not do this, never have, and never will. They only license premium video content, which means they're exclusively working with people who actually have negotiating leverage. Furthermore, the people selling that content are better-capitalized than Netflix and can afford to just DIY/self-host their own streaming service. Thus, their business model is less like YouTube, and more like Comcast. The amount of profit Netflix can make off of premium content is far lower than FAANG companies make off of the "30% of pennies" model. That's also why they moved into content production - owning the shows is more valuable than owning the screens they are showed on.
Counting Netflix as a FAANG makes absolutely no sense and we should just pretend the N stands for, oh... I dunno. Does Alphabet own an "N" company yet? Is there any other platform owner out there that has an "n" somewhere in their name?
[0] A tech company euphemism for a monopoly. Amazon likes to call it a "flywheel". Other companies use the phrase "stickiness".
[1] A lot has been made of "the 30%", especially in the context of Epic v. Apple. In my opinion, the problem is not the fact that the cut is 30%, or even that it exists at all; it's just a convenient shorthand for market power gained from owning the platform.
I always mentally treat the 'N' as standing for Microsoft. The letter isn't right, but FAAMG isn't as easy to pronounce as FAANG...
US money printer.
Inflation hedge.
Do you think we forget what the crypto-bros said just a few months ago?
You especially can't be an inflation hedge if you drop while inflation goes up.
Neither is as volatile as crypto, but my point is no asset has a guarantee that its value won't "drop randomly", simply not possible. Inflation was positive during the real estate crash of '08 and during multiple gold bear markets. If your time horizon is long enough, a volatile asset can still be a good inflation hedge.
Oil, housing, car prices all dropped at that time. Prices dropped so low that companies like General Motors went bankrupt.
-------
We face an opposite problem today. Prices are going up. Old established companies love this, they can sell their stuff at higher prices. Aka, inflation. Turns out crypto was terrible at hedging this scenario.
Most assets have tanked in the last couple months, so it's sort of misleading to single out crypto.
Don't conflate people talking about something with the thing itself.
Bitcoin doesn't have a HN account. Listening to people talk about it is the only way to get information about it.
Magnificent and as expected. We needed a 'crash'.
This is nothing. This is before the banning, and crackdowns of the other useless cryptocurrencies and the tether scam. So let us sit back and watch it go even lower.
One more thing for those who bought BTC at the top with their life savings: [1]
I know people that bought at the peak in 2019 at $20k despite me laughing at them. They sold them last year, more than doubled their money and had a nice holiday. Don't know many that bought last year other than those that just buy every month come rain-or-shine.
Everyone knows bitcoin is nothing more than greater-fool gambling with a side effect of enabling a lot of criminal computer activity (ransomware, sextortion, etc).
Right now, this is just the usual ebb and flow.
What I think is interesting about crypto is that it has the potential to go to zero because it has zero intrinsic value, unlike for example dot-com stocks, many of which had some value in the form of cashflow.
The two most likely scenarios that could cause a crash to zero, in my mind, are an unrecoverable vulnerability in a blockchain, or a brutal and global regulatory clampdown. The latter may not cause a crash to zero if some underground activity remains.
The probability of the globe simply falling out of love and discarding this new value store like a wilting tulip is unlikely in my opinion.
It happened in all previous bubbles, it will happen again. "crypto" could have been literally anything. Its not pretty, it does not reflect well on society that it can be so abusive of its more gullible members. But I guess we didn't need this particular pathology to figure that out.
does it even have a THEORETICAL path to value?
I'll take my currently existing and computationally reinforced and yes bubbly increase of value.
If Bitcoin falls to 0$ tomorrow, the vast majority of people would shrug and move on with their lives.
i'm pretty sure we're already there in 2022.
If you take the 7% inflation of 2021 at face value, and apply it to the M1 money supply, the headline of this article (130B lost) played out for USD eleven times in 2021 without recovering.
If I understand you correctly, I think you're implying that everything has to be speculative, like currencies too?
I'm implying that a currency should make an effort to maintain its value to be considered a currency. The fundamentals of USD are not backed by a trade surplus or by a demand for foreign reserves, as has been the case for the majority of time since the end of the gold standard. In this context, indefinite QE unsupported by economic growth puts USD in an unprecedented position, and is exposed to runaway inflation.
There's heavy dose of speculation present in any emerging market, but crypto, especially its smart contract sector, is not just speculation.
Most companies rely on hosted nodes across the entire crypto space, not just within the Ethereum one. That has more to do with wanting a highly-reliable node provider with a low likelihood of experiencing down time, for business critical applications, than running a node being difficult.
But there is no lock-in with or substantial dependence on Infura, because the private keys to your assets are stored on your own computer, or hardware wallet. The data Infura provides is public, and any node, including your own, can provide it.
So where is the Tether printing now? Since everybody agrees that Tether is unbacked and their printer can go brrr at will, why don't they just print more billions to prop the market up?
Two hours ago $100m USDC went into circulation. Almost another $100m two hours before that.
Tether - we’ll tether is not
Probably some institutional investor drove a garbage truck full of unmarked dollars in small denominations to some back alley near Circle headquarters.
You can look at the market cap here: https://coinmarketcap.com/currencies/tether/
IF the type of "printing" you were talking about were happening, you would see the market cap increasing with every print.
What does "Just printed $100,494,053 USDC!" mean?
I think this means that someone minted $100M of USDC by depositing USD.
The way this normally happens, USD deposits are made to an exchange that has a relationship with Circle, and 1 USDC is minted for each 1 USD on deposit at Circle.
Circle then invests those funds in things that are considered financially prudent, making some amount of money, but preserving the full amount of USD required to back the issued USDC. What they really do with the money has historically been the concern by people who don't trust corporate transparency, maybe rightfully so.
These "usdcoinprinter" tweets seem to imply that Circle is just making up fictional USDC not backed by anything to prop up the failing crypto market. As in, "we just minted $100M USDC which we'll now use to buy bitcoin, to keep the price of bitcoin high"? I'm not sure I see how that could work without Circle risking their entire business and probably committing some type of fraud.
On the other hand, the most popular (?) stablecoin, Tether (USDT) doesn’t have a one-to-one relationship with USD deposits, and the amount it really has in USD is believed to be very low (I don’t know the numbers, but have read that there haven’t been any audits or published audits).
But I find it generally a bit suspicious that people would choose to buy a stablecoin in order to buy bitcoin instead of buying the bitcoin directly (the explanation given is usually something about evading currency controls/KYC). In a bear market, I find it even more suspicious that there would still be more buyers than sellers of these stablecoins necessitating further creation.
Just to be clear, you're alleging a massive fraud by these people: https://www.crunchbase.com/organization/circle-2
> But I find it generally a bit suspicious that people would choose to buy a stablecoin in order to buy bitcoin instead of buying the bitcoin directly (the explanation given is usually something about evading currency controls/KYC).
I think it has more to do with how DeFi works. You can get huge yields on stablecoins right now (like 40%+), so a lot of people are taking money they would normally put in the stock market and are farming yields with stablecoins instead. I'm sure you'll identify this as a big red flag for scam, but it's actually not. It's the modern equivalent of saying "open a bank account with $100 and get a free toaster", except the numbers are much larger, and they're tokens instead of toasters.
> In a bear market, I find it even more suspicious that there would still be more buyers than sellers of these stablecoins necessitating further creation.
In a bull market, people sell their stablecoins to buy bitcoin. In a bear market, people sell their bitcoin to buy stablecoins.
And that's only what rose to the surface.
I'm more familiar with the people behind Tether, where I'm fairly confident they are crooks. I know nothing specifically about USDC except that the issuance patterns look similar.
> You can get huge yields on stablecoins right now (like 40%+), so a lot of people are taking money they would normally put in the stock market and are farming yields with stablecoins instead. I'm sure you'll identify this as a big red flag for scam, but it's actually not.
If there is an investment sector that promises such a massively higher yield than the rest of the economy, there are really only two possible explanations: (1) a massively higher risk of loss or (2) a scam. I've yet to see an explanation for why there is an enterprise that (a) can generate a 40% return and (b) would take crypto loans at 40% instead of taking fiat loans at much lower rates and buying their own crypto.
I've also yet to see an explanation for where those massive DeFi returns are supposed to come from. There doesn't seem to be any underlying economic activity, just finance all the way down. That would make the only revenue source the influx of new investment money, which has not, historically, proven to be a sound business to be in.
> I'm more familiar with the people behind Tether, where I'm fairly confident they are crooks. I know nothing specifically about USDC except that the issuance patterns look similar.
I think Tether are probably crooks that won't ever get caught, because I don't think their scheme will collapse, but I agree.
The main difference in issuance between USDC (Circle, New York) and GUSD (Gemini, Boston) vs USDT (Tether, US Virgin Islands) is that these are US companies playing by US laws to do business with US exchanges. They exist primarily because everyone is skeptical of Tether.
To be clear, neither USDC nor GUSD have full audits (they provide attestations like Tether), so some skepticism is definitely warranted. But know that these are US companies backed by US investors, selling products to other US companies.
For example, we know Gemini was founded by the Winklevoss's because they're very public about it. We know Tether was founded by Bitfinex because of the Paradise Papers.
While they could all technically be insolvent and none of us would know until it's too late, I trust the US stablecoins backed by prominent investors a lot more than I trust USDT.
> If there is an investment sector that promises such a massively higher yield than the rest of the economy, there are really only two possible explanations: (1) a massively higher risk of loss or (2) a scam.
I appreciate your skepticism, but you're missing another explanation: (3) innovation.
> I've yet to see an explanation for why there is an enterprise that (a) can generate a 40% return
Let me show you a live example for a hot project in DeFi right now. This launched 4 days ago: https://www.oxdao.fi/
See their medium post if you want to know why the DAO exists, but "farming" is a common thing in DeFi and you don't really have to know what the project does to do it: https://medium.com/@0xdao?p=86a8d6026191
If you stake your USDC there, you would currently be earning 37% APR on your USDC, paid to you in OXD. This rate of earning is highly volatile as it's based on the price of OXD, which is a brand new cryptocurrency that's still in price discovery. If you were to claim and sell your OXD as you earn it from staking USDC, the rate would be real.
If OXD is a very successful project, it could be worth a lot more. If it's a total failure, it could be worth noting. You get to decide when to enter and exit.
Assuming there's not a contract bug, the USDC will be returned to you in full when you decide to exit. If there is a contract bug, you lose your USDC and you get to read about what happened here: https://rekt.news/
This isn't a scam and the 40% return is real, but it's transitory. You're essentially temporarily pledging an asset to show support for the project, and you're receiving a share of the project in return.
When you decide to exit, you get the full amount of USDC returned to you, plus the OXD you earned, so your USDC is only at "contract risk" (vulnerable to a programming bug) and "opportunity risk" (maybe it could have made more elsewhere), but not "price risk" (vulnerable to a market crash).
> and (b) would take crypto loans at 40% instead of taking fiat loans at much lower rates and buying their own crypto.
The 40% isn't because someone is paying you to borrow that, it's because they're paying you in shares of their own (currently worthless?) project, and you're betting it'll perform better than USD parked in a money market account or treasury or wherever you keep USD.
This is an extremely common way of generating yield. Here's a dashboard you can use to learn more: https://defillama.com/protocols/yield
What does the project get out of this? Marketing, branding, confidence.
It's a huge vote of confidence that this project was able to lock over $4B in 4 days. The project is now has a market cap of over $30M on the tokens they've already handed out.
> I've also yet to see an explanation for where those massive DeFi returns are supposed to come from.
This particular example is a wonky one about DAO voting itself, so it's a bit meta, but the short answer really is "innovation".
If you don't find this explanation sufficient, let me know what's confusing and I'll try to help you understand it.
AFAIK noone borrows at 40%, as the parent said, at least with common tokens. There might be exceptions for borrowing niche tokens with massive issuance or what not.
People do borrow things like USDC at ~5%, sometimes higher. It varies a lot; see Compound or Aave for current market rates. These are basically margin loans, collateralized by tokens.
As for why users take these DeFi loans, sometimes it's just to access leverage, but I think it's mostly to chase those (say) 40% APRs. In theory they can make much more than the loan rate, though this assumes that the token they're farming retains its value, doesn't get hacked, the pool's rewards don't stop or get diluted too much, etc.
Why wouldn't those users instead take "TradFi" loans, which can be as low as ~1%? To access those low rates, I would need substantial collateral in stocks, real estate, etc. I might not have those assets (or I'm already borrowing what I can against them), whereas I might have e.g. BTC sitting around. I could sell the BTC, but that would be a taxable event, plus I might want to remain long BTC.
Is it a "fraud" is an open question because all that crap is unregulated wild west. They be doing it legally.
$47B in “revenue”, with probably a 99.99% margin.
Deal sized like this take a very long time, tons of legal work, audits, background checks, etc. To have multiple every day is nonsensical.
Another manipulation strategy is taking the price lower, collecting USD by having a bunch of suckers buy leveraged shorts, then manipulating the price up to wipe them out.
But what you can't do is try to use IOU printing to guard against the values of your IOU's falling, it just doesn't make sense when Timmy comes by and says "I want my $10k, here's the IOUs" that you say "Ok, wait a second, I have like $20k worth of IOU's I could give you instead, would that make you happy?". Because you aren't proping up the value of the IOU's, your just devaluing them faster.
They were also around during the last bitcoin crash from $20k to $4k approx and didn't stop that happening. I'm guessing this time will be similar. $68k to $14k? Maybe not quite that much - dunno.
I wonder if that will work again..
Some time ago, Tesla entered into $1.5 Billion in Bitcoin. They need that money to build cars and factories in the long term, they had the money raised from stock offerings and bond offerings.
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Someone out there wants actual dollars, not this USDT or USDC fake dollar crap. Sure, my financially illiterate coworkers who can't tell the difference from USD, USDT, or USDC may not care, but the people who actually use USD on a large scale care.
Such meaningless phrasing. If something wasn't on sale, nobody could buy it. The crypto meme of dips in the price being 'a sale' is key to hooking the uniformed new fish into the great ponzi scheme.
Bitcoin last year required something in the region of 134TWhs to maintain, for 4 transaction per second (https://news.ycombinator.com/item?id=29769892). Some nuclear pose stations generate over that in 20 years of production. The world is burning, but so long as you get more people to join the ponzi scheme, who cares, right, it's a "sale".
In the commercial Matt, walks past dioramas of past explorations / failed attempts then in the end he mentions that fortune favors the brave.
Gotta wonder it was a warning all along
Being a cautious optimist of decentralised money I think it's safe to say we've not achieved the main goal of having our currencies shielded from (rougue) government actions with the current designs (ETH, Bitcoin)
From 2018 to 2020 cap was stable at around 200B$
Covid propelled it to over 2600B$ just on 2021
Now a decrease seems pretty normal
I suspect most people have lost money on Bitcoin.
https://news.ycombinator.com/item?id=29769892
134TWh to maintain the blockchain last year, for 4 transactions per second. Some nuclear power stations generate slightly more than that in 20 years.
Given all this, and assuming adults are free to accept their own risk tolerance, what is the problem? If these are the assumptions, there is none. The problem comes from the belief that there is some limit to acceptable risk tolerance for the general public, beyond which it is so risky as to be definitely detrimental to the public's finances.
I claim that there are many riskier stocks already than the mainstream crypto. Outright fraudulent crypto are also already illegal under current securities law. Is it really just the concept of a tokenized, distributed public ledger (re: blockchain) that rubs people the wrong way?
A war require the players to show their cards, which is in nobody interest. Also, there is a chance they you might lose.
... was that a surprise? It's the definition of a bear market.