The Cryptocurrency Crash Is Replaying 2008 as Absurdly as Possible
foreignpolicy.com
foreignpolicy.com
Intuitively, that seems like it would be the price of its aspiration to be "digital gold", in the sense of it being an asset-of-last-resort that has little to no economically productive value, just like the piles at the United States Bullion Depository at Fort Knox.
Heck if I know what that is, though. $10k, $5k? Or are there structural risks that would preclude it from ever being used that way? Is there price or policy regime which will trigger a catastrophic loss of confidence and collapse, or like gold, is there a reality of its existence that can't be negated.
I build in this space all the time, declines are great for builders, and we mostly earn crypto and can immediately cash it out if desired. We don't need a bullish or bearish hypothesis. Transaction fees get cheaper. The economy is big enough to extract value regardless and we’re always accumulating professional experience (niche coveted coding skills) and network.
In these crashes there is always an illiquid whale. In this crash that illiquid whale is Do Kwon liquidating the bitcoin he just bought to prop up Terra/Luna, and maybe Microstrategy.
They’ll stop selling eventually.
Some funds aren’t going to get new limited partners to pump their favorite assets.
I would love to see how crypto performs in a market where sentiment isnt supported by the Federal Reserve, we havent seen that yet, even though crypto was never a direct beneficiary I think the limited partners in the last round of hedge/vc funds were fairly direct beneficiaries.
They’re unregulated slot machines. Go and look at the Terra/Luna Twitter and Reddit. It’s filled with casual to addiction-level gambling tells. The responsible ones acknowledge they’re putting a few hundred in and will likely lose it but maybe it goes up. The less fortunate treat it like an investment.
.. and we call those investments.
In contrast, a company can hide wrongdoing and you can be left with something like Enron.
Long-term, I'd trust the algos more than the traditional system. Survival is a powerful selector, flawed ideas will be weeded out. Those that remain will be both resilient and transparent.
LUNA being an algo stable helped with nothing. Do Kwon erratically bought BTC at a peak and during this attack, it was "sold" but is now /unaccounted/ for. Further, they minted more LUNA and increased circulating supply from 350k to 7T in a few days.
None of this is algorithmic, but purely (and messily) human-operated.
You can sometimes do the same with companies but definitely not always.
Many people feel it's their only way to escape wage slavery.
2022: What do you mean monkey pictures in block chains will lead to a recession? That sounds like nonsense!
The monkey pictures are … actually doing fine, maybe just “okay”, have you looked? Anybody trading ApeCoin though? It hit airdrop price, was tempting
It doesn’t seem like all the large investment banks and reinsurers are flirting with insolvency due to crypto exposure.
They definitely were due to CDO and mortgages. That distinction seems substantive.
You have to wonder. But Michael Saylor comes across as a true believer in bitcoin.
But Bitcoin was created as a response to the banks failures in 2008, so maybe they're trying to get ahead of that message returning this time around.
Anyone work in PR for mortgage companies? What kinda position are you taking right now?
The reckoning will be harder in crypto because on top of loose monetary policy, prices have been propped up by money-printing scams like Tether. If crypto wants to prove it has value as a technology and not just a get-rich-quick scheme, it needs to rid itself of the Terras, Tethers and other such actors.
The Dotcom bubble was inflated by a lot of people investing in something they didn't understand. And the crash did not threaten to destabilize the entire financial system. But it did cause a drag on the broader economy, and had fairly significant local impacts.
Of course that is just when evaluating the crypto bubble. There are multiple other ongoing problems in the economy, and I am having a harder time figuring out what the impacts will be. Stubborn inflation due to supply chain problems, coupled with rapidly rising interest rates feels like we are going to see a lot of companies get caught in very tough situations. There are a lot of companies out there that are supply constrained right now. I imagine they have been hanging on and avoiding layoffs/downsizing the last year or so in the hopes that once the supply chain issues resolve they can quickly ramp back up to 100%. But if debt/financing gets really expensive or demand starts dropping I think we are going to start seeing a lot of layoffs. I still don't think this leads to a 2008 style crash. But I am a bit uneasy about what happens when you take away the cheap debt that has been fueling the economy for the last decade.
By contrast, cryptocurrency has no revenue stream. It's a zero-sum game. A better analogy would be the bubble in Beanie Babies that happened around the same time as the Dotcom boom (and drove some early Ebay growth). Idiots were taking out loans to buy up thousands of those toys, thinking that demand would go up forever.
https://fred.stlouisfed.org/series/BOGZ1FL663067003Q
Now as the fed starts pulling money out of circulation by selling it's balance sheet, there's a multiplicative effect on the amount of money siphoned out.
Due to this magnificent, it seems very easy for the fed to overcorrect and pull way too much money out of the system. The fed must walk a very fine line in triggering this deleveraging.
"Crypto has at least started to work its way into the real financial system. Some traditional investors also own crypto; if their crypto goes down they might have to sell regular stuff. Some public companies are exposed to crypto (because they are crypto exchanges, because they have levered crypto holdings, etc.), so your boring old index fund might go down when crypto goes down".
https://www.bloomberg.com/opinion/articles/2022-05-12/crypto...
I need someone to explain to me how my S&P 500 blackrock ishares are going to die from crypto. I don't think FAANG, Berkshire, Exxon and Pfitzer are going to notice if all of crypto dropped to zero right now.
If some investors are invested in both FANNG and crypto, when they face margin call in the latter they may have to sell the former to cover their position.
I can understand _some_ investors do it, but i'd imagine it's not a majority.
In the scenario I describe, those investors take margin loans to long or short crypto, and when they fail, they sell other assets to cover themselves.
This is just one possibility I describe.
> but i'd imagine it's not a majority.
No one knows. It may take only one institutional investor who lost a gigantic amount of money in crypto trading and were therefore forced to sell stocks to shake the stock market.
2) There are plenty of crypto ETFs, such as GBTC and BITO, where selloffs there could cause liquidations elsewhere.
3) Major companies themselves now have significant crypto holdings. The most famous being Tesla, but investment banks have been piling into it over the past year. SPY's own State Street announced a 425-man team to head a new division last June.
https://archive.ph/20220512234058/https://www.bloomberg.com/...
I am semi pro crypto, depending on the use etc, but have personally always found this author to be a total dick, an opinion originating when I engaged with him via some correspondance after a published article a long time ago.
As for the crypto-maximalists screaming about Bitcoin as a peer-to-peer electronic cash system for on-chain payments and as a currency, it is safe to say that experiment has totally failed and that was found out the hard way.
Yes it is. Assuming you have read the whole article, it is safe to say that it has failed in its original purpose. I and and many others keep saying it because it is an irrefutable fact after many years of its existence. In the case of the author on Bitcoin and the contents of this article, he has made that totally clear.
Hence, can one use it for on-chain payments as described in Satoshi's white-paper which was supposed to be better than the current system or even as a currency?
Please think about your response to this question before answering.
My 'statements' and that 'something' that I am repeating are based on the contents of the article. That is why I am assuming you also have read all of it before commenting here and some of the author's previous articles.
So when are you going to refute them and answer a simple question?
Or did you just rush here to comment knowing that you cannot answer the question and just repeat 'Tick-tock next block' after the next commenter? Is that why you cannot refute me or the article?
Crypto has not failed. These are your words, not from the article. You are wrong, as you don't have any proof. Also, the onus is on you to prove your statement. Right now it's baseless and doesn't further conversation.
Is that clearer? Or do you need more words to explain your baseless position.
Unless you can prove above it's worthless, and obviously you don't know this and as such your sweeping generalizations are worth exactly 0 (choose your currency).
There are problems with any currency/commodity/anything, but saying X is failed/stupid/useless or anything else is worthless without proof, and as I was saying in my previous comments, none can predict future, so these general statements about future or present are completely pointless and go against HN standards, as again ther is no proof.
The fact that crypto. exists, makes me correct and crypto success provable. Your statement is false as, again, crypto exists. As long as the crypto space exists and has value above 0, it is not worthless and that makes you wrong.
Not sure how basic you need this proof to be, but here is one more attempt. 1 > 0, 1 being crypto existence and 0 it not existing.
Now I want to see you bring an example of pocket lint being used as collateral. Pretty sure you cannot, therefore you're wrong again, and probably should admit so and learn something, instead of being ignorant.
how about sending money all around the world with minimum fees? or paying for your VPN to preserve your privacy? (Mullvad FTW). Or donating to charity? (https://www.savethechildren.org/us/ways-to-help/ways-to-give...).
What does currency controls even mean?
Hate to brake it to you bud, like 99% of drugs are bought using the good old dollar. Does that make the dollar bad? Should we ban the dollar?
People have found real use cases. Just because you haven't experienced something yourself it doesn't mean that it doesn't exists?
And where in those words did I say that 'Crypto has failed'? Did I say 'about Crypto'? or was it 'about Bitcoin'?, the one who's author's name is 'Satoshi Nakamoto', and published a white-paper titled: 'Bitcoin: A peer-to-peer electronic cash system'?
Of all replies to me, everyone (except you) knew that I was talking about Bitcoin being a failure in its original purpose. The evidence that supports my claim(s) is all backed by the contents of this article and others by the same author, assuming you have read them.
But of course, if you needed to misinterpret my own sentence and create a straw-man out of it, that tells me that you still couldn't refute the article or my claim(s) about Bitcoin being a failure in its original purpose.
> Is that clearer? Or do you need more words to explain your baseless position.
Perhaps you need to explain why you're the only one that knowingly invented a straw-man to escape refuting the article and answering my question. If the majority of commenters to my reply recognised that I am referring to Bitcoin, it's more clearer to me that maybe the article and the replies here are beyond your own reading comprehension. Maybe that explains why you needed to find a way to escape refuting the article and answering my simple question, which is proving to be increasingly difficult for you every time you dodge it.
So are you going to finally refute the article and give a sensible answer to my question? Or do you still need more time to finish reading the article before you reply back and post something unintelligent again? Since it turns out you still haven't finished reading it and just rushed into posting here in the comments section.
Nope. Not everyone. You are making vague overarching claims. When you get pushback you are moving the goalposts.
Yes. Everyone here replying to me. Even in your replies, you still recognised I was talking about Bitcoin. Unless you want to admit to me that you did not read the replies?
> You are making vague overarching claims. When you get pushback you are moving the goalposts.
At most 24 hours is plenty of time to give you the chance to finish reading the article(s) and come up with a response that directly refutes the article and my questions if you think the claims made there are wrong.
So are YOU going to refute them and answer my question(s) if you think they are "vague", "overarching" claims?
Every time you hesitate or respond by avoiding the question(s) it is more clearer to me that not only they are difficult for you to answer, but you are unable to refute them.
But that isn't the whole story, and it is not really honest to pretend like it is. While it has not become a widely-adopted currency, or even a widely-used payment settlement mechanism, it has become wildly successful as a speculative investment and on that basis it has burrowed deeply into the public consciousness.
So while it's normally the case that when a new innovation comes along and fails to cross the adoption "chasm", we can close the book and say that it has "failed"; the odds it will have another chance are approximated by zero.
But it appears that time remains on the side of bitcoin and cryptocurrency. Look how many headlines there are about crypto at the moment. We're talking about it on Hacker News, and the whitepaper was released in 2008. Crypto will almost assuredly get many more chances to eventually cross the chasm... perhaps someday it will succeed, when volatility has settled down and L2 technology is mature. We are still in the "periodic block halvings drive crazy bubbles" stage of life, but the impact of the halvings are sinking exponentially into irrelevance.
In the end, you might be right; Bitcoin may never be a currency used for mundane payments. In fact, I personally agree that you probably will be right about that; the competing solutions are much, much better than they were in 2008. But it is simply too early to say, and it is definitely not "totally clear".
yes, people use it for payments. yes, it is better than the "current system" as it literally cannot be censored (as shown by its banning - multiple times - in China).
Assuming that you have read it, so is Satoshi moving the goal posts for Bitcoin? or is it the maximalists?
> people use it for payments.
Like in El Salvador who has adopted it as its 'legal tender'? It is going great isn't it and especially better and envisioned by Satoshi as a form of on-chain payment system?
> as it literally cannot be censored (as shown by its banning - multiple times - in China).
That is because its due to it being on-chain which that is decentralised despite the bans, which that is the whole point of Bitcoin. Is that what El Salvador and others are using it for?
Still, the amount of brain power Matt has dedicated to this makes me feel like it would be better spent elsewhere.