Crypto Is Crashing, But Companies Aren't Acting Like It
theatlantic.com
theatlantic.com
And these "news" companies, and all the "investors" can't tell the difference, which is the point, I guess. I really hope this is the end of people "investing" in currencies but I doubt it. So the ignorant "investor" opinion that drove speculation up now drives it down... but it has zero impact on me actually using the bitcoin blockchain to pay for things.
The risk of running a traditional currency exchange in places where people really need money is high. Some places simply don’t have a money service for this reason.
If you can cut the middle man and transfer money discretely, you may actually be able to send money, as opposed to not.
tl;dr: If the average risk is high enough, the volatility of Bitcoin and risk of getting scammed may actually be lower.
Walk me through a transaction that is better with bitcoin and would not be easier by modifying the current system.
This is true for societies that have good money systems.
No, you only need an exchange accessible to the sender. The receiver can receive Bitcoins; they don't even need to be online while receiving them, because they can agree on a fixed address.
> in the cases of unbanked areas that exchange needs to be physical and able to give out physical cash
That is the case for traditional currency exchanges.
It is not the case for Bitcoin.
The missing part that you might object to is of course: If the receiver eventually wants to convert their Bitcoins into some other currency (USD, or some local, not hyper-inflated currency), they do need some kind of exchange.
But they can choose to wait until they have access, they can send Bitcoins themselves, and they can meet with people to exchange Bitcoins with the risk that involves. None of these scenarios requires a traditional currency exchange to be available in their area. Running such a currency exchange is presumably too risky / not worth it. But being an individual Bitcoin trader might, because individuals are exposed to and assess different risks.
I said in my original comment that the recipient will need to exchange it to be able use the funds. Unless there has been a huge upswing in bitcoin usage for payments in the areas of the world remittances typically flow to that will be true.
> That is the case for traditional currency exchanges. It is not the case for Bitcoin.
I said unbanked since many remittances are sent by and received by people who are unbanked. How do you exchange something from/to bitcoin if you have no bank account (which usually means no way to pay or receive traditional money online) and there is no physical exchange?
> meet with people to exchange Bitcoins with the risk that involves
That's literally a physical exchange, regardless of if it's just one dude or if it's a company with a physical presence.
Eventually, undoubtedly.
Given the choice between non-existent traditional currency exchanges, and some sketchy guy your friend knows who will exchange your Bitcoins into iPhones or USD, Bitcoin presents a solution to a problem that isn't otherwise solved. Bitcoin, being risky and decentralised, allows for being traded in places where traditional currency exchanges will not go.
> How do you exchange something from/to bitcoin if you have no bank account
Using cash, for example.
If you've tried to buy Bitcoin from your bank account, you will have experienced that it is, due to KYC rules, often more difficult than when you exchange them for cash.
The interface between Bitcoin and existing money systems is at conflict in our society.
In societies that don't have well-functional money systems, less so.
Bitcoining the unbanked is easier than bitcoining the banked. :-)
We are literally back to what I said a few comments ago:
> And in the cases of unbanked areas that exchange needs to be physical and able to give out physical cash. It doesn't need to be the same exchange, but both those exchanges would still have the same issues as a traditional exchange, right?
So again: Why would a physical bitcoin exchange be easier to operate than a physical traditional exchange?
If your reason is laws then I'm guessing you'd also need to explain why widespread bitcoin usage wouldn't be subject to those laws too.
- physical money (eg. precious metals, physical cash) is hard to transfer, so that's out.
- conventional currency requires recognition from a legal system; anyone can open an illicit "exchange" claiming to trade foreign currencies, and record a bunch of numbers in a spreadsheet, in the same way I can claim to have paid you US$100000 through this HN comment. But nobody takes it seriously unless the transfer is recognized as legitimate by some legal body. And if local laws prohibit or severely limit the operation of such exchanges, it just cannot exist.
- Bitcoin's legitimacy is not based on recognition by legal systems, but rather a common, mutual recognition of a blockchain protocol. As long as there's just one shady dealer who accepts bitcoins in exchange for physical money (gold, precious goods, physical local currency), then this is an "exchange". It's not an exchange in the usual sense, but it doesn't really matter.
The crucial point is that the "protocol" if you will of conventional (non-physical) currency depends on some sort of legal system recognizing the currency. We're talking about wire transfers, cheques, etc., not paper money (which in this context is considered physical). The reason I can instruct my bank to transfer money from my bank account to your bank account is because of a bunch of legal rules and processes that ensure that it happens properly. If either party is in a place where such transactions are prohibited by the law, it is fundamentally impossible to do such a transfer because such transfers require recognition by the legal system.
Your confusion might stem from mixing up two concepts -- (A). the general duty to follow the law, and (B). the fact that conventional currencies depend on the law to operate. The GP's friend might be breaking the law no matter what kind of currency they are using, this is consideration (A). This is the same. But Bitcoin doesn't have problem (B).
I don't think I'm confused (but then again confused people usually think they are not), but I do think that modifying the traditional system is far more reasonable and doable than moving to the alternative crypto/blockchain system. Considering all the money and manpower thrown behind crypto I'd say it's not unreasonable to think that a better system building on the traditional finance system could be built.
You can't "fix" traditional finance system if the government of one party makes it illegal to do trades (unless you're thinking about plotting a revolution in another country).
This gets to the heart of another common refrain on HN that Bitcoin is great to facilitate illegal transactions. Well guess what, if a shitty government in some corner of the world is going to make it difficult for its citizens to live a normal peaceful life by devaluing currency and imposing artificial barriers to save meaningfully, then I am rooting for Bitcoin to help people evade that tyranny.
Then what's special about PoW tokens that give them value?
Why would this hypothetical enemy agree to participate? Even if they wanted coins (instead of say, land, subjects, or natural resources), it's cheaper and easier to steal or extort them from you than mine them.
> Such is the nature of the Bitcoin game.
I assume from this sentence in your comment and from your bio ("Character account — I only play a Bitcoin maximalist on the internet") that this is just performance art/trolling for you, so I'll wrap up my end of the discussion here.
Interesting with bitcoin though, when I first heard of it, I remember hearing they use that computational power to help (eg. Hospitals) run various computational heavy simulations in exchange for btc. Kind of like how Seti@home works. Always wondered where I heard that from. Unfortunately it’s just wasting energy rehashing sha256 a billion times :$
it’s possible that general purpose and usable proof of work system might exist but I dont think we have found it.
I have always said knowledge of the silicon capability of SHA256 and the integrity of ECDSA is itself of immense value.
However, the high energy consumption as the tradeoff is definitely like the elephant in the room.
This is the labor theory of value, originally espoused by Marx. I'm under the impression that most bitcoin fans consider themselves libertarians. It's interesting to see that combined with Marxist economics.
okay, i'll bite, what's it called
- Actually designed for payments
- Doesn't use silly blockchain token nonsense
- Allows for collecting taxes easily
(suddenly pays attention)
Is. Is there an electricity downside, like there is with blerkchain?
We were subjected to similar rhetoric from Enron execs as that house of cards crumbled[0]. Refusing to face reality in the face of financial calamity is the only rational choice when you are involved in a confidence scam, so we shouldn't be surprised at the Crypto community's recent behavior.
[0]: https://www.nytimes.com/2002/02/16/business/enron-s-many-str...
Sequoia and a16z effectively force LPs to put money in it.
Even with a tinfoil hat I can’t figure out their endgame, is it really just to make money off of greater fools?
ie: 100% downside vs 10,000%+ upside. If only 1 out of 100 such bets works out they break even. If 2 they have a profitable fund, 3+ they have knocked it out of the park.
But I think you're right that the upside is so attractive given how little they need to invest to realise significant gains.
The internet was always decentralized. That's literally the entire point of TCP/IP. The web, however, is indeed being centralized; and crypto is at the forefront of that. For all the talk of "democratizing finance", the reality is that all of these web3 proponents have no interest in anything beyond enriching themselves by reinventing the existing centralized banking system minus all that pesky regulation.
delegitimizing themselves in the process
.
> Even with a tinfoil hat I can’t figure out their endgame, is it really just to make money off of greater fools?
yes
Volatility works both ways and the press often doesn't consider that, especially in bear markets. The reason companies are still involved is because they do consider it.
Big players FUD the assets they want to buy cheaply, and hype up the bags they want to get rid of. This has been going on online even before crypto was invented.
They can have impact on the trend however the market can only be controlled to an extent.
When the shit hits the fan everyone loses money the problem is that the bailout tends to be rather selective.
And there is no easy way out of this cycle either. It’s easy to say just don’t bail them out but you are also bailing millions of people who stand to completely lose their life savings, pensions and jobs and so the cycle repeats.
If we want to dissuade unadulterated greed we first need to find a solution of how to effectively finance those who are no longer economically productive.
As far as your opinion that everybody loses money when the market goes down, well, that's not exactly true. There are numerous financial instruments possible where you can make more money when some asset goes down.
I'm not sure that dissuading greed is either a possible or desirable goal. The economy works, and resources are created and flow, precisely because the motive to benefit yourself exists. Every voluntary trade is entered into because everybody values what they get more than what they give up.
As far as those who are no longer economically productive, there's a lot that can be said about that, starting with an observation that there are people that never have been economically productive and never will be economically productive.
Most people in the business are smart. And smart people generally don't line up to be explicit about manipulating the market and committing possible crimes when it can come back to bite them.
Luckily, despite his best attempts to remove many copies of this video from the Internet, we have Jim Cramer on deck.
https://www.youtube.com/watch?v=jIfixbq_u0Q
https://www.youtube.com/watch?v=8RkqzRs95Sc
Also, as a general rule, it just pays to understand the following:
> With few exceptions, the entire media is shit and barely understands the topics they cover. It is easy for smart people to manipulate them.
> Access journalism is widely practiced.
> There's literally millions/billions/trillions of dollars at stake.
In this environment, it's close to a complete metaphysical certainty that media manipulation to profit occurs.
So either you can recover when hype is your only asset, or hype isn't crypto's only asset.
It would be great if we could, as Gottsegen says, shake the fraudsters out of the ecosystem—and I'd add the gamblers, too—leaving only the people who are using it as a currency, but I don't see that happening anytime soon. Certainly if the numbers go up again they'll be back.
As the article indirectly acknowledges, this sounds just like 2008.
I didn't see the banks all pack up their tables and go home then.
In fact they were collectively bailed out by government. That is, each and every one of us, indirectly.
edit: I certainly don't think crypto should be bailed.
Why would banks even care about crypto except for transaction fees they can collect?
It would be just a matter of time until other governments consider this too.
Private sector bailouts managing any collapse. Important in cementing power.
I like that panic because JP Morgan had more money and valuable resources than the US government did at the time, and it is unfamiliar to imagine that government as not all powerful financially. But as a direct result of this, JP Morgan used his leveraged influence to push for that sovereign arm of finance in the United States and succeeded in a form of that with the Federal Reserve Act a few years later, combined with the income tax amendment it put the US on a path to being all powerful financially. Fascinating to me. I kind of like how the opportunities repeat.
If you think crypto will be bailed out by governments, keep dreaming.
I certainly don't think they should be.
Nor do I think the banks should have been bailed in 2008. Some indvidual banks were directly bailed, the entire industry was indirectly bailed.
Closest thing is probably bailing out auto-industry, but I don't think there is appetite to do same with crypto as it really doesn't employ directly or indirectly enough people to matter.
Crypto ain't money, it's an asset class. Asset classes rise and fall, But none of these "billion dollar firms" created yesterday by a 25 year old are going to be safe when the price plummets given the highly leveraged nature of it all.
Crypto should certainly not get government bailouts.
It’s still worth something, so someone out there thinks it has value. If it has value, then it’s worth pursuing.
The panic just isn't there, yes it has and will go down dramatically but the people that buy crypto still have expendible liquidity. This is crypto being naturally unstable, it isn't an index fund you expect to remain stable.
Investing aside illicit use of crypto alone will ensure significant cashflow in my opinion. It isn't just speculative investors that are in the game. As an investment, it has a lot if vaue similar to derivatives, inherent value is not as significant as consumer/investor demand.
And then I saw no mention the sine qua non of that, when in late May a16z announce its 4th crypto fund at $4.5B. Man, would I kill for that list of LPs. They have deep, deep pockets and you can sell them anything.
https://www.reuters.com/markets/wealth/andreessen-horowitz-r...
Companies ARE acting like it. Coinbase, after all, did reduce its headcount in order to reduce their burn rate to be able to withstand the market turbulence.
More importantly, the current market turmoil extends way past just crypto. Many investment vehicles such as stocks, bonds, startups, commodities, etc have experience elevated volatility recently. That is normal. The market does not monotonically move up forever.
Also, do not take the above statement to mean I endorse crypto as an investment. I believe crypto is akin to unregulated startup investing (at least for most higher risk startups you need to be accredited which is a way to acknowledge risk). When investing in a new crypto you are IMO investing in the idea and team making it. The company! Not on a line-chart on your broker's screen. If the project turns out (in the long run) to have widespread adoption you would hope its value would go up.
For instance, consider the Chia (XCH) project. It currently has a market cap of $165M. Therefore, if I were buying Chia at the moment I would think about the following: Do I believe that this company/idea can be worth more in the future? Is it a fair valuation for this startup/company?
“Do you know even one person who has a problem withdrawing from Celsius?” he tweeted. Just over 24 hours later, the company put a freeze on all withdrawals, locking customers out of their accounts. (The freeze remains in place almost two weeks later.)
If there is money to be made, and clearly there is, it will live on in some form - just needs to shake some of that bad reputation and sliminess along the way - or at least superficially present it as more legitimate.
I read:
"If there is money to be made, ___gambling___ will live on in some form."
Or fill in the blank with any other vice.
At least gambling is regulated by states.
Just pointing out that "things that make money" can be a fairly low bar.
But, you know, equities can be extremely useful while Enron stock can still be a scam.