Bitcoin falls under $16,000
cnbc.com
cnbc.com
In my perspective the only real use of bitcoin is transferring money where you can't use traditional payment providers.
It's the same thing, you're just adding a lot of steps with a ton of overhead.
This doesn't strictly have to be some instantaneous automated buy and sell. You could accept some % of loss but you don't want to hold for more than a day.
If either party wants to hedge their exposure to bitcoin volatility, it gets more complicated.
If you are involved in buying legal items online where the merchant has to deal with a lot of claw-back from the bank or card companies, they will generally give you a better deal with crypto.
There is a lot of value in ransomware, the ability to purchase drugs, and money laundering.
https://stockx.com/supreme-clay-brick-red
Both art and grifts have changing value > 0.
Bitcoin doesn't have a single one of those.
People who constantly make this argument don't actually understand how economics and monetary value actually work. They've just heard someone say it and, like most bro-science, it sounds about right so it should be right!
Right from the jump, they'd know that among the many other worthless parts of BTC, if we actually had a deflationary currency be the standard it would be a horrible, horrible reality.
Inflation is a tool so not being able to use it, yes, would make things more difficult. It's a double-edged sword though as inflation can get out of hand. BTC's scarcity ensures no one can print it out of existence.
I am also convinced that The Economy is a huge dumb emotional beast that no one fully understands. If that weren't the case, we wouldn't boom/bust constantly because we could predict accurately.
People who make your argument usually don't understand that monetary theory hasn't caught up to accommodating cryptocurrency because most of the ideas are decades old.
USD is not based on GDP. Its value can only loosely be attributed to it.
Price is what you pay, value is what you get.
I've read a lot of sad posts at r/bitcoin. Not sad because people are saying "ouch, these losses hurt". Ouch because they are saying "what a great chance to buy more!"
It's a cult... for a non-zero amount of people :( They won't listen to evidence, logic, reasoning.
The differences today are at least three:
1) the Bitcoin market cap is already large, so it takes a lot more people to make it move upward.
2) Bitcoin is no longer a good proxy for the potential of crypto in general. Ethereum is now perhaps at least as important. There are oodles of other options, too.
3) Because of the large market-cap and bitcoin's maturity, the technical risk of the protocol from global government intervention is substantially larger than in, say 2017.
This time, it might be different, and not in the good way.
I hope this is for real this time, and that it won't be replaced by something even worse.
The network will never go offline because it's decentralized and costs nothing to run a node (miners are different).
Someone will always be willing to pay a few cents or dollars for one.
The best you can get is "stable," which then makes it attractive as a store of value again, and ramps back up the demand.
It will never end.
Tulips bulbs still exists and have a legitimate use if you want to grow tulips.
I don't know what BTC can be used for, maybe it will be kept for historical purposes.
That doesn't make sense to me. That's like keeping a phone number for historical purposes; it doesn't mean anything if it doesn't work any more. Old stock certificates are usually worth something, but a hypothetically crashed bitcoin is less like a stock certificate than it is like a memory that you once owned stock in a company that no longer exists, and a slip of paper with your old broker's number written on it.
Of course btc could crash. Once nobody cares about it anymore, and people stop wasting cpu cycles to run the software.
At some point during that process you will run out of the actual money you're using to buy bitcoin. It will then crash from being worth a fraction of a penny to zero.
The good thing if it would just be replaced is that you and me get a new opportunity to actually get on early, redeem ourselves and avoid being the laughing stock we currently are.
And is that really your best idea for what would be good to replace it?
What we need is to get rid of all of these systems for getting a small number of insiders rich quick at the expense of the general public. We need to make the distribution of wealth more equitable, not just try to change things around so we're the ones who get to be stepping on the hapless masses.
Would I love to have another few hundred thousand dollars? Sure. That kind of money would be life-changing to me.
But I don't in any way feel ashamed or embarrassed that I didn't jump on the cryptocurrency fad. Quite the contrary, in fact—I would be deeply ashamed if I had joined in enabling it.
Sorry, I must have missed all of the following posts:
- AMZN under $100 (Down 48% YOY) - GOOG under $100 (Down 42% YOY) - AMD under $60 (Down 59% YOY) - META at $101 (Down 77% YOY)
and the list goes on.
What is it about bitcoin that brings people into these threads to say "good riddance! I hope it dies because all of it's negative externalities."?
To the oblivious observer it would appear cryptocurrency lives rent free in many heads in this space. If you don't care for it why pay attention to it?
I am not a fan of BlackRock. The last thing I could imagine spending my time doing would be checking BLK on the NYSE to gleefully dance on its grave when it misses its earnings, and then hopping into my echo chamber to share the news with anonymous strangers.
Crypto allowed me to transfer my wealth across border and helped me survive while Visa blocked my cards and local banks harassed me with their KYC/AML requirements and creative nonsense based out of fear of the US and EU sanctions. The utility of that is much higher than any dividends.
> Instead it's a pyramid scheme, easily replaceable by any other shitcoin out there, and the value of it should be close to $1 or less.
Wow, shitcoins sound so much worse than pieces of paper that are propped up by a legal decree, which legitimacy rests solely on the monopoly on violence. Wait, does it actually sound worse?
In my view, society is propped up by future expectations. This includes the value of government money.
No one else denies this or doesn't believe it's true, I hasten to add. For most of us, we think that this is a good thing, but also such an obvious thing that it doesn't need to be mentioned.
The people who keep mentioning it are people who think it's a bad, bad thing. They want everyone to have access to violence at all times.
The sane majority does not.
I have no idea where you came up with "Many is civil war". Quite the opposite. Civil war erupts when one entity has a monopoly on violence and enough people decide that they've had quite enough of that, thank you very much.
There are all sorts of sayings. Is this one true?
The United States is the most heavily armed country of any size in the world. It is also more heavily armed than any time in its past.
And yet politeness appears to be at an all-time low. Certainly, a lot of political figures say things that are just astonishingly rude and horrible and false, things that would have destroyed their careers even twenty years ago but seem to make them very popular today.
It seems that saying is wildly false.
> I have no idea where you came up with "Many is civil war".
Probably they are knowledgeable about history, as their statement is simply true.
> Civil war erupts when one entity has a monopoly on violence and enough people decide that they've had quite enough of that, thank you very much.
I'm baffled as to how this makes sense to you.
How exactly do these people "decide they have had enough of that" without abrogating the states monopoly on violence? Surely by the time you get to civil war, there are _two sides fighting_??
It's like you just cut and paste a lot of slogans and stop thinking critically there.
I really suggesting reading some history.
and a currency whose value approaches zero as time grows. if bitcoin is bad, how is that much better?
So you use crypto to break the law, and you believe you are justified in doing that. Thing is, most of the people using crypto for crime are simply using it to not pay taxes.
> Wow, shitcoins sound so much worse than pieces of paper that are propped up by a legal decree, which legitimacy rests solely on the monopoly on violence. Wait, does it actually sound worse?
Yes, it absolutely does sound worse.
On one side, we have the United States - the largest economy in the history of the world, backed by the government with the largest income of any government in history, a court system, the police and their "monopoly on violence".
On the other side, you have a cryptocurrency backed by nothing, created by anonymous individuals, with no form of conflict resolution whatsoever.
Cryptocurrencies have been around for almost as long as the smart phone. You would think one or two of you would have taken even a first year economics course during this time.
Using it for crime? That just makes crypto even more similar to traditional finance.
> Yes, it absolutely does sound worse.
So you think all countries should switch their currencies to the US dollar? Do you think it is just as good for countries to give up their financial sovereignty as it is for common people?
> Cryptocurrencies have been around for almost as long as the smart phone. You would think one or two of you would have taken even a first year economics course during this time.
I was a teaching assistant for a graduate course in macroeconomics in a top 50 department during my PhD. Arrow-Debreu and all that.
I don't think _anyone_ is against using cryptocurrencies as a way of transferring money. It doesn't make sense to transfer wealth via something that rapidly changes its value, right? Because means of transferring wealth requires preserving the value of the wealth. Bitcoin today does not preserve its value, as evident by the rapid decline in value in the past few days.
I'm not going to pretend to be surprised - many American conservatives have expressed the same sentiments to me. However, I am surprised you post it in a public forum.
2. So called, "Money" does not pay dividend... does Gold pays dividend? now on the other hand, I can lend you BTC or Gold and ask you to pay me back the principle + interest on it in BTC/Gold etc so that is that... Fiat money can yield as it can be created of thin air, no actual work required (i.e. mining for Gold or BTC)
3. Any currency, company also can be replaced by something else out there but won't why? network effect, trust and liquidity matters...
Hertz: https://www.cnn.com/2021/07/01/business/hertz-bankruptcy-car...
2. Money does pay "dividend" - it's called "interest".
Only if you lend it.
Money sitting around under a mattress tends to lose value due to inflation.
Actual specie, dug out of the ground, tends to hold its value, relatively speaking. Sure, their may be shocks like discovering a whole continent made of gold but those are pretty rare.
Bitcoin, who knows? It simply hasn’t been around long enough for its place on the money pyramid to be found.
2.a. Gold is an asset and doesn't need to pay dividends as it has intrinsic market value.
2.b. Loans and interest are contractual agreements, i.e. financial instruments unto themselves that generate value. Just because you get suckered into agreeing to a hobby money loan doesn't mean the hobby money has any value.
2.c. Variable cost doesn't equal value either. You can burn a stack of $100 bills but that doesn't mean that brief fire has any value, but it sure as shit didn't help the planet either.
I am an art collector. None of it is rare or wildly expensive. Nor do I expect to resell any of it.
It might shock you to discover that I collect that art simply because I enjoyed looking at it and having it. I go to art galleries to see art that I do not own, not because of its financial value, but because I enjoyed looking at it.
The idea that art is exactly an precisely an investment vehicle is simply false to the fact. And honestly, I find it horrifying and empty.
> it's a pyramid scheme
That's your opinion.
> easily replaced by any other shitcoin
It's not.
The IRS seized $3 billion worth about a year ago. https://www.irs.gov/compliance/criminal-investigation/histor...
See for example the Canadian government freezing bank accounts[0] of anyone trying to contribute to the vaccine mandate protests.
But for example, Argentina has incredibly harsh currency controls, any freelancer or company that tries to export goods or services gets paid half the value per dollar and is forced to sell their dollars to the government
While companies can't really avoid it, most freelancers go around the control by using crypto and so can get the full value of their work
https://www.ccn.com/dutch-bitcoin-trader-suffers-brutal-tort...
This just seems apt: https://xkcd.com/538/
- BTC was originally intended to support smart contracts
- but people pitched “digital gold” because they didn’t understand that vision
- then the capability was removed for “safety”
- and then later ETH came along (with a different model), but one that still is too costly for general compute trade and which is inflated by the gimped-BTC bubble
- we’re watching that fools gold bubble pop
- and new ideas about compute for sale emerge [1]
And in the near future:
- eventually, tokens will represent real things with the interop currency being the one for buying compute time
[1] - eg, https://github.com/lucasgleba/zkRiscV
Value ( and by extension price ) of anything is what people are willing to pay for it. Some digital cards in a Blizzard game were purchased for thousands of dollars. There is some digital real estate that was purchased for millions. We can argue all day long whether it makes sense and what the value should be, but that is the wrong perspective to begin with.
<< will never give dividends
Even now I can easily point to stocks that never paid dividends.
<< it's a pyramid scheme
At this point, it is a pyramid scheme the same way US dollar is a pyramid scheme.
It was purchased for millions AT THE TIME OF PEAK MANIA . big difference
Also it was purchased for millions by the only guy in the world willing to pay millions for it…
Don’t extrapolate or you risk making an hypothesis of liquidity and price permanence which is just not there
A mansion in Naples or San Mateo was worth millions in the 1980s, 90s , 00s , 10s , 20s and there are millions of potential buyers globally who’d happily pay that price. That’s an asset which proved both liquidity and price permanence (matter of fact appreciation) but still it’s not a given that it will prove to be such going forward
If there is one thing that 2008 should have taught anyone, it is that nothing is permanent. I am not going to get philosophical here and say that possessions are fleeting, but to pretend that real estate is not propped up hard and effectively is guaranteed to "prove to be such going forward" is about the same faith that keeps ANY asset including bitcoin up.
Why are you so certain that this timeline will never see Naples mansion price go to zero? I can easily see several scenarios where that could happen.
Yeah the dollar is a pyramid scheme. It has the same construction flaws as Bitcoin. You can withdraw it from the markets and just hoard it which causes deflation. The central bank then allows commercial banks to increase the money supply instead of increasing the circulation velocity. The problem with newly created money: it can be hoarded too, resulting in an infinite doom loop.
Niter will Tesla shares, yet people still buy. Its purely for resale at later stage.
To be fair, many of the big companies (at least Amazon, Meta, Twitter) have gotten front-page articles about their losses with people laying into them.
Why wouldn't BTC get the same treatment? OP must be a bag holder.
And since bitcoin isn't a tech stock, but a "currency," why wouldn't you compare it to the S&P (down 19%), DJIA (down 10%), or the USD (up 17% against UKP, 15% against EUR)?
- Amazon Becomes the First Company Ever to Lose $1T in Stock Value
I'll let it speak for itself.
There exists a contingent of folks who experience psychological reactance at the thought of having to make decisions with respect to government oversight. They "[experience] motivation to regain a freedom after it has been lost or threatened – leads people to resist the social influence of others" when faced with the prospect of having to deal with the government. We all know people like this.
The same reaction exists when people feel they will be forced to make decisions with respect to crypto - a system they didn't and don't wish to participate in. No amount of reasoning is going to make someone amenable to government interference in the same way no one is going to be reasoned out of being currency-interfered with by those wish to establish a crypto-hegemony.
1. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4675534/
2. http://www.xenopraxis.net/readings/carstens_hyperstition.pdf
Because to your point, it's completely voluntary to get involved, and if someone is pretending to care about all the (relatively few) grandmas who put money in, well, they're losing money so this person shouldn't be so happy about it.
And as for the energy externality, the vast majority of crypto hashpower has hook ups to power plants where during certain times of the day/year, there is excess power and nowhere to put it, so they sell it dirt cheap to miners. I know someone who worked for a US solar power provider that had such an arrangement. Sure, some people are mining from their college campus and stealing power to do so, but the cumulative real effect of this relatively low profit activity is dwarfed by the out of context numbers you see in articles.
So at the end of the day, the crypto hating is just people playing zero sum status games, hoping they somehow benefit relative to the decline of others (just as the crypto people are playing zero sum wealth games). It would be nice if everyone could just be honest about it.
The news we constantly hear is "Hackernews 10/Dec/2022 Changpeng on brink of second bailout for cryptoexchanges."
It is like Bitcoin is supposed to send a hyperexaggerated message about our current money system and how unsustainable it is.
The answer is already obvious you have negative rates or not. The positive interest side of the loanable funds model is the side where new debt is taken on, the negative interest side of the loanable funds model is where debt is being paid off. We want to be on the negative side now because we have too much debt.
e.g.
1. https://news.ycombinator.com/item?id=33357289 2. https://news.ycombinator.com/item?id=33379932
Anyways, a sharp decline in cryptocurrency markets caused by the continuing house-of-cards is almost certainly going to make front page HN.
> To the oblivious observer it would appear cryptocurrency lives rent free in many heads in this space. If you don't care for it why pay attention to it?
The environmental impact is something everyone should care about
I think that mainly that is what drives the hate, just network effects. It's popular to hate because everyone's doing it.
But also, unfortunately cryptocurrency's reputation has largely been ruined by scammers. Because it's like any high technology, it multiplies the power of those who use it. Including the multitudes of low-lifes out there.
The biggest issue though is that people fundamentally do not understand what cryptocurrency is or that it has core advances in digital signatures and blockchains that make legacy trust-based financial systems obsolescent.
It also represents in some ways how technology has made all sorts of institutions and paradigms obsolete. Those who are profiting from these previous paradigms and/or are less cognitively adaptive subconsciously are threatened by these types of changes.
Nothing has been made obsolete, nothing about Bitcoin replaces any existing financial institution.
The fact that 99% of cryptocurrencies have no reason to exist including Bitcoin is visible in RAI. RAI is the Swiss franc of cryptocurrencies among hyperinflating nonsense.
What RAI represents is effectively a currency with an entirely computer controlled central bank just like Friedman dreamt of. Now that is possibly the greatest invention of this century. It is battle tested in one of the harshest environments. While every other currency(crypto or not) is dropping like flies, RAI is only dropping as fast as the Swiss franc which is hardly losing its value.
> It also represents in some ways how technology has made all sorts of institutions and paradigms obsolete. Those who are profiting from these previous paradigms and/or are less cognitively adaptive subconsciously are threatened by these types of changes.
I don't know what is going in your head but I could easily accuse you of the same. RAI represents how technology made the old paradigm of hypervolatile currencies obsolete. Bitcoin traders who were profiting from this paradigm or people who are unable to understand computer controlled monetary policy are theatened by these types of changes.
By the way, mining rewards are not a monetary policy because they don't take the supply and demand for Bitcoin into account, nor is there a way to get rid of excess Bitcoin.
Are you sure about that? Really, think about it…
Because many became rich riding the first crypto wave. And they missed out. It strikes them as an injustice and as some consolation, they would like to see crypto crash burn.
If I can't have, neither should they.
And now look at what's going on; big tech stocks crashed faster than crypto did. In a realistic economic environment, could these stocks be worth less than 'worthless' crypto? The effect is even more dramatic than I thought. It confirms my beliefs that the economy of the last decade was a kind of lucky lottery system.
This is because cryptocurrencies aren't even companies; they have no directors, no board members, no debt, no assets. It's impossible for them to go bankrupt.
Also, companies can become nonviable and be shut down. On the other hand, it's almost impossible for a crypto to become nonviable... There will always be some tinkerers willing to run nodes at a tiny annual loss. PoS cryptos are very cheap to operate.
I mean, FTT just went from $25 to something in the $2 range since the whole FTX thing blew up. And it will probably hit zero soon -- I have no idea why anyone still wants it.
You have no idea.
Well, it'd likely be worse than bankruptcy, because there wouldn't be any assets to go after in court.
Stock investors tend to think more like "This stock just dropped 80%, I have to cut my losses... Switching to value investing. Bye."
Do you normally charge rent to remember concepts you find ridiculous, evil or toxic? How much rent do you charge, say, "scientology" or "child abuse" for the mental real estate they are squatting on in your head?
Said differently: the price of everything rises, not the value.
And another nitpick: by definition the average/median price rises, not the price of everything (afair).
Since bitcoin itself is a currency though, I'm not sure how inflation really applies across currencies (since there are "prices" both ways).
The value of bread as measured in money rises. I'm just using the terminology from the parent comment.
> And another nitpick: by definition the average/median price rises, not the price of everything (afair).
No, that's wrong. The value of money sinking is exactly the same as the price of everything rising. That is the meaning of "the value of money"; there is not even a theoretical distinction between these concepts. If the value of money falls in half, then all prices, of everything, have increased by 100%.
> Since bitcoin itself is a currency though, I'm not sure how inflation really applies across currencies (since there are "prices" both ways).
There seems to be some kind of conceptual confusion here. Currencies inflate (by losing value), or deflate (by gaining value), or don't (by maintaining the same value; in reality this can't happen).
If one currency inflates more than another one does, then the exchange rate between them will shift. (It will take more of the first currency to buy a constant amount of the second one, or less of the second one to buy a constant amount of the first one.) If two currencies inflate by the same amount, then the exchange rate between them won't shift. What's your question?
Is that really what you mean, and what you think my parent comment meant? Inflation is a mechanical thing; to get that effect, you'd need a financial instrument that was specifically defined to produce it.
The negative externalities.
Because it affects people. A lot of people needed graphics cards for not just gaming, but for 3d animation, video making, and video games during and after lockdown.
Ethereum was responsible for very large price increases and scarcity of graphics cards. The collapse of Ethereum eventually brought supply back to graphics cards-but we still have these inflated prices. Early in this recent crypto boom it was impossible to buy a mainstream card ($250-$400) while the top end cards were available because mining profitability on the mainstream ones was much higher.
This is before you consider that the high demand also attracted scalpers and the environmental issues.
Also note we have a global currency war, where U.S. is forcing policy/pick your side to countries and also "exports" inflation.
This is done in part by the rate of increase of interests rate -- a derivative other countries can not simply follow up. In big part in the way energy gets exported.
So as DXY goes up everything else free-falls, and causes extra strain -- as the fixed costs to pay debt increase rapidly due to the rates too -- things break. And when things break, people sell everything they can to save the boat.
So you are looking at a table full of fireworks randomly popping trying to guess what is going to stay there. I wouldn't say there is a good asset thus.
Note this is simply unsustainable. My perspective.
Edit: But yes, you can make money during a recession. If there is a lot of inflation that might not count as much. I don't think I implied you can't with my statement. But even where you place your money is a game then -- think Lehman Brothers taking hedge fund liquidity down with it.
In 2013 it crashed 83% ($260 -> $45)
In 2015 it crashed 87% ($1,140 -> $150)
In 2017 it crashed 82% ($19,900 -> $3,540)
In 2022 it crashed 76% ($66,938 -> $15,853) - so far..
As we can see, 80% crash for Bitcoin has not been that scary.
> In 2011 it crashed 94% ($35 -> $2)
In 2011 Bitcoin's market cap was 23.6 million
> In 2022 it crashed 76% ($66,938 -> $15,853) - so far..
In 2022 Bitcoin's starting market cap was $891B.
In this context, I understand "scary" to mean "destructive economic impact", and from that perspective a 76% crash is very scary.
(Did I gambler's fallacy correctly?)
Bitcoin is a hedge against inflation of currency supply (QE infinity).
> WASHINGTON (Reuters) - The U.S. economy shrank during the closing months of 2007 for the first time in six years, the Commerce Department confirmed on Thursday, hurt by the steepest slump in housing since 1981.
> But it bounced back to record modest growth in 2008, avoiding back-to-back quarters of decline that would have met a popular definition of recession.
> The department sharply revised its estimate for fourth-quarter performance to show gross domestic product, or GDP, contracted 0.2 percent -- rather than growing 0.6 percent as it previously reported.
And later that year of 2008:
> Growth resumed in the first quarter of 2008, however, with GDP rising at a 0.9 percent rate that accelerated to 1.9 percent in the second quarter as government stimulus payments began to flow.
The wheels of recession were in motion since 2006, its head cropped up during the later quarters of 2007 and completely exploded in late-2008.
Look at all the macroeconomic indicators right now, inflation, energy costs, customer spending, etc., do you really believe we are not way into the wheels of a recession?
[1] https://www.reuters.com/article/us-usa-economy-gdp-revisions...
I think you left out unemployment from that list because it doesn’t fit the message. How many recessions happen with a 3% unemployment rate?
The economy is odd the last couple years. I don’t know that the usual data points help predict as well as they might normally.
However, we have been in a sector correction for nearly a year now with it beginning to affect high growth cloud tech a year ago and moving into tech generally since. In general growth has done poorly as yields have risen and people have moved into other assets. Many over-leveraged investors have had to liquidate to stay solvent (due to not only falling asset prices but the cost for margin has rising extensively) further driving down prices.
But some large parts of the economy are operating much like they would if we were in one. Other large parts are not.
The Cycle starts with nobody giving Bitcoin a second thought. It's deader than a doornail. Yesterday's news. That is, if anybody even remembers it. Winter.
Spring comes in the form of inexplicably rising exchange rate. Few are paying attention because... Bitcoin is dead. There have been rallies in the past, all failed. Too many failed rallies to even count. So many hopes dashed. So many families broken. So many lives warped beyond recognition.
Summer arrives with an out-of-the blue shot at making a new all time high against the dollar. Will it or won't it? The excitement drives the materialization of a new generation of promoters. Those who have "done the math" and now believe in Bitcoin. People who will tell you to mortgage your house, sell your car, and borrow against your retirement because it's "going up forever."
The popular press starts to smell the sweet scent of clicks and gets busy.
In late summer, problems with "custodians" begin. First with a trickle of instability at an obvious scam. Maybe an exchange. Maybe a yield farm. Maybe an admitted Ponzi.
Before long two, three, four of these custodians are tits up in a pool of blood. "Victims" can't believe their misfortune! They were lied to!
Influencer after influencer comes out of the woodwork to assure followers that capitulation has happened. The exchange rate has stabilized around a nice round number $10. $1000. $10000. $20000. Further declines are not in the cards. Fortune favors the bold!
This goes on for some time, each episode tearing the exchange rate to a lower level. It's Fall.
Eventually, the influencers move on to other audiences. Nobody ever admits what a complete fool they have been. They just... disappear.
Winter comes and the only ones left are the ones who warned the Johnny-come-latelies that this is blood sport, that they are ill-suited for the risks their taking on, and for the love of God, get your damned money off of exchanges.
So surely it's getting to a point where anybody interested, if they mention it to one or two people will hear horror stories about people they know losing huge amounts of money and, and will probably stay away... Like an 'anti-network effect'.
But why the assumption that that particular chain will keep blockin?
Lets say you borrowed 1BTC from FTX exchange so that you can short BTC. Congrats, you're correct! You're technically worth a lot more US-dollars now.
You go to FTX, and it stopped existing today. So you don't get your money. In fact, it turns out that you never had borrowed 1BTC in the first place, because FTX where you handled this whole concept has stopped existing entirely.
-------
You can only do things like "short" something if the bank you're shorting with still exists by the end of it all.
You can't win this at all. You _MUST_ have trust with somebody to do any kind of financial trade (be it a long, or short, or any other such complex trade). If that trust is broken, everything collapses.
If the exchange is doing it's job properly, it would ensure there's a long position for every short position. It's the trader/market maker on the other side that pays you. The premium is what attracts your counter party to the trade.
In the case of FTX, there wasn't a problem with the counter party, it was a problem with the exchange playing with the customer deposits that should have been left untouched.
You need that if you're long, unless you have ownership [almost always true...] in which case you can just close out your long position on some other exchange. You don't need it if you're short, because you get your payout immediately when you go short; closing out a short position is always a loss for you. (You profit when the loss from closing the short is smaller than the gain you got when you took the position. If you never need to close it at all, that's the best-case scenario for your short position.)
I don't know of any exchange that would let you withdraw premium before the short position was closed/expired. If you thought that happened once before, it's only because you are using margin collateralized with other assets on that exchange.
I have two questions, because unlike with the other crypto drama, I'm late to this party.
1. Is that actually what happened?
2. If the answer to #1 is yes, why does this still keep happening? We're in 2022, how many times has this played out, already?
Yes, this is our best guess based on all current facts.
https://www.bloomberg.com/opinion/articles/2022-11-09/bankma...
"The problem is that FTX took its customers’ money and traded it for a pile of magic beans, and now the beans are worthless and there’s a huge hole in the balance sheet."
>2. If the answer to #1 is yes, why does this still keep happening? We're in 2022, how many times has this played out, already?
This is a common occurrence during bear markets. The non-US crypto exchanges are (self|minimally|un)regulated. FTX is the biggest blow-up, and surprised many experienced people.
As Warren Buffet says: “It's only when the tide goes out that you learn who's been swimming naked.”
It's also rumored that FTX/Alameda were hit hard by the LUNA/Terra collapse early this year. They may have tried to cover it by manipulating the tokens they control, and trading with customer deposits.
It's not unique to crypto. LME (London Metals Exchange) had an issue this year with someone short nickel that didn't want to payout. Also, Archegos capital ran up much more leverage than they should, which resulted in loses at several prime brokers. This was due to the brokers not margin calling them sooner. Credit Suisse had to close their broker services unit afterwards.
Why does that guy trust you to return the BTC later?
You don't need an exchange per se. But both people need to trust each other. In the stock market, cleaning houses serve as the central role of trust (and brokerages pass your money/stock to these cleaning houses).
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It goes like this: if you don't return the stock, the clearinghouse will return the stock. If the other guy doesn't return the money, the clearinghouse makes it whole again.
Since the clearinghouse is well trusted, everyone is happy with the trust issue. Otherwise, you have no reason to trust random people on the internet with your $15,000+ bets.
> You go to FTX, and it stopped existing today. So you don't get your money.
What? That's not how shorting works. If you borrow 1BTC from FTX so that you can short BTC, you then actually perform the short by selling the 1BTC to some other party. Now you have two things: (1) cash; and (2) an obligation denominated in bitcoin. That is what it means to be short.
As soon as FTX stops existing, that's great for you, because it means you don't need to give them their 1BTC back. You got your money a long time ago.
1. You never got the BTC to begin with. Its on FTX's platform, with a little database entry that says "User Bob has -1 BTC on margin on the books".
2. The cash never leaves FTX platform either. Because FTX needs to "margin call" (aka: grab your assets somehow) if the market moves against the short position.
3. So really, you're trusting that FTX is going to give you the money back eventually when you zero out all your position entirely.
4. Also remember: exchanges regularly grab the assets. So its not really FTX's bitcoin either. They probably took it from Alice to lend to you.
5. If you wanna say "Well, why doesn't Bob go to Alice directly for this transaction??", its because Alice doesn't trust Bob, and Bob has no trust of Alice, so the entire scheme would never work.
If you thought a fraudulent non-US centralized exchange blowing up would cause it to drop below $100, you may not know anything about bitcoin.
If you doubt bitcoin's future, there is a way to put your money where you mouth is without having to trust anyone a mutual fund wouldn't.
Makes me wonder who wants to hedge bitcoins?
This is probably not a good time though. See https://www.blockchaincenter.net/en/bitcoin-rainbow-chart/
Ironically I was short Celcius Networks token (CEL) on ftx which was working well apart from one recent unexpected flaw in my scheme.
I've written about it a couple times.
https://paulbutler.org/2022/the-problem-with-bitcoin-miners/ https://paulbutler.org/2021/betting-against-bitcoin/
I'm still WAY above what I bought in at total, and already took out a good 20x of the original principal. Wake me up if it gets below 14,000; that might be worth actually rolling over for.
What part of volatile asset class is hard for so many people to understand?
Whatever, maybe I'll be wiped out tomorrow. Or maybe it'll be $10k in a year or two. Let's ride it and see.
That's because fear and greed are anti-fragile, and Bitcoin is fear and greed and little else.
It’s a negative roi to mine on old hardware.
They mined 1,047 bitcoin from July, Aug, Sept. Their cost of revenue for mining works out to $13.5k per coin. But that doesn't include the cost of the equipment they use (which, by value, is mainly the ASIC miners). If you add in the figure that they provide for equipment depreciation, it's an additional $25k per coin.
(Full disclosure: I'm short this stock)
[1] https://www.sec.gov/ix?doc=/Archives/edgar/data/1167419/0001...
The speculators may want to consider the impact of the slowing rate of "money printing" price (it's-different-this-time(TM)). Once all the tourists are gone, you're still left with the first artefacts from trustless consensus tech that lets you exchange value. That's gotta be worth something...eventually.
I am expecting the recovery to begin next year leading into the 2024 halving, but we will see.