JPMorgan team says crypto markets face ‘cascade’ of margin calls | Hacker News Reader

JPMorgan team says crypto markets face ‘cascade’ of margin calls

bloomberg.com

51 pointsVagueMag18 comments

> Crypto markets face weeks of deleveraging in the fallout from the crisis at digital-asset exchange FTX.com, a period of upheaval that could push Bitcoin down to $13,000

> The production cost is mainly the electricity needed to operate the powerful computers that run the Bitcoin network. “At the moment, this production cost stands at $15,000, but it is likely to revisit the $13,000 low seen over the summer months,” they said.

So if I understand this correctly, Bitcoin won't be worth mining

If it's taking miners too long to find blocks because of a decline in hash rate, the difficulty adjusts, which would reduce the cost of production. Some commodities can trade for less than their marginal cost of production for extended periods, but this is unlikely to last long in Bitcoin, because mining operations are so cheap & easy to stop and start as compared to, say, a copper mine.

> If it's taking miners too long to find blocks because of a decline in hash rate, the difficulty adjusts

Bitcoin hash rate: The amount of processing and computing power being given to the network through mining is referred to as Bitcoin's hash rate. [1]

If miners drop out producing a decline in hash rate but transaction volume remains the same or higher, doesn't "the difficulty adjusts" imply that Bitcoin would get less secure?

[1] https://cointelegraph.com/explained/what-is-bitcoin-hash-rat...

imo the only security is the defence of a 51% attack - the actual hash rate is to some extent correlated with the distribution of miners. However, at high enough levels of difficulty hardware becomes specialised and reduces the number of parties that can compete.

> If miners drop out producing a decline in hash rate but transaction volume remains the same or higher, doesn't "the difficulty adjusts" imply that Bitcoin would get less secure?

It’s not incorrect to say, but you have to be careful with what you mean by “secure”.

The attack is one miner with 51% of the hashrate controlling consensus. This still doesn’t mean your bitcoin gets stolen, it does mean bitcoin fails it’s mission in that the one user controls which transactions make it on chain.

However the value of controlling bitcoin is proportional to the market cap of bitcoin. Hashrate also scales with the market cap. So arguably it would never be worth executing this kind of attack. The same is true of the zillions of tiny PoW coins out there.

Caveat: Any market analysis the big banks are publishing for free has a low signal-to-noise ratio and should be taken with a small pile of salt.

Well there is a plot in it with both axes labelled.

why a floor of $13k? The floor is clearly $0

This. The cost of production is irrelevant for something unless there is demand, although what they may be saying is that at around 13k the sellers will simply disappear so liquidity will be zero and the price will sort of stop at that point.

Greater Fool Theory.

Why would anybody invest in a „security“ with no IRR.

It is a poor summary of a commentary piece, but even from that perspective the reader can deduce the model they are using for the purpose of determining a short term floor. Its cited in the piece - Hayes 2018.

Bitcoin price and its marginal cost of production: support for a fundamental value - https://arxiv.org/pdf/1805.07610.pdf

Archived: https://archive.ph/AD6lb

seems like a perfect time to load up on more ETH, self stake, and activate my own validator. All of the shady investors and crypto bros flee while I sit pretty and earn rewards.

And then what? Wouldn’t you need the crypto bros and shady investors to return at some point for your rewards to be of appreciable value? What are the rewards?

No. You would need more mug punters / dumb money to drive the price up. Events of the last few days will likely have scared them away, for now.

"This cycle" is just code for "this batch of the gullible". Many of those "innovators" (and their fans) of the last decade are about to find out that they haven't reinvented the parts of human nature associated with fear, greed, and hubris.

The value of Eth doesn't need to rise for rewards to be of appreciable value, it just needs to stay more or less stable.

So it wasn't a ponzi scheme? Yeah.

Reply on news.ycombinator.com