I browsed through the paper. Their main result, if I understood correctly, is that they found "considerable evidence that Tether is used to purchase Bitcoin following Tether authorization and a drop in Bitcoin price, and that this phenomenon has a sizable relation to future Bitcoin prices and other coins."
This result, if true, does not imply directly the conclusion ("rally caused by single whale").
First, it doesn't explain the original raise of the price before the fall (that followed with tether purchases). Second, these results can have, I think, alternative explanations. For example, Tether was used as a tool for shorting Bitcoin, hence it makes sense that it be sold after Bitcoin price drops.
I write this with knowing that perhaps my interpretation of the paper is wrong, since it relies heavily on professional jargon I'm not familiar with.
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title: Is Bitcoin Really Un-Tethered?
Abstract: This paper investigates whether Tether, a digital currency pegged to the U.S.dollar, influenced Bitcoin and other cryptocurrency prices during the 2017 boom. Using algorithms to analyze blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. The flow is attributable to one entity, clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests insufficient Tether reserves before month-ends. Rather than demand from cash investors, these patterns are most consistent with the supply-based hypothesis of unbacked digital money inflating cryptocurrency prices.
> One entity on the cryptocurrency exchange Bitfinex appears capable of sending the price of Bitcoin higher when it falls below certain thresholds, according to University of Texas Professor John Griffin and Ohio State University’s Amin Shams. Griffin and Shams, who have updated a paper they first published in 2018, say the transactions rely on Tether, a widely used digital token that is meant to hold its value at $1.
> “Our results suggest instead of thousands of investors moving the price of Bitcoin, it’s just one large one,” Griffin said in an interview. “Years from now, people will be surprised to learn investors handed over billions to people they didn’t know and who faced little oversight.”
> “This pattern is only present in periods following printing of Tether, driven by a single large account holder, and not observed by other exchanges,” they wrote in their new peer-reviewed paper, set to be published in a forthcoming Journal of Finance.
> “Simulations show that these patterns are highly unlikely to be due to chance. This one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in aggregate flows from other smaller traders.”
Tether is starting to look like a Madoff-scale Ponzi scam. What maintains the $1 price of Tether is a continual net inflow of cash. Tether is known not to be backed with sufficient real assets.[1] If there's a period of net outflow from Tether, the whole house of cards comes crashing down.
It's looked like a Madoff-scale Ponzi scam for a long time. Even in 2017, when the world was gaga over cryptocurrencies, people were saying that the Tether stuff is super sketchy.
There was a near-run on Tether this May, though, and ironically that's what pumped Bitcoin from $5300 to $8000. When folks want to dump Tether, they generally cannot dump it directly into dollars. They have to dump to Bitcoin, move it off-exchange, and then sell the dollars on an exchange with fiat currency. That means that every Tether dump creates a run on Bitcoin, which pushes the price higher. If the arbitrage trade is interrupted (as it was in May, when Binance and Bitfinex both shut down withdrawals just as the run was beginning), then the price of Bitcoin remains permanently high, and instead of selling Bitcoin on other exchanges to compensate, people buy them to match the new price, the public forgets about the panic when withdrawals open 2 weeks later, and the price remains permanently high.
I wonder also if at some point Bitfinex can just make up Tether's reserve shortfall out of their profits. (Actually, they claim that they made up the shortfall already with their Tokinex IEO, which was also super sketchy, but even if they hadn't...) Coinbase reportedly made $1B in profit in 2017 and about $400-500M in 2018; Bitfinex is of similar size, so a couple years like that and their profits could probably plug the hole, if they don't get sued/regulated out of existence first.
> When folks want to dump Tether, they generally cannot dump it directly into dollars. They have to dump to Bitcoin, move it off-exchange, and then sell the dollars on an exchange with fiat currency.
Not sure where you got that from, but that's not true whatsoever; USDT/USD is a thing in a bunch of exchanges with really healthy volume. Other than a few months ago (perhaps the run you mentioned in May) there's normally no premium and the peg is down or up by perhaps 0.5% or so.
Maybe you are saying that because Binance, the largest exchange doesn't have a USDT/USD pair (they don't have any USD pair afaik), but you can easily withdraw USDT and sell them for USD directly in other exchanges.
It's a thing on Kraken and Bittrex, with about $2M in daily volume on Kraken and $290K on Bittrex. That's a lot of trading days to absorb the $4.1B market cap of Tether or even the $800M that are reportedly unbacked.
If the dollar peg has staid for years, how risky lottery it is to do short term value transfers with it? It is obvious that it shouldnt be used for long term value storage. However since it has been called out as a ponzi scheme for years and still maintains the peg, these articles start to be more like advertisements for it.
No, fractional reserve banking does not work that way, despite what the cryptocurrency community thinks. Most of a bank's assets are in the form of loans to others, usually with real assets, like houses or cars, behind them. The risks are loans going bad, and owning long term loans while taking short term deposits.
If I have a house, I can't turn it into cash immediately. I may have a fraction of my net worth in cash. That's not the same thing as only having the small amount of cash and nothing else.
It's probably a combination of manipulation on an incredible scale and the media attention this surge caused. We all know multiple people who FOMO'ed into crypto and lost most of their money. So that surge definitely wasn't all manipulation, but I'm not at all surprised that manipulation was what triggered that madness.
Most of the crypto market follows Bitcoin's price, at least roughly. If Bitcoin gets up 5%, Ether and other coins might rise 6,7,10%. If you look at the 30, 60 day, etc charts of BTC vs the others, it's quite clear. So the market following the Bitcoin part is plausible.
It's in the source material, but crudely it looks like tether issuances were used to prop up the market as it faltered, timed as they were. Either there was a remarkably, improbably prescient actor there, or it looks fishy as f*ck.
Probably not. Nobody knows the full story, but given that the pattern is one of responding to market movements rather than looking like money flowing in to a market from investors, it seems unlikely.
Further, given their outright lies about auditing and the recent admission that only 75% of tether is backed by cash or cash-like instruments, it looks a lot like a huge fraud to me.
Make your own mind up I guess, but if you're going to tell me "See, nobody actually knows!", then that's true. But we can analyse what looks likely, and what looks likely is that it's been issued out of thin air to prop up the market price of BTC and fleece market participants for the benefit of owners of the Tether corp and Bitfinex.
I guess we'll see more as the various lawsuits shake themselves out.
People do "technical analysis" on a daily basis, only to be wrong 50% of times.
The paper is quite filled with terms unclear to a non-finance 3rd party, but here is what I gathered from reading it diagonally and your explanation:
Their only argument about Tether in question not being cash backed is that it is infused exactly at the moments when Bitcoin goes down, and that is "not consistent" with what investors generally do.
Well, duh. Maybe it is not consistent with investing in, for example, falling Microsoft stock after some scandal reveals malpractice. But in case of cryptocurrencies, which historically have been very volatile, it makes quite a bit of sense to buy on a downward turn.
I don't see any reasoning in the paper, assigning probabilities to their expectations for investor behavior versus the reality of Tether trading conditioned on both hypothesis. And that assumption is the cornerstone of the claim. 80% of the paper for whatever reason is spent proving an obvious fact, that large Tether infusions are causing the rise of cryptocurrency prices.
> People do "technical analysis" on a daily basis, only to be wrong 50% of times.
That's because 'technical analysis' of an irrational market, for the purposes of projecting price movements, is worthless.
That's not the same as retrospectively examining things that have occurred in the past.
> in case of cryptocurrencies, which historically have been very volatile, it makes quite a bit of sense to buy on a downward turn.
But not in huge monolithic chunks.
Look, you live in denial if you want, but it's been pointed out so many times that tether is dodgy as all hell (and they've more or less admitted it themselves too). We'll find out sooner or later what's gone on.
The more I know about cryptos, the more I remain skeptical. The only people I know that uses cryptos seriously are acquaintancies from latin america, and none of them for storing value, with the exception of Venezuelans. Not even argentinians, that just buy as many dollars they can.
I've used it seriously. Paying people in countries without a functional banking system is a real problem and bitcoin nicely helped with that. I also collected some donations for reocities.com which helped to keep it alive. I never bought any, just mined a bit and I never sold any either.
Similarly, I try to add it to all my side-projects that accept payment. I looked at a few payment providers and settled on OpenNode, as they had the right mix of an easy API, quick support and good documentation, though I would like it if they supported more cryptocurrencies.
If you want cryptocurrencies to succeed, you need to make them widespread as a form of payment. I already lament Steam and Stripe removing Bitcoin support because of the rampant speculating, let's not do more of that.
Unfortunately, Bitcoin as designed is technically incapable of being in widespread use for payment, due to a severe lack of network capacity, and a complete lack of interest in ever changing this.
Instead, all effort is going into a building a flawed second layer that is theoretically unsound and a usability nightmare.
> Instead, all effort is going into a building a flawed second layer that is theoretically unsound and a usability nightmare.
I don't know much about LN and actually I'm quite sceptical about it. However I have tried it now couple of times with different wallets and it seems to work very fluently from user perspective. And saying this as a very old bitcoin user, so I'm used to sending bitcoin payments a lot, LN payments don't seem to differ that much from usability perspective. You scan the QR code/invoice and press send.
LN requires an on-chain transaction to open a channel and another to close a channel which means it'll take 70 years to open a channel for everyone on earth and then close it once, assuming the blockchain does nothing else. If an intermediate node loses power all your channel money is locked for over 48 hours. It's also not even Bitcoin and could work just as well with any other cryptocurrency or probably even dollars honestly.
Then of course there's the features people actually want like dispute resolution, the ability to charge back, and so on.
Is the argument here that Lightning, or Bitcoin, is useless because everyoneonearth can not use it at the same time? Isn't that moving the goalposts, even a little?
Even if only a couple of thousand people could use it, as long as it is useful to them it has a niche. It might not be enough to justify insane valuations, of course, but that's another discussion entirely.
Traditional banking serves pretty much everyone on earth, without running into performance issues, so if Bitcoin is going to replace those banks then yes, it must do the same. And it was Bitcoin fanboys who declared that Bitcoin is here to replace fiat money, so you set that goalpost yourself.
No. Traditional banking doesn’t even serve everyone in the United States, with 55 million people unbanked or underbanked: https://en.wikipedia.org/wiki/Unbanked
This is the biggest misconception in the space (and that's saying a lot). They're un-banked and under-banked because they don't have money, not because the services don't exist. You want to solve this problem, solve wealth inequality and income inequality, don't pretend magic beans that cost $1-3 to transact will solve the problem for you. That's more than it costs you to use an Amex Bluebird or even a Green Dot card at an ATM, let alone a T-Mobile prepaid visa. And it's dropped half its value in the last two years (generously). Those are the people you want to disadvantage with a massively fluctuating currency?
Not to mention the low-income folks are most likely to have smartphones and therefore access to online banking with Ally or Schwab, which require $0 minimum balances and refund all ATM fees. You need a phone to use BTC, which means those same people can access Ally or Schwab and be objectively better off.
This is again a social problem in need of a social solution.
Postal banking is a great way to solve the access problem where it exists, too, like is done in the UK, and was in the US until the 1970s.
Sorry, this talking point is debunked, unless there's something I'm missing here.
Not having a bank account doesn't mean that the financial system isn't being used. If I get a paycheck and take it to a check cashing place, I'm still relying on the financial infrastructure and the banks and crypto isn't a viable alternative.
It's kind of a straw man to talk about opening LN channels for 7.5 billion people, as if that's something to be concerned about today. Not every man, woman and child has a cell phone or computer right now, so that's not really a concern in 2019.
Dispute resolution is built into the protocol: it's a two-way channel; both parties have to agree that the transaction in question took place and either party can close the channel if they wish.
And because LN is under heavy development, there are all kinds of new features being developed, like watchtowers that can monitor the channel on your behalf, etc.
You don't need chargeback if you can claim your money and close the channel if thing you want to happen isn't happening, right?
Yes, other cryptocurrencies (such as Ethereum) can create LN as a layer-2 feature.
No, you can't do this with dollars; since there's no cryptocurrency representation of USD with the required blockchain and scripting/smart contracts language required for LN—at least not yet.
Your figures are about right, but 70 years is a long time to assume nothing else changes.
As to "it's not even bitcoin" you're flat wrong. Holding a valid Bitcoin transaction is definitely Bitcoin, and with Lightning you always do. This is why it can't be done without bitcoin.
And from a FOSS development perspective, bitcoin is the only project in the *cryptos" space I consider serious. I wouldn't base a project of mine on any of the other chains, and I think I've earned my graybeard enough in FOSS to make that judgement.
[Disclaimer, I work on Lightning standards and one implementation, since 2015]
There are over 10,000 LN nodes right now, with a capacity of nearly $8 million and growing quickly. The site is called “1ML” because the goal is to get to 1 millions LN nodes: https://1ml.com
You have nodes running on smartphones now; as soon as you launch a LN app, the channel is opened. There are billions of smartphones out there, so the 70 years you quoted is not a thing.
Eh, there's Stellar, Nano, whatever. There are solutions, the important thing is that cryptocurrencies start having uses other than speculation. It doesn't matter which one is useful as long as one is, and I'd rather use Bitcoin now than use Visa because of a theoretical fear that Bitcoin might not scale to millions of people.
And they are all an absolute shitshow. Nano especially is complete and utter garbage that barely holds together under the minimal usage of its tiny user base.
The idea here is that the blockchain model where everyone checks everything that happens doesn't scale to billions of users.
Fortunately for people who disagree, there are hundreds of crypto projects that think this is possible. Including straight up copies of Bitcoin like Bitcoin Cash and Bitcoin SV.
What do you mean by "compliance" issues? If you meant that the sum of money you send cannot trigger someone, somewhere to check to make sure the transaction is legit, and we're assuming a transfer from a "normal" bank to another, then I would guess on the order of $10,000. But companies and organizations routinely transfer millions and billions between normal banks. Yes, the transactions may cause someone or many someones to investigate, but the transfers still succeed.
What does OP mean with "liquidity issues"? Lightning is a routing network, and you can connect directly to your counterparty, circumventing all potential liquidity issues.
> But companies and organizations routinely transfer millions and billions between normal banks
Just like companies have direct lightning channels between each other, they can send billions of they please.
You're being disingenuous. A channel needs to be already funded before a transaction can happen, with an amount at least the size of the transaction. So, to transfer billions, you need billions more to first fund the channel. A quick search shows that most channels currently have less than $100 in them, limiting how much you can send without prior arrangement.
> A quick search shows that most channels currently have less than $100 in them, limiting how much you can send without prior arrangement.
Note that not all channels are public, so you won't find all in searches. I'm only saying that you shouldn't be worried about lightning liquidity if you can directly connect to your counterparty - as you can directly transact with that party without relying on any liquidity from anyone else.
For Lightning to work at scale, we need solutions for problems that nobody on earth has solved yet, nor have any idea how to solve.
Sure, it kind of sort of works for small network sizes. It will die a fiery death the second it attempts to become popular with no known way out of the mess.
Let me further clarify: Lightning is not worthless and has already become the basis of a new industry of apps and services.
Like any low-value transaction using bitcoin, like the proverbial cup of coffee, it’s not necessary to wait for even one confirmation before doing anything.
Plain vanilla lightning uses a UTXO (that’s what a bitcoin on the blockchain is, an unspent transaction) to open a channel. But you don’t have to wait 10 minutes for at least 1 confirmation before using the payment channel.
I’ve received multiple LN transactions with various LN apps and it’s always been instant.
Once the payment channel is opened, it stays open as long as it needs to. But the killer feature is being able to transact without requiring the underlying bitcoin blockchain; it’s only required once the parties decide to close the channel.
Same thing with multi hop payments.
There are many enhancements being worked on, like loop-in, loop-out and submarine swaps, which handle providing liquidity to enable transactions and the ability to make swaps between chains, like being able to “swap” between bitcoin and light coin if that was desired.
There’s also work happening to enable one on-chain UTXO to fund multiple payment channels in one go.
So tens of thousands of transactions can take place without touching the underlying blockchain.
So there’s no lag when it comes to opening or closing a payment channel.
There are no scalability issues; we’ll have more LN nodes than Bitcoin full nodes (about 55,000 worldwide) by this time next year and it’ll be fine.
> But the killer feature is being able to transact without requiring the underlying bitcoin blockchain.
To be clear, you can send and receive bitcoin without the fees or latency of the bitcoin blockchain until you close the channel. And depending on the use case, that could be weeks or months in the future.
And even when opening or closing a payment channel, you don’t have to wait for the blockchain to confirm that transaction.
> Except a 4tx/sec cap on opening and closing channels.
Once a channel is funded, it can stay open for as long as it needs to. I can have a payment channel open with my local coffeeshop and we can transact dozens of times; only the final bill has to be broadcast to the bitcoin blockchain.
Well connected LN nodes can be connected to hundreds of other nodes and route transactions accordingly.
In the short time LN has been available, there are over 10,000 nodes and growing; the network capacity is almost $8 million USD: https://1ml.com/statistics
The Internet was always at capacity. Until we had the pervasive networking we have today, there were always more people wanting to have Internet access more persistently and with more performance than what was available. Almost everyone who had the opportunity to use the Internet, would. As a result, enormous advances in technology were made to implement today’s pervasive networking. New use cases manifested immediately all the time. Nobody ever said “we implemented this world wide network thing, now we are looking for use cases”, there were, and are, always more use cases to choose from than resources to implement them.
> Almost everyone who had the opportunity to use the Internet, would.
I'm too young to have experienced this. But I've seen countless of clips and interviews of people claiming they would never use the internet because they can send post and use a telephone instead. "Computers are for geeks", etc.
> New use cases manifested immediately all the time. Nobody ever said “we implemented this world wide network thing, now we are looking for use cases”, there were, and are, always more use cases to choose from than resources to implement them.
It took a dotcom bubble to find the use cases we actually use today. Would you have not said the exact same thing back then about the internet?
Nobody said that back then, no. They said there had been an over-exuberant market with people throwing stupid money at any old idea, but nobody was saying "the internet is a bust" or even "we don't know the use-cases" because there were a ton of other useful, successful things going on with it.
You said it yourself - you're too young to actually know a lot about that, but you use it to bolster your arguments anyway.
Many people were saying this, Paul Krugman (one of the leading economists) went as far as comparing the internet to the fax machine:
"The growth of the Internet will slow drastically, as the flaw in 'Metcalfe's law'–which states that the number of potential connections in a network is proportional to the square of the number of participants–becomes apparent: most people have nothing to say to each other! By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's."
> You said it yourself - you're too young to actually know a lot about that, but you use it to bolster your arguments anyway.
I'm too young to live through it, but luckily I studied it in university :-) Many people claim to know many things about history prior to their birth. I guess I'm one of these people.
> Many people were saying this, Paul Krugman (one of the leading economists) went as far as comparing the internet to the fax machine:
And he caught a bunch of shit for it, even at the time. You keep trying to conflate critics of Bitcoin, many of whom have technical & finance backgrounds, with the largely non-technical crowd that didn't understand the web back in the 90s.
> I'm too young to live through it, but luckily I studied it in university :-)
What's the name of this "history of the internet" course(s) you took? The most historical context I ever got consisted of maybe a few intro paragraphs on Arpanet in my networking 101 class.
"Media history" would be the English translation. It wasn't about the technical origins of the internet which are irrelevant in this discussion.
They studied the impact on a few big media inventions (printing press, TV and the internet) on (western) culture. It seems you don't believe I had this in University? You can find some information here: https://docplayer.nl/2209094-Studiegids-2013-2014-communicat...
The subject is called "Mediageschiedenis" and you can find it on page 37. This document is unfortunately in Dutch.
> You keep trying to conflate critics of Bitcoin, many of whom have technical & finance backgrounds, with the largely non-technical crowd that didn't understand the web back in the 90s.
People today are as illiterate about economics as they were about the Internet back in the 90s. Just look around and see how many people know what Austrian econ is.
I was there. By the time the dotcom bubble burst, the Internet was already everywhere, having steadily grown as a household technology since first introduced to the general populace just a few years earlier.
The dotcom bubble was then precisely a symptom of the Internet's runaway success: Everyone wanted to use it, massive amounts of money were being made with it, and so everyone thought they could make money with it as well. As a result, even the stupidest ideas got funding.
When the bubble burst, it caused a significant economical upset. It did not have any really noticeable effect on the Internet itself, its usage, and the availability of most of the services that were actually in use. I don't think anybody remembers a time where Internet usage "dipped" from its massive momentum since the mid-90s, because the dip was largely economic.
Then he was an idiot, because at the time email was already in heavy use and had been for years, and had had a massive effect on business communication and the economy. Unless for some reason you don't count email as part of 'the internet'?
I was working back then, in 2003. The view on the ground was that SV had blown its head, but the rest of the world was just getting on with it. In fact most of the tech industry didn't even notice or care.
If you want to talk about whether web-based commerce was looking feasible, well even that was healthy enough - amazon was there and people were using it more and more, though clearly it wasn't as big as it is today.
So no, there was no feeling that 'the internet' wasn't going to be such a huge thing. There was a pessimism about some aspects of web commerce.
But I guess that's not as catchy a tagline as "It's like the early internet!"
> The internet didn't support millions of users after a decade either. Is the internet a scam?
The internet wasn't actively anti-efficient, making itself less efficient the more people wanted to use it haha.
> I'm not sure why you are saying all efforts go into a flawed second layer?
Because Bitcoin is fundamentally incapable of processing more than a laughable number of transactions, barely enough for a small town let alone the world?
> a) Dozens of teams are working on other efforts.
With nothing to show for it that isn't either (a) an objective scam or (b) not true to the fundamentally unachievable objectives underpinning "Bitcoin"
That's not an issue at all, for large transactions. The real issue is each payment being a taxable event, due to IRS treating it as property, rather than currency. You literally have to report each payment on schedule D and calculate its cost basis! This burden kills any legal US adoption.
I thought the Bitcoin community were publicly stating that Bitcoin is optimised as a "Store of value" rather than a currency to be used for transactions? Which is it?
It's properties are more in line with a store of value, especially the deflationary aspect, but the line between a store of value and a currency is blurry. Gold also has more properties of a store of value than a currency, and it's used more as a store of value globally, yet some parts of North Africa and the Middle East are using the gold dinar as a currency. It can be both.
If you wanted to know how it's taxed, you could've asked that directly. I didn't see anything in your question about how it was taxed. Short answer specific to the US (IANAL): capital gains on every transaction, counting transactions between different cryptocurrencies as if you'd sold your original currency for USD and then bought the other cryptocurrency using USD. These are just arbitrary laws though, they have nothing to do with the actual properties of a given cryptocurrency.
According to the Austrian School of economics, a thing has to be valuable or seen as a store of value before it can be used as a medium of exchange. This podcast has a great explanation of this: https://stephanlivera.com/episode/76/.
Why would you spend bitcoin if you didn't have to if you believed it’s going to be a lot more valuable 5 or 10 years from now?
Famously, a guy spent 10,000 BTC to buy two pizzas during the early days; that’s over $94 million USD at today's prices.
We were one of Stripe’s early Bitcoin integration users. I even got a free T-shirt for finding bugs in their documentation. In the years that it was enabled (until Stripe ended support) we never received a single payment in Bitcoin.
There’s a large portion of the population who have no compelling reason to use Bitcoin.
I integrated Stripe early on too, and did get some payments in Bitcoin (out of a few per month total). Eternum.io has had a Bitcoin integration for two weeks and already got two payments in Bitcoin.
Of course. There's a subset of the population that is eager for Bitcoin payments, and if you have a service that either targets those users, or is a service they'd already use, you'll see usage. (Even that's a challenge, with the "hodl" mentality that's prevalent)
I think we're still a long way away from general purpose adoption however.
> If you want cryptocurrencies to succeed, you need to make them widespread as a form of payment.
This! It's unfortunate that the most well known cryptocurrency failed to grasp this and refused to prioritize scaling so that it could accommodate demand.
At the end of the day, if a cryptocurrency can't be used like cash, it has nothing to offer over existing solutions.
I looked at that too, but 1% for my low volume isn't worth the hassle of running my own processor (which would have been more expensive even before factoring in the hours I took to set it up).
> Paying people in countries without a functional banking system is a real problem and bitcoin nicely helped with that
Bitcoin isn't a solution to this problem because regions afflicted with non-functional banking systems have very little options for converting or spending bitcoin.
Not really. We had an extremely hard time trying to receive funds in Russia from an Indonesian customer, his native banks just flat out refused to do the transfer. Bitcoin solved the problem easily.
Except that bitcoin can be converted to any fiat currency. The people with dysfunctional banking systems can trade bitcoin for fiat in a peer-to-peer manor. Somebody up the chain can trade bitcoin for USD or any other fiat currency.
1,000 sats is worth about 10 cents USD but $14 Jamaican dollars.
I’ve also used bitcoin as a faster and cheaper than banks/western union means of transferring funds between my brother in Australia and myself in Europe.
It's not a real problem that Bitcoin solves. A single transaction costs multiple weeks wages in one of these less-functional countries (and wastes as much power as it takes to run an average American home for 20 days). They have social problems that need social solutions, not magic beans that live in their computers.
Maybe not Bitcoin, but there are other cryptocurrencies that actually prioritize low transaction fees. For example the next block fees on Bitcoin Cash is currently $0.0014.[0]
Ah yes classic crypto enthusiast banter: my coin de jour is better than the others for some reason even though it’s basically identical.
It’s down 93% in value in the last two years so it has held its value worse than the Turkish lira and only slightly better than the bolivar and the egg salad sandwich I left on the windowsill back in the summer of 2017. Its transaction fees are only low because nobody’s using it. Supply constraints in transaction count were just kicked down the road, there’s no way on earth it would ever be able to match visas current transaction throughput of 50,000tx/sec.
Ah yes classic anti-crypto argument: pure dismissal.
It could easily process 20-30x more transactions than Bitcoin do, with the exact same fees. So the "only cheaper because it's not used" is just wrong.
So a cryptocurrency can only be useful if it matches the throughout of VISA? Sounds like a lazy way to dismiss it. I would for example consider it great if we could match PayPal for example.
Which in numbers would be blocks of around 100MB for PayPal's average volume last time I checked. And Bitcoin Cash is around that with 32MB.
Of course there's still ways to go, with the main bottleneck being block propagation (so blocks don't split the network or cause too much centralization due to orphan rates). Of which there are improvements being worked on.
Funny how you cherry-pick the value drop from the top. There's no denying they're too volatile, but you should try to be more objective.
That’s one of a litany of arguments. From sheer waste to limited capacity to funding international terrorism to missing all the basic features of the modern financial system to being slow, anti-efficient and rife with manipulation. It’s beanie babies for nerds. It’s a nifty theoretical solution to a hard CS problem, that’s found zero real world use in the last 10 years that isn’t crime. It’s great for crime.
I’m not necessarily cherry picking it for the top to make it look dramatic but that’s when volume peaked so more people bought in at that point than any other in the history of the currency. It’s the number that’s relevant to the largest group of people.
I’m picking this because these things can’t be true for it to be a solution to the stated problem: helping the Venezuelans.
On Monday, the Central Bank of the Republic of Argentina moved to limit the amount of dollars that can be purchased to stanch large outflows of foreign reserves from the country and keep the peso steady, according to Al Jazeera.
Dollar purchases are now restricted to $200 per month via bank accounts and $100 per month in cash until December. It's a huge cut from the $10,000 limit and currency controls imposed in September to protect the economy following the August primary election, where a surprise sweep by Fernandez sent Argentina's stocks, bonds, and currency sliding.
It's important to note that in Argentina there is a black market for dollars -- You can buy dollars at "blue" price, which is more expensive. This means that the government is subsidizing the difference.
After the primaries, the price of dollars started ballooning and the government (which was clearly set to lose in the national elections), set a price for purchasing USD and a USD 10,000 per month limit.
So what the Argentinian people did was as follows: get paid in ARS, buy as many USD as you can afford at the official (lower) price, then go to the black market and sell at a higher price, which netted them more ARS than they had at first. Repeat until you reach the USD10000 limit.
They call this "hacer puré" (make mashed potatoes), and caused the unofficial price to go even further up. This scheme is basically "free money" for the people at the cost of the federal reserves, but it's nothing new for the Argentinian economy (the 90s were crazy). After the national elections, the government cut back on the limit down to USD 200 per month, rendering the scheme unusable (for now).
That one is a plus. Money is a transactional tool, speculation and storing value do not add to its main value.
As an aside, everybody that I know that ever brought some crypto coin did it for speculation. The more likely explanation is that I'm looking at the wrong country, but if speculation suddenly stoped being a main use of BTC, I would start to seriously look at it.
All money has value because people demand to hold it. In a hyperinflation scenario, people are dumping the currency for goods as fast as they can. They are using the money as a transactional medium only: get paid -> rush to buy goods to capture the value of your labor in something that won't be worthless tomorrow.
Dumping worthless paper currency is a form of speculation that the value won't unexpectedly rise before the goods purchased with it are consumed.
When people have confidence that the money they receive in exchange for their time will be able to transport that labor into the future, then they will demand to hold a balance in that money. That is why the money has value.
The "store of value" proposition of Bitcoin is that it can't be printed by a central bank, so you can be sure that your holdings relative to the size of the money supply cannot be diluted.
> The "store of value" proposition of Bitcoin is that it can't be printed by a central bank, so you can be sure that your holdings relative to the size of the money supply cannot be diluted.
Except that's not true. The block reward consists of newly created coins of which there are 1800 per day. Currently, that is a 3.7% annual inflation rate in supply, which is far more than the 2% target most central banks from developed countries have. In value terms, at a price of $9300 per coin, that is $16.7M that need to flow into the Bitcoin eco system each day for it to remain stable.
But "store of value" also means something beyond just money supply, namely stable buying power. And that is not something that Bitcoin has ever offered on account of being more volatile than a micro cap biotech penny stock. Bitcoin may very well be one of the worst stores of values imaginable.
You have to also consider the (hard to measure) rate at which Bitcoin is accidentally lost or intentionally destroyed, which is a deflationary pressure.
"2%" is target for the growth in the ratio of money supply to product supply, not the money supply itself.
BTC could be wildly above or below 3.7% (+/- deflation due to destruction) based on the growth of the GDP of the BTC-financed economy.
In short, those two metrics are just not comparable types. BTC has no "target" inflation. At best, you could measure BTC's observed inflation.
The supply is currently being bootstrapped, the rate of new creation is falling as the supply get closer to the maximum. Some months from now new coins from block rewards should halve (3.7% inflation dropping to 1.85%), and the process repeats as maximum supply is reached in the distant future, at which point the mining reward would primarily be the transaction fees.
This is I think the point OP is making. Up to this point in time, there has been a steady, and somewhat exponential increase in the supply of Bitcoin. As you say, that is about to start tapering off.
At which point, the behaviour of the entire system can be expected to radically change.
Storing value is considered to be one of the three functions of money [https://en.wikipedia.org/wiki/Money#Functions]. And the fact that BTC's value fluctuates so wildly (in an era where fiat currencies like the dollar tend to remain a lot more stable) is one of the obstacles to mass adoption.
It turns out that making a currency behave "gold-like" carried with it the disadvantages to the gold standard that induced so many countries to move away from it.
What he should have said is the focus on being a store of value, while rejecting the other functions (high fees work against being a medium of exchange).
In practice when people say "store of value" they mean "speculative vehicle that will make me rich".
That is the real problem that's causing volatility and making cryptocurrencies worse at it's intense purpose: as money.
I'm not saying that money isn't useful as a storage of value. What I am saying is that there is very little social benefit from that usage.
To decide whether a currency is successful, one should look exclusively at its use as a means of exchange, ignoring any use as a storage of value or speculation target.
The social benefit to storing value is de-risking against the future (2). I keep some money in my bank account so that if I need to buy food for a month with no source of income I can(1). If the money in my bank account buys a third as much food tomorrow because it lacks stable value as a store, that's bad for society, because if I'm going to starve to death, I might as well use the remaining energy I have to burn some stuff down or eat the rich.
(1) Ideally, I of course live in a society that doesn't consider it acceptable to let people starve to death and has a secondary system for routing food from supply to necessity without demanding I exchange stored value for that food, lest I die because I have no measurable stored value. I'm using a simple model here, and we can probably move the particulars around to find something that a society doesn't provide which is considered valuable enough that people store up private wealth to acquire it (and lacking the ability to do so, would resort to burning the system down).
(2) There is probably an interesting question in whether such privatized de-risking against the future is actually a societal benefit (because of the risk that it becomes simple hoarding). Is that risk why you have discounted value-store as a societal benefit?
Money should have a predictable value, not a stable vale. That's why most economies target 2% inflation. If money had a stable value, then saving would be riskless, until the accumulation of saved money increased would put increased pressure on the expected GDP until that "stability" collapsed catastrophically (as in the Great Depression)
> I keep some money in my bank account so that if I need to buy food for a month with no source of income I can.
Well, that thing in your bank account is not money, but a complex derivative of it, with different risk and depreciation profiles.
Anyway, some money that you can easily receive from the other side of the world, immediate convert into local currency, and move away without seeing any of it again would be very useful, provide a lot of value, and wouldn't require any value stability if it was created at the moment your peer started the transaction and destroyed as you finished it. Ditto for something you could send very small amounts over the net.
The thing in my bank account is enumerated in US dollars and backed by FDIC insurance against theft, fraud, and collapse of the institution storing and tracking it causing the quantity of such enumerated dollars I have changing. I agree that it has different risk profiles than "A sack of greenbacks under my bed," but not different in a way that makes it practically not-money.
It satisfies the three basic functions for all practical purposes. In fact, it does so better than BTC (in the sense that there is no FDIC-equivalent to protect me if theft, fraud, or collapse of some holding institution tracking my BTC wallets for me divorces me from my BTC).
Yes, storing value is useful, but not storing value doesn't make a currency useless. You can always store value in other ways, by purchasing assets - such as food, or another currency.
It's worth noting that people tend to like to do this anyway, even when the currency is already pretty stable - because a house you can rap your knuckles against feels like a more secure store of value than numbers in a bank.
Money is designed (by central banks) to depreciate at 2%/yr. Most erstwhile "durable" goods depreciate at a faster rate. Your house certainly does. Heck, taxes and insurance alone are almost 2%, before you even look at physical depreciation, which is generally estimated to be at least 1%/yr.
(Speculative assets like the land it sits on might appreciate far more to compensate, however.)
I wouldn't say "useless" (it's clearly usable as an agreement between two parties that some amount of value was exchanged).
But it's less useful than a currency where the observed exchange of value between two parties implies that most other parties agree value was exchanged. If you give me 2 BTC today but tomorrow the value of BTC has fallen by 90%, it's almost as if we never exchanged value in the first place. It's certainly not as helpful to me as if you give me $18,500 dollars today and I can spend them tomorrow.
Failure of a currency to act as a store of value damages its utility as a means of exchange, because the amount of value exchanged is imprecise over time.
Thankfully your circle of acquaintances isn't even remotely close to representing the wider world out there and the plethora of legitimate use cases that it presents for all sorts of people in this world.
Just last week a friend of mine from another country was suppose to send me a few hundred bucks. He could have sent it 'traditionally' but he would have been harassed about why he was sending money abroad and wasted considerable time and effort going to a physical bank branch. Instead in under a minute he sent me some Ethereum and we both were able to confirm the transaction near immediately. I'm now able to use that in the way I see fit directly within a Chrome extension within the browser I'm typing this on. I can take this money and start earning interest higher than any bank will give me within a few minutes. And this is just the beginning of cutting out middleman and processes that feel as cumbersome as sending a letter vs an email.
Yes but you don't end up with the few hundred bucks, you end up with Ethereum. If you need to pay for something using euro, dollar, ... you going to need to convert it which will include fees.
Plus, I don't want to defend the banking industry, but there is often two reason why transferring money is a bit cumbersome with banks: Scam and terrorism/money laundring.
The first thing is, the average Joe cannot help himself but get scammed. Because of this banks have to try to check has much has possible that you are doing what you think you are doing and make you jump through some hoop. Because had the end of the day, its probably the bank that will have to pay for your idiocy. They have insurance but insurance are not free.
Crypto-currency usually don't care about this, if you send BTC to one address, you send BTC to one address, and if it was a scam, you have no way to get anything back.
Being able to transfer money at just the click of a button also has its problem, lets be honest.
And terrorism / money-laundering. There is a lot of regulation about it, none that crypto-currency care about. You could be sending BTC to Daesh, nobody can stop you. Banks have to stop you. Just like they have to check that the money you are sending / receiving is legitimate and not from some illegal operation. That is why international money transfer takes more time and cost a lot more.
Now granted, a lot of banks are still awful at preventing scam even though they are extremely cumbersome to use. Just like a lot don't want to be bother with the whole money-laundering process and will try to discourage you to do anything that would require them to follow the process. And yes, some of them abuse their dominance to put ludicrous fess, etc.
But the fact is that crypto-currencies live in a dream world where they don't have to put up with the rules that banks do. And that is why they will either never see widespread use, or they will have to find a way to comply with country regulation, which will need the third party that they tried so hard to remove.
>Yes but you don't end up with the few hundred bucks, you end up with Ethereum. If you need to pay for something using euro, dollar, ... you going to need to convert it which will include fees.
I one has dollars and wants to pay for something using Euro or anything else, one will need to convert it which will include fees.
I'm fully aware of that. What I would like to know is the mechanism that links Dai in any way to USD. So far, I've been told the onus on me is to research it, and then that my conclusions from that research are wrong.
If you spent as much time reading and internalizing the whitepaper as you did arguing about it online you'd be there already. I know I'm being snarky, but you're coming of as trollier and trollier. This is not Reddit.
I read the materials, and I still can't figure it out. You have also done your research, and apparently do know why Dai is stable to the USD. I'm just curious what that mechanism is, and why you can't explain it. I did read your very long answer elsewhere, but that's an overview of the entire Maker system, and at no point does it explain which part does the "stabilizing", apart from a vague reference to "incentives". What are they?
Oversimplifying a bit here at the price of accuracy and completeness, but mainly arbitrage. Ceiling is easy; if the market price is > 1$, it is free money to create new CDPs and sell the DAI off for ETH on the market.
If the ETH/USD price goes down, so does the capitalization ratio of CDPs. If a CDP goes low enough, users have to either repay their DAI debt (removing DAI supply from market) or rebalance by depositing additional ETH collateral. Otherwise, their position will be liquidated (which means the CDP owner loses their collateral) and their ETH collateral is put up for public sale for DAI on-chain. The DAI used to pay at these sales is destroyed. This creates an incentive for people to burn DAI to acquire ETH below market price (thus creating demand for DAI).
Also in general I advise you to ask clarifying questions rather than post scoffy dismissals if you know that your understanding might be incomplete.
If you have an adversarial mindset (which is absolutely healthy) and want to understand it well enough to not immediately come up with counterarguments whose only valid reply is "RTFM", yes, it takes at least 20 minutes. But regardless, I'll bite.
DAI has a couple of intended use-cases. I will focus here on the "stable coin" asset, meaning you should be able to expect it's value to not go up or down over time. It is inherently debt.
The main component of DAI is "CDPs", Collateralized Debt Positions. There is a smart contract on the ETH blockchain. Smart contracts are computer code on the blockchain that are "open trustless execution", meaning you can inspect the source code, verify that it matches the deployed bytecode, and be certain that any transaction follows the rules. In DAI, there is no entity that can even theoretically exit-scam you.
The configuration parameters of this smart contract is set by votes by the holders of the MKR token. This token is traded on public markets and is the speculative token of the ecosystem.
You can deposit assets into this smart contract. The current version of DAI only takes ETH, but the intention is that MKR holders will consider any significant asset representable on the ETH blockchain. This includes other stablecoins (think fiat-backed tokens), tokenized equity or government bonds (which have already been issued on the ETH blockchain), tokens backed by commodities like gold, etc.
When you deposit assets into the smart contract, you get DAI in return, representing a loan backed by the deposited assets. How much DAI you get in return is determined by an oracle (meaning a smart contract providing data external to the blockchain). This oracle is aggregated from several other oracles, similarly public and approved by the MKR governance. In general, the system is over-collateralized at any point in time.
There is an incentive and liquidation system around the whole things that goes a bit further to ensure that the price remains stable despite fluctuations - and so far the DAI/USD price has remained really close to 1 throughout the ETH/USD long bleed of 2018, including short periods of high volatility.
There is some degree of risk involved of course, most notably including the oracle price feeds. There is a road map to both increase transparency and decrease the possibility of collusion between oracle providers.
There is also the "emergency shutdown", which involves freezing and instant liquidation, but this comes at a big cost to the MKR holders who have to approve it.
Despite having been running for several years and having dozens of people (I think over 100 now?) it is, of course, still to a large part an experiment that is still evolving. But so far it has been performing better than I thought. And there is no way you could call it a scam.
No, did you even read what he wrote? Price feeds are used in the system, but the whole system does not boil down to "price feeds". I am not even sure what that could mean.
Price feeds are the answer? The price feeds in question don't even track the price of Dai - so I am not even sure what mechanism you have thought up to explain to yourself how Maker works.
If you are still having trouble understanding the system there is no shortage of resources available. Of course if you dismiss the resources because of an anti-cryptocurrency bias as you have then you will end up clueless since this is a realm with low-coverage in the mainstream.
I've read the previous, very long, answer. Yes, it explains how the Maker system works, but it does not explain which parts constitute the Dai to USD peg. The price feeds track the price of Eth, which is used to set the price of Dai if automatic settlement is needed (something I learned from the resources you describe!). If that doesn't set the price of Dai, then what does? Are you suggesting it's an emergent behavior of the system as a whole?
When someone's ethereum CDP is liquidated onto the market it is auctioned off for Dai before the collateral no longer backs the Dai. The price feed determines when a CDP is in need of liquidation. This mechanism is important because it keeps the system overcollateralized.
There is also something called global settlement. This is for major upgrades (they are doing one on the 16th) and also in case of emergencies. The price feeds in this case are used to determine Dai holder's proportional claims to the collateral (using the target price 1 Dai = 1 USD). It may happen happen Dai holders get less or more depending on the circumstance. In addition Maker is a major Ethereum application so if it failed the price of Ether would tumble. That is part of the reason they are expanding to support more collateral types in the update slated for the 16th.
So every Dai is a rough promise for one dollar but that does not answer why Dai is stable day to day. It works like this: When the price of Dai falls under 1 dollar, CDP owners will buy it up and close their positions at a discount which will put upward pressure on the price. Likewise, if the price of Dai goes above one dollar then fresh CDPs will be opened and fresh Dai will be sold on to the market, putting downward pressure on the price. If that isn't enough, the interest rate is manually adjusted to fine-tune the supply.
In the future part of the interest will be payed in to an optional savings account for Dai holders. The idea is that by adjusting the APR the demand for Dai can be fine-tuned. When rates are high people will buy Dai and lock in in a savings account. If demand is too high rates can be lowered causing an inverse affect.
DAI is a complex series of loans, borrowing, and interest that creates incentive to sell your DAI if it goes over $1 and incentive to buy if it goes below $1. DAI has basically maintained $1 for years even as ETH prices have been all over the place. It's battle tested. If you can't be bothered to do a few minutes of research on a complicated topic I don't know what you're doing here.
So far, I have a 20-minute video that is clearly mostly not about the Dai peg, and a link to a very wordy "paper". I skimmed both, and the answer is apparently "oracles", or a price feed from several crypto exchanges. That's a really simple answer, that doesn't need burying in layers of cryptobabble and an attitude that I can only describe as condescending.
It is very good to be critical about the value of information others provide.
But I find your commenting style abrasive; I wouldn't be surprised to see you flagged if you continue with it (especially with multiple examples in a single thread). Occasional outbursts seem to be tolerated here, although frowned upon as unconstructive. I myself personally tend towards abrasive confrontation of facts; but I really value the rules here since they create good discourse and avoid discord.
> He could have sent it 'traditionally' but he would have been harassed about why he was sending money abroad and wasted considerable time and effort going to a physical bank branch. Instead in under a minute he sent me some Ethereum and we both were able to confirm the transaction near immediately
Have you heard of options like TransferWise or OFX? They offer immediate transfers, lower transaction fees than ETH or BTC, etc. Using crypto in this manner is wholly unnecessary.
> I can take this money and start earning interest higher than any bank will give me within a few minutes
Earning interest? Are you talking about "HODLing"? ETH has dropped by nearly 90% since its peak less than 2 years ago. There's massive risk in holding ETH/BTC. You don't get to cherry-pick dates and claim that it's better than holding in a bank—it's not. BTC/ETH are 0-sum games, so on average nobody earns a dime of interest.
> BTC/ETH are 0-sum games, so on average nobody earns a dime of interest
I would argue it is actually negative sum as billions of dollars worth is newly minted every year and a lot of that inevitability has to be sold to pay the miners electricity bills. I'm honestly shocked they haven't collapsed due to the never ending supply side pressure requiring billions of dollars worth of capital inflow every year.
The supply of Bitcoin is by design not "never ending" [1]. The future inflation rate is known and trending towards 0, eventually turning BTC deflationary.
First of all YOU are the one cherry picking dates (conveniently picking the all-time high price which only lasted for a small timeframe). And now, I'm talking about DeFi (decentralized finance) where you can earn interest on top of your principal.
Also the ETH transaction fee is literally a few cents.
He's talking about "DeFi" ("distributed finance") - the current craze in the Ethereum world. Various groups are offering significant interest rates for loaning out your Eth. It's hard to see how it's not another speculation bubble waiting to burst.
And Venezuelans don't really buy to store value either. It's just one of the ways to go around currency controls. And lately not even that, as more and more local business are accepting US Dollars either by cash or bank transfer.
With current Bitcoin volatility it's crazy to store money with it. I really love tech which allows me to remember passphrase and having all money locked inside my brain, so I would certainly use it if it weren't so volatile.
Listen, really, for storing large amounts, why would you not want to have any backups?
Look at Shamir Secret Sharing and consider hiding the keys in multiple locations that only you would know. You would need N of them from any of N x 3 friends and 1 of them from you.
Remembering where you stored one key is easier than remembering the seed phrase or whatever.
For good measure, watch the beginning of The Bourne Identity.
The rest is strictly optional
If you are worried about forgetting even the location you stored the backup key, you might want to have an additional safeguard, that if you don’t “phone home” for a year, then afterwards you announce on a public platform that you are OK, then the machine storing one of the Shamir keys (the one which only you know) will also copy it to an account that anyone can open using your biometrics.
That means, to steal your money, they have to kidnap you for a year, then go get N of your friends to give up your keys and also use your body to fake your biometrics and somehow get you to publicly announce you are OK (this last requirement would be well known to everyone around you, so if you forgot, anyone could tell you the personal key recovery procedure).
The biometrics must include M of N things that remain stable over years, like your eyes, cardiac pattern etc.
Well, that would be stupid from your part if you kept wealth that should be inherited in Bitcoin-form, not a Bitcoin shortcoming. Just like it is not a shortcoming of cash that you can bury it in a hole in the desert and tell no one about it and expect it to be inheritable.
Thinking you will know the day and hour of your death is extremely bad estate planning. Any wealth is potentially inheritable, because you can die at any time.
(And yes, that is a shortcoming of cash. Which is why we've invented other ways to store value, and approximately nobody stores their money in random holes on other people's property.)
Uh I mean, not that I'm a cryptocurrency enthusiast by any means, but wouldn't prudent estate planning include a prepared will or some sort of next-of-kin document that includes a mechanism for access to your accounts/passwords/passphrases?
Yes...except when you forget the password on your wallet after someone, as an incredible charity offering, sent you 0.75BTC, and that wallet turns out to be "ultra-secure and distributed", which means you can't recover the contents by sending an password change request email.
Yes...I do currently have 0.75 BTC in a locked wallet where I forgot the password and it's totally frustrating.
It depends on your time frame, really. Most people I know do a dollar cost averaging for long term savings and their return over the years beats a whole lot of alternative ‘safe’ asset classes.
I always get downvoted for asking this but... doesn’t that seem like a really bad idea that makes you far far more vulnerable to physical crime? If a guy mugs you at an atm, the bank is going to flag something as suspicious. If a guy mugs you for your private key, you have no recourse for all of your holdings- and the getaway is a lot easier. Physical crypto crime feels like it would be very prevalent if it became “mainstream”
The idea of Bitcoin is a system without any centralized trust, eg. "what do you do if the bank mugs you" would be a counter argument.
Some people used to think/want that Bitcoin was going to take over all other forms of money. I don't think many people still believe that. In that sense it's just like other forms of property that can be stolen.
By the time crypto goes mainstream people will be using smart contract wallets like Argent and Gnosis Safe that implement things like social key recovery, daily transfer limits, and other common sense measures.
the MakerDAO system has two parts, the DAI token and the MKR token. The MKR token is the governance token the is used to vote on things like interest rates debt ceilings, and other decisions. As people take loans out by over supplying ETH and getting DAI, the interest paid on these loans is used to burn MKR, this provides the incentive to keep DAI stable so that MKR keeps getting burned. If the system collapses then MKR is printed to make up the difference and restore DAI to a dollar. This would be bad for the governance tokens since their stake of MKR would get diluted and the price would go down.
In order for that to happen, it has to be trading on multiple exchanges and for it to fail, all the exchanges’ stop-loss orders must fail at once.
Nothing can be pegged with absolute certainty, though, unless you liquidate everyone’s position before the peg breaks. Look at how Soros broke the Bank of England.
I've been using it to buy gift cards since the vendor gives a larger discount for using bitcoin. My exposure to price volatility is limited since I purchase the bitcoin a few seconds before buying the gift card.
That's just arbitrage, though. You're converting your liquid cash assets into another differently liquid type of cash using a less liquid form of currency, because you have special knowledge about the transfer process.
Bitcoin in this is a material asset, like a house to flip in an underappreciated/subsidized market.
Hi. You can get to know me. I'm an american and I regularly use bitcoin to pay for services, pay for physical products, and donate to causes over the internet. I've been involved in bitcoin since 2010 or so. I did not get rich but I still see the obvious utility of having a means to transfer value without trust or centralized control.
This was especially true after the US state dept. started using the big credit card corps as a means to impose their will politically.
It's like cash, i frankly don't care about value either but a form of payment that is not tied to me specifically where I can exchange the money for goods and services is crucial to me. Not much different from a cash giftcard i can use to pay for things online
Sounds like as good of a deal as right now where do the dollar bills I hold are guaranteed to be worth less tomorrow, with occasional periods of it being worth significantly less.
The US inflation rate has never been more than 4% annually in over 30 years. Bitcoin often moves more than 20% in the span of a few days. If you don't like volatility, you don't want Bitcoin.
Using one-off wallets increases the complexity of a financial forensics problem, but doesn't make it unsolvable. For one thing, you can't force everyone you do business with in the network to follow the same practice.
As a businessperson,yes. As a consumer it works quite well. When you offer services you become tracable. But alas XMR is not so traceable,one can always launder btc through XMR (and maybe profit?) Or zcash.
Even in Venezuela, with their huge currency issues, Bitcoin makes up only hundredths of a percentage point of transactions (I did the math in a comment elsewhere but I’m on mobile right now)
There is plenty of future potential for crypto currencies. However, there are a few yet to be addressed technical problems with the current blockchains that make them unsuitable for anything but speculative investment and very light/experimental usage (i.e. only a handful of transactions per meaningful timeunit).
The main technical challenges have to do with scaling issues. Facebook's recent proposal for Libra is interesting in the sense that it proposes some workable solutions for these. If you ignore the permissive vs. permission-less fundamentalism by some in this space as well as the political controversy, they actually did a fine job technically moving things forward with a better contract language than solidity and a loosely permissive and potentially long term permissionless system not unlike Ripple and Stellar.
Also, Ethereum is on a slow path to sharding and proof of stake. Sadly, that means it's currently unusuable for anything that requires scaling numbers of transactions/users. That in turn means most of what is currently running on it is a bad joke in terms of scalability. Most of the serious things associated with it happen on so-called side chains. This is just a fancy name for a convoluted and centralized database. Also it means anything building on the current version is going to face repeated disruptive forks in the network. That makes anything depending on Ethereum a proof of concept at best. That's the vast majority of (at this point mostly failed) ICOs on this platform.
IMHO a few things will happen in the next few years.
1) several of the currently well funded startups will start producing working products with actual users and revenue (the non speculative variety). Given the level of funding these companies received they would have a long runway for getting there and no rush to hit the market until several years from now earliest. In terms of tech startups, this would actually be relatively fast.
2) Most of the early startups in this space will fail. I expect a dotcom style consolidation phase where all of the BS, scams, etc. will fade away or be abandoned. This will take some time and be chaotic and generate a lot of negative news.
3) Several fin tech companies and banks are already integrating blockchains into their technology stack and the transaction volume depending on this will hit an exponential growth curve a few years from now. Most of this stuff is operating under the radar currently but are doing the right things from a technical point of view to make this scale. These will be mostly using permissive blockchains based on Ripple, Stellar, Libra, or similar.
4) Central banks outside the US and EU may start using blockchains because it makes sense. E.g. China has some plans here and and has an obvious opportunity to establish themselves as the digital currency of choice in most of South America, Asia, and Africa (basically anywhere with a weak, inflation challenged currency, and a lack of widely used banking products). Libra was after this opportunity as well.
5) Most of the utopian stuff in this space is IMHO doomed because it doesn't solve a problem people have other than fulfilling some political/idealistic agenda. That means I expect most of the financial success to be in permissive rather than permission-less systems. Legislators are pretty much going to require this for anything serious and most institutions with access to money are not going to want to come anywhere near the scams, criminals, and money launderers currently trading bitcoin. Bitcoin as such may survive as a convoluted alternative to owning gold (which is it's only use today).
6) The US and EU will take their sweet time adjusting their legislation. Short term we can expect nothing more than platitudes from ignorant politicians and very little in terms of any coherent/meaningful new laws in this space. The status quo is that most of the parliament members across nations lack the knowledge to have a coherent point of view. IMHO china is going lead by example here because they don't have this problem and have a clear incentive/goal. Then the west will catch up, eventually.
Very insightful comment. I still have hope for 5) permissionless blockchain. I think the space needs an inflating cryptocurrency. I started a crypto project with 7% supply inflation. I think inflation changes the economics and fill the gap that Bitcoin misses. https://bitflate.org/
Anyone who uses crypto seriously wonders how people can use banks. Your reddit link is some guy writing a couple of paragraphs about having customers too stupid to buy it themselves. Their entire job is based around keeping people too ignorant to control their money.
This article makes me bullish about the future price of Bitcoin and cryptocurrencies. Imagine that there is a very large community of people around Bitcoin and all it takes is for 1 strategically placed person to do something extremely risky and ruthless and then the whole community benefits. If just 1 person out of a community of 1 million manages to secure a massive loan and unscrupulously starts buying up Bitcoin with it then that person goes bankrupt; that person might go to jail, but everyone else in that community will profit from that act and bear 0 culpability. Creditors cannot get that money back. The unscrupulous buyer may go to jail and loses access to their coins in the process (thus reducing the remaining circulating supply of Bitcoin). The value stays in the network.
Cryptocurrency is an unjust financial scheme but IMO it's less unjust than any other financial scheme of our modern time such as those found on Wall Street or the Silicon Valley startup funnel with all the hype-driven unicorn startups which allowed a select few crooks to extract billions of dollars from the economy whilst providing no value in return.
So long as the current international fiat system (the giant pyramid scheme that it is) is allowed to continue, cryptocurrency will thrive. Fiat money will flow towards any financial scheme which is less fickle than itself; and unfortunately, at this stage in history, even speculative cryptocurrencies which can handle only 4 transactions per second seem to fit that description.
"First, following periods of negative Bitcoin return, Tether flows from Bitfinex to Poloniex and Bittrex, and in exchange, Bitcoin is sent back to Bitfinex. Second, when there are positive net hourly flows from Bitfinex to Poloniex and Bittrex, Bitcoin prices move up over the next three hours, resulting in predictably high Bitcoin returns. The price impact is present after periods of negative returns and periods following the printing of Tether, that is, when there is likely an oversupply of Tether in the system. This phenomenon strongly suggests that the price effect is driven by Tether issuances"
I don't see if the researchers checked to see whether the wallets used were exchange wallets, and what happens to the coins exchanged. It could easily be bot actions that purchase altcoins when bitcoin is going down (poloniex having more altcoins than bitfinex), or just plain arbitrage bots. Is this evidence considered solid? It seems flimsy
Clickbait title. The subtitle is probably more accurate:
"The series of $1,000 days that brought BTC to a record above $19,600 could have been the work of one entity"
I'm very skeptical. It is certainly possible that a single entity may have encouraged the rally. But there is no way that a single entity actually moved the markets this much. The amount of cash required would be significant.
During this time, there were shops in Korean cities advertising cryptocurrency sales in their store windows. This was not entirely the work of a single whale.
You're implying a single exchange moving the market needs cash to move it.
If the ecosystem has decided one exchange is the lead price, then they manipulate the price without needing the underlying assets.
Furthermore, bitcoin is one of the only markets I've seen which rewards "whales" instead of punishing them, because in most markets moving the market you will lose money to slippage. The market price will retract after you bump it. In bitcoin markets if you move out the price no-one is trading the 'fundamentals' so it just stays at the new price. Instead of losing money to slippage you gain money from it.
That's an interesting way to think about it. When you say "no one is trading the fundamentals", is that because of some sort of market flaw? E.g., hard to trade that way? Or because there really are no fundamentals to Bitcoin?
By the latter I mean that most tradeable instruments are based in some sort of value external to the trading. Stocks have income streams and assets. Commodities have use value. Currencies have national economies (plus central banks who will defend the price). But I'm having trouble thinking of what a Bitcoin fundamental could be.
One might say it's the collective belief its fans, I guess. But given that Coinbase now supports 30 instruments, it seems like the supply of digital currencies is potentially infinite. Which suggests the fundamental value will tend toward zero.
Even if we assumed that bitcoin had fundamentals, they wouldn't matter in the end of the day. There is too much fraud and price manipulation in the system, which prevents any chance of market self-regulation.
Don't those go hand in hand? It seems to me that fraud and price manipulation are much harder in, say, commodities markets or large-cap stock markets, because people are willing to make big bets on a return to fundamentals. E.g., look at the willingness of people to short stocks that seem overhyped.
> because in most markets moving the market you will lose money to slippage. The market price will retract after you bump it.
That's not slippage. Slippage is when you get filled at a higher (or lower) price than you were expecting. Prices moving up when an asset is bought is normal on traditional exchanges as well.
I’ll second that, as there seems to be a strange connection between slippage and fundamentals in GP comment. 7777fps, can you please expand on that a bit more?
I think 7777fps just meant that if you buy up an asset with a balance of supply-demand you bid up the price, but then when you try to sell it, you drive the price back down.
But with BTC being a speculative asset, since there was already an excess of demand (price increase), and the excitement of the rising prices drives more demand, by buying up coins you drive up the price even further faster. It's a classic pump-and-dump or market-cornering model. The bubble will burst eventually, unless fundamentals grow enough to cover the speculation.
>If the ecosystem has decided one exchange is the lead price, then they manipulate the price without needing the underlying assets.
Okay, but I think there's a big difference between:
A) Some whale committed bottomless resources to keep bidding up an asset whenever it fell in price, leading to a much higher price over six months, vs
B) Some whale caused a one-day surge in price of the asset, which got the asset attention, which had numerous cascading effects over the next six months, including greater attention for the asset, which led to a bigger, deeper reserve of demand for it.
It feels like a stretch to refer to B) as "one whale causing the entire rally", as there is a more complex network of effects at play.
It’s somewhat of a stretch, for sure. I’d normally expect “one whale caused the rally” to mean that the whale started buying arbitrary amounts of bitcoin at a price near the top of the rally.
But I think any other description is more of a stretch. If (B) is correct it’s a speculative bubble, which happened in response to the whale’s activity, and wouldn’t have happened if not for the whale.
>But I think any other description is more of a stretch. If (B) is correct it’s a speculative bubble, which happened in response to the whale’s activity, and wouldn’t have happened if not for the whale.
That's what I dispute. If that one-time spike was enough to set off that kind of activity, then it was probably going to happen eventually, and the whale, at most, hastened it.
And yes, it gets kind of tricky, because most of us, including me, are comfortable saying, "This jerk tossing his lit cigarette caused this massive fire", even if the whole place was a tinderbox just waiting to turn into a blaze from anyone's single spark.
But the point is, when people write these articles, they're promoting the narrative that this single whale is the major determinant of the price. I dispute that narrative, just as I dispute that one cigarette-jerk's ability to determine how many forest fires there will be.
Bingo. For those curious, here is a very thorough history of Tether and how it's use brought chaos to the entire cryptocurrency ecosystem. It was used as a money printer to prop up an insolvent (and criminal) exchange while creating insane volatility in the markets. It is still alive today and continues to be a massive liability for the entire industry.
The accusation here is that Tether/Bitfinex colluded with the whale to move the price by printing Tethers that weren't actually backed by a dollar 1:1.
It's possible a single entity was behind massive world wide promotion campaign. But unlikely. More likely many players who had to gain something on speculation all contributed to the campaign on their own.
Personally I wouldn’t surprised at all. The people working in HFT are some of the smartest in the world, and they have the smarts, tools and the algorithms to smell blood/weakness from thousands of miles away.
It only took one or two of these smart people to identify a weakness in the system, and then they raked in I’m sure millions from it.
News via Chinese Whisper? This is getting a bit out of hand since the actual paper/study is not available. Even the discussion at https://news.ycombinator.com/item?id=21440947 only links to the previous paper these guys published.
* No one seems to have read the full paper
* Is the title misleading? Discussion seems to indicate that this study only addresses the end of year Surge and not the year long surge through 2017.
BitCoin was mentioned at nearly every party at the end of 2017. Google Trends showed massive growth in the search term. Many unsophisticated investors poured money in solely based on past performance.
It was not a single whale. It had all the hallmarks of bubble like tulip mania or Internet stocks in 1999.
That attention was generated by the skyrocketing price, though. No one in the general public or news media really cared until it had already shot up substantially.
It was a self-reinforcing snowball effect, because news coverage of BTC was pretty constant for a good while. Feedback loop kinda thing.
I for one am sure people are being paid to hype up or report on BTC so that the people paying for those "news" reports can profit from the increased price.
It's even more insidious than that. An astonishingly high fraction of people in both the news media (and particularly in the financial news media) as well as in variously leveraged positions of power in government and quasi-governmental bodies, were primed to talk up Bitcoin wherever possible due to having taken some position in it (or in one of its boutique gateway drugs alts) "just to see how it works."
This position being facilitated either by direct action or, more frequently, by enthusiastic prompting from a "blockchain consultant" acquaintance who offered to walk them through setting up a wallet (or even a miner / mining contract) and show them how to use it. You know, "just to see how it works."
Now that their curiosity has been elevated to, as Bitcoiners love to quip, actual "skin in the game" (both in terms of time/material investment and reputational commitment), they are biased to repeat the pro-bitcoin messaging points they've been spoonfed by what they believe to be a helpful, fashionably libertarian insider geek contact, but is in effect merely this generation's reboot of the garden variety penny stock shill.
There was certainly hype and hysteria -- but ultimately every time it would look like it was going to turn down, more USDT would magically appear and prop the price up.
It's really a textbook study in how to manipulate markets -- and yes, it was probably one entity doing it. Now who that entity is may be a matter of speculation, but it's likely bitfinex/tether, which are really the same company run by the same people.
For tech’s sake in this cryptoeconomy PhD thread, working with Bitfinex API was a pleasure. A simple websocket protocol with concise deterministic event packets and clear documentation. The only limitation is $1k barrier even for testing purposes, but no big deal. These guys know their ropes.
Opposed to say Bitmex, which rolled out a braintrashing overengineered differential update protocol, so hard to scratch that we just opted out of its implementation. I believe that was inspired by bare fix/fast, with all strings attached (pun intended).
If you need public data from multiple cryptocurrency exchanges but don't want to deal with weird differences in exchange APIs, Blocktap[1] is a free GraphQL API (that I assisted in developing). We also open sourced our web socket data collection tool CCXWS[2]. It's a single, consistent Javascript API for most major exchanges.
Time passed since then, but this is it: https://www.bitfinex.com/posts/243
I don’t remember dates exactly, maybe we entered with $10k even, because I worked with it around Mar 2018.
It could be possible, but I doubt it. Here is the growth of Bitcoin before Tether was created [0]. Within 3 years, the price went from $0.05 to $1177 and then settled at $220. I remember there was an article claiming that even this growth was caused by a single whale [1], but again, was it really? In comparison, here is the price of Gold within the last 40 years [2]. Looking at this chart, one could say that the price was also artificially inflated during those years. And if someone chimes in claiming that of course it was, then, well, is it the nature of markets?
Is it any different for stock exchange / company news though? It's all written with an agenda, even the time of publication matters. Bloomberg is a party that tries to be neutral in that regard, but even there, whoever gets and absorbs the news the fastest will have an edge over the rest of the market.
Anyway it's neither here nor there what the research says to be honest; there's major, wealthy players that see (saw?) an opportunity in crypto, pumped up the price (if it happened via Tether then it was via freely generated, pre-mined coins), then gradually cashed out again but in real dollars this time from the somewhat lagging "plebs" who wanted to follow the upwards rollercoaster.
Presumably it comes from academia, they have things such as peer review, the paper is presumably public and they will have to defend it, including with some data. How does one determine which experts and authority are actually trustworthy?
Thanks for pointing that out. I missed that part. Anyway in one report it says that "high-frequency traders did not cause the Flash Crash, but contributed to it by demanding immediacy ahead of other market participants."
Just pointing out that market manipulation might also happen in heavy regulated and established markets with much more stability and trust than cryptocurrency exchanges.
there is an old adage I recall in trading.. "volume justifies price". so if you can sell your shiny new coin for a dollar a token with a billion such tokens outstanding & you can do it with any significant volume then yeah it would be a billion dollar cap coin.
Given the volatility, few if any actual uses, the fraudulent exchanges, crackdown by the SEC, value based entirely on speculation, and not producing anything useful, you're right.
It is way worse than penny stocks, and it is unfair to penny stocks to compare them to crypto currencies.
There are companies offering completely useless software 'solutions' that don't even do their useless task well and many of them have stock prices that have grown 100% + since the bailouts, even if they haven't updated their technology since before then. How is the value of BTC more fake than that?
The difference is that if management of the average publicly traded stock shopped it around, they could probably find a buyer for 50% or more of current market cap. Maybe not for the biggest companies like Amazon and Apple. If a substantial fraction of BTC owners tried to exit, they'd have more trouble getting close to nominal value.
For something like this a metric known as enterprise value is used. Assets - cash + debt AKA the takeover price. You can find these numbers on the company's balance sheet. The average company is traded at something like 3.5x their book value (Assets - debt). The market value of a company is likewise some multiple of their EV.
Unlike penny stocks, bitcoin won't perform a 100:1 reverse-split and print new coins. Many penny stock gamblers have been burned this way, which is why they're moving into crypto
Prediction: Bitcoin will crash together with a general financial crisis / recession.
People hold their bitcoin, because they don't know where else to put it right now.
With low interest rates everybody is apparently doing well.
If the market crashes, some people are worried, or have some assets outside of bitcoin which they have to offset.
They will start to dump their bitcoin, but where is lower bound? There are no hard assets backing it like a stock.
Maybe it's a few "believers", "whales" and exchanges who value bitcoin no matter what. But what is their total buying power? If there is a strong devaluation, those people or companies would be the ones who were hit the hardest, so how much can they afford to put aside for preppin up Bitcoin?
The last spike in 2017, $10k-$19k, is what this article refers to as „the rally. That was not caused by ICOs, but likely by a single entity (I was witnessing it in real-time back then on multiple exchanges and the price action definitely looked like one entity with ultra deep pockets was running a buying bot with no limits whatsoever - I had this theory back then already, although I got the exchange wrong, I thought the action originated from GDAX, but the paper here says Bitfinex).
However, the ascent from $500 upward, which mostly happened in the entirety of 2017, was clearly caused by free money on the streets in the early ICO craze. That drove people into cryptos, mostly Ethereum as an on-ramp to ICOs, but subsequently also Bitcoin and all the others.
Yes I remember this as well, but the real rally was from 1.2k to 10k from January to November. I do remember the spike from 10k to 20k in December, and it did seem very unnatural to me, but it could have also partly been due to euphoria.
ICO mania really started in April, and the ETH/BTC ratio rose to its ATH in June/July. This drove a ton of hype into cryptocurrencies, and naturally every single crypto rose spectacularly. BTC would have never gotten to 10k if it wasn't for the ICO mania of Summer 2017, IMO.
Bitcoin is worth what someone will pay for it. While printing tethers is lame, I don’t really see how it’s different from a central bank printing trillions of USD to prop up bonds, housing, etc. other than it’s the antithesis of what Bitcoin is supposed to be.
If tether was truly under attack it would trade for under $1 against trusted stablecoins like USDC, but it hasn’t yet. This has happened before, but it isn’t today.
Crypto traders simply don’t care, they appreciate USDT because it’s sketchy. Something that is more regulated would make them less likely to use it.
> If tether was truly under attack it would trade for under $1
You’re assuming efficient markets. (Also, Bitfinex has admitted in court filings that Tether isn’t fully backed.)
I have capital, have spent my career trading securities and think Tether is a scam. But I’m not going to short it, for a variety of reasons, one big one being the main places it trades are controlled by Bitfinex.
The problem is that tether allows one private entity to effectively control the market for everyone else. There is no real price discovery going on here if they can just be printed and used as if they were real dollars. It makes the whole market a lie.
Which it arguably is anyway with at least 95% of reported exchange trade volumes being fabricated.
They could always base themselves in a jurisdiction where it isn't considered fraudulent, then. The whole point of crypto is de-centralization, de-regulation, and anarchy. Anyone trading crypto should model the world on those assumptions and trade according to human behavior under anarchic conditions, not modeled according to the SEC-regulated world.
Yes, I understand the "problems" with Tether, but it has objectively succeeded in holding up its market price of ~$1 USD for more than a couple years now, so it has functionally served its purpose to its customers needing to make short-term exchanges. To a great degree the fact that the black box's inputs and outputs work is all that really matters, not what's inside the black box.
Might it implode one day? Maybe -- that's life in a financial anarchy. But that should be part of your model. For example, minimizing the time you hold USDT and using it purely as a medium to facilitate other transactions reduces your risk.
Crazy use for Bitcoin: mine Bitcoin in satellites with giant solar arrays, at a capacity that makes it cheaper than terrestrial mining. Since terrestrial mining no longer economical, it ceases altogether resulting in reduction of energy consumption. I.e. space Bitcoin mining captures solar energy in space and sends it to earth in the form of coin, which is much safer than beaming the energy itself.
I'm sure there are many reasons this wouldn't work, but it's fun to think about.
Instead of launching solar panels into space and getting free energy there, they could be placed on Earth to save the launch costs and get free energy here. Let's ignore that because the following is far more interesting ;)
To give you an idea of the scale of the problem that such an enterprise would be dealing with: the ISS has a cooling capacity of less than 100kW and current mining infrastructure has a power consumption in the order of gigawatts. This energy ends up as waste heat that needs to be dumped into space at the same rate. So for every gigawatt, there is 10000 times the cooling capacity of the so-far largest human-made object in space required.
> Instead of launching solar panels into space and getting free energy there, they could be placed on Earth to save the launch costs and get free energy here.
I suppose Solar panels in space can be arranged such that that it's always solar noon, and it's never cloudy. So more efficient at collecting than on the ground, in theory.
You realize this doesn't actually transfer any energy, right? Assuming you're not joking, all you've done is calculate the world's most expensive sha256.
I was serious about that part - computing the hash requires energy, which is acquired in space instead of on land. By using the energy right there in space and shipping the final product
(the hash) you don't have to transfer the energy which you would have needed to make the computation on land.
Installing a solar array in space has a larger carbon footprint than mining those coins with coal on earth. Proof-of-work will be seen as a crime against humanity in retrospect
I recall reading a story in a book of a technique in horse racing where a person slowly makes a lot of bets to change the odds & then watches people poor in cash on what looks like a rising star. Then the initial person places a bet with better odds somewhere else.
I've always been curious how well this works in other markets, especially the smaller cryptocurrency alt coin markets.
I enjoy reading comments about Bitcoin on this site because the valuation of this 11 year old decentralized startup has a bigger than all of Y Combinator companies COMBINED, and people are still doubting if it's useful.
If you still think Bitcoin is a fad or toy, just wait until summer 2020 when the supply shock makes 2017 look like a blip.
Did the study think to ask the person doing the transactions who they were or why they were transacting? They would have been happy to say if only they'd been asked...
You know, I originally read this title to be referring to the marine mammal, and it didn't really seem that discordant to me, given the absurdities in the cryptocurrency world.
Pretty sure lone bitcoin bear created bitcoin fall via futures as well - the CTFC.
The U.S. Commodity Futures Trading Commission (CFTC) is an independent agency of the US government created in 1974, that regulates futures and option markets. The Commodities Exchange Act ("CEA"), 7 U.S.C. § 1 et seq., prohibits fraudulent conduct in the trading of futures contracts.
That speaks to Bitcoin's price spikes, but it doesn't explain why almost all the other ones moved almost in exact lockstep, at least in terms of momentum up and down?
No, never did it for a living (did consult for some over the years) and this sort of ad hominem nonsense pointed towards people who know what they're talking about is why we can't have nice things.
It wasn't ad hominem, it was largely in jest as most of the people I've encountered who don't like Michael Lewis are HFTs who didn't like Flash Boys. If you are worried about substantial discussion here, perhaps you could start by detailing why you disagree with Michael Lewis, rather than dismiss him outright with generic, detail-devoid dismissals that he doesn't know anything, as opposed to yourself who does "know what you're talking about".
Again, a non-substantive response and deflection. I don't care what credentials pop up when I google your name. You still have provided no actual critiques of anything Michael Lewis has claimed or stated, and instead you continue to make the same "appeal to authority" fallacy (while simultaneously failing to prove why you have any more authority than Lewis).
If you would like explain why Lewis is wrong, I'm all ears. Otherwise take the meaningless criticisms elsewhere.
I don't like Bitcoin because of its energy use, I definitely prefer future Ethereum w/ staking and current Nano, but the last "research" of these guys was just them not understanding basics of trading. For this reason, I'm definitely not wasting time again looking over what they wrote. I'm even amazed that they got so many upvotes; they should have had a negative reputation by now.
this is just non-existent science plus lazy journalism. The source paper is pulled and is to be published in the future. Nice clickbait article for skeptics to easily confirm their bias.
Any complex system like a crypto trading ecosystem will exhibit Scaling Law behavior ... You will see similar big whale players driving say the NY Stock exchange dynamics
Exchanges had to literally stop registration, because they couldn't scale, apparently of the same user creating accounts. Seriously this is a terrible article.
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066
I browsed through the paper. Their main result, if I understood correctly, is that they found "considerable evidence that Tether is used to purchase Bitcoin following Tether authorization and a drop in Bitcoin price, and that this phenomenon has a sizable relation to future Bitcoin prices and other coins."
This result, if true, does not imply directly the conclusion ("rally caused by single whale").
First, it doesn't explain the original raise of the price before the fall (that followed with tether purchases). Second, these results can have, I think, alternative explanations. For example, Tether was used as a tool for shorting Bitcoin, hence it makes sense that it be sold after Bitcoin price drops.
I write this with knowing that perhaps my interpretation of the paper is wrong, since it relies heavily on professional jargon I'm not familiar with.
------------------------------- title: Is Bitcoin Really Un-Tethered?
Abstract: This paper investigates whether Tether, a digital currency pegged to the U.S.dollar, influenced Bitcoin and other cryptocurrency prices during the 2017 boom. Using algorithms to analyze blockchain data, we find that purchases with Tether are timed following market downturns and result in sizable increases in Bitcoin prices. The flow is attributable to one entity, clusters below round prices, induces asymmetric autocorrelations in Bitcoin, and suggests insufficient Tether reserves before month-ends. Rather than demand from cash investors, these patterns are most consistent with the supply-based hypothesis of unbacked digital money inflating cryptocurrency prices.