Hacker News new | past | comments | ask | show | jobs | submit login
Bitcoin and cryptocurrency prices have fallen sharply over the last few days (forbes.com/sites/billybambrough)
236 points by lossolo on March 12, 2020 | hide | past | favorite | 241 comments



It's a common misconception that Bitcoin is a safe haven. It's not. Not even Gold is a safe haven during a liquidity crisis. In sharp downturns, cash is king.

Think of Bitcoin and Gold as call options on the entire global monetary system. If Govs become insolvent, Bitcoin and Gold is there. If the masses lose faith in central banks, Bitcoin and Gold is there. If central banks debase currencies too quickly, Bitcoin and Gold is there. That is the staying power of scarcity via well known stock to flow ratios.

I'm glad Bitcoin is not inversely correlated to equities, because that would mean Bitcoin went down in an equities uptrend. Being non-correlated is superior: Bitcoin marches to it's own drum.

All this being said: cash is king in times of uncertainty. Bitcoin is a speculative bet that "money without masters" will become an essential part of the future monetary system. We're a long way from that still.

Advice in good times and bad: maintain a deep safety net and don't get too nuts with debt or leverage.


bitcoin is not really "there" the same way as gold is.

The whole point of gold is that it is a tangible asset. You can hold gold in your pocket or under your mattress and it costs nothing to store it. You can't prove you have bitcoin if you don't have internet access for example. You can't have bitcoin if miners don't run their nodes. Basically, you are depending on a resource in faraway lands to let you "own" what you have. What kind of asset is that?


This is another misconception.

Gold can be held, yes. It also is expensive to verify, transport, and protect. This has proved problematic for holders of the past. A paper system had to be built on top of Gold, which severely diluted the value proposition as gold was confiscated and stockpiled centrally. Practically speaking, very few individuals hold gold and the utility of doing so is limited when you consider how liquidity in the gold market functions.

Bitcoin is a different beast. You hold the cryptographic keys (like a password) which let you move Bitcoin to someone else’s address (under their password). You don’t trust anyone: Bitcoin is verified by math, not humans. It is tangible in the same way that owning google.com is tangible (and unarguably valuable). Bits and bytes exist on a global network and only you can move them.

When compared to Gold, Bitcoin is interesting because it is highly transportable, easily divisible, and censorship resistant. Consider this: Bitcoin let’s you store $1T USD of dollars in your head, transport it anywhere in the world, and there’s not a single thing anyone else can do about it.


You don't have to transport a heavy metal, instead all you have to do is ensure an electrical grid, fully functional internet access, and a distributed network of other people! I'm not sure that's any easier than carry around metal :P


It isn't, it is more difficult, but it is a different kind of difficult. That is why both have a place, and will continue to do so until a social collapse, at which point only gold will remain. But until such a point, bitcoin exists as sometime harder to trade than gold in some ways and easier in others. It also borrows a bit from fiat currency in that it only has value because we agree to give it value (at least greater than the value of as single cut of cloth/plastic paper). Gold has some level of intrinsic value in both how resistant it is to change, its socially desirable look, and its practical use.


There is no such thing as “intrinsic” value. Value requires an evaluator.

Maybe you mean that bitcoin doesn’t have value outside of its ostensive monetary value. Bitcoin has that too. It can back up data to thousands of locations and be censorship resistant and have a verifiable timestamp.


I'm not convinced that the total social collapse of modern society will result in a state where either bitcoin or gold hold much value.


I see: you’re concerned with a future where the concept of an internet ceases to exist? I’m afraid money will be the least of our problems then.


Money was definitely not the least of the problems in Puerto Rico when the grid went down.


for me, it not so unthinkable that you could have intermittent access to the internet (out days at a time), or that some parts of the internet would not be accessible for extended periods of time

for you it seems that must equate the end of the world where it doesn't matter anyway.


This is an interesting scenario worth thinking through.

If Bitcoin is forced to go split-brain temporarily, the network could coordinate to rejoin after the fact. Or, it could stay split in two.

Regardless, infighting over which network was “the real Bitcoin” would ensue. See Bitcoin Cash and friends.


A "rejoin" isn't really possible. People who spent money on the "wrong" chain will simply have to live with the fact that their money is lost on the "right" chain, although it will probably not be an overnight thing. The two forks could exist for a long time after the split simultaneously, and many merchants may accept either form of payment. There will even be arbitrage between the two chains as profit can be made.

Ultimately, one chain will come to dominate the other, and the ones who fight hardest for it to be their chain will probably find they're on the wrong one. That's because people on the right chain will not need to fight about it. They'll just be running their software as they've been doing till now, and it will pick the correct chain for them. The ones screaming "you need to download a new client" will proceed in destroying their own reputations.


So which is more likely: severe debasement of USD or the devolving of the global internet (ala an increase of firewall-ism by nation states)?


The devolving of the internet to national intranets is likely, but I don't think it can be done to a big enough extent that it stops Bitcoin. It only takes information to leak through the firewall at one point of entry to make the firewall completely useless. Bitcoin transactions and blocks can be transmitted globally via sat, long and short distance radio, telephone, or the internet, bypassing the firewall through steganography and such. It seems like a futile task for states to attempt to filter it. The Bitcoin protocol will likely be available over encrypted and authenticated transport channels too, meaning that the nation state isn't going to be able to stop it without completely banning encrypted communication for which it has no back door.

That may be attempted, but then no technology company is going to start a business in the locations where this happens. The nations which attempt this will probably do more damage to their economies by enacting it than any damage that Bitcoin could possibly do. It will only take a couple of nations to declare themselves open for bitcoin business, to have economic success, for the rest of the world to realize that fighting against Bitcoin is a losing game.

Debasement of the USD will probably happen, but who knows when. My guess is it that it won't be a sudden event but will happen gradually over a few decades. You might measure USD to lose half of its value over a decade, but if you attempt to do the same for bitcoin, you might find that it has barely changed because "inflation" in bitcoin is negligible - ~7/8 of the total bitcoin supply has already been released, and the amount of "inflation" is decreasing over time.


In my opinion: the latter.


You think the internet is going to be compartmentalized before USD is devalued?

Fed is printing $4T this week!


Update: Fed just committed to unlimited liquidity injections through money creation. USD debasement is now a guarantee.

Welcome to the new normal.

https://twitter.com/apompliano/status/1238463895095869440?s=...


> have to live with the fact that their money is lost on the "right" chain

It's not that simple. Transactions can, and will be, replayed on both chains. There would however be many opportunities for attacks such as double spends for a short window of time.

> The two forks could exist for a long time after the split simultaneously,

That's not realistic. As soon as there is some communications between the chains, the system will reconcile. It's sort of the whole reason why this proof-of-work thing exists. Without the need to reconcile chain splits it would be sufficient with some sort of voting of proof-of-stake scheme.


> It's not that simple. Transactions can, and will be, replayed on both chains. There would however be many opportunities for attacks such as double spends for a short window of time.

My point was that a merchant who accepts a payment for some good or service, and later finds out that they were partitioned from the network after they have already released the goods, may find that they don't have any money on the other (main) chain because it was already spent. The merchant has no recourse to get back their money.

> That's not realistic. As soon as there is some communications between the chains, the system will reconcile. It's sort of the whole reason why this proof-of-work thing exists. Without the need to reconcile chain splits it would be sufficient with some sort of voting of proof-of-stake scheme.

This is what I was alluding to in the last paragraph. The majority of participants who do nothing will simply continue to operate on the main chain, but those who were partitioned (which may include miners) may resist operating on the main chain by forking their software. If enough people are affected by a partition, they would have the incentive to follow the partitioned chain and promote the forked software because their money doesn't exist on the main chain. They would probably operate both chains in attempt to spend the money they received whilst the partition occurred, but eventually the dominant main chain would account for most of their economic activity and the partitioned chain will become obscure, like Bitcoin Cash.


> they don't have any money on the other (main) chain because it was already spent

Right, the double spend attack. It's feasible under certain circumstances, such as a chain split. That doesn't mean the system breaks down completely, but that it has to be mitigated. In the event of a multi hour long network partition, some participants are likely to take action.

> they would have the incentive to follow the partitioned chain and promote the forked software because their money doesn't exist on the main chain

My point was that their money do exist on both chains as long as transactions are replayed. That may be more or less hard depending on the nature of the split (say, a whole country falls on the Internet completely). Economic participants do have an incentive to replay transactions (for example by following the satellite feed, or a number of other ways).

It is enough that one participant does this to at least give everyone else the possibility to mitigate themselves. Not a good situation to be in, of course, but still. It doesn't require nodes to follow both chains, and certainly not promote minority chains. There is simply no economic incentive to do that should transactions be guaranteed on both chains.


>That's not realistic. As soon as there is some communications between the chains, the system will reconcile.

If you think that is possible then you must not have paid attention to how blockchains work. By definition there is only one chain and it is always the longest chain in the network. The shorter chain will always be discarded and all the data within it is lost. Now we have a problem. Can't everyone just create their own chain with garbage data and then win by being the biggest spammer? (also known as 51% attack). This is why proof of work is necessary. It is basically a cryptographic lottery that ensures that there will only be one winner every 10 minutes. Since there will never be more than 1 winner there will also never be more than one longest chain. If you decide to disconnect from the network and solve the POW offline your chain will always be much shorter than the main chain. Only if you possess 51% of the miners can you do this offline attack and control which chain becomes the new one. It is possible to rewrite past transactions as well. Just start mining 3 blocks ago and remove transactions or add new ones. However, this becomes harder and harder the older the transaction is. Finding e.g. 10 blocks takes such a huge amount of mining resources that it is infeasible if don't control at least a super majority.


It's already happening with Russia and China having their own networks.


Absolute financial control of citizens is a hell on earth type of dystopia we must resist, thwart, and avoid at all costs.

We must not go silently into that dark night.


This is another misconception:

>Bitcoin let’s you store $1T USD of dollars in your head, transport it anywhere in the world, and there’s not a single thing anyone else can do about it.

It's amazing how easy gray matter cryptography can be broken using a cheap $5 wrench.


Love that meme: https://www.xkcd.com/538/

So true too. At the end of the day, digital security must be reinforced with physical security and good opsec.


To be fair, it's quite easy to find that wrench used for 5 bucks. Also they'd likely just steal it.


I'm truly struggling to understand how gold can be censored.

Also, left out of this discussion is the fact that gold is actually tangible, divorced from some weird semantic backflips. You can build useful things with it.


Holding Bitcoin is not a semantic backflip. Do you hold the dollars in your bank account?

Also: gold can easily be confiscated and it has been before - https://en.m.wikipedia.org/wiki/Executive_Order_6102.

How much gold do you think you can travel with? Think the TSA would allow even $100k of gold to be carried on your person?

Given golds limited supply, why has the price been relatively stable in dollars (which are unlimited)? Because the gold market can easily be manipulated because central banks and Govs hold most of the supply and they can, and do, suppress with targeted market supply flooding.


> Do you hold the dollars in your bank account?

No, we don't, which is exactly why gold is considered superior.


You missed the point.

Holders of gold maintain custody at risk of physical confiscation.

Holders of Bitcoin maintain custody (of the password that allows spending said Bitcoin) and are cannot he compelled one way or another. The bitcoin moves when they say so.


I didn't miss the point; this discussion is conflating two separate ideas of ownership: physical ownership of an item (gold, dollars in-hand), and unrestricted (unrestrictable?) use of an item (bitcoin, and to a limited extent dollars in-hand and gold).

There's four things in play in this discussion, and they each fit those ideas differently. Paper dollars in the hand, digital dollars in a wallet, gold in the hand, and bitcoin. This discussion would be over if better definitions of 'ownership' were used.


Yes, you can fly with far more than $100k in gold, iirc coin dealers do so on the way to conventions. They typically ask for a private screening.


Would you dare try that with dark skin and/or a Latin American accent?


> You can build useful things with it.

A vanishingly small percent of gold's value is attributable to its industrial use. Of all the gold ever mined in history, only something like 1% has been used in an industrial or construction context.

Maybe if you extend "useful things" to jewelry you might have a point. But almost assuredly jewelry is made out of gold because gold is expensive and valuable. Not the other way around.

If everyone on Earth tomorrow forgot about gold's historical role as a store of value, it might be worth $50 an ounce at most.


Well, ok, but my point still stands. Even if the only reason gold has such high value is that everyone agrees it has value then it's the same as Bitcoin, but again, at the end of the day, it is physically useful and therefore less volatile.


You might find this long-form article attempting to make an argument against “bitcoin has no intrinsic value” skepticism:

https://medium.com/coinmonks/bitcoin-has-no-intrinsic-value-...


> This is another misconception.

Care to elaborate on what my misconception was? I never said that bitcoin is not an interesting concept on its own. Just that is ain't got what most people think or need when they talk about gold or money. Especially not in time of economic distress.

Can you use bitcoin without the internet? Can you use bitcoin without someone else mining and being allowed to connect to these entities?


> Can you use bitcoin without the internet? Can you use bitcoin without someone else mining and being allowed to connect to these entities?

The answer to both is, simply, "no".

All cryptocurrencies (not just Bitcoin) are incredibly reliant on the availability of unrestricted communications between all participating parties, including miners. Where those communications break down, the cryptocurrency is likely to become unreliable or entirely unusable.

(As such, Bitcoin is an incredibly poor choice if you're planning for some sort of apocalyptic scenario -- it's likely to be one of the first things to stop working.)


This is true.

Bitcoin is more of bet that Keynesian monetary policy fails. It doesn’t hedge for Armageddon.

Planning for a collapse of world order involves small coins, farmland, prepping pantries, home schooling, and firearms.

Hey, I’m all for individual sovereignty!


To address your point more directly: many think that Bitcoin isn’t tangible because you have to trust that the network of full nodes are verifying transactions, and if they stop then Bitcoin ceases to exist.

Full nodes have financial incentives to run and they do so today at a scale that rivals the internet. It’s not a favor to Bitcoin, it’s a business. They would only stop if the financial incentive ceased to exist. I can’t think of a reason node operators would cease to care about their own financial well-being. That’s baked into our species.

Note that your reservations apply equally (and potentially more so) to fiat. USD is a virtual currency. Cash is on the way out. You will not be able to spend your USD offline. USD is based on a network of centralized banks. You cannot spend your fiat without a computer asking permission from these centralized systems.

The world stops if the internet stops. That’s not a Bitcoin problem. Bitcoin actually improves on the state of things by replacing encumbant authorities and centralized computing systems with math and a decentralized network.

I’ll add this. It’s not the current state of the world, but there is a very real chance Bitcoin can be made available off-internet via a satellite network. This would prevent state-level censorship like what we see when authoritarian regimes cut the internet.

https://github.com/Blockstream/satellite/blob/master/README....


When you think about it, you realize: USD is also virtual currency. Cash is on the way out. You will not be able to spend your USD offline.

I mean by that definition anything past barter economies are virtual, so sure if that's your definition then your statement stands. It's completely incorrect by any meaningful definition of virtual though.


Are you actually taking issue with the fundamentals of my argument or just annoyed by my equating USD to a virtual currency?


> You will not be able to spend your USD offline. USD is based on a network of centralized banks. You cannot spend your fiat without a computer asking permission from these centralized systems.

Yes, I can, as long as I have it as physical currency, and regularly do. Admittedly, this relies on confidence of all participants that eventually systems (banking, etc.) which are as you describe will work or be replaced/retooled without he online dependency (and there is plenty of historical precedent of systems working with fiat without digital backup which could be reverted to in extreme need), but there is no real-time dependency on online systems for use of physical currency, and as long as systems are up and working it's easy for fiat users to adjust their risk profile regarding potential future system failures by moving funds into or out of physical currency.


Moreover, even if centralized banking stops functioning, individual banks can continue operations. This isn't true of Bitcoin -- if the network is partitioned, there is no mechanism for it to be resynchronized without massive rollbacks.


Bitcoin would work similarly, but with far less trust in centralized institutions.

Today, central banks acts as a final settlement later upon which the rest of the financial system is built (banks, credit, etc). This makes it impossible for the financial system to “shut off”.

In a Bitcoin world, the main ledger would act as a final settlement layer, and local lightning networks act as the layers on top providing payments, loans, and credit. All transactions would be batched and only get settled so often (once an hour, globally, for example).

This gives you similar local-affinity that today’s financial system offers without relying on governments to award permission to engage in commerce.


> Bitcoin would work similarly, but with far less trust in centralized institutions.

And far more trust in anonymous, unaccountable actors, largely foreign from the perspective of any given trusting party.

Those centralized actors have, in the case of major states, have well established trust and accountability systems that maintain that trust. Bitcoin not only doesn't have that, it is fundamentally premised on preventing it.

There is a certain ideological phyle to which this is appealing, but I'm not convinced that generally it hard an advantage over centralized institutions in establishing user confidence.


In Bitcoin, you trust only your own node. You don't place any trust in particular third-parties - you only accept communication from a large number of randomized nodes in hope that at least one of them is honest, which is sufficient to reveal the dishonesty of all others. (ie, you have not been eclipse attacked).

You then need to have confidence that humans will always act in their own self-interest, and that you are not important enough that a sufficiently large portion of participants would act against their own interest in attempt to try and scam you.

Acting against your own interest means deliberately losing money by trying to coerce a large number of economic participants to act against their own self-interest in order to benefit you.


> In a Bitcoin world, the main ledger would act as a final settlement layer

Keeping the "main ledger" functional requires miners to have reliable communications with each other; I believe Lightning nodes need an up-to-date view of the ledger as well.

> All transactions would be batched and only get settled so often (once an hour, globally, for example).

There is no mechanism in Bitcoin which would provide this functionality. It's not clear that it'd even be possible without a major rework of the protocol.


Batching by definition consolidates the throughput to fewer transactions. That's what I mean with that (unprecise) example.


Physical cash is not long for this world. We are rapidly moving towards always-online and fully-digital ledgers controlled by governments and central banks.

You will not be able to get a hair cut unless you are an outstanding citizen and have your governments blessing.

I wish this were a joke.


> Physical cash is not long for this world.

Maybe, especially in some places, but even if that is the direction of digital financial transformation, the US is decades behind on most levels of that transformation and has cultural issues that that even if it was caught up on other aspects would make retirement of physical currency harder than it might be in other places.


This is wishful thinking.

I will be surprised if central banks don’t use the ushering in of the next monetary system as an excuse to go full-stop 100% digital.

I get the sense you think this is a far off and unlikely event. I think it’s much more likely and impending than that.


> there is no real-time dependency on online systems for use of physical currency

You are underestimating degree of our reliance on banking. Stores, restaurants and repair shops don't have enormous vaults with cash — they store money in bank accounts. If banks make cash transactions infeasible, businesses will suck it up. If your local coffee shop stops accepting cash, you will have to find another one, possibly located in different district (or even different country...). Many countries enforce mandatory use of bank accounts for business — companies are literally not allowed to operate in pure cash. When banks conspire to make cash undesirable (via high cash collector fees, shunning low-denomination bills etc.), local entrepreneurs begin go "cashless", a trend already seen in many places.

Never mind that, ­— even if your local legislators force shops to accept bills, who cares about them? Brick and mortar stores are deteriorating all around the world. A lot of things already can't be bought offline, unless you take an international flight each time you want to purchase. When your local electrical parts shop closes down, will you open your own? Or just order parts online and pay with VISA like everyone already does?

In not-so-distant future you will be able to spend your cash on bread and not much else. Until the backer becomes unable to spend his.


> Bitcoin let’s you store $1T USD of dollars in your head, transport it anywhere in the world, and there’s not a single thing anyone else can do about it.

That's going to be pretty hard to do when all bitcoins have a combined "worth" of 92B.

Bitcoin has no intrinsic value in that it only exists due to artificial demand, e.g. if someone invented a better digital currency, Bitcoin's demand would evaporate and all BTC's would be worthless. It's nothing like Gold which is one of the most useful precious metals with usages beyond a storage of value.


Many would argue that a "better" digital currency has already been created, yet Bitcoin remains at the top. I don't have much in the way of opinions here it's just an interesting aspect of what makes a digital currency more or less valuable (that is, it doesn't _seem_ to be how much better the tech is)


“Bitcoin let’s you store $1T USD of dollars in your head, transport it anywhere in the world, and there’s not a single thing anyone else can do about it.”

As of now the $1T can also disappear and nobody will even notice.


This!

Bus factor and too many single points of failure. How many lost wallets are out there with a few hundred or thousands of coins from before Bitcoin hit $100?


Single points of failure? Bitcoin is decentralized, like the internet. It’s designed to explicitly avoid points of failure and trusting of node participants.

Lots of Bitcoin has been lost. Good key hygiene should not be taken lightly. What is unfortunate for those losers is fortunate for Bitcoin. As the supply of lost Bitcoin increases the overall scarcity of the asset increases.


There is no single point of failure for a bank account. If you die suddenly, your assigns can petition the court for the assets.

With bitcoin the single point of failure is always your key. That's why every random walk down the timeline leads to 100% of keys lost over the full course of time.


What do you mean it can disappear and nobody will even notice? I can think of a few things but I’d rather not assume. Can you spell it out so I can better reply?


Nothing is backing up bitcoin. Almost nobody is using it to pay for things. If bitcoin went away I don’t think the regular economy wouldn’t notice anything. Only speculators would notice.


Totally. Bitcoin is not a medium of exchange (cash). It’s not useful for payments. Bitcoin is currently a bet that digital scarcity will bring back the concept of saving (SoV) so that people don’t have to invest in equities just to protect their purchasing power. Only the people making this bet will be affected if Bitcoin fails. The monetary system will keep moving forward unaffected. If Bitcoin succeeds, eventually the price will slow down and it can be used for cash. That will have to occur many decades down the road, if it ever occurs.

As for backups, the Bitcoin ledger is likely the most durable dataset that has ever existed. Backups are made daily at every layer across the world and there is no central point of failure in the network.

Shutting down the Bitcoin network would take a world war, and even then the network would survive through backups and the will of network participants to bring it back.


“Only the people making this bet will be affected if Bitcoin fails”

Which means that it’s just a gamble of some insiders.


Does it feel like I’m arguing that point? I’m not.

Speculation is by definition gambling. Investing is also speculation. You have a thesis, and you make returns if that plays out. You lose capital when you are wrong.

Also, I'm not sure what you mean by "insiders" - most of the world can purchase Bitcoin, the software is OSS, the network inspectable, and the evolving thesis and narrative is fully available online.

Bitcoin is the people's money.


Bitcoin may be the people's money but it's price in fiat is controlled by shady cabals like Bitfinex/Tether. It may be the people's money but it certainly isn't the people's value. Dividing those two is a worthwhile exercise. Hiding behind the networks inspectability minimizes all the shady participants that the open network provides for.


Whether or not I agree with your position, I'll give you mad props for sustained and well-reasoned argument.


>Totally. Bitcoin is not a medium of exchange (cash). It’s not useful for payments. That seems entirely contrary to Satoshi Nakamoto's original intent for Bitcoin.

>Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.


This is not the right way to compare BTC and Gold in terms of meaningful financial value.

The 'transportability' of the asset is really a secondary feature when talking of 'stores of wealth'.

Gold is obviously terribly difficult to move around, but that's fine, it's stored in large vaults and we make agreements as to 'who owns it'. Just as BTC implies a kind of 'contract' so does Gold ownership, they just take different forms.

The value of Gold and BTC will be a function of their perception as a credible long-term source of value. BTC will not achieve the status of Gold for a very long time, and it's unlikely it ever will. I wouldn't write it off entirely, but it's basically not a relevant instrument at this time.

As a currency BTC is probably dead for a variety of reasons, but it could come back in those terms, in which case, we'll view it differently.

But the world is not going to value BTC materially differently due to how it's 'transported'. We can trade Gold in mostly the same way.

"Bitcoin let’s you store $1T USD of dollars in your head, transport it anywhere in the world, and there’s not a single thing anyone else can do about it"

Yes, there is 'something' we can do about it, and that's to collectively not care a single bit about the magic number in said BTC holder's 'head'.


"Bitcoin let’s you store $1T USD of dollars in your head, transport it anywhere in the world, and there’s not a single thing anyone else can do about it."

How much of that 1T dollars would you keep after you try to pump it into bitcoin and then try to pump it out?


You would have the same problem with any asset that needs to be sold in a market. Even gold


> You can't prove you have bitcoin if you don't have internet access for example. You can't have bitcoin if miners don't run their nodes.

Nothing you said addressed this.


Yeah, I missed the point about trusting the math that enables a decentralized network. Addressed here:

https://news.ycombinator.com/item?id=22559645


Someone could convince enough people to switch to running code that says you don't have that $1T. Like they did with Ethereum.


Gold is resistant to government intervention because there need not be any record of transaction or ownership.


Yes I'm sure a 1T transaction in bitcoins won't trigger any suspicion by anyone and will not cause people to try and track the authors of the transaction.

I'm also sure trying to cash that out is going to be as easy as taking money out of an ATM

Unless you "cash out" in USDT (tether) or something similarly fake


Obviously $1T is meant to by hyperbole. Still, it’s not that outlandish.

$500M transferred for less than $400 on 7/29/19 - https://twitter.com/whale_alert/status/1155808847908544512?s...

There are many of these, and they are increasing.

Cashing out large sums is done over the counter, not through regular on/off ramps (as in your ATM example). Bitcoin is legal in the US, so I'm not sure how suspicion plays into it.

The rich play by different rules than you and I.


No billionaire is going to pay more than $400 to instantly wire money either, though, as to your point, they play by different rules. Even HSBC offers free wires in the US.

Also, it's $250M now due to the 50% drop in the last half hour, so in a way, they paid $250M for that transfer.


Bitcoin is a call option on governments going down but the Internet staying up. Gold is a call option on everything going down and society reverting to how things were done in the 1600s.

They reflect different threat models. If you believe that governments will get swept away by the global market-state, Bitcoin is your asset. If you believe that society will crumble and we'll be back to trading with other villages, gold is your asset.


I like your thought provoking analogy.

But why would a modern apocalypse look identical to the 1600's? I think some tidbits of technologies we've gained since then would be scrapped together by industrious survivors.

What was used for "currency" in prior dark ages before the 1600's? I'm guessing it didn't pan out well for the guy who stockpiled cowrie shells in between.


That's why I chose the 1600s, alluding to a particular time period in history where gold happened to be the world standard. The Roman denarius was made out of silver; in the early middle ages most transactions were done using denarii that remained in circulation. The original English pound stirling was also silver (and weighed a pound, hence the name). Later in the middle ages the Byzantine gold solidus would become a major currency. In 1284 Venice issued the gold ducat and Britain simultaneously introduced the gold florin, which would usher in the gold standard that lasted until 1933 (though much everyday money in both the U.S. and Britain continued to be silver). The 1600s were sort of the heydey of gold as a currency, as large amounts coming from the conquest of the Americas began to circulate in Europe.

Elsewhere in the thread a lot of people say that gold has real tangible value. Sort of. It's tangible in that you can hold it in your hand and have physical possession of it. But "value" is always in the eye of the beholder - currencies are valuable if other people think they are valuable. With today's world, there's no guarantee that'd be gold - it could be silver, or cowrie shells, or bullets, or cigarettes, or Juul pods, or USB sticks, or n95 masks.


Bingo.

Populations tend to the hardest money. Bitcoin cannot be undiscovered.


Actually I think populations tend to use the softest money that they have any confidence will be worth something tomorrow - that's Gresham's Law, "Bad money drives out good". And that's sorta happening with Bitcoin as well. It's use as a currency is declining, and people hoard it for price appreciation.

But you're right that Bitcoin cannot be undiscovered. It wouldn't surprise me if the dominant currency would be some other cryptocurrency with built-in inflation (maybe ETH, maybe XLM) that remained outside of the ability of some single entity to cause runaway inflation.


Bullets might fare better than gold in the latter scenario


> What kind of asset is that?

A digital one.

The idea that gold gets its value because it's a tangible asset is wrong. Gold, as a lot of other things, gets most of its value from speculation. The real difference between gold and Bitcoin is the market size, maturity and general trust in gold that people have.


> You can't have bitcoin if miners don't run their nodes.

If there's less miners the mining difficulty goes down. If there's _really_ no miners left, you can mine alone on an old laptop AFAIK. For mining to completely stop bitcoins price would effectively need to be 0.


Gold is generally not free to store. If anything, it is one of the more expensive things to store safely.

Also, if someone handed you a shiny yellow object saying it's gold, you'd still need to verify it with a chemical or physical test requiring a bunch of paraphernalia, much like the cryptographic proof required for bitcoin (requiring, in turn, the internet, a computer etc).

Not saying that bitcoin is a great asset, but it shares common problems with gold, albeit in a more "virtual" domain.


> The whole point of gold is that it is a tangible asset

I fail to see how. I know a number of people who trade gold online and it is definitely not a tangible asset to them.

Even if it was, so what? I really don't get this point. Scarcity is what gives value to gold, if it wasn't then anything tangible would have value.


No, 'Bitcoin is not there' as a long-term safe haven, it's a totally unproven and risky asset.

Yes, in a liquidity crisis, cash is king, but Gold will usually retain its value through hard times.

Bitcoin is a meme compared to Gold. There are very few people who would consider it a meaningful asset, it's really a 'good economy speculation'. In a few hundred years and several massive crises if BTC is still around, then maybe.

BTC is not Gold, they are not in the same category.


Almost. Correction: Bitcoin is a speculative bet that “others in the future will purchase more Bitcoin”.

:)


You just described every single investment.

:)


Not really. Many types of investments also return value through investments or dividends.


Many investments are a speculative bet on their future return of investments or dividends :)


I understand your comment has and smiley indicating you are not completely serious, but I think I still need to point outthat your comment is blatantly untrue.

For example, see fixed income and dividend paying companies.


> That is the staying power of scarcity via well known stock to flow ratios.

Could you please explain this sentence? What is a stock to flow ratio? How/why is the well-knownness of it matters? How scarcity builds on top of this?



Thanks! Pretty interesting, and great graphs!

I don't know why you are getting downvoted :(

Also, why would the price go up in May after the halving? Why would people just start to buy BTC? Okay, sure the graph say it will, and negative interest rates and so on. But gold seems to hold better. ( https://fred.stlouisfed.org/graph/?g=qlDu ) Maybe it's just because BTC is not hundreds of years old and this shock led people to cater to their primal instincts and hoard papers about shiny things.

We shall see.


Deep Aside: EconTalk's episode on Richard Davies' Extreme Economies is really really good (and long!).

The section on how Angola Penitentiary's underground economy changed overnight from Cigarettes to Ramen/Mackerel and Bitcoin-like-cyphers is amazing stuff.

https://www.econtalk.org/richard-davies-on-extreme-economies...


So you mean put options?


I suspect that by this time next year Bitcoin will be seen as a safe haven. The events that are about to play out are exactly what Bitcoin was designed for.


I suspect that by this time next week, one or more major exchanges will have trouble meeting dollar withdrawal demands, and it will become more and more obvious that USDT (Tether) has been printed massively out of thin air to prop up Bitcoin. Crypto currencies aren't a safe haven, they're more like a house of cards that's currently coming apart.


And yet we lost 50% in the last half hour.


There is good chance that narrative re-emerges as Bitcoin proves to be consistently non-correlated. I can see that.


Would have been happening if that was true


Why is cash king?


It is for retail investors, but Treasuries are the real "King" when there's a liquidity crunch. Bonds are basically as liquid as it gets, and safer than than cash. That's why yields go down in situations like we see right now.

Not that I think that a liquidity crunch is happening right now anyways since liquidity is readily available if we judge by the Fed rates and how commited towards supporting the repo markets they seem to be. And even just the psychological effect of that strong Fed support make everyone feel safer about their liquidity levels, which makes a run for cash even less likely! Liquidity is probably the biggest self-fulfilling prophecy in Finance.


Assets and long term-investments mean nothing during a crisis, so short-term value stores becomes a much higher priority (currency).


Assets are rather useful though, depending on what they are.

If it's living space, that's rental value right there. If it's production hardware, depends on what you produce, from which sources and how easy it is to reconfigure. Farming assets can become extremely valuable. If the asset is a stockpile of a good, again, some goods can become very valuable.

Owned land, depends, unless it's somehow prepared it's likely not useful.

Assets such as office space, hardware and supplies, not so valuable.


Because in a deflationary debt crisis that is what you are going to need to pay your creditors. No substitutes will be accepted.


In case of a deflationary economy (unlikely imo), wouldn't Treasuries' yields adjust and still be as widely accepted and safe as they are now? Huge amounts of cash are an extremely risky way to hold liquidity in general, and much more so in a deeply depressed economy. There is simply no way to insure that much money against a potential bank bankruptcy or for banks to hold it without parking it anywhere.


The Fed action today suggests that they do not think a credit crisis is unlikely. And while it is true that big corporations and players in money markets don't hold a lot of actual cash, it does seem to be the case that every asset class is getting punished, and that is actually kind of weird.


More generally, all tradeable/redeemable issueance of the sovereign are royal peers: cash, treasury bonds/notes/paper, US savings bonds series I/EE, even agency bonds.


Its value is not suddenly dropping as the same rate as the other investments. You can (hopefully) buy food with it.

(But being good to your family, having low or no debt and some prudent food storage are also wise, among other things our church has counseled us for a long time). (Edit: and savings "for a rainy day".)

(Edit: This is considering the definition of "cash" to be not just paper in your hand, but as a regulated currency whether paper or in a bank. Further clarification in another reply just below.)


Depends on the crisis and what you consider "currency". Hyperinflation is also a crisis.

More generally, in times where people would rather have useful things like food, tools, and gas than pieces of paper you'll be screwed if cash is all you have - because there's going to be one hell of a price hike. Even more so because economic output is likely to go down.

Then in case the crisis gets really bad it'll turn out you can't eat cash. Nobody is going to hand over food or other useful things in exchange for a few bits of paper with questionable value.


> More generally, in times where people would rather have useful things like food, tools, and gas than pieces of paper you'll be screwed if cash is all you have...

This may be happening in some limited fashion even in the current crisis. My country still has its own currency within EU, and is undergoing unprecedented levels of lockdown over the last few days. The currency is already tanking compared to Euro (lost 4% over a few days), as people stockpile stuff.

https://www.xe.com/currencycharts/?from=EUR&to=CZK


Cash was not king during periods of hyperinflation in Germany (30s), Venezuela (ongoing), and many more. It is roughly as common as a stock market crash.


You’re thinking of the early 1920s for Germany, during the Weimar republic.


Or perhaps late 80s Soviet bloc crash.


Good point. To help make such decisions, maybe one could also try to gauge the overall level of honesty, competence, and responsibility (edit: and strength given trends) of the sponsoring entity. (I have been in USD and varied bonds rather than stocks for a while now, partly due to general debt and overconfidence levels, and plan to revisit things, around August after current trends play out more.)


Liquidity is King.

Cash is filthy bacteria rags that are pure liquidity. Contactless and Cashless solutions are the future.


Liquidity isn't everything. What makes USD bills any better than Hasbro dollars? Why are people trading dollars over the internet when they could be just trading packets, which are infinitely more available (liquid).

You're missing an important piece of the puzzle. People want to trade for something that they perceive to have more value than the thing they are trading. This can't work if you have an infinite dollar printer (or magic numbers somewhere on the internet) because the money will be perceived as worthless (or will become worthless in the not so distant future).

The future is being able to trade something which is perceived as holding (or accruing) value which can't be arbitrarily reduced by policy-makers, and also is highly liquid, difficult to forge, easy to verify, low-cost to transact, and can be used as payment for most services. Any guesses as to what this might be?


Why is there a liquidity crisis?


Watch the Fed's actions: (eg: https://www.cnbc.com/2020/03/12/fed-to-pump-more-than-500-bi... )

The Fed has been very active in repo markets since last fall and has aggressively ramped up operations. As an armchair fake-economist, that sort of thing signals that banks are reducing loans between themselves because they don't want to be low on cash when stuff hits the fan. Reducing in available loans -> pretty high interest rates -> Fed stepping in to float the cash and buy some bonds.

Perhaps someone closer to the money will chime in here with corrections/details but this smells like the big banks expect unpleasant times ahead (remember this started before Covid19)


Repos aren't exactly bond buybacks, they are more like temporarily loaning cash in return of a treasury bond. It has a neutral effect on the Fed's balance sheet. So overall, the money supply stays the same. It does help keep liquidity available since few banks/Institutional investors keep any significant cash reserve which is usually okay, but can be dangerous if there is a sudden run for cash.

And if anything, the Fed interventionist policies are a good sign. You could argue that it is bad for the Fed to intervene in the economy during bull markets and periods of economic growth, but for situations like these the Fed can be a huge factor in avoiding a collapse of credit and liquidity. If credit stays available there is little reason to believe the economy will be affected by anything more than what the virus directly causes. So structural collapse of the financial system/job market like that of 2008 is unlikely as long as credit is readily available to corporations and banks.


One of the supposed benefits of holding cryptocurrency that has been peddled is that it is a strong hedge against a down turn in traditional securities. Here we have a new, real data point to the contrary.


Since almost nobody is using Bitcoin to pay for things it’s just a giant speculative thing. It’s not a safe haven.


People are using bitcoin to pay for cash, and vice versa. Besides drugs, that's its primary purpose.


What's the payment volume ;)


I still think this is true in a "traditional" bear market where companies are doing poorly. I don't think is applies when the entire market is panic selling to acquire supplies.


This is the first bear market (drop of 20% from a recent peak in broad-based index) Bitcoin or the crypto-currency market has ever seen, 'traditional' or not, so it's really uncharted territory.


Bitcoin has experienced large price crashes several times before.


None correlated to stock market crashes though.


This. Everyone is speaking so authoritatively as though they knew crypto was not a hedge. This is the first real such test that crypto has seen. Yes, it appears to have failed, but no one could have predicted this with any certainty.


Looking at the leveraged trading, which is generally controlling the price of the market in crypto… you see the large majority of people went long and lost big on it. Very few went short.

To me it seems much more likely the large exchanges just dumped in order to make a killing off the leveraged longs.

So in short people did actually believe in it as a shore of wealth and exchanges manipulated this belief in order to selfishly profit.

This isn’t something that was easy to predict, my comment is obviously a reflection of what happened today but I think it’s the most logical explanation.


Many of us in the cryptocurrency community always knew this wasn't true. Unfortunately it's a misconception that was long and frequently advertised as recently as last week.


it's all correlated and the correlation to link them all is human emotion.


If you mean the OPEC thing: this really is a wild guess, I'm not convinced in the least. And insane volatility of Bitcoin is old news, anybody who said otherwise obviously never looked at the trading charts in his whole life. In fact, it's volatility is the main real reason it's interesting to the majority of BTC users: they only need it to speculate. Nobody really buys anything for BTC.

And other cryptocurrencies are still very much tied to BTC, so when BTCUSD falls dramatically, they do as well.


I have to say, the crypto market's strong ties to traditional finance in this crash surprise me. I understand selling off stock because of expected corporate losses, I don't understand mass conversions to FIAT especially when "print more money" seems to be the fed's response to this.


My take on the selloff is people looking for liquid cash. Very similar to stockpiling home supplies. People are looking for stuff they can use or trade in the very short term because they don't know how bad it would get. It's a lot harder to do that today with crypto.

I haven't seen anyone with strong reason to believe that companies are gonna be that much worse off a year from now than they were a month ago, or for the four years after that, so I don't see a reason to sell stocks based on expected company performance anymore than to sell crypto - but in the short term, everyone's stockpiling immediate goods.


I wouldn't be surprised if there was significant amount of sell off occurring because people are looking to start stockpiling home supplies. I've known more than a few conspiracy minded people that collect crypto currencies due to a belief that it will be a safe haven in the event of a government collapse, and the current Corona virus panic is probably causing a lot of them to realize that all of the bitcoin in the world may not be enough to get you a single roll of toilet paper if that time ever came.


Exactly. It's like here in Florida, when the systems go down after a hurricane, cash is king in the digital age.


That sorta depends. The energy companies are getting squeezed by the oil price war, and they are heavily leveraged and dependent on high prices. A lot of companies loaded up on cheap debt, so the banks are screwed if liquidity issues mean defaults.


IIUC the metatheory is that in times of crisis btc would strengthen and become more fiat than fiat.. so far it's not. But who knows ... maybe people will leverage the events to move forward on crypto in the next weeks...


The average company a few years from now will probably be as profitable as the average company last year. But that's survivorship bias: some of the companies from last year might not be around anymore, and it's hard to predict which. I think that fear might be driving lower valuations.


One possibility is that it's because the stock market seems like a good buy for speculators right now. The stock market does have an underlying value long-term, in that stocks are pieces of companies that produce products. The true value of that is always uncertain, but various measures indicate that it may be approaching reality (after a long, overheated bull market).

Crypto is more purely speculative, with no real underlying value aside from the hope that it will some day become the fiat currency of some nation. (Fiat currencies have a "value" in that they are the only thing a government will accept.)

So it's possible that people are seeing bargains in another market. They need to move through fiat currency in order to buy it, but they don't hold it long enough for inflationary measures by central banks to affect it.


During the financial crisis circa 2007-8 gold also sold off initially when a lot of gold bugs believed it should rise higher given the financial markets instability.

The reason was that people needed to sell their "winners" in order to cover their "losers". Stocks were down, they sold gold which was way up at that point to cover some of the losses and get cash.


One winner of an investment strategy is regularly rebalancing your portfolio to a set of fixed ratios between asset classes.

Let's say you want a 1:1 cash value ratio between stocks and gold. If stocks go up and gold goes down: sell stocks, buy gold. If stocks crash and gold spikes: sell gold, buy stocks. It's an easy way to buy high and sell low without going to extremes.


Just an hypothesis (which applies to the stock market as well): if you already thought things were overvalued, but were just waiting for the right moment to cash out, then whether this moment makes rational sense or not, you get out now because you were going to get out soon anyway.

Also, you may think everyone else is going to be "irrational" in this way, and wish to get out before they do. Sort of like buying toilet paper because you're worried about everybody else hoarding toilet paper.


People have been saying for a while the stock market was ripe for a downturn. It had been in one of the longest periods of consistent gains ever. Lots of things were overvalued and with the double hit of a pandemic which is certainly already having economic effects and an oil war within OPEC, one tends to think that companies are going to start making significantly less money (compound with aging population not being replaced with young people). Jumping off a burning ship isn't necessarily irrational.


because bitcoin is not money, it is an asset, it is a property that can be traded for money but its value fluctuates and is not tied to anything other than people's perceived future value in it (which can be valuable, don't get me wrong there, all I am saying that it will change all the time)


What should be considered money is subjective and the value of all money comes from people's perceived future value in it. Even gold coins and dollar notes.


there's a fairly objective definition of a currency. it's a store of value and it's a means of transaction. Bitcoin is not really a means of transaction except for illegal ones where people are willing to accept the high fees.

Also, there is a clear difference in underlying value. Bitcoins value is entirely speculative. The US dollars value is guaranteed by the US government, which in turn is underpinned by real economic assets of the American economy and its firms and so on. Which are very much real and not imaginary.


No, that's not the definition of a currency.

Money has different functions, where store of value, unit of account and medium of exchange are the popular ones. And they have different properties, such as acceptable, fungible, durable and divisible and others (properties also differ.)

The big point is that these are subjective, and exists on a scale, and they vary from community to community. Cigarettes can be considered a currency in some prisons for example.

> Bitcoin is not really a means of transaction except for illegal ones where people are willing to accept the high fees.

I never mentioned Bitcoin. There are many other cryptocurrencies with low fees.

And I've bought VPNs, VPS, domains and computers with them, purchases that are completely legal.

> The US dollars value is guaranteed by the US government

The dollar will only hold value as people believe that the government can manage the dollar correctly, so my statement still holds. There's nothing intrinsically valuable with a dollar note.


>so my statement still holds.

No, it doesn't because not every form of belief is equally justified. If you believe your currency has value because the Aztec god of fertility has bestowed value upon it then you'll have a problem when you figure it that not everyone agrees.

The American government and the American economy underpinning the dollar however represent vital goods and services as well as security provided and have an army to back it up so the chance that it magically loses all its value is just about nil.

A mistaken assumption, common among crypto folks for very obvious reasons is that just because a system is the result of social consensus, all such systems are of equal status and equally risky. This is not so.


> The American government and the American economy underpinning the dollar however represent vital goods and services as well as security provided and have an army to back it up so the chance that it magically loses all its value is just about nil.

It doesn't need to lose all of its value at once. It just needs to lose some value frequently enough that some people decide "hold on a minute, this is an unjust tax I'm facing on my savings," and will look for an alternative where they are not taxed so heavily.


everybody already understands that the dollar is subject to long term inflation which is why people put their money into stocks or pension funds and don't put cash under the mattress for 80 years. The predictable change in the value of the dollar is priced in and desirable for many macro-economic reasons and irrelevant to consumers.

As far as the dollar value is concerned you care if the milk and the orange juice cost roughly as much this month as they do next month, there is this weird crypto and gold obsession with long sterm steady value that's not relevant at all for fiat currency.


> everybody already understands that the dollar is subject to long term inflation which is why people put their money into stocks or pension funds and don't put cash under the mattress for 80 years. The predictable change in the value of the dollar is priced in and desirable for many macro-economic reasons and irrelevant to consumers.

Understanding and accepting are different things. I might know that the dollar is going to inflate by 1-2% every year, but I don't agree that this should be the case. There exists no avenue for me to opt-out of this either, because it is the policy of both parties, but not the policy of either party - it is instituted by an unelected chamber by which I have no say as to who makes the decisions. Hence, an unjust tax - it is taxation without representation.

This unjust tax also benefits the early receivers of newly printed money at the expense of the later receivers who bear the additional costs. (The Cantillon Effect).

The predictable rate of inflation is also only predictable during periods of economic success. If the economy begins to tank, we can see that the inflation becomes very unpredictable. There are countless cases of hyperinflation in the last century alone which we can take as evidence that centrally controlled supply of money isn't particularly stable.

The dollar is perhaps an exception due to it being the global reserve, but this also means it is potentially of much greater risk if this MMT experiment turns out to be a massive failure, which to me appears inevitable, and is more of a question of when than if.

> As far as the dollar value is concerned you care if the milk and the orange juice cost roughly as much this month as they do next month, there is this weird crypto and gold obsession with long sterm steady value that's not relevant at all for fiat currency.

You're making the implicit assumption that the price of milk and orange juice won't change by much month to month, but this is absolutely not the case in places where hyperinflation has hit. The price can change week to week, day to day, but you can be almost certain that your wage isn't going to follow the price hikes. It isn't a "weird obsession" to consider that the dollar may face the same fate as dozens of other currencies. In fact, the historical evidence of currencies not hyper-inflating is the one we should bring into question - and the dollar as we know it has been around for less than half a century. It is no less of an experiment than Bitcoin.


>It isn't a "weird obsession" to consider that the dollar may face the same fate as dozens of other currencies.

yes it is when my alternative is cryptocurrencies traded by nerds who want to buy lambos while I don't even know if its value is up 50% or down 50% week to week and every transaction costs me dollars.

The US dollar is one of the most stable and predictable currencies that we have and it has been for decades, as are most other major currencies or baskets of assets or what have you. There is no worry for hyper-inflation and even if there was, don't hold your entire assets in dollars and you're fine


Well, as long as everyone else in the community also believes in the Aztec God, the money will hold value.

That there are different confidence levels in our beliefs doesn't refute my point that it's fundamentally about collective beliefs.

I do agree that the chance that the dollar loses all it's value is about nil.


This 'illegal ones' canard again. Unregulated=/=Illegal.


If you understand that the market is just a reflection of human emotions, then you understand what happened to the cryptocurrency market. Panic spreads, and it is not rational.


The money that they are injecting is only going to be a momentary stopgap against the coming credit collapse.


Exactly


> especially when "print more money" seems to be the fed's response to this

The simple answer is that the quoted text isn't even a concern in your average investors head. Also why gold isn't doing great, and why the US dollar is doing just fine.

People are escaping equities specifically, not the dollar.

edit: If i had to guess, people are probably looking to maximize cash on hand with the goal of "buying the dip" when it looks like the market is going to bottom out.


Say you have an extra tampon and want a banana. I want a tampon but don't have a banana. What would you rather accept from me in exchange for a tampon, $cash or some BTC in your online crypto wallet? What do you believe has better chance of being exchangeable for a banana, from someone else?


What's the window on that question? I believe that QE has baked hyperinflation into the USD cake by now, that doesn't mean I expect it to hit main street by June.


Has it? QE has been happening for the last 10 years already, and inflation hasn't (in products; asset prices have inflated though).


Precisely. My interpretation is that we would have had a deflationary cycle over the last decade had it not been for QE. Main street prices have remained fairly stable, but it looks to me like assets have priced in a strong future currency devaluation. I still think that devaluation is likely to happen.


I have a hypothesis that Bitcoin post-2018 is largely held by a handful of major banks as a way to sidestep anti money laundering rules. It's widely known (and proven in court) that the major banks routinely serve billionaire-class criminals (real criminals like drug cartels and terror groups) and large crypto holdings and prop trading operations allow them to move money on and off their books with relative ease.

A slowdown in money laundering activity (as would be expected during an extended period of restriction of goods and services) would lead to a rapid drop in crypto prices.


I think this is a misunderstanding about how banks work. The board of directors or CEO of HSBC didn’t decide to get into the cartel money laundering business. Rather, some middle managers decided to turn a blind eye to some dodgy transactions, which got past the Bank’s AML controls, which were not up to scratch. I’m not justifying anything, they reneged on their legal responsibilities, but banks aren’t conscious entities that decide things like that.

Also it’s highly unlikely a bank could hold vast BTC reserves without the regulators finding out about it. Anyway BTC is used for money laundering, but that doesn’t require holding reserves. Most money laundering transactions transit into and out of BTC very quickly. The only reason to keep BTC for very long is speculation.


I believe a more likely theory for the crash was the large exchanges pushing the price down on various exchanges to make money off the leveraged longs and then pair that with panic and you see this price plummet.


I actively trade crypto. Today's crash was due (from what I'm seeing) to a massive Bitmex contract liquidation (probably in the $100m-300m range). The market, with panic, couldn't get the price in sync across all exchanges. At some point the difference between two exchanges is close to $1000/btc. Very profitable if you know what you are doing. You can AMA.


I saw that the large majority today was lost on longs, with shorts being much less active. Do you believe it’s likely that the crash was intentional with the large exchanges pushing the price down on various exchanges to make money off the leveraged longs? Obviously panic plays into this as well.

I’m not one to get involved in any type of trading personally, as I don’t trust myself, so this is outside of my space. Please excuse and correct me if I misused any terminology or don’t understand stuff. Some of my family is heavily invested in crypto, so I like to know what is going on.

Anyway, does my assessment sound accurate to you? I would love to see you expand on this.


> I saw that the large majority today was lost on longs, with shorts being much less active.

Given that Futures now have the most open interest, I'd say the long/short ratio is practically equal these days in Bitcoin land.

> Do you believe it’s likely that the crash was intentional with the large exchanges pushing the price down on various exchanges to make money off the leveraged longs?

No. Only bad traders will say that! I don't think there is any kind of price meddling from the exchanges themselves. Any exchange that does that will end up burning to the ground eventually (and there were exchanges that did that). The reason is, a single exchange will unlikely be able to move the price to the sought after direction. Given that trading is distributed through multiple exchanges that are in different jurisdiction, I can hardly see them colluding to manipulate the price.

> Some of my family is heavily invested in crypto, so I like to know what is going on.

God help them.


Do you really not see what bitfinex is doing?… it’s almost painfully obvious they are manipulating the market.


You did arbitrage between the bitcoin exchanges?


I do arb primarily between spot on exchanges and futures/options derivatives.


I still assume it is possible and likely that something like cryptocurrency will eventually become incredibly valuable, but I see that happening only when technical and social hurdles are overcome to make it as widespread and scalable as the current credit card system for everyday transactions. Unfortunately for current cryptocurrencies, they just don't have what it takes to compete with decades of trust to get everyone to put their daily spending money in them, that is what will make a future system valuable. The current role they play as a speculative investment seems quite silly to me, literally they only thing they are good for is transactions, if you can't do that effectively I don't see value in the tokens at all.

Imagine if someone started a stock exchange and listed a single stock, their own, the stock for the exchange itself, and no one else's. While you can buy some things with bitcoin or ethereum, it's nowhere near widespread, so that really seems to be effectively what it functions as for now, which looks very bizarre on its face. Unfortunately for the people who do want to get rich, if there is an eventual winner in crypto, their rise will probably look something like what we see now, limited buy in from speculators followed by some inflection point, so it's entirely possible buying this dip of ethereum or some other coin might be the right thing, but I'm just not sure any of them are ready yet. Even with SegWit and other stuff happening in bitcoin, it just isn't clear to me that becoming a cash or credit card replacement system is even the goal anymore, which seems like they are just riding on their first mover advantage to prop up the value more than anything at this point.

Note: reposting this from the stock trading halt discussion after its parent appears to have been deleted.


Look into Lightning Network


take a look at libra.


> I still assume it is possible and likely that something like cryptocurrency will eventually become incredibly valuable

Probably, but whatever it is, it won't be Bitcoin and some magic software updates won't make your Bitcoins turn into whatever cryptocurrency-ish thing wins.

The other thing to remember is that cash doesn't appreciate in value. (In the US, we typically have 4% inflation every year.) If a cryptocurrency is going to work for day-to-day commerce, its value needs to be rather steady. (Either low inflation or low deflation.) This means you can't just stick a bunch of cryptocurrency in your wallet and expect it to make you rich overnight.

(Note: We don't have a lot of experience with deflation as "normal" in modern economies, so if crypocurrency comes with low deflation, like we have low inflation, we'll all have to adjust our expectations with money.)


Absolutely agree, if you can't represent some of your resources in it and have any idea if you'll be able to spend it somewhere near at the value you put in at, there's just no incentive to use it as a means of exchange. Kinda makes tether seem like a good idea if I wasn't so worried it's a ponzi scheme.


https://grin.mw

https://grinflation.com/

1 Grin per second, forever.


I've been trying to avoid looking at my bitcoin portfolio lol. I agree the volatility in its price makes it far from ideal as an alternative currency. That being said what keeps me invested (a relatively small portion) is looking at places like Venezuela and a few other pockets of areas where the monetary system has collapsed or undergone hyper-inflation, bitcoin is being used as a means of exchange, albeit still rather limited. That goes to show the proof of concept works. Hence I think there is somewhat of a chance that there could be a more widespread use case for it, especially as the ecb and possibly the fed start flooding the markets with liquidity again.


I hold a small amount of it and BSV as a hedge against the Fed flooding the market with liquidity too. Emphasis on small amount.

Crypto usually rallies when the Fed undergoes extensive QE for a long period of time but the current popular crypto’s have flaws.


> Last Saturday, ahead of the traditional market rout caused by Opec, PlusToken scammers moved a little over $100 million worth of bitcoin to so-called mixers, designed to disguise the origin and destination of the coins.

> The fraudsters may have then sold off the bitcoins, causing prices to fall as supply flooded the market, according to Singhal.

May have? Is this anything more than pure speculation? I mean, I am a very, very big fan of using time to correlate events ("what changed"), so the mixing is certainly a signal, but how good of a signal? Why highlight PlusToken vs bitcoin holders en masse wanting to get cash out thanks to the market downturn?


Crypto crashing at a time like this is actually tell me its true colors


That the crypto market is largely controlled by the exchanges?


Bitcoin market is like the regular equities market...without the halting capabilities


> Bitcoin market is like the regular equities market

No it's not. The Bitcoin market is the exact opposite: it's unnecessary and of little consequential tangible value to the real economy. The regular equity markets have a large share of the productive output of nations behind them, including the employment and taxation that goes with that. Companies that actually produce goods and services. In many cases goods and services that people and other businesses have to purchase or otherwise heavily depend on.

None of that is true about Bitcoin. It could disappear tomorrow and other than the lost capital trapped in it, it wouldn't matter in a meaningful way; and it wouldn't matter at all to the average person. The masses of people do not need it, they do not depend on it. Government revenue does not depend on it. The lives of billions of people do not depend on it.

Now, for comparison, shut down the top five farm tractor manufacturing companies. Shut down Airbus and Boeing. Shut down Walmart, Costco, Target, and Amazon. Shut down every dental office. Shut down every auto manufacturing company and witness the industrial effects including unemployment. Close every power plant. Shut down the telecom companies and every media company. Shut down every publicly traded energy company. Close every publicly traded bank and financial firm. Close every publicly traded agricultural company including the major food producers.

Compare that to Bitcoin vanishing tomorrow. By comparison, it would have zero consequence, it would not matter at all in any grand scheme of things.


> It could disappear tomorrow and other than the lost capital trapped in it, it wouldn't matter in a meaningful way; and it wouldn't matter at all to the average person.

That's because Bitcoin is a zero-sum game. No value is created or lost, it's basically just a big game of poker.


This. Stocks can still generate dividends. The only way you 're making money from Bitcoin investments is if some other sucker buys it off you for more than you spent.


It's worse. Huge amounts of energy is wasted for creating the poker chips.


It will be interesting seeing how cryptocurrency performs during and after worldwide panic surrounding the coronavirus, the fed printing a trillion USD and so forth.

I was astonished when Bitcoin rose above $30 so calling it a "crash" at $6,000 might be somewhat accurate short-term, but anything over $0.00 for randomized bits on a hard drive will always seem bananas to me.


Europeans of old thought the same when they saw the Chinese using paper money as a medium of exchange :) I do understand your point though


> anything over $0.00 for randomized bits on a hard drive will always seem bananas to me.

I'll happily buy the randomized bits making up your debit card number and PIN for $0.00


Wait...aren't crypto currencies supposed to be the favored monetary instrument during times of crises?


Well the market pointed to that, with the majority of liquidation today being on leveraged longs. So it’s more likely the market is corrupt and the exchanges just spent their vast wealth pushing the price down to make a killing off leverage… pair that with panic and today makes sense even though it originally seemed most people believed what you did.

Turns out humans are selfish and emotional, who would have thought?


It depends on the nature of the crisis. In a monetary crisis, yes, probably. But this is a bit different than that.


If there is any correlation between current events and bitcoin price, then we have both a monetary and an existential crisis happening. What other crises would bitcoin be useful in?


Purely as an asset Bitcoin is probably a good hedge against inflation of the dollar. If you expect high inflation, owning Bitcoin is probably a reasonable way to protect against that.


Supposed by whom? Mad people, I suppose, but besides them.


Not until they are widespread among general population and can be easily and anonymously transferred between people, like cash.


Only to anarcho-capitalists and speculators. Most people don't mistrust regulated banking enough that a volatile, unregulated black market economy looks attractive, even in a crisis.


> even in a crisis

A crisis can just destroy regulated banking.


Sure. Given sufficient scale, a crisis can destroy anything, including crypto.


Are you being sarcastic?

...

You should be.


Yes


Not as much as cold hard cash.


I think Toilet Paper is the preferred currency now.


I know your comment is, at least somewhat, in jest, but it's kind of true.

My wife's boss has been spending a good bit of his workdays lately tracking and buying gold. But not buying physical gold. Just buying a promise from some agent that he owns some gold. Of course, that's not going to do him any good in a crisis; you can't eat gold, you can't drink it, pretty sure you can't wipe your ass with it. You can only trade it. And when resources become scarce, utility becomes far more important than value. And gold certificates, or whatever, will become even less desirable.


Yeah, that was only half a joke. At some point, the only things that are worth anything are things that have utility. Money isn't intrinsically useful, it's only useful in what others will trade for it.

The Postman, while it was resoundingly mocked as a movie, was a really chilling book that dealt with what happens when you get to that point.


Unless you're a bidet user.


That is the real answer. Toilet seat bidets are available for like $25 from amazon.


Or have a working shower.


I have made a large amount of money trading cryptocurrency over the years. This correlation is spurious at best. These stories are so wrong it is hilarious. The price action of crypto is unlike any other market. What we have seen over the last month is massive legs down caused by whales flooding the market at specific times. These bart patterns are so obvious I can't believe people can't draw these incredibly easy to see conclusions. Crypto is pure manipulation. This coronavirus panic happens to coincide with a period right before the block reward halving where it is in the interest of miners to drop the price as much as possible as to make the mining operations of competitors infeasible leaving them with a larger slice of the mining pool.


Ok, this is completely silly. No miners have the luxury of the price dropping, as it could make all of them insolvent. They depend on Bitcoin's exchange rate increasing so that the revenue generated from the block reward exceeds the cost of electricity to run the miners. They're not working large enough profit margins to take such risks.

It's non-workable anyway. If any miner has to drop out of the race, they still have an inventory of mining equipment to auction off. The highest bidder is simply going to put that equipment to reuse immediately, so there will be no meaningful reduction in overall hash rate. Any miner who attempted to cause the price of bitcoin to slump has simply shot themselves in the foot.

If the dollar cost of Bitcoin does not continue to increase sufficiently over time, Bitcoin is dead and every businessman who took out loans to buy mining equipment is going to default.


Long term large scale miners with massive reserves of BTC (you could literally get 50BTC for ten minutes of CPU mining on your laptop when BTC started) can crash the price on a whim with a small percentage of their reserves due to the lack of volume in the BTC market in combination with the liquidations from ridiculous amounts of leverage people are using in crypto (binance and bitmex are >100x to unqualified investors) which causes accelerated declines when the price drops even slightly. They can use this as a short term strategy to force miners with less profitable operations (higher electricity costs, worse equipment) to liquidate their coins at a lower price and cease mining temporarily allowing the more profitable miners to enjoy less competition and the ability to buy the coins at a reduced price. Even if the operation starts up again after the market pumps the superior miner has increased their proportion of coins allowing them to swing the market even greater, and sell coins to get better equipment (the newest bitmain miners), and the bagholders who bought the worse equipment or have more expensive electricity naively set themselves up for failure. The entire crypto space relies on long term pumping and dumping as well as short term "barting" to liquidate leveraged traders. I didn't even mention bitmain patent fuckery and the likely collusion of key players with the BTC devs to purposely not scale BTC to increase transaction fees which benefits miners. The whole thing is a disgusting mess and I don't touch it anymore. Do not fuck with cryptocurrency. It is entirely bought and paid for.


> This coronavirus panic happens to coincide with a period right before the block reward halving where it is in the interest of miners to drop the price as much as possible

Besides selling at market the handful of coins they mine, by what mechanism can miners control the price?


To me the most likely explanation is the exchanges pushed the price down to make a killing off leveraged longs.

The large majority of the liquidity was on longs today.


It’s amazing that anybody believed these cryptos were any kind of hedge against the market. It was pure speculation. Always was.


I believe you mean gambling, not speculation.


Hopefully this starts to kill the notion that crypto is some magical thing that people should gamble with.

If it can't go up during a global crisis or EVEN be resilient.. then it's proven it's just a house of cards.

Crypto technology itself has value, but not in most of it's current forms as some magical gambling currency/asset.


There is zero value in crypto as a currency with this kind of volatility. It would be equivalent to trying to buy coffee at Starbucks with shares of Boeing stock.


The fact that Bitcoin is marketed as the “new gold” is a double-edged sword. Because of the hype, it’s too volatile to become gold.


Some of this could be you can’t spend crypto to buy food in a crisis... cash is still king.

When everything gets locked down cash is what you need


Funnily enough, farmer's markets are some of the few places I've seen 'crypto accepted' signs in my city.


Banks won't accept your Bitcoin when you get margin called. You need to sell for real money.


Bitcoin is so 2009...how do we still have news about it? Are there people still waiting for an "exit"?


Where is all this cash going? If stock is down, crypto is down. Where is all cash?


It's in cash.


does not need to go anywhere, cash is a form of storage


People still talk about Bitcoin as though it's a real market and not completely manipulated by a handful of key players? Ok then.


That's true of the stock market and every other market. For stocks, a bunch of market makers of major financial firms set the "market" for these stocks. The same for forex, commodities, you name it.


If you know how to ride the wave, you can still make money.


[flagged]


Please do not comment as if this were Reddit.


[flagged]


Can someone please flag this person?


[flagged]


Indeed. You must've missed the memo. I know I did. The Internet is a safe space for serious business now. It's no longer just the fun world of lol cats, memes, and pr0n. We have serious things now. Like Facebook. And Snapchat.


I make comments one tenth as retarded as this and get flagged instantly...


I hope this whole madness will come to an end so that GPU prices will start deflating.


(Pick an appropriate meme template)

GPU prices goes down...

As China is shut down and can't make mew GPUs.

Linus Tech Tips has a good video what the shutdown affects: it suppliers of suppliers are slowed down due to quarantine, then they're in trouble too: https://www.youtube.com/watch?v=SPoPwrQwm_g


All of the crypto fans and hardcore fanatics kept saying it: "Bitcoin is digital gold don't you know? It's what's going to shoot to the moon as all that terrible icky fiat collapses in a major crisis! You just wait and see"..

Well here we are. certified 100% organic Unfolding Global Pandemic and the cute bonus of teetering on the brink of a global recession. And what does Bitcoin do with all the rest of its cousins?...... It simply shits the bed.

This was your shining moment crypto, and so far you've turned out even worse than the stock market.




Guidelines | FAQ | Lists | API | Security | Legal | Apply to YC | Contact

Search: