What's Happening with Bitcoin Prices
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I've actually always wondered this. What were to happen if the moment I click Sell, the price is $10K but when it's "processed", the price at that time is $1...would the USD I receive be based at time of click or time of processing?
This is why most (all?) exchanges have the option of buying/selling at market price ("best" price, I could imagine there is some protection included though so the order doesn't go through if there is more than X% price difference), or with a limit (where you say "sell X BTC, but I want at least $Y per BTC).
Btc usually operates in practice on a 0.5% spread or less.
There's a reason why the only name we know from the gold rush is Levi Strauss. The real money is in the facilitators of the rush, not in the prospecting.
More details:
https://seekingalpha.com/article/4129543-bitcoin-one-way-go-...
Even the Bank of England failed to maintain the peg to the German Deutschmark some years ago. Can someone with more knowledge in the FX market area explain this better?
Edit
Unless of course tether is not a store of value in any way and just a fancy name for a dollar.
If you do not verify my claims, you think this is a great idea, because now you can transact with usd(t). Formally these exchanges only used cross-coin exchanges.
Now this is not a problem as long as you have _enough_ money to support withdrawals on an ongoing basis. Nobody knows you dont have enough cash to support all issued tokens, because seemingly, everything works nicely. With the recent hype, money keeps flowing. Until a mass withdrawal happens.
Can I buy a can of coke with it directly? What if the coke seller is a bit skeptical of tether and asks for 1.2 tether instead of one usd, just to play safe. Isn t this pressure applied to the exchange rate?
> Because most exchanges cannot and does not support withdrawals - they are virtual.
Can you elaborate? I'm not familiar with these exchanges, really curious. You mean exchanges accept cash for coins and don't allow withdrawals? :)
To allow deposit or withdrawal of fiat, exchanges tend to have to comply with international banking regulations, which requires a great deal of paperwork. As a result, only a few exchanges offer this - examples are Coinbase, Bitstamp, Bitfinex, Kraken.
Before Tether existed, you couldn't buy or sell dollars or Euros on a pure crypto exchange. That's a big limitation.
Among other things, Tether allows you to trade in USD on these crypto-only exchanges.
Basically, one problem Tethers solve is allowing exchanges to operate more completely without regulatory oversight. As such, the limitations in their transparency may be acceptable to many users, who know that they're not operating in a regulated market and are willing to accept some risk for doing that.
Bank of England couldn't maintain the peg because they weren't holding DM for literally all pounds in existence.
In principle, it's simple: people pay you USD for Tether, you charge them a small percentage fee, put the remaining USD in a reserve account, and issue the buyer a corresponding amount of Tether. You do the reverse to buy Tether back from people.
For the trust issue, you get a reputable company to audit your reserves and Tether/USD transactions.
If you do this, no defense of anything is needed - if someone wants to sell Tether, they can always come back to the company that issues it and exchange their Tether for some of the dollars in the reserve account at an exchange rate of 1:1 minus fees.
In practice however, the auditing and transparency for Tether is not sufficient to be sure that this is what's actually happening. So the "having people believe you" part is definitely an issue right now.
> Even the Bank of England failed to maintain the peg to the German Deutschmark some years ago.
That's not the same kind of peg, at all. A Tether is just supposed to be a proxy for a USD. The pound and Deutschmark were two otherwise completely independent currencies, so the idea of pegging one to the other was dubious to start with. Here's a brief article which covers some of the issues with that peg: https://www.investopedia.com/ask/answers/08/george-soros-ban...
That would make sense indeed, so for every tether coin issued they’d normally have to pull a dollar out of circulation. Otherwise they re printing money isn’t it? Even if true, saying that they back it up is not enough.
Now that I think of it this would make sense for the FED to actually use the blockchain tech to manage its currency supply. Instead of the printing press they issue cryptodollars which supposedly are better than paper because they can be easily and fastly moved around or whatever. But not for a 3rd party to just say: This is a dollar, but called differently, trust us, we issued it.
Correct.
> Otherwise they're printing money isn’t it?
Correct.
> Even if true, saying that they back it up is not enough.
Right. The original idea was that they would provided audited statements proving they held the necessary reserves. They did start out doing something like this, as described here:
https://medium.com/@bitfinexed/the-so-called-tether-audit-th...
See the screenshot of their "previous release" which showed reserves of $44 million across seven banks.
However, for various reasons, including avoiding regulations which would make running this kind of business much more difficult, subsequent releases were less specific and suffer from a host of issues described in the above article. Nevertheless, the latest release mentioned in the article did show $442 million of reserves backing Tethers.
You're correct that the Fed could certainly use a blockchain. However, there's nothing wrong in principle with the idea of a 3rd party issuing a token representing a dollar, if they provide appropriate auditing and comply with regulations in a respectable jurisdiction. No-one is currently doing that.
Having a dollar token is very useful, since you can move in and out of crypto trading positions into a stable store of value, good old USD.
Converting to real money takes a long time so you can't react to the market, and is also taxable and often has other fees on top.
Are we sure about this?
Some of them have boatloads of assets and will trade a small percentage just to get in the crypto game. No credit required.
My friend I helped buy in isn't disappointed. He doesn't fully get what cryptos are yet (although I explain them every time I talk to him), but he sure likes the returns...so far.
Edit: filly -> fully
That's when you know we're at a dangerous moment in time.
The other dangers are municipal general fund and endowment based investments. Local municipalities in countries like Greece and Italy got caught up in the 2008 real estate crash and then all of a sudden, things like street sweeping and garbage pickup stopped. Speculative bubbles cast wide nets.
Daily transactional BTC value has been in the billions for months, even before the recent price explosion. Yesterday's was a [very] record breaking value pushing $6 billion. The total market cap of Tether is less than $0.9 billion. That would've been about a single day's volume back in July. And to clarify, we're talking about if 100% of every single Tether is being used to purchase BTC with these numbers. That assumption is not correct meaning the actual impact is likely substantially lower.
They list the 24h volume for Bitcoin at $24 billion. At 9% or 10% of the 24h volume, Tether could very possibly be a major factor in the bitcoin price spike.
That's absolutely true but what you cannot tell is how much actual liquidity exists. I was playing around with algorithmic trading this summer and would routinely have days where my personal transactional volume would exceed $500k and I was only playing with $2.5k. Just a lot of very short duration (sometimes holding for mere seconds) trades and I always took the maker side to avoid paying any fees.
The tether situation has been twisted into a PR campaign against bitcoin by the bcash supporters (formally the segwit2x) supports.
When the segwit2x fork was cancelled, /r/btc (a segwit2x and bcash community) and a number of popular twitter accounts suddenly started picking up the bitfinex'd anti-tether campaign. This includes a large group of what are most likely twitter bot accounts (have not tweeted in a long time, all joined around the same time, etc).
Tether/Bitfinex is working on an audit but this takes considerable time. The auditing group will not put their stamp of public approval on an audit until it has gone through the most stringent reviews.
Tether has been receiving significant "institutional" money over the past few months specifically trying to exploit the bitfinex USD lending market.
Given how Wells Fargo and other large banks have been treating any company related to the bitcoin space, it is not in Tether's best interests to publicize which banks they are using. Hopefully someday this situation will improve, but for now if you run a company in the cryptocurrency space your fiat banking is tenuous at best, therefore you do not advertise your industry to your banking partners.
Bitfinex is making $5m or more per day on a slow day, and has been for quite a while. This revenue stream can be used to support Tether if needed.
Tether's USD pair on Kraken has remained close to $1. This would be the first market to go crazy if there were an actual issue with Tethers as the tether holders would rush to redeem them at Kraken instead of via Tether themselves.
The "printing" of Tethers is now largely being sent to Bittrex and Poloniex in order to support their customers' tether balances. Tethers are a public blockchain, do the research and follow them to their actual destination.
Even if every single tether were being used to borrow margin funding on bitfinex and buy bitcoin, it would hardly make a dent in the daily BTC volume at Bitfinex. Tether "followers" make a big deal about a 15m or 30m tether generation event, but even with this being used for 3x margin on bitfinex it would hardly make a dent on the > 2.5B usd trading volume.
There are many more arguments supporting or attacking tether. I will not be responding to any comments because I have a feeling this will turn into a mess but I just wanted to throw some more information / opinions into the mix. The whole cryptocurrency world has been completely fueled, almost lives off of, FUD and rumors that would push a price up or down. This feeds right into that.
BUT:
At the end of the day you should trust no exchange, the entire point of cryptocurrency is that you control your own holdings.
https://omniexplorer.info/lookupadd.aspx?address=3MbYQMMmSkC...
I will be publishing a blog on the market schemes of different token soon as there seem to be a lot of hype.
I am wondering... if they can grant new tokens, why havent they? Lack of demand?
The idea is out. Bitcoin may die, but another will thrive.
Doesn't matter if it's tulip bulbs, baseball cards, bitcoins, houses, or dotcom companies, markets operate on similar principles and talking about the market dynamics doesn't say anything about the asset in question. Cryptocurrency is a viable means of exchange and the technology is great and all but that doesn't change the rules or mechanics of the marketplace. It isn't magic.
>>if you try to trade this you WILL get smoked; charts are bullshit and do NOT apply here; stop jumping on and off the train, you look foolish
But at the same time investing only the funds that I can afford to lose.
An elegant raison d'être for this whole thread: Not having any real technical knowledge of economics, it was very easy to head down the rabbit-hole of conspiracy theories and hype - this brought me back to thinking fundamentally (I live in one of the most ridiculous housing market "bubbles" - but it's been a "bubble" for about 10 years now).
1) Blockchain and its first application BTC is the most the Most Significant Invention since the Internet and Electricity.
2) Any sufficiently advanced technology is indistinguishable from magic.
-- Mark Twain (November 30, 1835 – April 21, 1910)
“It’s mostly likely because these institutions don’t have the liquidity to actually pay you. The important thing to realize is the exchanges aren’t selling the Bitcoins on the open market nor are they transferring anything between wallets when you sell.‘ “
Anyone here know if this is true?
The article is based on the above assumption. If it is Ian selling my bitcoin NOW. THIS IS THE BIGGEST RISK I HAVE HEARD IN THE CRYPTO WORLD
I have no idea why it takes a few days to process, however. I don't think the fact that it can take a little while to "process" sells is because it's a ponzi scheme though, that seems like a bit of a jump. I mean plain old ACH transfers take a few days, does that mean that ACH is a ponzi scheme?
This is high risk. No kidding.
I still don't think selling "taking a few days" necessarily is evidence that there is a ponzi scheme going on, though.
When I sell equities in my Schwab account, it takes two days to access the cash. I'm pretty certain Schwab isn't running a ponzi scheme.
The claim card only needs to be satisfied when claims are made. Detaching the claim from the asset and then reattaching when claims are made IS how the exchanges work fundamentally.
Having 100% of the liabilities here is certainly possible but if you had only 20% of them, there'd be effectively no difference unless there's a market panic.
And when/if that happens, I bet that not all 124 or so exchanges have 100% of their liabilities on hand at the same time as the panic.
There is the possibility that I'm reversing causality here. In other words that the media coverage increased following the increases in bitcoin, rather than the opposite as I'm suggesting. But Google Trends along with the price graph seem to support my suggested causality:
https://trends.google.com/trends/explore?q=bitcoin
https://www.coindesk.com/price/
This just seems to be a huge influx of dumb money. If this is true, it's going to lead to some interesting near future volatility. These sort of investors are going to be more inclined to jump ship at what would normally be the tail end of swings. They will see it as 'the crash', race to get out, and create a self fulfilling prophecy. Perhaps offering a great time for investment for anybody who can accurately determine when the double dip decline is bottoming out before a return to normalcy.
Like you, I noticed an increasing amount of fairly oblivious people talking about Bitcoin a while ago in our office and that's the most certain marker of an impending crash, but in terms of there being smart money outside of huge investors in the earlier days of Bitcoin I disagree. Developers that like to gamble are not smart investors.
And then the banks themselves also face countless rules and regulations which result in more hassles to consumers. Happen to keep depositing just below $x for whatever reason? Welcome to a suspicious activity report (for fear you may be trying to dodge financial accounting reporting regulations) and having all deposited funds confiscated until you spend tens of thousands of dollars proving yourself innocent, because in finance innocent until proven guilty apparently doesn't fly. And that's of course just one example among countless.
The current monetary system is pretty much awful. I thought (and think) Bitcoin is the start of a change to this. In other words that it has inherent value. The limits of that value are now being shown as transactional fees get crazy, but the point of this is that I don't view Bitcoin as an arbitrary commodity. It is a decentralized financial service.
...this changed over the summer/fall, of course.
Not exactly true. Bitcoin was extensively used as a money laundering tool to facilitate illegal trade online. The money being used on those bkack-market deals dumped some liquidity into the mix and each money laundering transaction helped back bitcoins with real cash. As bitcoin's adoption as a key part of black market payment systems kept increasing, the increase in demand started driving the price.
The phenomenon was very similar to the one where drug pushers started using Tide detergent as currency, except Tide has real world value and there are no shills pumping its value saying it's the future.
Economists are the worst predictors in this space and the ones that are constantly wrong about Bitcoin being dead.
This won't and well.
That's the "pump" part of a pump-and-dump scheme.
> They don’t do technical analysis or are savvy enough to place limit orders.
I agree on limit orders but what is the fascination with TA. Not a day goes about where someone in cryptocurrency uses some kind of chart mumbo jumbo to prove a point.
> Ever wonder why Coinbase takes about a week to “process” the sell?
Simple answer - Settlements. Banks are not very fast. If someone was to refund you now, you don't get the money in a day. They will always say, "money will be credited back to you in 2-4 days".
There are so many additional reasons for this:
1. Security. The amount of non-technical people going on the exchange is huge. So they don't know if the sell was the right one or not.
2. KYC - They need to ensure the buyers are following AML laws to ensure they don't get sued later for helping drug dealers.
3. Volume - The sheer volume of transactions which need to processed, specially with KYC confirmations.
4. Settlement - They can only pay someone if the buying party has sent the money to them.
5. Banks - Banks always know who is crediting the money. They might have put extra checks for money coming from Coinbase, not to slow Coinbase down but again to save their asses.
etc.
> Closing shop for a bit
The logic on this is so convoluted. If they keep the public price API is fast because it doesn't need to handle additional requests. It is a simple fetch.
Additionally, if they keep the price API open it is just providing ammunition to detractors.
Have you ever been in a stock market crash? Try that, your broker will freeze up and stop responding. You will have a public price API to know what just hit you.
Go check, https://coinmarketcap.com/currencies/bitcoin/ $24.1 billion in the past 24 hours
So, if I use your logic - there is no disclaimer/disclosure on your holdings ie there is opaque-ness. Hence, you have written this article to try and spread FUD to cause market panic.
There is no room for honest and upstanding way to explain your actions.