The Cryptocurrency Industry Is 'On the Brink of an Implosion', Research Says
bloomberg.com
bloomberg.com
https://www.bloomberg.com/news/articles/2018-10-15/dollar-pe...
Billions of Tethers were printed seemingly out of thin air and used to purchase Bitcoin. It's part of the foundation of the house of cards that keeps Bitcoin at its current price:
"Despite their modest total market value of about $2.4 billion, Tether’s coins play an outsized role on cryptocurrency exchanges. They were the second-most traded among all digital currencies after Bitcoin as of Oct. 15, according to data compiled by CoinMarketCap.com." https://www.bloomberg.com/news/articles/2018-10-14/why-crypt...
Do we know if it was BTC that was purchased?
I have half a mind to think that people who were smart enough to buy decentralized and scare BTC are different than the people who would buy a centralized fiat coin Tether.
The only people I know that use Tether are gamblers who are day trading alt coins.
It is become more and more apparent every day that Bitcoin is different than Alts.
Yes. You can monitor the price and volume charts of BTC after a wild tether appears. For example: http://www.tetherreport.com
Its unfortunate the early adopters spent much time understanding and educating people about currency while the most recent crowd is following the greed. Tether is the opposite of the problem that was being solved.
USDT is a pegged-currency. It's often described as a stablecoin but that's not correct because it doesn't have an inbuilt stabilisation mechanism unlike Maker's DAI for instance.
The way it works is purely based on well known legal mechanisms that have no cryptoeconomic properties on its own. The issuer holds a USD balance at a bank, then commissions a receipt that proves their balance and issues an equal number of USDT. 1 USD = 1 USDT at issuance time and the trustworthiness of both the issuer, the auditor and banks involved.
The token itself is used to facilitate trading and many investors 'park' their gains in USDT while waiting for the market to reach a certain point or just in between trades, but that means that the token's FX value is set by the open market itself so if there are more buy orders than available USDT the price goes up and if there are more sell orders than demand the price goes down. Where this gets interesting is that some exchanges list assets based on the USDT fx and not USD which opens some arbitrage opportunities like we are seeing today.
For more info:
https://github.com/jpantunes/awesome-cryptoeconomics#stablec...
[1] https://cryptocoincharts.info/pair/usdt/usd/kraken/today
Redemption implies a non-market transaction to turn in an asset for a guaranteed face value. For example, you redeem bonds (and bond coupons) for the face amount with the original issuer, once the bond or coupon has matured
But if they are in fact backed 1:1 with USDs, then it raises the question: if the tether peg is slipping below $1, why doesn't Tether or one of these alleged "verified customers" buy them up at a discount, redeem and destroy them for USD, and bank the difference?
The answer to this question is left as an exercise for the reader.
[2] https://wallet.tether.to/app/#!/signup
[3] https://omniexplorer.info/tx/bd9520b9aea701e9606ad8a8f4d6852...
Here's 30 million being destroyed earlier this year:
https://omniexplorer.info/tx/24db40680654b8b505fda3e96be722c...
The moon also had to be in full eclipse while in Mercury retrograde.
the closest there has ever been is a letter from a law firm that was related to the owners and which clearly stated that it was not an audit.
They also parted ways with that firm because they were unwilling to provide what the auditor requested. They've never completed an audit, despite their website claiming "subject to frequent professional audits".
Yeah. "Our auditor wanted to actually conduct an audit to say we had been audited."
Tether tried to give them an instantaneous bank account balance of an account with no history, and say "Yes, on day x, there's this much in the account".
Whereas, of course, there should have been nine digit deposits (sometimes multiple times a week, lol) showing on this account.
Not so much.
Tether was basically a workaround for the severe problems that cryptocurrency exchanges seem to have paying out real money. "Withdrawal limits", "pauses", "verification", and just not paying withdrawals are continuing problems. Kraken: [1] Coinbase: [2] (Over 1000 Better Business Bureau complaints!) But getting money out of Tether is hard, too.
[1] https://www.bbb.org/us/ca/san-francisco/profile/financial-se... [2] https://www.bbb.org/us/ca/san-francisco/profile/financial-se...
Not be able to secure an auditor to do this suggests somebody was too cheap. It's important to spread the loot around, for example instead of paying for an audit and expecting them to lie, try paying for the same audit AND buying ten times as much "specialist professional services" from the audit company. Don't ask exactly why these services are so expensive, and in particular don't expect to see all the people you're supposedly paying for busily working on anything. Just hand over the cash and voila, your audit is spotless. What a wonderful business.
Why would this report be believable?
If the USDT to USD ratio fluctuates so much, what is the point of 'parking' your money in USDT?
I mentioned DAI today in comment and essentially got banned for doing it.
In comment I provided link to interview with Olaf on blog.ycombinator.com where MakerDAO was mentioned.
So I got banned as spammer in HN for providing link to blog on YC.
It tells a lot about the level of average HN reader.
Stabilisation mechanism
unlike Maker's DAI for instance
The Maker DAI relies on users trading Etherium for another token DAI.
It’s essentially a mortgage backed security derivative, except instead of houses it’s a speculative database token swap.
Certainly not safe.
Billions of Tether were printed, and then used to buy Bitcoin. That means Bitcoin's current price is supported (to some degree) by Tether.
Whether its catastrophic or not... well... time will tell. But its certainly a worry of some people.
Are they not? Shakes can be a decent way to lose weight. Seems to be that people are willing to pay a premium for the "community". But IMHO saying their stuff is overpriced is like saying beer in a bar is overpriced because you can buy a beer for one dollar in the supermarket. Yes, it is correct. In some way.
http://brontecapital.blogspot.com/2015/06/herbalife-very-lon...
[I don't have any position in Herbalife and I enjoy my shakes Harbalife free]
How much of Herbalife’s success is from selling a competitive product will determine its survival in the long run.
Still its MLM sales methods are questionable and cost a lot of people money.
However, Herbalife's success comes from their incredibly shady and destructive pyramid scheme that preys on individuals and tricks them into acquiring debt in exchange for becoming "distributors" of Herbalife products. According to the FTC [1], "it's virtually impossible to make money selling Herbalife products".
I recommend the documentary Betting on Zero [2] for more insight into Herbalife, as well as the fascinating story of Bill Ackman's failed attempt at shorting their stock at a huge scale.
[1] https://www.ftc.gov/news-events/blogs/business-blog/2016/07/...
http://brontecapital.blogspot.com/2015/06/herbalife-very-lon...
Removing it from the equation would be very welcome.
More importantly, and I can't stress this enough, the FX value of a cryptocurrency is not directly related to the project's status (developer activity or security track record, etc) but it is correlated to public perception of its value, which is why these sort of article pops up every now and again at regular intervals.
https://www.reddit.com/r/Bitcoin/comments/9niw8x/lightning_n...
Check this visualisation for a current view of the size of the network: https://www.easyzoom.com/image/126770
If you meant "shortest path problem" instead, then it seems that route planners for road networks have already solved it reasonably well.
I suspect the challenges for lightning have more to do with keeping the map up to date.
sounds like woo to me
Your comment brought me back to the year 2000, I’m sitting at my desk waiting for something and trolling f—ckedcompany.com, reading about how the future is CRM and pets.com.
No it hasn't.
Unfortunately Bloomberg as a whole doesn't know anything about cryptocurrency beyond the speculation side which is similar to their existing competencies. But that's all they see.
We have a blind man feeling an elephant's ass and telling us it's shitty. While true, it only describes a tiny part of what cryptocurrencies are or do.
They don't know anything? Even though they partnered with Mike Novogratz to create an index?
https://www.bloomberg.com/professional/product/indices/bloom...
Bloomberg keeps trying to predict crypto's behavior based entirely on the most traditional looking speculation markets. Speculation markets aren't really a part of cryptocurency at all (they aren't on the blockchain(s)) but they are the only part of the concept that traditional finance people can (or will try to) understand.
Why are blockchain advocates so emotional? They should understand these articles because speculation is a core feature of the ICO boom and cryptocurrency in general.
No one really cares about bitcoin and etherium, after their wild value swings.
Let alone - it's way too complicated for any layperson to grasp. Money is easy... but think about the distrust that many elderly people have with simple debit cards! Cryptocurrency will definitely be our nerdy wet dream
Would you believe that the author of this research was harping about blockchain adoption by large companies less than a year ago? A lot has changed in 11 months, such as a slow price drop from the 2017 December insanity.
Isn't it a bit rich to first make companies anxious to join in on the bandwagon, then to turn around and say they are investing into something that is on the very brink of destruction? Based on pretending that Bitcoin was invented at its height in December 2017?
Heck, I did not sell any of my market research, I gave it away for free (silly me). Sure, sure, I made a few million here and there, but nothing like charging 0.5 BTC to tell you the financial world is collapsing, because John McAffee is so irrationally bullish.
This time it is real though. I can feel it too. Bitcoin is over! I hope you made out like a bandit, because soon, the only way to make money is to sell research about the impending bounce-back of crypto.
Of course the early adopters of Bitcoin are critical about its demise. They have a vested financial interest in seeing it succeed. Unlike these researchers, who only stumbled upon Bitcoin when they realized that people are willing to pay for their objective expert opinion on something they themselves missed the boat on.
Don't work for Bloomberg, eg?
Bloomberg News Pays Reporters More If Their Stories Move Markets: https://news.ycombinator.com/item?id=18162440
Obviously you haven't heard of the NSA or the US Military.
Nationstate backed fiat currencies require enormous amounts of energy waste in the form of standing armies and other tools of power. Compared to the energy Bitcoin uses to protect itself from attack or fraud this energy is very large.
Seeing as how I can't retrieve the computing power back out of Bitcoin that was mined, it is a cost.
Another example of this is gold. To extract it out of the ground, you need to invest energy. That energy is then "stored" in the gold. You can release it by selling it for USD, then purchasing service from someone and so on.
I think it's hard to argue that the energy you put into it is lost even if that seems unintuitive at first glance.
The only currencies which exhibit that feature (no energy put in, hence no real intrinsic value) are fiat currencies, which come with their own set of unique issues.
My understanding is that a currency needs to be backed by something intrinsically (seen as) valuable as it goes through the bootstrapping process. Once it is generally accepted, it can stand on its own (at least for a while).
No matter how big Bitcoin is, it can never get off of its "gold standard" -- i.e. the computing power required to mine it.
On its own, this would be fine, but the parallels break down very quickly when we are talking about new *coins coming out at a MUCH higher velocity than traditional currencies.
Maybe I misunderstand your issue about getting the energy back out. For me it's quite clear that you can get it out, simply by exchanging it for something else that provides you with that energy.
Fiat currencies tend to devalue to a point where there's literally nothing left of the energy that it originally represented. E.g. the USD devalued by more than 96% since 1913. In my point of view, this really is the currency which you can't extract the energy back out of — with a government guarantee.
I think Ethereum is a step in the right direction compared to Bitcoin since it is backed by usable computation, but it is still overpriced.
BTC inflation is currently higher than USD
Historically, Bitcoin started off as a hyperinflationary mint in order to produce the supply rapidly before the general public would be able to access the production methods.
Aprox 4.11% of Bitcoin users (addresses) control 96.53% of all bitcoins in circulation. Also there's a chance that something will make Bitcoin obsolete in the near future - immediately destroying the trade value of Bitcoin, either a new cryptocurrency, a quantum computer or cryptographic breakthrough that would allow theft of BTC private keys or more predictably a bug like what recently happened in the main Bitcoin core wallet client software which allowed a user to inflate the supply of Bitcoins past 21 million and mint more BTC for free.
Here’s an explanation on how the Bitcoin market differs vastly from Gold speculation markets:
While I respect these people for their great expertise on the general economy, I don't agree with their take on crypto. They obviously misunderstand its nature and, to be frank, during the crypto boom they sometimes appeared to be a bit threatened by the rise of crypto (one of their core businesses is — you guessed it — gold).
With regard to your other points:
* Yes, you can create new altcoins out of thin air, but do you really think that will be possible forever? There are strong network effects at play and — as with any other market — there will be winners and losers. So far Bitcoin has oscillated around the 50% dominance mark. I don't see that changing in the near future. Saying that you can indefinitely create new alts is like saying that you can create unlimited Amazon clones. While technically true, this does not work in reality.
* Yes, inflation is built into Bitcoin, but in contrast to fiat it will not go on forever. Eventually it's a deflationary currency.
* According to the NYT the richest 1% in the US hold more wealth than the "bottom" 90%. This pattern seems to have nothing to do with Bitcoin, although I'd personally wish it would look different.
* Yes, there might be fraud and maybe there are also severe bugs. But up to now, Bitcoin has survived all tests in the field and appears to be pretty stable. Probably more stable than most other pieces of software I have ever seen.
nations will continue regardless of currency.
nations will always have different levels of resources.
nations will need to defend those resources.
this has nothing to do with electricity used in current electronic financial transactions.
bitcoin and it's ilk are wildly fantastically inefficient.
If anything, a powerful standing army is more likely to result in failure of fiat currency (hyperinflation)--hyperinflation is fundamentally caused by a government pursuing really bad economic policies to the detriment of the economy, and the failing economy will tend to precipitate an internal (potentially violent) rebellion if there is space to do so.
The Department of Defense has a much larger purview than propping up the value of currency. Cryptocurrency doesn't fight terrorism (at best, it's agnostic to terrorism, at worst, it aids it). It won't fight back against the next Pearl Harbor or 9/11. And if your reasoning reduces everything about society to the economic output/currency value of that society, it might be time to get some fresh air.
Additionally, regardless of whether the DoD and all governments of all nations spend more energy or warm the planet faster than global cryptocurrency, cryptocurrency is superfluous—the global financial system was working without it, and could work without it again. Everything cryptocurrency "fixes" about the global financial system could be fixed more surgically, and without a system that exerts so much stress on the planet.
I'm sorry if you lost the money... But I'm not using cryptocurrency in any public space. Considering that cash is still way more anonymous... and US Dollars are fairly widely accepted notes.
However, that's separate from the point I was making.
If we except the tetris, or minesweeper...
On the other hand, blockchain mining responds to more efficient hardware by increasing difficulty in order to compensate for the impact of improved hardware on the hash rate, while still doing the same amount of work (i.e. processing the same amount of transactions).
The comparison is absurd and intellectually dishonest.
Maybe the cumulative effect on energy spent for playing tetris, or minesweep (not to mention much modern videogames) is not so small after all.
... Equals huge amount of entertainment hours. What you don't seem to be grasping is that the power consumption only increases the minimum amount necessary to meet demand for entertainment hours, i.e. the more power consumed the more entertainment hours produced. With PoW, power consumption continually increases but the amount of transactions processed remains the same. PoW is clearly and inarguably inefficient by comparison.
When bitcoin inevitably hits 100,000 dollars, 1,000,000 dollars and so on (it's an algorithm, it will happen, you're just investing in an algorithm) people will use that money to buy Tesla's, start eco-friendly businesses, upgrade their outdated appliances and so on.
Just wait and see.
I have never owned crypto currency, I'm just easily triggered by bad graphs.
https://bitcoincharts.com/charts/bitstampUSD#tgSzm1g10zm2g25...
Bitcoin has had relative declines this big and lasting this long (late 2013 to mid 2015) only to bounce back later.
You said bitcoin twice and linked to btc's price over time, I'm not sure why anyone would take that to mean crypto-currencies in general.
This seems like a textbook example of moving goal posts.
Without 3rd party audits, all the cryptocurrency exchanges can be assumed to be operating fractional reserves and wash trading.
Notice how once Chinese exchanges were forced to implement a fee on trades, their entire trading volume nearly disappeared.
See the integrity report from the New York Attorney Generals office:
I can’t do that with gold. Bank deposits are always available until they aren’t. But Coinbase can’t do this either.
2. There’s a chance (however small) that you could lose the other $950m, but keep some of this other $50m.
How you get it through what now? Private aircraft don't deal with that. GP did specify "billionaire", and at that level at least fractional ownership in private long distance transportation is not a reach either.
Debating the logistics of potentially being able to evade some of those difficulties by having even larger sums of money (to afford private airliners or private security, even in times of unrest) and accepting larger risks misses the point.
The billionaire looking for security would already have a cache of stone and gold, but would appreciate other new forms of diversification.
;)
cryptocurrency, is about the pump-and-dump.
I dont trust my local government's always inflating currency.
>bitcoin
Pick one.
> fixed number of Bitcoins
Don't think he needs to.
Let’s take a step back and remember how Bitcoin’s purchasing power has lost nearly $15,000 since its all-time high. So yes, he does need to.
In the meantime it'll be fun to say snarky things about shitcoins, no question about it, but the tech does have some pretty exciting potential.
And some terrifying consequences for bugs. Or administrative errors with contracts, or non-binding contracts that you'll need a traditional court to sort out anyway.
As all important software (aircraft, medical, financial) do.
When an aircraft has a bug, there is a federal investigation.
* Porn
* Donations to wikileaks
* Pot
* Sending money to Venezuela
* Leaving Venezuela with your wealth intact
* Payments without giving all transaction info to the credit card companies
* Digital payments for the unbanked
All legal usage that makes sense.
PayPal froze the donations to wikileaks. That's not possible if you donate using Bitcoin.
The corrupt government in Venezuela may deem it illegal but it's not immoral to want to flee the country with your wealth. This is much easier with Bitcoin as you can just remember or write down your seed.
The point is cryptocurrencies does this all better. And your definition of "pretty trivial" is for the most part ignorant.
Cryptocurrency stored on an exchange can be frozen, just like one's PayPal balance can be. Wikileaks takes PayPal (and credit card, bank transfer, checks, etc.) donations currently on their site.
The infrastructure for automatic payments isn't there yet that's true. There's no reason why it can't be done though. I also have recurring payments for my email service, VPN, VPS and domains which I pay using cryptocurrencies.
To be fair the point of cryptocurrencies isn't to store them on an exchange (although you can) as some of the benefits are then lost.
That Wikileaks take other options doesn't retract from the point that there are clear benefits for them to accept cryptocurrencies.
https://www.reddit.com/r/Buttcoin/comments/9jv70b/butter_tri...
I guess they're going all-in on the whole 'stopped-clock' prediction strategy, no?
- Sincerely, a guy who's been buying bitcoin since 2013
Honestly I have no idea whats going to happen. I threw some money into Bitcoin I was okay with loosing and check on it every few months. It's been fun.
Maybe some perfect storm of the Lightning Network, Web Payments and dodgy banks or failing economies will bring about some crypto-utopia. Or maybe it will implode and in the end all we have done is collectively purchased a metric shit ton of GPU's.
Actually, that's not all we would have done. It didn't work out but at least we ran the experiment.
Before critics show up - technical analysis is not meant to predict the future, but rather to pick the more probable outcome.
https://bitinfocharts.com/bitcoin/address/3D2oetdNuZUqQHPJmc...
They have about 934 Million in BTC, having had as little as 869 Million USD recently. Their tether liabilities are between 2.5 and 3 Billion USD:
https://coinmarketcap.com/currencies/tether/
It has long been asked how a token can be pegged to 1 USD without any actual USD.
The reality is that it can work if your balance in other currencies doesn't go below the average price you bought them at. The more the price of btc goes down, the more btc they have to give back when people exchange their tethers for btc (you can't exchange them for USD).
Two dynamics work in their favor:
First, exchanging tethers for btc means buying btc, which makes the price of btc go up. If people buy the btc so that they can exchange it at real exchanges for USD, then this effect would be temporary and you would see a disconnect between the price of btc at Bitfinex and real exchanges like coinbase. Two days ago the premium on Bitfinex was about $100, now it is about $400 higher than coinbase and bitstamp.
Second, what many think originally happened due to the stark correlation between tether creation and btc price jumps on bitfinex, was that the creation of tethers and subsequent transfer in bulk to bitfinex's exchange caused the btc price to rise. Now not only do they benefit from creating tethers out of nothing, they get the exchange commission on top AND get to create the illusion of demand. This illusion of demand was seen to work extremely well on unsophisticated investors during the run up to 20,000 USD per btc, helping to create articles, fear of missing out and general hysteria that brought in more unsophisticated investors buying in to something they did not understand.
I took out its “worthless” video card and still sold it for $40.
Hocus pocus Capitol Hillus make usury illegal spell. I really don't want to use cash anymore.
This is the silliest human endeavor that somehow seems to attract a few smart people too.
As for whether or not any cryptocurrency will ever be stable and widespread enough to be usable in the western world remains to be seen.
It's an interesting algorithm, but not actually useful. Society is literally built on trust. So "anti-government" (or "anti-social"?) currency is the only use for it.
We also don't need 10 different messaging apps.
The vast majority of existing cryptocurrencies are just copies of others, or just sit atop Ethereum. Those will certainly end up being worthless or nearly so. That doesn't require that all future cryptocurrencies will necessarily meet the same fate.
Cryptocurrencies are tech products, various projects try various ideas. You'll have the initial blockchain idea from bitcoin, the privacy blockchain from monero, the programming contracts from ethereum, the decentralized exchange from stellar, etc.
I'm perfectly fine with that, I prefer to see people create new projects to test new ideas rather than to hear them complain bitcoin is not doing what they want.
* BCH as a fixed coin limit at 21 million. XMR has a tail emission so the coin supply will always increase
* BCH has a POW backed by ASICs and XMR has been doing all they can to brick existing ASICs and keep the mining on CPUs and GPUs
* BCH prioritizes scaling on-chain aggressively while XMR has more hope on second layer solutions
* BCH allows more script functionality (for example allowing you to store Twitter message, see memo.cash) while XMR disallows all that
* BCH has a transparent blockchain where all transactions can be traced while XMR tries to shield all senders and receivers
Of course other coins can make other trade-offs. Ethereum for example explores the extreme end of scripts on-chain, even having a Turing complete scripting language. Other coins are experimenting with alternatives to mining like proof-of-stake (POS).
Etc...
"Blockchain isn't about democracy and decentralisation – it's about greed "
https://news.ycombinator.com/item?id=18219256
I'm not a fan of cryptos, but it's fascinating how so much of the media ( even in different countries ) push the same narrative in almost a coordinated fashion.
I'm seeing more an more of these "the end is near" articles popping up. After witnessing a half dozen or so boom/bust cycle firsthand, my spidey sense is beginning to tingle that we're about to enter another one. After ten months of decreasing volatility and regression toward a mean price of $6,500 +/- 5%, I'm expecting a run-up any day now. It may not be another "to the moon!" run, but it'll happen. When it does, the new value will stabilize higher than it is right now.
Yea, Paul Krugman has been saying "Bitcoin is doomed" since 2012. He'll always be wrong because this is all politically motivated. The banking and political establishment are scared shitless by alternative currencies, crypto or otherwise. Google the "Liberty Dollar". Mouth pieces for the financial industry like Bloomberg will attack alternatives to the petrodollar no matter what they really think, and obviously they know Bitcoin has a future because Goldman-Sachs has bought tons of them.
One of the strongest argument Paul Krugman makes against bitcoin is about trust. Like, he says dollar has value because US government backs it and you can pay taxes with it. Basically, he is questioning can bitcoin gain that level of trust among its users to be successful. Not the current level of some transaction around dark markets.
Personally, I don't know.
Yes, by putting people in jail who put forward viable alternatives to USD, like Liberty Dollar. And making Bitcoin impossible to use legally as a currency by applying strict capital gains tax reporting requirements.
>Can Bitcoin gain that level of trust amoung its users to be successful.
The massive public and institutional buy-in over the past 5 years suggests that trust in its cryptographic security is not what is holding it back.
Bitcoin, from its inception, is part of a political battle, not a technological or economic one. Read the Satoshi white paper. Paul Krugman is saying that it wont be successful because the banks and government will fight it, and his social status is dependant on him being part of that fight. Do you think Krugman would keep all his exposure and prestige if he went off the reservation and criticized the banks and the petrodollar? No way.
He's wrong.
It won't be successful because it's pretty much unusable by regular people, difficult to secure (surprise, "be your own bank" implies "be your own security guard" — and 99% of people want to be neither of those things), extremely wasteful, slow and full of scams.
Most people's first encounter with buttcoins is literally RANSOMWARE. Do you really think mass adoption is coming?
really? source for that? Google says they're preparing to open a trading desk but that's not the same thing.