Bitcoin’s Overnight Collapse Probability Is About 50%
tr0lly.com
tr0lly.com
I mean reading journals on monetary policy transmission, central banking, and finance in general, it is an extremely complex arena (understanding the global economy might be the most complex man made "game" to try to understand). And those researchers will readily admit faults and shortcomings of our current theories. I never ever see any statements from researchers that carries the same strength of conviction about any of the aforementioned topics compared to the crypto crowd, whatsoever.
Some perspective might lend itself useful.
So, you don't quite need to live in SanFran in order to not consider $1,000,000 serious money.
Yes, I could go back to my home town of Sofia, but even there 1 mil won't take me too far (certainly not make me an all-mighty mogul, this is 100x times of capital volume away. and if we're talking about buying journos and influecing public opinion, then - 1000x of capital volume). And to be honest I envy people in urban areas such as Austin (ČR is rated ~150th in the world (between Zimbabwe and Botswana) on granting construction permits) for having a real supply-demand based housing market, where you are not getting brutally punished for wanting to raise a family.
And yes, I currently live off rent, take only gigs I consider meaningful (currently hoping to get in Fidelity IT), but drive an 8-year old 530xi and live in a rented 3-bedroom flat as I expect my BTC to grow in value quicker than real estate (as has been the case in the past 8 years). This is the frugal lifestyle I mean.
P.S. Anyway - cheers: https://www.youtube.com/watch?v=RJbgNvP47-0
Oh come on... yes a millionaire lifestyle isn’t a billionaire lifestyle but still.
2) TFA also says the reason Bitcoin futures are contango (6 month contract costs more than 3 month contract) on the Chicago Merc is because of counterparty risk with Bitcoin exchanges. But it also says there's zero counterparty risk with the Chicago Merc. So who cares about sketchy Bitcoin exchanges when you could just buy the CME 3-month, sell the CME 6-month, roll it every month and pocket the premium?
3) We should immediately discount stories about cryptoassets from any site that can't manage to set up a TLS cert.
100% this
Very interesting conclusion. Let me see if I can follow along:
Adding an SSL cert = SSL
SSL = encryption
EnCRYPTion = CRYPTocurrency
Cryptocurrency = Bitcoin implementation
Bitcoin implementation = Bitcoin price
Yes, I see now how they're equivalent.
The article definitely is hand-wavy and there are other reasons to be skeptical but conclusions like this rarely help the situation.
Understanding cryptoassets = Above minimal IT skills + more skills + more knowledge required
Not knowing how to add an SSL cert certainly does not bode well for one's expertise on crypto. Knowing how to do so but not caring is even worse.
To me, the most probable outcome would be that as mining network consolidates and it gets harder to acquire more power, it becomes urgent to support the price by finding other sources of value to attach to the chain being mined, so we end up in a scenario where mining firms(which will increasingly mingle within the nation-state system) sponsor new coins and applications with additional social value.
The amount of power used to mine a bitcoin will always raise in the long run so that the power costs approximately the same as a bitcoin at industrial electricity prices, less a contribution to the mining capital (e.g. the ASIC miner) and margin.
I was reading thru Coinbase's own insurance wording, and it's clear they dance around it by saying:
To the extent these funds are held as USD in U.S. banks, they are maintained as pooled custodial accounts at one or more banks insured by the FDIC. These pooled custodial accounts have pass-through FDIC insurance up to the per-depositor coverage limit then in place [1]
Which basically means, only Coinbase's holding accounts are covered for $250k, not our personal accounts. I can't imagine the US Gov stepping in to rescue US crypto account holders when/if it does tank, but it might be necessary if it balloons enough.
[1] https://help.coinbase.com/en/coinbase/other-topics/legal-pol...
What happens is any USDT-BTC exchanges utterly collapse. The price there shoots up to hundreds of thousands of USDT per BTC, those BTC all flood to legitimate exchanges like Coinbase, and deplete their USD. If you believe as I do there's way more USDT printed than backed USD anywhere in the system, Coinbase will dry up too. The price will drop to pennies per BTC on Coinbase.
Then there's a ton of bag holders with BTC, and literally no USD to exchange them for. Plenty of USDT though.
This is what the 2% per month risk premium is about.
A friend recently got his BTC stolen in one of these online wallets, which are not wallets at all.
I advise no one to keep their money in exchanges.
For example, when you trade EUR/USD, you can take "physical delivery" of the position. That doesn't mean that you will get a stack of banknotes, only that the trade will be settled in a different way.
> You can’t lose your Bitcoins – you just keep them on chain, and no exchange going bust will affect your position.
You absolutely can lose your Bitcoins if your private keys are compromised. Large institutions can and do get hacked or have money embezzled all the time.
This is a bit hand wavy. Holding Bitcoin has real administrative and compliance costs for financial players in a position to sell Bitcoin futures. Particularly since, to do this properly, you’d need to be trading on the referenced cryptocurrency exchanges.
Also, I don’t think that default probability equation works for this case. (It’s also highly sensitive to the recovery assumption.)
If there's way more USDT than USD in the system, because let's say the Tether folks are printing USDT, buying Bitcoin with them, then selling them on Coinbase for cash...
What happens is USDT-BTC exchanges, the price skyrockets to millions of USDT per BTC. You transfer to Coinbase and try and sell there, but the price collapses to pennies.
And the nice thing about any revealed-preference argument is that in some sense it’s also a thrown-down gauntlet. “Is this estimate full of crap, HN? Then put your eggs in this basket. Your fortune awaits.” Like, it’s not saying that your arguments are not valid to me, as if the Hacker News comment thread were some sort of arbitrator of truth if only we could argue loud and hard enough for our points of view. A revealed preference argument is saying that your arguments are not valid to you, in the sense that if you profess other confidences or values then your actions are not in line with your values. Who cares about the bluster on the HN comment thread then? This is something that you need to work out in your own case, wondering if you are convinced enough in the stability of Bitcoin to buy some Bitcoin right now to short the future, and if not then why not. Because if you do not have credit-card debt then that 24% APR should look mighty tempting.
I'm developing a blockchain to block these people using sustainable AI. Want to get in on the initial coin offering?
Let's hope it is just a side-step given that BTC with censorship/regulation is just a breaking of a glass-wall away from perfectly free monetary unit.
P.S. If you are looking to get no-KYC truly anonymous BTC you'd better live in a top-10 city (e.g. Prague), because in a top-100 city (e.g. Sofia) it is not quite straight-forward and takes tons of waiting/selecting.
No, he didn't. He got convicted of money laundering, conspiracy to commit computer hacking, and conspiracy to traffic narcotics. Evidence related to the alleged murder for hire scheme was presented at trial and was weighed in the sentencing phase in terms of what sentence he got within the range authorized for the crimes he was convicted of, but he was not tried, convicted, or sentenced for “hired gun charges”.
> Not to mention that all the major mining pools have voluntarily chosen to collaborate with governments on censoring the blockchain, etc.
What do you mean by this?
BTW Juraj is a great source on anything crypto-related. And from what I now there has been no resistance from the pools so far (at least the EU/US-based ones, though in China it is probably even more difficult.)
BTW Juraj is a great source on anything crypto-related. And from what I now there has been no resistance from the pools so far (at least the EU/US-based ones, though in Chine it is probably even more difficult.)
> Not to mention that all the major mining pools have voluntarily chosen to collaborate with governments on censoring the blockchain, etc.
> Is there any reason a cryptocurrency can’t be made that uses very little energy?
As far as proof-of-work is concerned, if you don't use enough energy, you are vulnerable to 51% attacks.
As far as other schemes (e.g. proof-of-stake) are concerned - none of them have the same desirable security properties as PoW.
BTC is "clean" money in that it doesn't have the blood of millions and an imperialistic army powering it.
The energy usage by BTC is a drop in the bucket compared to the ecological damage wreaked by the US military.
Most evidence shows the U.S. no longer benefits from the dollar as a global reserve currency. And lots of governments have currency boards or currencies they don’t control.
1. The currency board countries are very small players, mostly beaten to blue and also not all currency boards are tied to USD.
2. The bulk (I guess 90%+) of global lending is still in USD - a currency which the Fed can debase at will - as has been happening since 2008 and happened at a grande scale in 2020.
This brings only frustration and bitterness - the last two things you want in international relations, especially in the post-nuclear age soft-power days.
P.S. I think that the US was playing this role very well over the past 76 years and am perfectly happy with 90% of what has been done.
There's a lot of extreme Bitcoin hate on this site, but BTC is helping a ton of people right now, as evidenced by the rapidly increasing demand and money flowing into Bitcoin investment.
There really is no alternative for where to park your money in 2021 unless you want to buy real-estate or stocks both of which come with their own massive set of problems.
Not making a judgement either way on BTC's success but what you've highlighted there isn't evidence. An artificially inflated market based on speculation would show the exact same signs.
I don't think this is the case, it feels more like people here are no longer as easily charmed by the whole buzzword catalogue surrounding bitcoin. This switch from everyone starting a new cryptocurrency and "X, but on blockchain" dominating the discourse towards a more critical view probably just feels more extreme than it really is.
I never understood why people described Bitcoin as an anonymous currency, it really isn’t. Arguably physical currency is much, much more anonymous than Bitcoin.
On the other hand, "anonymous" is to some degree like computer "security". Secure against what threat? Anonymous to who?
Paper money is certainly traceable to some degree. Plus it almost requires you to meet in person, where the other person in the transaction can see your physical appearance (or your proxy/accomplice's).
Both mediums of exchange have similar risk profiles, but they are a little bit different. Not sure that I'd argue one is better than the other, generally. Depends on the use case.
Plus there isn't any way to order 500 hits of acid from 3 timezones away in-person without a lot of issues. Lotta ID checks at the airport, and lots of cameras on highways.
If something goes weird with the darknet shipment I walk, feign ignorance, burn the laptop. If I'm carrying drugs on a plane and get busted then it's on me, no question.
But yeah, if you didn't pull good OpSec in 2014 it's possible the feds might link it to you in 2023, or whenever they get around to it.
Monero solves this problem currently.
A lot of people here probably have BTC in their own wallets so don't care but the current btc exchanges (binance/coinbase etc) collapsing like mt. gox did would not be good for BTC in the short run at the very least.
Can we reasonably infer that you have a financial stake in Bitcoin?
archive version though it seems slow https://archive.vn/UvZTZ
Bitcoin’s price is determined by zero fundamentals, so it will swing wildly if you zoom Out enough, forever. That’s why if you ask me it makes logical sense to have 1-10% Of the portfolio betting long or short, because it has a much better than 1 in 10 chances of going x10 or -90% in relatively short timeframe. I didn’t backtest it but looking at a chart it looks like there are those many-sigma shifts every 2 years.
To that extent, if you’re interested in betting on it, you might want to use option contracts and make sure your max loss is fixed at the premium and the upside is unlimited.
It’s really not true if you have any leverage at all, where a crash might increase your margin requirements or wipe you out entirely.
Because Bitcoin is just shared belief, it is hard to dispel that belief via real-world events such as earnings releases and other things that affect more grounded investments.
Bitcoin is more of a movement and it is somewhat revolutionary in that it aims to replace our existing monetary system of central banks and interest rates, etc.
I think the main threats to Bitcoin could be governmental if it continues to grow. If it starts to be a reserve currency competitor to USD which could affect treasury sales, I could see it being banned by the US government and others... but I am not smart enough to work out all that would play out if Bitcoin became that important.
I wonder if Bitcoin will ever be forced to bend towards an inflationary monetary policy controlled by government like entities? It is code and code and always be changed. If it is so successful it becomes necessary to co-opt it into the existing system.... weird stuff.
How? As an intrinsically valuable means of speculation because sound investment opportunities are absent?
Bitcoin's block reward can be changed as well, it's not some immutable law of the blockchain. I'm not claiming that it will change, but I also see the potential for there to be a change there to incentivize mining once the block rewards are minuscule and miners are dependent on transaction fees for profitability.
Those people are losing money due to inflation. This is well known and an issue with people keeping cash in "mattresses".
> Bitcoin's block reward can be changed as well, it's not some immutable law of the blockchain. I'm not claiming that it will change, but I also see the potential for there to be a change there to incentivize mining once the block rewards are minuscule and miners are dependent on transaction fees for profitability.
This is called a hard fork, and has been done more or less unsuccessfully multiple times now.
I'm aware of what a hard fork is, I'm also aware of what a 51% attack is. The risk of that down the road could be a fair amount of incentive for folks (and the network effect) to get on board. I'm not saying something will happen there. You do need to maintain clarity to understand the reality of what's possible though. It's also possible that bitcoin's first mover advantage is overcome at some point.
As I said, I own some cryptocurrency too. It's important to see through the mania that is the current market.
The fixed, deflationary nature of Bitcoin isn't the only financial instrument we need, but it is desperately needed in its own right.
Competing tenders in most countries are outlawed. It is an enforced shared belief.
The EU came the closest, but no one outside of Europe has wanted Euros since the Greek economic crisis. Hell a large chunk of internal European trade is still done in dollars on the back-end.
On the stick side, under Obama the US stepped up the various mechanisms such that we can cut off trade denominated in dollars on a whim to anyone we want, that's part of how sanctions work. If we (the US) decides we don't want a country to be able to trade internationally, we just cut them off from converting into dollars at the exchanges. There are no economically viable ways around this at present. Just ask Iran.
Bitcoin however, will collapse the moment enough of the crowd loses the faith. It'll go on for a while because it's the new hotness, and some people will get lucky and rich, but at the end of the day it's an ultimately worthless commodity (unless you're trying to avoid government regulation over financial transfers) that exists as long as world governments allow it to exist.
Sure, if theoretically some critical mass of the population all collectively decided Bitcoin was the future it would be, but right now we can't get a critical mass of US citizens to wear masks during a pandemic that's killed hundreds of thousands. So I wouldn't hold out too much hope for pan-Bitcoinism.
USD is the dirtiest fiat there is because it's backed by blood at a global scale.
As for moral purity, it's no secret that a significant (albeit unknowable) portion of Bitcoin's current value comes from illegal transactions concerning everything from human trafficking to drug sales to organized crime rackets. The ability to obfuscate financial transactions is part of its intrinsic value, so anyone with an interest in doing so will be attracted to it. Plus if Bitcoin were to somehow grow large enough to even consider replacing the dollar, all the blood behind the dollar would simply shift to Bitcoin in some (albeit likely different) manner. Someone has to enforce monetary policy and financial laws, a chaotic, decentralized enforcement would arguably be even worse than centralized fiat enforcement.
There's no way forward financially without some blood on your hands at some stage. So for my money I'm going to build my financial house on solid ground. I'm all for making the system more just and less bloody, but IMO Bitcoin isn't it. In the meantime we've all got to play the hand we're dealt, the only other option is to be a martyr, and while they might get some occasional press and lip service, martyrs typically don't accomplish much.
No. Internal trade is balanced with target2.
That's not just shared acceptance because even if the mighty USD should crumble and fall, a US citizen will still be able to pay the taxman with a dollar bill which is in itself of great value.
It's difficult to imagine this causing the price to go any direction other than up.
To what do you refer here?
Though in the longer run, assuming the network stays up (I see no reason why not), I also think it would strengthen the case and we'd see prices continue to climb.
the only thing novel is that its decentralized and inefficient but the average user really doesnt care about that.
These are some of the problems with centralization that decentralization solves. The original Satoshi white paper calls out many of these use cases. Part of the reason bitcoin is exploding in value again is because the US government is inflating everyone's money.
This is before even getting into applications of smart contracts...
Congratulations on your successful investment (that's not something I would recommend publicizing though)...
Whereas with bitcoin, it is fairly unmoored from physical constraints.
There is no natural price for bitcoin.
It could go up forever or drop to nothing and both are acceptable valuations that would be hard to question -- because it is merely shared belief.
People should know more about the paper gold market. Most importantly how much gold people think they have stored safely in vaults, but is essentially just an IOU that could never be paid if everyone withdrew at the same time. Pretty scary/exciting stuff. I couldn't even begin to describe all the dimensions to this and still learning myself. But long story short, consider the possibility that the price of gold isn't anywhere near tied to a physical thing. :)
All money, currency and assets are based on faith on the continuing demand for that thing. All the other properties are incidental.
As soon as the BTC market reaches maximum penetration and no new buyers can be found, Bitcoin becomes price stable. And once price stability is reached, because the price isn't appreciating anymore, people will want to start spending their earnings. And as BTC in particular isn't actually that good as a currency, people need to turn their BTC into fiat in order to realise their value and spend them.
And then suddenly... there aren't any buyers and it crashes.
In fact, inflation is the only reason people put money into Bitcoin lol. If there wasn't any inflation, nobody would buy Bitcoin. Really makes you think.
The stock market goes up because you are looking at a market index of the biggest companies, which are growing bigger as markets concentrate. The difference is if you have a share for a year, it earns you a return separate to what happens to the price of the stock (i.e. a dividend), and this is the intrinsic value (i.e. you can do a fundamental analysis of the stock to reach a price). If you hold onto a Bitcoin for a year it might be worth more, but only because the market is pricing it differently, not because of any fundamentals. This is why it does not have intrinsic value.
People need to turn gold into fiat in order to spend it. Those are people with excess wealth and not enough income. There will always be people on the other side, excess income but low wealth.
The supply of new people earning money who will want to invest income into Bitcoin has to be finite. Growth can't continue forever because you always need to find someone new who is willing to pay more than you did for a bitcoin/satoshi to keep the price growing, and there isn't an infinite supply of people with an infinite supply of money.
Bitcoin is negative sum because the miners constantly have to sell Bitcoins for real currency to pay their electric bills. The equilibrium point is when the new money entering the system is equal to the cash value of block rewards. The higher the price, the more new money has to come in to keep it stable.
Currently, Tesla's $1.5B investment is about 4-5 weeks of electric bills (lmao).
The point at which there are no new buyers is actually a negative slope point.
Clearly it has value as a speculative vehicle and as a systemic risk hedge (like Gold). Whether it can become a true currency is still debatable. Its infrastructure feels more like selling stock or bonds today.
So is US dollar.
Bitcoin is not even not in the same league - it’s playing different sport.
The nuance in this is that its value also includes a financial incentive - the MLM structure inherent to Bitcoin, and that is truly what aligns everyone in Bitcoin - it's not for whatever other positives may exist as the primary glue, arguably 99%+ is the financial gain and potential that is the glue.
But yes, pro-Bitcoiners have been good at refining their narrative, the propaganda, conveniently ignoring the MLM structure whenever writing prose of how amazing Bitcoin is - while avoiding answering questions related to its pitfalls like with Bitcoin how do you implement policy and mechanisms like the Magnisky Act to block money of known bad actors as an economic punishment and attempt to sway their bad actions - before needing to perhaps (hopefully not) escalate actions into the physical, destruction-violence mechanism?
You can change the code, but it's up to the miners to actually run that code. Not saying it's impossible, but that's a big ask for a controversial change like that. Maybe someday if the mining is even more centralized than it currently is.
Also of note was their claim that in late 2020 they shifted their client base from individual miners to mostly publicly traded companies.
I am not sure what to make of it. Maybe HN can chip in?
https://cointelegraph.com/news/btc-miners-pocket-4m-in-60-mi...
The only problem I see in "investing" in BC is the counterpart risk, i.e., I don't trust any of the companies that do trading in BC. I think this problem is currently bigger than the "currency" itself.
> So the next time someone tries to explain to you that “Bitcoin is a store of value”, when the chances of it getting utterly destroyed overnight before the year is over are around 50/50, try not to shoot coffee through your nose laughing.
EDIT: Not saying I agree with the prediction, it's just a far more timid prediction than I initially thought.
Now, will he?
>"In our case [...] R ≈ 50% based on what happened after MtGox collapsed."
He is counting on another MtGox. Black swan events are not certain, by definition.
Be aware that crypto-related submissions like this one might be intended to trigger or influence a wanted market behavior by OP.
Edit to add: what are the odds this comment would be downvoted in a Bitcoin thread? Would be great to see the bias of upvote/downvoters and commenters in Bitcoin threads, then can have 2 thread columns: top comments for those who own Bitcoin, and top comments for those who don't own Bitcoin; obviously it'd an honour system and could be gamed.
You wouldn't. You would just know that OP owns GOOG if the article is about GOOG. Only HN/the brokerage would have their entire portfolio.
> It's why VCs, for example, if writing a blog post about a company - they will write a disclaimer that they own shares in the company
As far as I can tell this isn't a legal requirement - shareholders have no obligation to disclose their position, even major stakeholders don't have to do so every time they post about the company - it's mainly to protect the writer's reputation and because they really don't want to mislead the reader. The point is that HN shouldn't be the one keeping the comments and submissions free of articles posted "for the intent of manipulating the market" regardless if we're talking about crypto securities or public securities.
Very much seems like this should be remedied, it's part of integrity for people to know if you have a financial motivation behind what you say - at least if you want a society that has integrity and not as easily open to manipulation; it's ultimately why advertising is bad, the people didn't deserve to get the attention they've getting - and why in part Tesla has done so well - they created a good enough product to get word of mouth and receive the attention they deserve (for the good and bad) to receive.
> This is usually due to the fact that there’s a risk premium on the uncertainty of the future, and it costs a little bit to be sure of the price that you’ll pay for something three months from now.
This is wrong. Being sure of the the price you'll pay in the three months from now does NOT cost this premium. It costs essentially nothing (other than the transaction fee, which is much smaller - of the order of 0.025% on most exchanges, plus the orderbook spread). Note in particular that this transaction cost doesn't depend on the time horizon, unlike the premium the author refers to.
People hold Bitcoin as insurance against the dollar collapsing. It makes no sense to assume that both Bitcoin and dollars will be circulating currencies: currency is a winner-take-all market, the most widely-accepted one will win. The Bitcoin price is a superposition of those who believe that Bitcoin is going to infinity and the dollar will become worthless, and those who believe that Bitcoin is going to zero and the dollar will retain its position as the global reserve currency.
You are aware of other currencies,let's say the Euro, right?
Tether's collapse will be to Mt. Gox what Little Boy was to a firecracker.
Note: (current value at USD 49K time of post)
Username checks out.
Kind of like the constant stream of anti-Tesla posts from a couple years ago, which were linked to short sellers.
The main driver of BTC is belief and hype, as more people believe in BTC there’s more hype and increase in demand and price.
Anyone who is fresh on the scene or still hodling, god bless you, you have stronger hands than I.