Most of these entities probably don’t have that much liquid cash. Are they going to need to sell a bunch of crypto to pay the fine? $100M is a huge amount in these shallow markets.
* Bitcoin mining is an efficient market and there are no profits
* Bitcoin miners sell all of the bitcoin they mine
These assumptions aren't exactly realistic but over the long run they should actually be close enough to the truth. Given those assumptions, at current market rates then an extra $41,121,180 has to enter the markets each day to keep prices stable, assuming buy/sell demand is otherwise equal.
More than that wanting to enter, prices go up, less, prices go down. Leaving aside price manipulation by Tether, Binance etc (THIS is a big assumption, but the exercise is still valuable I think).
So, the fine is only 2.5x the daily excess needed to keep prices stable. Shouldn't have a giant effect.
(You may wonder, if no profits, what are the miners doing? Essential the bitcoin network is an organized effort to take capital, acquire coal, and burn it. Contrary to "store of value" claims, literally all money invested into bitcoin either gets burned up, or goes to pay someone who entered bitcoin previously. It's an entirely negative sum game, with guaranteed capital losses in aggregate. However, this added $100 million is not a meaningful amount in view of the actual scale of energy burnt each year to run the network. It might be a meaningful amount of Bitmex's capital, but likely this won't wreck them on its own.)
I’m in fact more inclined to the view that prices aren’t sustainable and will collapse and fraud has propped it up.
You still need a $42 million a day outflow to satisfy miners if they are all selling. But this money could be coming from balances on exchanges etc rather than new entrants. So yes, seems stable until suddenly it becomes clear the reserves aren’t there and money people believed is real, isn’t.
There is, for example, a vast gulf between the amount of money people think they have on Binance and the amount of money that actually exists on Binance. One of these days they’ll to Mt. Gox…
Attributing a phenomenon to some high-level concept with no attempt to explain how the observed characteristics of said phenomenon can be causally linked to a concrete, specific instantiation of said high-level concept is, depending on the context, more commonly called a "superstition" or a "conspiracy theory".
It's also probably a maximum on net new money entering the market with stable prices, come to think of it. Though I'm inclined to agree with your view that actually the markets are net negative, being held aloft by Tether/exchanges, and will be vulnerable to a swift collapse when the money runs out.
I'm just not sure $100 million is the amount to do it.
1. If you buy a bitcoin, and sell it, the money can only come from a new purchaser. Bitcoin generates no yield on its own
2. However, the network costs a fair bit to administer and this scales with price. At $40,000 per bitcoin this costs $40,000 * 900 * 365 = $13.14 billion per year.
You can imagine a simple thought experiment. Suppose miners sell all 900 coins a day, and there are 100 trades happening apart from the miners. (This is NOT accurate, but the idea doesn’t change if there were 1,000,000 trades)
* The 100 non miner trades simply trade $40,000 for a bitcoin, back and forth, ad infinitum. You can see there is no wealth generated, it is merely a shuffling of wealth. This is the purported “store” aspect. As long as people want in, you may find someone to trade.
* Meanwhile, 900 people come up to the miners with $40,000 each. Each person hands the miner $40,000. With that, each miner goes to the open market, purchases coal, and burns it in a fire pit.
I think when people think of bitcoin as a store of value they think somehow capital has entered into the market. But it hasn’t. 100% of entering capital is immediately used to burn coal.
Anyone who wants out has to compete for the limited supply of new money entering.
Could an individual cash out their bitcoin for millions? Absolutely, there’s enough new money entering to allow for them to swap places with someone.
Could Satoshi cash out billions and billions in bitcoin? No, absolutely not. There isn’t the requisite amount of new money entering, and the miners need most of it to burn coal.
This is obviously a simplification but I think it is instructive.
When you go to a casino to play Poker, as condition to play you must pay chips every hand called a "rake". When you and everyone else walks out of the casino while there may still be winners there will likely be more losers, and the total is negative. The casino has some of your money. That's a negative sum game.
With mining bitcoin is equivalent to the casino scenario. Except instead of the casino keeping the money as profit, it's using that money to buy energy. Then you add onto that the exchanges taking a fee on top of that.
Bitcoin is short term capitalism driven to extremes. People are worshipping money because it earns a return in the financial world. When money earns a return in itself people will "quit" the real world to live in the financial world. They will even destroy the real world through mining if that is what it takes to be accepted into the financial utopia.
The store of value story doesn't hold up for me though. Fiat is actually a better store of value (this isn't necessarily a good thing by the way) because debts and tax obligations force people to both accept it as income and use it for spending. If we assumed 0% inflation then acquisition of money is basically the same as indebting someone else, forcing them to work for your benefit. If billionaires were immortal it would not be unimaginable that they could withhold their money for entire lifetimes forcing people to be unemployed for their entire life and yet the obligation to work for the money would persist long after the death of the worker. How could this possibly make sense?
A store of value is effectively a promise that someone else will give you your money (or good or service) back in the future plus compensation for the costs of parting with the money (inflation, opportunity cost, friction, a desire to make a living). We already have these and we call them bonds. The difference is that you aren't forced to accept bonds as legal tender. The reason why this system is fair is that it is voluntary. Nobody has to buy government bonds if they don't want to.
It feels to me that Bitcoin isn't an alternative to the current system. It is an extremely overexaggerated parody of our current system. Consider that there have been thousands of "tokens" and the vast majority of them don't even share a tiny bit of similarity with the hundreds of complementary currencies that were created during the great depression. Those complementary currencies were specifically designed to avoid recessions and poverty within regional communities.
A Chinese defi site just got hacked for $600m today.
Today's USD trading volume was $193M while USDT was $5.2B. USD trading volume is a rounding error against USDT volume.
100M USD is more than 1/2 of the entire day's trading volume of BTC against real dollars.
My understanding is the CFTC doesn't take Tethers.
There is a lot more volume than you probably know about it.
> 100M USD is more than 1/2 of the entire day's trading volume of BTC against real dollars.
This statement is false and what I'm reacting to. There is literally no way to measure it. For example, I could take USD, sell it for Mexican Peso's and buy BTC because there is a arb opportunity where I get more peso's for my USD and BTC happens to be less expensive on this Mexican exchange that I'm dealing with. In that case, you don't see the USD volume at all.
The point I was making is that the vast majority of the liquidity is synthetic, not real USD trading. Both the regulators imposing fines and the electric companies only accept bona fide fiat.
I think there's a big shortage of real liquidity.
> This statement is false and what I'm reacting to. There is literally no way to measure it. For example, I could take USD, sell it for Mexican Peso's and buy BTC because there is a arb opportunity where I get more peso's for my USD and BTC happens to be less expensive on this Mexican exchange that I'm dealing with. In that case, you don't see the USD volume at all.
There is, because there's only USD:BTC, equivalents make it look worse.
Re: MXN that's MXN volume. USD:MXN and MXN:BTC. Not the point I'm making. And I do believe Coinlib captures all major foreign currency trading pairs, the JPY and EUR are both included. If you have other data I'm happy to look it over but from where I'm sitting...
I'm not claiming its 60% of all fiat liquidity just all USD.
When you say "absolutely legit" what exactly do you mean? That they clearly have anti-money laundering programs in place?
Or do you mean they are "absolutely legit" in the sense that they created a foreign entity that shouldn't be held to U.S. anti-money laundering laws?
They are absolutely guilty of what they are accused of here - they allowed US persons to trade in violation of US futures laws. They were trying to play the "we block US IPs, therefore we block US persons" card, which is laughable enough that they were never going to fool anyone serious.
Gox was a ridiculously amateurish affair run by a french pimply php hacker and manga lover teenager.
Bitmex is in a slightly different league.
But if they have $1B-2B worth of trade volume daily and they charge a 0.1% fee per trade, wouldn't that mean they're generating $1M daily in revenue? From that, wouldn't it be reasonable to assume they have profits accumulated to pay the fine?
It's not. The parent commentis talking about the liqudity of the market as a whole (ie. what would happen if 100M worth of bitcoin was sold at once)
>An exchange with 0 fiat on/offramps and no cash in the bank could still trade billions of USD worth of cryptocurrencies a day.
It would presumably have millions of USD worth of crypto in their wallet (since they charge trading fees). They can take the crypto and dump it into the very liquid bitcoin market to turn it into cash.
Is it? What are your sources?
I also very much doubt that selling USD 100M worth of crypto over the course of a couple of months will have any sizable effects on the markets.