[HN Gopher] The Bit Short: Inside Crypto's Doomsday Machine
___________________________________________________________________
The Bit Short: Inside Crypto's Doomsday Machine
Author : tim333
Score : 241 points
Date : 2021-01-15 08:35 UTC (14 hours ago)
(HTM) web link (crypto-anonymous-2021.medium.com)
(TXT) w3m dump (crypto-anonymous-2021.medium.com)
| Majromax wrote:
| > Now fast-forward one year. In March of 2020, I bought a large
| amount of Bitcoin. At the time, I saw a market dislocation and
| the likelihood of significant dollar inflation due to the US
| Government's likely response to the unfolding pandemic.
|
| I'm frustrated by this statement. If you predict inflation in the
| USD that is not currently priced into the market, then there are
| already plenty of _conventional_ ways to make money on the
| prediction.
|
| For example, go long on real-return (inflation-adjusted) bonds,
| and go short on nominal bonds. Or purchase call options on
| commodities (preferably ones like food or energy that would be
| directly part of the predicted inflation). Or just invest in
| less-speculative equities like utilities or transport.
|
| There's no need to structure investments to _also_ bring in the
| entire unhinged, speculative nature of cryptocurrencies just to
| place a bet on inflation. Bitcoin (vs the USD) has had tenfold
| increases (year-over-year) and larger than 50% drops, all against
| a USD that has not in fact experienced abrupt price-level swings
| (expressed in terms of consumer goods).
| optimiz3 wrote:
| My favorite way to short the dollar is to use fixed-rate debt
| to buy productive assets (real-estate, etc.). Double whammy.
| Assets in general should keep pace with inflation and fixed-
| rate debt gets inflated away.
| throwawaypali wrote:
| Does this actually work if you're being paid a salary in USD
| that wont likely rise with inflation?
| JohnJamesRambo wrote:
| >On January 9th, 2021, I liquidated my crypto position for USD.
|
| Crypto Anonymous, you sold extremely early, I'm sorry.
|
| https://digitalik.net/btc/
| mckirk wrote:
| Thanks for this article, I've gotten out of crypto for the moment
| for the exact same reason.
|
| The probability that something fishy is going on which would
| trigger a panic-sale when it's discovered is too high until we
| know more about the court case against Tether, imho.
|
| Though all the people insisting on calling this FUD do make me
| wonder whether I'm seeing things or this is an "emperor's new
| clothes" situation.
| christiansakai wrote:
| I wonder what will happen to DeFi and the entire Ethereum
| network, because Tether is largely used in DeFi transactions.
| dannyw wrote:
| This is nothing more than FUD designed to benefit a short
| position. The reason why exchanges like Binance and Bybit have
| their inflows from Tether... is because (as the author explains)
| they only take Tether!
|
| Why do they only take Tether? Because US banking is incredibly
| expensive and a regulatory nightmare.
|
| Why do people use Tether exchanges, over Coinbase? Not just
| because of leverage, but also because many do not AML/KYC,
| especially if you only deal with crypto. A LOT of people in the
| crypto community don't like to pay taxes, and we've known this
| from day one.
|
| Many crypto enthusiasts also boycott "regulated" exchanges like
| Coinbase, because they shut down accounts if you use it to gamble
| on a sportsbook, or whatever their surveillance doesn't like.
|
| So it should not be a surprise that many people in the crypto
| community, me being one of them, actually prefer to use Tether
| and Tether exchanges.
| ur-whale wrote:
| The "all the banks in <random caribeean island> only hold a
| tiny fraction of the cash Tether claims to own" argument is a
| fairly solid one.
|
| Care to deconstruct it?
| doggosphere wrote:
| How about Tether's refusal to do an open audit of its books?
|
| Or when they had some funds seized and loaned funds between
| Bitfinex and Tether, breaking the 1:1 peg?
| anfogoat wrote:
| > Why do people use Tether exchanges, over Coinbase? Not just
| because of leverage, but also because many do not AML/KYC,
| especially if you only deal with crypto. A LOT of people in the
| crypto community don't like to pay taxes, and we've known this
| from day one.
|
| I don't know if evading taxes is the main reason but it is
| definitely not the only one. Going through KYC is an
| embarrassing and demeaning experience, unless you like prancing
| in front of a camera.
|
| It is also close to equivalent to just plastering your picture
| and ID all over the public Internet as that is exactly where
| they'll end up when your exchange of choice is eventually
| broken into.
|
| Just another gift from the anointed ones.
| PaulAJ wrote:
| So if I understand this correctly, you can go to one of these
| pyramid scheme exchanges, tank up on highly leveraged tethers,
| and then go sell them on Kraken. Do this often enough and you
| will drain the resources of the pyramid scheme, causing it to
| collapse. So you make a profit and provide a social good all on
| one smooth move.
|
| Have I got that right?
| Erlich_Bachman wrote:
| How exactly do you plan to make a profit in this scenario?
| PaulAJ wrote:
| Well, if I understand the OP correctly, it sounds like
| tethers are basically being printed and sold cheap in return
| for real money, so lots of people think they have a profit
| because they have more tethers than the dollars they started
| with. So if you can get in to that situation and then quickly
| sell the tethers before the whole thing collapses then you
| should be in the money.
|
| OTOH if that isn't possible then the allegation that this
| whole thing is a pyramid scheme fails.
| Erlich_Bachman wrote:
| > sold cheap
|
| Where? Find a place that consistently sells tether cheap.
| If anything, the lack of this place is a sign of poor
| research base for the original article.
|
| They mention that some exchanges give tether "prises"
| sometimes, on some occasions, to a select number of users.
| I don't see how that is so bad, and neither do I see how
| you could consistently profit from that. Those incentives
| are likely to be once per user, or once per referred
| customer, etc. There are likely protections in the form of
| "you have to trade for this much in order to realize the
| total prise amount". I don't see how this is any different
| from bonuses that many online casinos give out, and no one
| takes that as a sign that a given casino that does this is
| insolvent.
| azeirah wrote:
| Good point, for those tethers to have that big an
| influence on the market, they need to get into the hands
| of real people buying tether with real money somehow.
|
| According to the article it looks like this
|
| 1. Person buys btc with usd on coinbase or equivalent
|
| 2. Moves btc to shady exchange with tether promotions
|
| Those promotions need to be _huge_ in for those newly
| minted tethers to get into the hands of real people
| trading.
|
| I looked at the site with promotions linked by the
| article, and the front page features a couple of missions
| that give 50 USDT total for doing things like "join our
| telegram group", "set up a notification on our app".
| leppr wrote:
| You can do this indeed but that'll cost you money as USDT is
| valued slightly below 1 USD, and you will incur slippage the
| larger your amount is. The best way to withdraw large amounts
| of Tether's to USD is through their platform itself, for a
| fixed ~$1000 fee.
| ForHackernews wrote:
| Is there any way to "short" bitcoin? I don't really trust any of
| the fly-by-night cryptocurrency exchanges, but is there a real
| derivatives market somewhere?
| brobinson wrote:
| My broker has allowed trading their futures since 2017:
| https://www.interactivebrokers.com/en/index.php?f=25379
| genericacct wrote:
| The Chicago Mercantile Exchange:
| https://www.cmegroup.com/trading/equity-index/us-index/bitco...
| garmaine wrote:
| LedgerX options.
| doggosphere wrote:
| Short on Coinbase Pro, or Kraken
| DSingularity wrote:
| You can short on pro?
| doggosphere wrote:
| My bad, you can go margin but not short.
|
| Kraken can short though.
| ForHackernews wrote:
| Is Kraken SEC regulated?
| doggosphere wrote:
| Assume so, based in US, available for 48 states.
|
| https://support.kraken.com/hc/en-
| us/articles/360031282351-Is...
| gwbas1c wrote:
| See if someone will loan you Bitcoin, paid back in Bitcoin.
| Then you sell the Bitcoin, wait for the price to go down, and
| buy some to pay back the loan.
| dylkil wrote:
| >But during the same period, total issued Tethers increased by
| almost $5.4 billion -- going from $4.6B to $10B
|
| >The implication was shocking: there weren't nearly enough
| dollars in all the domestic banks in the Bahamas to >back the
| Tethers that were floating around in the crypto market.
|
| Doesn't match up with whats shown here[1], Bahamas banks are
| holding 110bn in customer deposits.
|
| [1]https://stats.bis.org/statx/srs/tseries/LBS_D_PUB/Q:S:L:A:US..
| .
| EliRivers wrote:
| Upvoted for coming armed with an actual fact related to the
| article, disagreeing with the author's premise based on some
| actual evidence. Might be right, might be wrong, but it's
| something other than just more opinion. Wish I could upvote
| more than once.
| piva00 wrote:
| I'd like to point out for you to refrain commenting in this
| style, it reeks of reddit-ism. Also, another comment [1]
| clarified why the original commenter's analysis might be
| flawed.
|
| [1] https://news.ycombinator.com/item?id=25789949
| acoustic wrote:
| Those numbers are for all bank offices located in the Bahamas,
| most of which are foreign bank branches. The numbers in the row
| "By type of bank - Domestic banks" [1] appear consistent with
| the article.
|
| [1]
| https://stats.bis.org/statx/srs/table/A5?c=BS&m=S&p=20202&o=...
| [deleted]
| cryptoanonymous wrote:
| Author here; this is the correct answer. The larger number
| refers to all banks. Deltec is known to be a domestic bank,
| so we can use the smaller number to get tighter uncertainty
| bounds on its currency flows.
| csomar wrote:
| I'd be very careful to take advice from this guy.
|
| 1. He's definitively bad at investing. He doesn't have an
| investment strategy, and probably never heard of portfolio re-
| balancing.
|
| 2. He got in lucky and made some good returns. Now he thinks he
| is a genius because of that, and as a result can predict the next
| market move.
|
| 3. He didn't do good market research. For example, most of the
| volume in USDT is faked by the exchanges. Coinbase, GBTC, and CME
| each one of these is are probably bigger than USDT in size and
| volume. Unregulated derivatives are an alternative to USDT for
| more sophisticated traders and they are also huge.
|
| 4.USDT is now also used outside of the crypto-market. Not because
| it is great, but because of the practicality. This offshore
| unregulated market of USD is worth in the $ trillions. USDT
| having a market cap of a dozen billions is really peanuts. That
| being said, I'd be more interested in an investigative journalism
| on how Tether has succeeded in moving such amounts of money while
| avoiding all the KYC bonanza a regular joe (or business) has to
| go through.
| mathgenius wrote:
| > For example, most of the volume in USDT is faked by the
| exchanges.
|
| I agree this volume cannot be trusted. Much like the asian
| volume in 2017 turned out to be mostly fake. I find it hard to
| believe that Binance got so big so fast.
| cryptoanonymous wrote:
| Hi, I'm the author.
|
| > He doesn't have an investment strategy, and probably never
| heard of portfolio re-balancing.
|
| This is perhaps a reasonable inference to draw based only on
| the information in the article, but it is incorrect. Without
| going into too much detail, the missing context is that I have
| effective long exposure to certain markets through my ownership
| of founder stock in a startup that operates in those markets.
| And while I place a high expectation value on that stock, it's
| also illiquid and can't be easily hedged. For reasons I didn't
| go into in the piece, I believed Bitcoin would also serve as a
| partial hedge for that market exposure, which justified a
| higher allocation than one might naively expect.
|
| (I'll also observe that portfolio rebalancing isn't the right
| decision in all situations. Startup founders rationally
| concentrate their net worths into their companies, which is
| justified by their overwhelming informational advantage.)
|
| > He got in lucky and made some good returns. Now he thinks he
| is a genius because of that, and as a result can predict the
| next market move.
|
| I agree with the first sentence. I would strongly dispute the
| second. It's precisely because I _don 't_ think I can predict
| what will happen next that I've zeroed my exposure to this
| entire ecosystem.
|
| > He didn't do good market research. For example, most of the
| volume in USDT is faked by the exchanges. Coinbase, GBTC, and
| CME each one of these is are probably bigger than USDT in size
| and volume. Unregulated derivatives are an alternative to USDT
| for more sophisticated traders and they are also huge.
|
| I'm aware of these claims -- there are rumors of wash trading
| by the big unbanked exchanges that I consider quite credible. I
| didn't include those in the piece because I wasn't able to find
| confirmatory evidence in the time I'd allocated to research it.
| I would be _extremely_ interested if you could share any
| evidence you may have collected about these claims.
| DSingularity wrote:
| I like your style. Off topic question: why are you so
| absolute in your investment decisions? Can't predict what
| happens so you totally exit? Thought you had figured out some
| inflation dynamics so you all-in BTC?
|
| I've lately decided I need to be more moderate in my
| investing to avoid quagmires of conflicted indecision.
| ikeboy wrote:
| >What's more, the supposed USD inputs (e.g., 401,431,056 USD in
| the top left transaction) are giving perfectly round Tether
| outputs (e.g., 400,000,000 USDT in the same transaction) in every
| block -- regardless of the prevailing exchange rate or anything
| else.
|
| You're misunderstanding. There's no USD input. They're simply
| looking at the exchange value of USDT and converting it into
| dollars. Their data source says that USDC = $1 USD, so USDC
| minting is in round numbers.
| wslh wrote:
| A complementary paper from 2018 investigating how Tether (USDT)
| influenced Bitcoin and other cryptocurrency prices during the
| 2017 boom:
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066
| fortran77 wrote:
| > _There's a scene in The Big Short where Mike Baum meets a
| stripper who's taken out mortgages on five properties. The
| stripper doesn't think there's anything wrong with doing that,
| because her mortgage broker told her she could always refinance
| her mortgages when the prices of her houses went up. And housing
| prices would always go up._
|
| Of course, our Government ended up bailing out people like the
| "stripper" who would complain that they "lost their homes."
|
| Let's hope the new administration doesn't bail out crypto specu-
| vestors.
| cryptoanonymous wrote:
| Hi, I'm the author. Using a throwaway for all the obvious
| reasons.
|
| I'll try to dive into this thread over the next few hours to
| answer any questions folks may have about this. Please feel free
| to ask.
| dgellow wrote:
| My personal prediction (shasum256): fd559af88adde4082122c16e6b7
| 7356a90d2a367600f43acbdd6615c3dc4cc28
| ric2b wrote:
| Wow, that's a bold prediction. Not sure I agree though.
| gokhan wrote:
| Seems like the article is flagged as hell. That's disgusting if
| you're flagging because you're long BTC.
| Animats wrote:
| Today, January 15th is the court-ordered disclosure date for
| Tether. So soon we should know how big the Tether bubble is.
|
| Clearly, it's time to get out of USDT. There's no upside
| potential, and there's a big downside potential.
| soneca wrote:
| But there will be no news for some time until the attorney
| general's office review all the delivered documents right? Or
| should there be relevant news in the next few days already?
| dgellow wrote:
| We don't know yet
| thorwasdfasdf wrote:
| Ok, for everyone here worried about the value of their BTC,
| please consider this. At the end of the day, all that really
| matters is what percentage of BTC bought was from HODLERS. If 80%
| of all BTC bought was from HODLERS, it means the market cap of
| BTC can NOT drop anymore than 20%, at the very maximum drop, and
| since the number of BTC coins in existance is constant, it means
| the drop in value of BTC is at MOST 20%.
|
| The last bitcoin bubble was mostly bought up by speculators who
| eventually sell very quickly, which what allowed the price drop
| to occur so much because most BTC holders were not hodlers and
| most were just speculators.
|
| You can sidestep all the concerns about Tether and USDT and
| conversion, etc. Just figure out what percentage of BTC is bought
| by HODLERS or get some kind of estimate, and that will tell you
| your downside risk.
|
| I for one, am long BTC, because I know this time around a much
| higher percentage of BTC was bought by HODLRs and there's a whole
| lot more coming in 2021.
| owenversteeg wrote:
| Sorry, but this comment is wrong on every level.
|
| First: that is very much not how prices work. If everyone else
| stayed on the sidelines and did not sell or buy any Bitcoin,
| the price could be set by two people - one buyer and one
| seller.
|
| Second: you have no way to know who bought BTC. You can get a
| guess from various media, but you can never truly know. Large
| amounts of Bitcoin frequently change hands in entirely private
| transactions. Lots of volume is on shady exchanges, and of the
| volume on legitimate exchanges - what's to say that those are
| all "HODLERS"?
|
| I have no idea what the price of Bitcoin will be in the future,
| but your comment is definitely not correct - downside risk is
| certainly not limited by the type of people who bought in.
| thorwasdfasdf wrote:
| What you're saying is only partially correct.
|
| Imagine if everyone stayed on the sidelines and did not sell
| any bitcoin (the HODLRS), as the number of sellers continues
| to diminish more and more and more, this puts upward pressure
| on bitcoin as the percentage of buyers outnumber the selllers
| more and more. It's like trying to buy a house in the bay
| area. there's very few people who can afford to buy a bay
| area house but there's even fewer houses for sale and so the
| prices keep going up and up and up.
|
| What matters is the ratio of buyers to sellers. and once you
| run out of sellers, the price starts going up again.
| owenversteeg wrote:
| No, what I said was entirely correct. I did not say "if
| everyone did not sell any Bitcoin", I said "if everyone did
| not sell or buy any Bitcoin".
|
| I'd also like to point out that you do not need to own
| Bitcoin to sell Bitcoin. If you believe the price of
| Bitcoin will be lower in the future, you can borrow Bitcoin
| and sell it now, also know as "selling short", or
| "shorting". You can, of course, also borrow Bitcoin and not
| sell it.
|
| I would also like to mention - if you truly believe that
| you can forecast future prices based on the psychology of
| recent buyers, you can make lots of money. There are a
| number of regulated markets where the buyers (or at least a
| decent portion of them) -are- known, so if you feel that
| you can do this, be my guest and become the next Warren
| Buffett.
|
| Finally, Bitcoin is entirely unlike Bay Area property. You
| cannot generate Bay Area property out of thin air using
| computers, there are no schemes being investigated for
| printing billions of fake dollars to buy up Bay Area
| property, and it is far less liquid than Bitcoin. The price
| of Bay Area property also does not double in a month.
| dpiers wrote:
| There are issues with almost every assertion and conclusion in
| this post, but I will limit my critique to the idea that the
| downward movement of BTC is capped at the % of BTC people are
| willing to sell. It's simply not true. The spot price of BTC is
| a function of what people are currently willing to pay and what
| people are willing to accept. If the primary source of demand
| and liquidity in the BTC trading markets collapses - which this
| article argues is Tether - the price could rapidly collapse
| even on small trading volumes.
|
| If you add in the fact that these exchanges allow trading on
| margin, you could have a situation where people are forced to
| liquidate their holdings regardless of the current price. It's
| the perfect storm for a flash crash.
| thorwasdfasdf wrote:
| Ok, you make a good point about the possibility of collapsing
| demand. but, even after tether collapses, as long as bitcoin
| has sufficient buying demand, then there's no problem.
|
| (assuming there's a fixed set of HODLRS). As bitcoin sells
| off, the number of sellers decreases, correct?
|
| Assume on a given day, 10K buyers and 10k sellers.
|
| As the number of sellers decreases, the ratio of buyers to
| sellers increases, correct?
|
| maybe 10K buyers, 5k sellers, then 10k buyers, 1k sellers,
| then 10kbuyers 500 sellers, etc. this continues to put
| increasing upward pressure on BTC.
|
| The above example would still be true even if bitcoin buying
| demand went from 10k to 2k. (collapse of tether BTC demand)
|
| All that matters is that there's a certain minimum number of
| people willing to buy bitcoin for a given time period and the
| HODLRs who won't sell there BTC. as long as those two
| conditions are met, the number of buyers will soon outnumber
| sellers. it's just math in the end.
|
| how can this be wrong?
| owenversteeg wrote:
| Ah, I see. Your problem is a fundamental lack of
| understanding of financial markets. I'd recommend
| Investopedia as an easy way to get into understanding
| things.
|
| First of all, in financial markets there is almost never a
| "fixed number" of buyers for anything, and especially not
| for something like Bitcoin. If you want to see something
| with (as good as you can get) to a fixed number of buyers,
| look at uranium. It's almost entirely used as fuel for
| nuclear reactors, which take years to build and to be shut
| down, so not only is the demand very stable, the future
| demand (for the next few years) can be pretty easily
| predicted. You'll be surprised to see that yes, sharp price
| drops can occur, even in such conditions.
|
| Next, of course, the market of sellers for Bitcoin, "HODLR"
| or not, certainly does not behave how you imagine. Some
| sellers are forced to exit large Bitcoin positions every
| day, with reasons ranging from tax liabilities not payable
| in Bitcoin, businesses that accept Bitcoin that do not wish
| to maintain a Bitcoin position, divorces, governments that
| seize Bitcoin, etc etc. Then of course you have people
| exiting Bitcoin because they're people and life happens:
| their partner told them Bitcoin was stupid, or their
| government added rules to holding Bitcoin that scare them,
| or they read that a shady entity was printing billions of
| fake dollars to buy Bitcoin, or they bought in years ago
| and wow, they can buy a car with the profit! or they bought
| in yesterday and the drop in price spooked them.
|
| None of this is to say anything about the price of Bitcoin
| or if you should buy Bitcoin - I'm just saying that your
| _reasons_ are deeply flawed.
| ceedan wrote:
| Bitcoin & the crypto world has always felt like a cult to me.
| TacticalCoder wrote:
| Great article "cryptoanonymous" (welcome to HN btw): really lots
| of information in there but...
|
| Aren't you writing this because now that you could get out and
| got the (real) USD on your bank account, you actually want the
| price to crash very badly to buy much more coins?
|
| If the price were to crash back to, say, 3K USD, wouldn't you be
| tempted to put a few millions back in and ride to 15K and more
| again?
| robinhoodexe wrote:
| On kraken, one can short Tether against the US Dollar. Since
| Tether is usually pretty close to $1, I wonder if it's worth it
| to open a short in case it's all falling apart. I mean, in case
| of a crash the price of tether would most certainly fall, right?
| ric2b wrote:
| That's a good point, there's almost no downside to shorting
| Tether besides the interest, since it would never go much above
| USD.
|
| Given that the interest must be wild, no?
| kneel wrote:
| Standard FUD.
|
| Anonymous blogs with heavy dialogue to reach a conclusion? Where
| is the evidence? Oh it's just a narrative.
|
| Tether is used heavily in Asia. The fact that they cannot audit
| Chinese inflows is to be expected.
|
| This reminds me of all the FUD around Tesla in 2018. Just loading
| up the spring even more.
| lurker619 wrote:
| So everybody's sure it's gonna drop, and everyone's gonna buy the
| dip at $25k? Get ready to FOMO back in at $50k...
| yeneek wrote:
| Crypto today is pretty wild. Most of the crypto currencies are
| trash with good intentions or straightforward scam. On the other
| hand, the flaws make it a great opportunity for those who dare.
| mattxvrsmith wrote:
| Some people want Bitcoin to fail so much that they'll believe in
| literal conspiracy theories if it supports their priors. A
| legitimate market for hard money is impossible for these people
| to believe, it must be fraud.
| gfrangakis wrote:
| On the other hand, some people want Bitcoin to succeed so much
| - or rather want the price of Bitcoin to succeed because they
| speculate on it - that they'll engineer some fraudulent schemes
| in a relatively unregulated market to support their bank
| accounts.
|
| I think it's likely a bit of both, but you can't deny there is
| something unsavory going on with Tether and these offshore
| exchanges
| yawniek wrote:
| inaccessible. anyone got a cached version?
| yawniek wrote:
| https://archive.is/aEiLp
| T-A wrote:
| Not exactly news:
|
| https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3195066
| asimilator wrote:
| > Most of my wealth was exposed in the form of Bitcoin
|
| Yikes.
| tim333 wrote:
| Kind of wish I'd done that with hindsight.
| ur-whale wrote:
| He didn't say most of his wealth was in the form of Bitcoin
| when he entered the trade.
| lixtra wrote:
| If they put just 30% of his wealth in BTC, after increasing 6x
| it would be most of his largely increased wealth.
| H8crilA wrote:
| > For the rest of 2020, my inflationary thesis looked right
|
| Just to make it clear: there's absolutely no broad inflation
| almost everywhere in the world, certainly not in the United
| States. It may still come, but inflation is not why Bitcoin is on
| such a tear. Look at CPI or PPI of you don't believe me.
|
| Although this does remind me of the Green Lumber Trader story
| from Taleb. Congrats on the trade!
| alcio wrote:
| inflation in consumer goods might not be high, but financial
| assets have clearly inflated: a quick look at gold denominated
| SPY shows it.
| H8crilA wrote:
| Why not TSLA/gold? That proves there is inflation! Or I know,
| BTC/USD, that clearly proves there's lots inflation and look
| at that bitcoin price is perfectly correlated with it!
|
| (I am only half-joking here, the point is that broad
| inflation is much much more important than some bull market
| in this or that asset class)
|
| On a more serious note a lot of commodities are looking
| really bullish, including some foodstuffs, and that's
| obviously not good news ...
| nivenkos wrote:
| Real estate inflation is the real driver behind practical
| inflation all over the world though.
|
| Real estate bubble -> High deposits for house purchases ->
| High rents -> Effective inflation
|
| Most governments don't include real estate (or even rent
| payments) in their inflation calculations to keep it
| artificially low.
| H8crilA wrote:
| > _Most governments don 't include real estate (or even
| rent payments) in their inflation calculations to keep it
| artificially low._
|
| Housing is > 40% of the US CPI:
|
| https://www.bls.gov/cpi/tables/relative-
| importance/2019.pdf
| ur-whale wrote:
| >there's absolutely no broad inflation
|
| If your measuring stick is fiat, then sure there isn't any
| inflation.
|
| However, you're using a measuring stick whose length isn't
| constant.
|
| If you use Gold as your measuring stick, then things change.
|
| If you user Bitcoin as your measuring stick, things change
| dramatically.
|
| If you use real estate - can you still say there is no
| inflation ?
| H8crilA wrote:
| You confused the numerator with the denominator. To get
| inflation we put a basket of things in the numerator, and
| currency in the denominator, then compute annualized % change
| in the said number.
|
| Now if you swap (in the denominator) the USD for either gold
| or bitcoin you'll conclude we've been in a severe deflation
| in 2020.
|
| (I do not agree with the above, I am just fixing basic
| mistakes in your reasoning)
|
| If you would like your basket of things (the numerator) to
| consist solely of Bitcoin or gold then go ahead but you may
| as well put baseball collectible cards there, as it doesn't
| relate to people's consumption needs.
| keypusher wrote:
| Inflation is already here, it's just that the wealth hasn't
| "trickled down" into the middle/lower class so consumer goods
| haven't spiked yet. It will seep out eventually, but right now
| it's mostly still sitting in financial markets and corporate
| accounts. The trillions (yes, trillions) of dollars that have
| been pumped into the economy via QE and other fed programs
| don't just go away.
| H8crilA wrote:
| Where's the inflation in the Eurozone? They're way ahead of
| the US. Or even better, Japan, "printing" like a madman since
| the 90s, uhm where is that inflation you mentioned?
|
| But yes, they don't go away, such things actually cause
| _deflation_ because they prevent recession-cleansing of
| inefficient organizations, keep property prices high, cripple
| people and organizations with debt, ...
| cryptoanonymous wrote:
| Author here. I agree that past inflation has been minimal; what
| I was referring to was the expectation of _future_ inflation
| after the pandemic has materially ended. It would have been
| rational (or so my thinking went at the time) for investors to
| buy into Bitcoin in anticipation of this shift.
| H8crilA wrote:
| There are explicit contracts for such things (based on TIPS,
| so it's not some small shady market). Inflation expectations
| are still low, though materially higher than even in May:
|
| https://fred.stlouisfed.org/series/T5YIFR
|
| In particular they do not go outside of the 3.0% range where
| we've been stuck for decades (the US CPI itself hasn't
| printed anything above 2.5% year-over-year since the 90s).
|
| Inflation will come one day (one year? one decade?), but sure
| as hell isn't here yet.
| comboy wrote:
| I don't get it. tether sucks. If you hold tether it may turn into
| air. But your bitcoin is still bitcoin. Also, when tether is
| going down wouldn't you want to sell it thus creating pressure in
| btc/tether market and value of of tether/btc going up? It's
| always been clear to me that USD/BTC and USDT/BTC are two
| different markets. USDT is just another cryptocurrency. Many of
| them were scams and disappeared and many more will. Same with
| exchanges. It seems like describing somebody maliciously selling
| fake or paper gold and concluding that gold is bad.
| dannyw wrote:
| Tether is lovely for many people, because there are many entry
| points without AML/KYC.
|
| This allows you to trade while minimising your exposure to the
| taxman, something that many people in crypto value.
|
| Of course, there is the calculated risk of Tether being seized,
| but that's part of doing business.
|
| Bitcoin itself was born out of active rebellion with the
| existing financial system, and depending on who you ask,
| rebellion of the state itself.
|
| Go to a bitcoin meetup that's a few drinks in, and ask how many
| people pay taxes ;)
| TomSwirly wrote:
| If you don't pay taxes, you're cheating the rest of us.
|
| We in the west have extremely luxurious societies but this
| isn't cheap. When a few rich people cheat on their taxes, a
| large number of poor people suffer.
|
| Not paying your taxes is theft from the rest of us.
| comboy wrote:
| Please pay taxes. Change the system instead of giving it
| reasons to put you into jail. I don't think very highly of
| people who brag about not paying taxes which they are due.
| ur-whale wrote:
| Please do your darndest to _legally_ pay the least amount
| taxes possible and find every opportunity to change the
| system so taxes are lowered: you tax money will, in the
| vast majority of the cases, be _wasted_
|
| Stop feeding the beast.
|
| Starve it every opportunity you have.
| andyjohnson0 wrote:
| How about paying your taxes and "doing your darndest" to
| change the system so that tax revenue is spent wisely for
| the benefit of the whole of your society?
| ur-whale wrote:
| I prefer not to play games that I know are rigged against
| me.
| spurdoman77 wrote:
| Both opposites of this tax debate spectrum are flawed.
| Most important thing is to enjoy life. If you focus too
| much on avoiding taxes, or pay them too much, you are
| losing. Pay what you pay and only spend resources on tax
| planning if it makes sense.
| piva00 wrote:
| I prefer to support Swedish's society and just pay my due
| taxes, thank you. The beast here is responsible for a lot
| of the quality of life we enjoy, public services
| included.
| azeirah wrote:
| Very much the same here, I've been paying taxes on crypto
| for years now and I'm in the Netherlands.
| ur-whale wrote:
| I respect your choice.
|
| But please take into account that when you were born and
| raised in a socialist environment and properly
| brainwashed into believing it's the best thing on earth,
| it's kind of hard to imagine that there could be
| something better.
|
| I was born and raised in a society similar to yours, and
| until I crawled out from under my rock to see the world,
| I held beliefs very similar to yours.
|
| You need to get out of the box to understand its shape.
|
| If you have (gotten out of the box) and then decided that
| the inside of that box is what you want & need, then I am
| a 100% with you.
|
| In my case, living in a socialist society like Sweden at
| this stage in my life would be a living hell.
| atemerev wrote:
| "depending on who you ask, rebellion of the state itself" --
| as if it was a bad thing!
| mrDmrTmrJ wrote:
| Environmental protection - check Public education - check
| Research spending - check Social security - check NASA -
| check
|
| There's a lot I like about the state! Yes, I admit it has
| many problems and frustrations.
|
| But given we moved *away from the gold-standard, what is
| different now that makes it wise to accept a fixed money
| supply?
| pjc50 wrote:
| Like talking about storming the capitol, plotting to evade
| taxes is all fun and games and may even work for years, until
| it goes "too far" and everyone gets arrested.
| notahacker wrote:
| Bitcoin is supposed to be a store of value, is it not? If most
| of this 'value' stored turns out not to be real, the
| implications for the price of Bitcoin are not good. If the
| value of USDT falls to nothing then USDT holders trying
| desperately to offload aren't going to create much demand for
| BTC, compared with what was being created when new USDT
| supposedly worth a dollar entered the system every day. And if
| the price of BTC falls, it isn't a very good store of value any
| more so people who have traded legitimately earned wealth for
| BTC have an even stronger incentive to sell. If 70% of gold's
| daily trading volume was down to orders based on fake gold
| securities, it would also be a very bad time to hold gold (but
| at least if you took a big enough loss you'd find someone that
| wanted it for reasons other than their belief about its ability
| to hold value)
|
| It amazes me how Bitcoiners scream 'hyperinflation' every time
| the Fed prints more money (with the goal of increasing prices
| by 2% annually) and yet struggle to understand the relationship
| between Tether printing dollar-denominated crypto-purchasing
| vouchers (with the goal of increasing crypto prices by as much
| as possible) and the supposed dollar price of BTC
| leppr wrote:
| Did you read the article? The author doesn't concluse that
| Bitcoin in itself is bad, they simply realized by themselves
| that most of the dollar value increase was caused by Tether,
| and they fear Tether eventually going down might be a black
| swan event causing prices to tumble. But 1 BTC = 1 BTC, yes.
| comboy wrote:
| Many value increases are irrational, whatever that means, I
| understand how it can be used to pump the price. I just don't
| understand how it takes bitcoin with it when collapsing.
| quickthrower2 wrote:
| If tether is pumping BTC then it'll stop pumping BTC when
| it's taken away. Weak hands will fold and then there will
| be a crash
| comboy wrote:
| OK, yes, that's a fair point. But it's not clear to me
| that pumping being taken away would be a bigger change
| than people trying to get out of USDT and buying BTC.
|
| Also we've been there (mtgox's willy etc). I don't think
| bitcoin will be much less volatile any time soon.
| https://www.youtube.com/watch?v=XbZ8zDpX2Mg
| TomSwirly wrote:
| Bitcoin has no fundamental/breakup value and no market
| maker.
|
| In the same way that there's no obvious ceiling to its
| value, if a lot of people try to get out of it at once,
| there's no obvious floor either.
| garmaine wrote:
| How would you sell USDT? You'd buy on a BTC/USDT market.
| These markets aren't unified--there are different markets
| for tether and backed USD. Who would be counterparty to a
| tether exchange?
|
| Thise specific USDT pairings would crash. If they wanted
| USD (as they presumably do), they'd then crash the other
| stable coin or backed pairings.
| leppr wrote:
| People are not buying BTC to get out of USDT, they're
| buying other stablecoins and tokens pegged to real world
| assets. The last week has seen a surge in the price of
| those tokens compared to USDT. I've made good money
| arbitraging the bouts of panic.
| dragonwriter wrote:
| > But it's not clear to me that pumping being taken away
| would be a bigger change than people trying to get out of
| USDT and buying BTC
|
| People trying to get out of USDT into BTC because the
| USDT:USD parity assumption collapses will boost BTC:USDT
| prices, but probably not enough to avoid dropping
| BTC:USD, because it would be less than the USDT:USD drop,
| is the idea.
| yeneek wrote:
| Tether market cap is 24bil, Bitcoin market cap is 714bil.
| Its just 3%. I think that Tether isn't inflating BTC that
| much. The institutions that buy BTC like PayPal, Square,
| JPMorgan have much bigger effect on Bitcoin than Tether.
| ur-whale wrote:
| This is addressed in the article.
|
| Basically the market cap of BTC is not relevant here, but
| rather the daily volume.
| yeneek wrote:
| JackFr Fair point. Thank you.
|
| Well, it will be an interesting week for sure.
| Bellamy wrote:
| And from the 3% of tether, probably 74% is actually been
| backed.
| JackFr wrote:
| That's not quite how it's gonna work. It doesn't matter
| what the Tether market cap is. The BTC market cap is
| coins x price. If Tethers represent 70% of inflow and
| they disappear, price is gonna come down. Likely a lot
| more than 3%.
| maxbond wrote:
| Tether will almost certainly collapse, and then you'll have
| a lot of bitcoin chasing very few dollars. There is likely
| to be a stampede for dollars, which becomes a vicious cycle
| deflating the price of Bitcoin - the liquidity is consumed
| (Bitfinex is printing Tether because there aren't enough
| dollars to go around at unbanked exchanges, afterall) at
| the same time the downward volatility dramatically
| increases the perception of Bitcoin's risk; market makers
| start heading for the door; the cost of liquidity becomes
| massive.
|
| There's some magic number for the price of Bitcoin, and
| it's hard to say what it is, where the miners start to lose
| money. If it stays too cheap for too long, it puts pressure
| on the miners to either switch to other coins or get out of
| the game entirely.
|
| Things could get very bad, very quick. The only reason I
| don't have a bearish position in Bitcoin is that I can't
| find a counterparty that a.) I can afford at my account
| size (eg not CME) and b.) that I'm confident will still be
| around after this crash.
|
| Stay cautious. Happy trading.
| leppr wrote:
| There are some Defi options on Ethereum that could allow
| you to short BTC with a USDC [1] collateral, like dYdX
| [2].
|
| You would need to keep a small amount of ETH to operate
| the smart contracts, which could fluctuate in dollar
| value, but even after a black swan event, there's no
| reason that this decentralized infrastructure would not
| still be running, allowing you to redeem the USDC to real
| dollars.
|
| [1] Circle dollars, 1:1 backed stablecoin from a well
| regulated issuer.
|
| [2] https://trade.dydx.exchange/perpetual/BTC-USD
| maxbond wrote:
| I appreciate the idea, but I neglected to mention (c) is
| legal in the US. Speculating on bubbles is just out of my
| league, and I'm okay with that.
| tim333 wrote:
| The argument basically is tether has been inflating the price
| of bitcoins. If tether collapses bitcoins will still be there
| but may trade at $3000/coin rather than $38000.
|
| Comparing with gold it's like the price has been inflated by
| people buying it with forged dollar bills.
|
| That said the author seems a bit new to this all with his shock
| at finding Bob is likely being scammed. Bitcoin has been linked
| with scams almost from the start, certainly since 2014 with
| MtGox. Things will go on in spite of the scams.
| BelenusMordred wrote:
| Why on Earth would $100 billion worth of Tether rushing for a
| conversion into anything else drag _down_ the price of BTC?
| Or any other coin for that matter?
|
| Have you actually sat down and thought about this, even if
| 99% waited and cashed out over weeks, that 1% is still a huge
| injection into the ecosystem.
|
| People have been shown time and time again that the money is
| there, the peg can hold, the underlying company is also a
| cryptoexchange that can print cash simply by existing and all
| haters have left is attaching their ego to this notion and
| clinging to the dream of it going bankrupt over night. And
| the more they are wrong the more they desperately cling to
| this idea.
|
| Tether had $1B stolen from them when it was a significant %
| of their assets, along with the US govt taking other funds in
| the NYAG case and they easily survived, if not thrived.
|
| These comments/stories on HN have been here for years and
| they don't age well, it's hilarious to watch.
|
| You can all go short tether or bitcoin today for a fraction
| of a penny on the dollar, and yet, don't :/
|
| Why not do it, you can hold a bitcoin future going short for
| the next year less than a coffee per / $1k, why not do that?
| Would surely make a great story.
| leppr wrote:
| _> Why not do it, you can hold a bitcoin future going short
| for the next year less than a coffee per / $1k, why not do
| that?_
|
| Assuming you have enough collateral, you currently even get
| paid money to hold a short.
|
| As to your general point, I'd avoid holding the view that a
| 7 or so years old business can't fail as any kind of
| general truth. I know many smart people who are extremely
| bullish on cryptocurrencies, with huge investments. None of
| them think Tether will not fail one day. Everyone is
| playing the current market as a bubble.
| LittlePeter wrote:
| > Why on Earth would $100 billion worth of Tether rushing
| for a conversion into anything else drag _down_ the price
| of BTC? Or any other coin for that matter?
|
| Price in which terms? USD? USDT?
|
| Suppose it turns out tether is a fraud. What will happen?
| Tether holders will try to sell it for USD or Bitcoin. High
| supply of tether will lead to higher BTC/USDT and higher
| USD/USDT rate. Those who managed to convert tether to BTC
| will likely try to convert BTC into USD. This will lead to
| relative over-supply of BTC versus USD and BTC/USD will
| decrease.
| tim333 wrote:
| >short tether or bitcoin today for a fraction of a penny on
| the dollar
|
| I shorted tether one time, on Kraken, and it was
| horrendously expensive, like 25% per annum. Do you know
| where it can be done cheaply?
| leppr wrote:
| https://ftx.com/en/trade/USDT-PERP
|
| Slightly positive predicted funding at the moment, which
| means you would get paid for shorting.
| furi wrote:
| If the scheme described by the article really exists, then
| it represents a substantial fraction of the demand for BTC.
| It's true that such a scheme collapsing would drive demand
| for BTC from USDT holders up. That's of course assuming
| they could still trade their USDT. Tether (the company)
| cancelled $30 million worth of coins stolen from them a few
| years back which suggests if the company was seized the
| ability to trade USDT could be disabled. But it's also true
| that such a scheme collapsing would instantly drive demand
| for BTC from Tether (the company) to zero. If that demand
| really is almost 70% of all the demand for BTC then BTC's
| price should decline significantly.
| gomox wrote:
| There's a very strong point to be made that shorts in a
| rigged market are not a good idea, because squeezing the
| shorts is easy for the money printers (who plausibly have
| visibility over the liquidation price points), whereas the
| odds of actually collecting in a black swan crash are slim
| to none.
| soneca wrote:
| > _" you can hold a bitcoin future going short for the next
| year less than a coffee per / $1k"_
|
| Genuinely curious about how could I do that. I am not that
| much into cryptocurrencies, so I appreciate if you have the
| time and will to be specific in the operationals. I do have
| a (currently empty) account at Kraken, if that helps.
|
| How can I short BTC?
| phyalow wrote:
| Buy put options on deribit, or short USDT-BTC on FTX
| wcoenen wrote:
| Kraken has margin trading, which allows you to hold
| negative positions in BTC. However, this means you are
| borrowing the BTC that you're selling, and the interest
| on that is rather high (0.01% per 4 hours). You also need
| to keep EUR or USD as collateral in the account to cover
| potential losses when the price goes up.
| dragonwriter wrote:
| > Why on Earth would $100 billion worth of Tether rushing
| for a conversion into anything else drag _down_ the price
| of BTC?
|
| If USDT:USD collapses, BTC:USDT will naturally go up, but
| it's also quite likely that BTC:USD (whether direct or
| indirect) will go down, to the extent it has been inflated
| by artificially inflated USDT:USD.
| rmtech wrote:
| How do you short Tether?
| leppr wrote:
| FTX exchange. Unavailable to US residents though.
| frankenst1 wrote:
| Sidenote: It currently costs miners ~$10K to produce 1 BTC.
| ForHackernews wrote:
| This is only relevant because if the price of BTC drops
| below this, many miners may shut down their hardware.
|
| The amount of money & electricty wasted to generate a BTC
| is otherwise unrelated to the price of BTC in dollars or
| other assets.
| ric2b wrote:
| > The amount of money & electricty wasted to generate a
| BTC is otherwise unrelated to the price of BTC in dollars
| or other assets.
|
| Isn't it _directly_ related? If I'm a miner and the BTC
| I'm mining doubles in value I can afford to spend 2x as
| much money on hardware/energy and still make a profit.
| ForHackernews wrote:
| You've reversed the directionality: price drives mining
| activity, but mining activity doesn't determine the
| price. Miners spending more on hardware & energy won't
| produce more bitcoins (it just means the difficulty will
| increase and more CO2 will be released).
|
| I'm saying the fact that you have to waste $10,000 worth
| of electricity calculating redundant hashes in order to
| make a bitcoin doesn't mean that bitcoin somehow contains
| $10k worth of "value" or that the cost of production sets
| a floor on the price.
|
| People sometimes get confused about this, perhaps
| reasoning by way of analogy with real-world goods that
| will (typically) never be sold for less than the cost of
| their inputs, or they imagine some computerized form of
| the labor theory of value applies[0], but this is not
| true. The only factors determining the price of bitcoin
| are supply (fixed) and demand (driven by speculation).
|
| [0] https://en.wikipedia.org/wiki/Labor_theory_of_value
| ALittleLight wrote:
| I'm not really sure I understand this, neither finance nor
| crypto is my strong suit, but I think it's saying that most
| bitcoins are purchased with tether, and if the tethers are fake
| then that means most of the demand for bitcoin is fake. If the
| demand falls a lot, the price will too.
|
| Not sure if I'm misunderstanding this though. It's hard for me
| to believe people buying and selling bitcoin wouldn't notice
| this somehow.
| jimmydorry wrote:
| I don't believe any significant number of people buying
| Bitcoin are using Tether. Tether was aimed at the exchanges,
| institutional level investers, and day traders that wanted to
| move between dollars and crypto without creating taxable
| events (this loophole has since been closed). Its primary
| purpose was touted as allowing exchanges to move US dollars
| between themselves quickly and without using the banking
| systems directly.
|
| Things may have changed in the last two or so years though,
| so maybe Tether's role radically changed.
| ur-whale wrote:
| >when tether is going down wouldn't you want to sell it thus
| creating pressure in btc/tether market
|
| It will only create pressure on exchanges that allow you to
| actually sell USDT for BTC.
|
| These will unfortunately be the same one that will likely go
| the MTGox route the quickest, leaving you a bag of virtual BTC
| that you can't withdraw.
|
| Not your keys, not your coins, and doubly so for USDT.
| JackFr wrote:
| I've always been, and remain still, a skeptic of all things
| crypto. I typically skip the crypto-focused articles on HN. I'm
| sure glad I didn't today.
|
| > The US Treasury should enforce 100% reserve requirements on all
| USD-pegged crypto stablecoins, with mandatory audits.
|
| Laughter is really the best way to start my day.
| spottybanana wrote:
| So, you are glad to see articles that support your viewpoint?
|
| Don't you regret at all missing all the gains you have made
| along the years by not buying small amount of BTC? In the end
| the guy who wrote this article made quite good amount bu buying
| BTC low and selling high. Lets see how it ages.
| JackFr wrote:
| Honestly I don't care about articles that support my
| skepticism, they largely bore me as well. What made this
| article and others like so amusing is the tremendous irony of
| demanding regulation, irony that the author seems completely
| oblivious to.
|
| Do I regret missing out on all of the crypto gains I could
| have had? Honestly I don't really think about it that often
| and when I do it's largely because I work in tech and I'm
| often forced to work with people who won't shut up about it.
| But I lived through similar periods with the first dotcom
| bubble, and the housing market in the run up to the financial
| crisis. I don't like 'greater fool' investing as a strategy
| (but certainly some people have gotten very rich with it) so
| no I guess I don't regret it.
|
| (One sidelong observation there are a lot more paper gains
| than realized gains. I've worked with a number of bitcoin
| millionaires. But if I filter the count to those who have >
| $1mm in USD, in a US domiciled bank, the number drops top
| zero. Who knows? Maybe it's adverse selection. Maybe the real
| winners aren't working anymore.)
| garmaine wrote:
| What irony? I've been involved with bitcoin since 2010, and
| I too think all exchanges should have reserves enforced and
| audited.
|
| Not all bitcoin enthusiasts are anarcho-capitalist
| extremists.
| warkdarrior wrote:
| You are certainly an outlier in the crypto community.
| Most crypto enthusiasts seem to be opposed to regulation.
| garmaine wrote:
| Regulating USD on-ramps and endpoints is not regulating
| bitcoin itself.
| ric2b wrote:
| Laughable indeed.
|
| Banks, which are essential to our economy, have 0% reserve
| requirements but this niche company that can crash to 0 without
| doing much harm to the economy should be forced to have 100%
| reserves? Who cares, just don't accept Tether in exchange for
| anything and you're good.
| BelenusMordred wrote:
| The naivety of this post is just great. It's crypto conspiracy
| theorist Q, financial anti-vaxxer and monetary flat earth all
| rolled into one.
|
| Sell everything my friend and never look back. Happy for your
| wins here. Enjoy your "life-changing" investment decision.
|
| > This is a one-time-use account. I won't be responding to
| messages or inquiries on this platform.
|
| If you aren't willing to put your real name to it, guessing
| you're not that confident about it either and are just another
| market timer looking for easy kudos over the centruries of
| proclamations. Crypto is basically ground zero for the biggest
| flaseflagging and ubershill campaigns on the planet.
|
| Without proving what you sold, this is a fairytale, and you know
| damn well you can cryptographically prove right now how much and
| when you held it.
|
| Tether holds far more than your bank or many bluechips in
| backing, try not to forget that one.
| EliRivers wrote:
| "Tether holds far more than your bank or many bluechips in
| backing, try not to forget that one."
|
| The author writes right there in the article why he thinks
| Tether is full of shit. He states that the bank they claim to
| be putting all their dollars in simply doesn't have that many
| dollars.
|
| So you can now put your money where your mouth is and explain
| why he's mistaken about that.
|
| Addeundum, some time later: dylkil has done it for you. Now
| there a commenter who actually comes armed with facts.
| phyalow wrote:
| Devils advocate, (I think tether is B/S) but the Bahamas
| deposits sheet they mention wont include securities like
| TBills and Corporate Credit, which I expect Tether would hold
| as collateral...
| shawabawa3 wrote:
| Article seems mostly accurate but there's a mistake in
| understanding about the Whale Alert tweets
|
| > What's more, the supposed USD inputs (e.g., 401,431,056 USD in
| the top left transaction) are giving perfectly round Tether
| outputs (e.g., 400,000,000 USDT in the same transaction) in every
| block -- regardless of the prevailing exchange rate or anything
| else.
|
| Whale Alert uses exchange rates to convert currencies in the
| post. The "USD inputs" are simply the USDT that was minted
| converted using a USD/USDT exchange price (I'm not sure which
| one)
|
| Whale Alert has also hard-coded USD/USDC to 1:1, which is why the
| coinbase pro minting Tweets match exactly
| rmtech wrote:
| We are due a cryptocurrency correction.
|
| The question is, how low will Bitcoin go on Tether collapse?
| $20k? $10k?
|
| Or will things get even crazier with $100k bitcoin crashing to
| $60k?
| Bellamy wrote:
| The tether market cap value that is in Bitcoin, so it's 3% +
| normal overreaction. My estimation: 9%.
| garmaine wrote:
| That's not how markets work. There isn't an infinite buy wall
| at the current spot price.
| [deleted]
| ur-whale wrote:
| _Really_ good article, recommended read for anyone interested in
| crypto.
|
| For me, it's almost 100% aligned with what I've felt was going on
| with Tether in the last 2 years.
|
| Also, it sort of crystallized an answer to a question I've had
| about Binance for quite a while: how did they manage to get so
| big, so fast.
|
| Answer: easy, they never had to establish proper on and off ramps
| to the traditional banking system and lured customers with
| unreasonable leveraged offers (which BTW is another Tether-
| related scam in itself: if you are an exchange with a shit ton of
| USDT, you can manipulate the price up and down, and trigger
| artificial margin calls whenever you damn please).
|
| The real interesting question is though: what will happen when
| (not if) Tether explodes. There will be a sudden huge demand for
| exiting from USDT, and the only way looks like buying BTC on semi
| or fully fraudulent unbanked exchanges (good luck with that).
|
| This will also trigger a big price unbalance between exchanges,
| and it remains to be seen if arbitrage channels will be able to
| weather the storm and if so for how long.
|
| If you hold USDT, better get out quick unless you want to be left
| holding the bag.
|
| If you hold BTC (as in: for real, in your own wallet, not on some
| shady exchange, not your keys not your coins), it's likely the
| BTC ecosystem is going to undergo a very large "event". Up or
| down, who knows.
|
| If you hold BTC on an exchange, especially a shady one with 100x
| leverage type offerings, get your coins out of there ASAP before
| you get BTC-E'd [1]
|
| [1]: https://en.wikipedia.org/wiki/BTC-e
| leppr wrote:
| _> it sort of crystallized an answer to a question I 've had
| about Binance for quite a while: how did they manage to get so
| big, so fast. ..._
|
| No, Binance didn't get big because of Tether or leverage. It
| was already eating most of the crypto-only exchanges volume
| when altcoins were almost exclusively paired with BTC and
| before it acquired its perpetual futures business.
|
| The main reason they managed to attract so many users is
| flamboyant altcoin pump and dumps orchestrated with ICO teams
| and Chinese whales, and pioneering exchange coins with the
| securities/utility token mash-up called BNB. Users came to
| chase the pumps, and stayed when they were invested in the
| platform itself.
|
| Binance's thriving in its later phase even as Coinbase ramped
| up its altcoin listings can certainly be attributed to Tether
| though.
| SI_Rob wrote:
| > and pioneering exchange coins with the securities/utility
| token mash-up called BNB.
|
| To be fair there were other exchanges that tried this 'invest
| in the house' gambit, but Binance made it stick.
| gomox wrote:
| Also Binance is quite simply a better exchange. It works
| flawlessly even when the market is hot. The quality of what
| they've developed and the speed at which they did it makes
| the average silicon valley team look like 7 year olds.
| leppr wrote:
| Most of what they developed is customization over white
| label solutions (that's how the main exchange was started),
| and acquisitions. The UI is a convoluted mash-up of
| different systems. Try using their margin trading. They're
| spending very little on in-house software development
| compared to their revenue and the average SV company of
| that size, and it shows.
|
| _> It works flawlessly even when the market is hot._
|
| That's factually false. It holds up better than Coinbase
| sure, that's not hard, but it very frequently gets
| overwhelmed during volume spikes. The web UI and the
| various price feeds often fall behind. The orderbook feed
| falls out of sync even during normal usage hours. The more
| robust part of their stack, the trading API, rarely goes
| down though, I'll give you that.
|
| I guess your comment makes my point about BNB. It's a great
| way to keep customers loyal and engaged. I do agree that
| overall it is the best cryptocurrency exchange, but let's
| not use HN as a shilling avenue.
| dannyw wrote:
| 1. I don't hold BNB.
|
| 2. I have had way less problems with Binance than
| Coinbase, so I am a happy Binance customer.
| leppr wrote:
| The bar is low with Coinbase, and I was replying to a
| specific unwarranted praise about Binance, already
| mentioning that it's indeed arguably the best exchange
| overall.
| gomox wrote:
| Lol. I hold precisely 0 BNB, and never did. These guys
| are execution masters, and the proof is in the pudding.
| leppr wrote:
| Sure, praise for their business execution is warranted.
| It might even be allocating so little resources to the
| surface product (UI/UX) that's allowed them to move so
| fast in other more important avenues like liquidity,
| diversity of offerings and customer support.
| DeafSquid wrote:
| I got out of BTC-E shortly before they shut down. Gambled my
| gains on stocks and lost. Oops
| cryptoanonymous wrote:
| Author here. I really appreciate your kind words about the post
| - thank you!
|
| I'm also broadly in agreement with your conclusions as to what
| this means for a crypto trader or holder. I've zeroed my net
| exposure to this ecosystem myself, both in anticipation for
| such an event, and out of recognition that I frankly understand
| it far less well than I originally thought.
| christiansakai wrote:
| I am not a Bitcoin holder, but Ethereum. I zeroed all my
| Ethereum except the ones locked due to staking (32 ETH, but I
| bought them when they were $600) because of these Tether news
| lately. I will wait for more clarity before jumping back in.
|
| It is kinda sad that in this technology there are so many
| frauds like that.
| ur-whale wrote:
| >I will wait for more clarity before jumping back in.
|
| Probably wise given how correlated ETH and BTC prices are.
|
| >It is kinda sad that in this technology there are so many
| frauds like that.
|
| It is, but it is also unavoidable.
|
| As the author correctly points at towards the end, many of
| the properties of cryptos (high liquidity, non-reversible,
| pseudo-anonymous), while very useful to legitimate users,
| are a wet dream for crooks.
|
| As a matter of fact, Bitcoin has been used to scam people
| for its entire existence, e.g.[1][2], sometimes even in new
| and innovative ways.
|
| There is one aspect of Bitcoin that many people entirely
| overlook, especially newcomers: [3]
|
| [1] https://en.bitcoin.it/wiki/Trendon_Shavers
|
| [2] https://archive.is/PZdxu
|
| [3] http://trilema.com/2013/the-story-of-pointless-and-
| witless/
| christiansakai wrote:
| Indeed. It is part of the game I guess.
| pjc50 wrote:
| > it's likely the BTC ecosystem is going to undergo a very
| large "event". Up or down, who knows.
|
| This seems to be one constant of BTC: "events" which you might
| expect to have a negative effect on the price often don't.
| qeternity wrote:
| ...because Tether has been there to ensure that.
| nmlnn wrote:
| Uh.. one little problem with this kid's analysis. There are
| multiple USDT/USD markets
| (https://www.tradingview.com/symbols/USDTUSD/)
| leppr wrote:
| Yes, three other markets accounting for a total of... $4
| million daily volume. That's less than many random Uniswap
| tokens, and could consist entirely of some minimal market
| making. I've done stablecoin market making myself, it's not
| very profitable but the low inventory risk makes it attractive,
| as the ratio always trends back to 1:1.
| alcio wrote:
| USDT-USD markets are indeed marginal. however, implied USDT
| price using BTC as a cross shows USDT is valued pretty much
| at parity with the dollar by the market:
|
| https://www.tradingview.com/symbols/spread/BINANCE%3ABTCUSDT.
| ..
| leppr wrote:
| Yes, and that parity is precisely the thesis behind the
| author's contrarian short position.
| nmlnn wrote:
| If people want to short bitcoin or tether, they should do so.
| However, I don't really get all the internet whining. If
| they're right they'll make a lot of money. I don't buy these
| concerned citizen FUD posts though, they reek of
| manipulation. If there's one thing I've learned over the last
| 25 years it's.. don't trust random people on the internet.
| leppr wrote:
| Taking a position and then publicizing the position and the
| thesis behind it is standard procedure everywhere in
| finance. It's a way of accelerating pricing-in of the
| information.
|
| You can indeed just short an artificially inflated asset,
| but if the sham is only revealed long after you're
| insolvent, you lose your money.
|
| BTW, your bull case for Bitcoin wasn't built from trusting
| random people on the internet?
| nmlnn wrote:
| Nope, that's why I'm so confident. The entire point of
| Bitcoin is to remove the need for trust and replace it
| with network consensus rules and proof-of-work, both of
| which you validate yourself. Since, to me, that's far
| superior to the current system - I just see it as an
| inevitable transition.
| jdjfjtkfkf wrote:
| The real USDT/USD market is not the Kraken one (or similar ones),
| but the implied synthetic market creating by arbing BTC/USDT and
| BTC/USD.
|
| Companies like Alameda trade billions arbing this synthetic
| USDT/USD market close to peg:
|
| https://twitter.com/AlamedaTrabucco/status/13487730276395622...
| TimMeade wrote:
| Excellent Excellent. I have been trying to explain this to
| people. Now i can just send a link to this. Excellent.
| rwmj wrote:
| Tether has to produce evidence in the New York court case today,
| right?
| nik_s wrote:
| The author implies that the recent growth in tether's market cap
| is an indication of an incoming exit scam.
|
| A cursory glance at Coinbase's USDC's market cap [1] shows that
| it too is growing at almost exactly the same pace as tether's
| [2]. I think most players in this market would agree that
| Coinbase, for all of it's failings, is unlikely to be planning an
| exit scam at this point.
|
| It doesn't disprove the whole thesis, and some elements of it
| might have merit, but at least one element of it seems weak to
| me.
|
| [1] https://coinmarketcap.com/currencies/usd-coin/
|
| [2] https://coinmarketcap.com/currencies/tether/
| cryptoanonymous wrote:
| Author here; I agree this is a valid objection and that one
| should be very cautious when extrapolating cause-effect
| relationships. Systems like these also often have multiple
| embedded feedback loops in them, which can make it impossible
| to identify a single cause once the flywheel gets going.
|
| It's when you _combine_ the USDT /BTC correlation with the
| available evidence for Tether's unbacked issuance that the
| problem becomes clearer, in my view. When issuance is unbacked,
| it can be decoupled from real demand -- and that's a degree of
| freedom that _allows_ Tethers to be injected arbitrarily into
| the system. Coinbase 's stablecoin is backed by audited
| reserves, so USDC is constrained by demand -- making it more
| plausible that USDT is the causal factor rather than USDC.
| staplers wrote:
| one should be very cautious when extrapolating cause-effect
| relationships
|
| Interesting statement after publishing this article with that
| title.
| traumivator wrote:
| Check the volume for USDC/USDT. It has been increasing the last
| couple of weeks.
|
| So one could argue that people are trading largely unbacked
| USDT for backed and audited USDC. Which increases the demand
| for USDC and the USDC minting.
| qeternity wrote:
| No, it doesn't. In fact it's exactly what you'd expect if
| Tether is fraudulent. Stablecoins are a great way to transact
| in dollars that you otherwise wouldn't be able to, for instance
| the proceeds of illegal activity. The author notes the exact
| mechanism: print USDT, buy BTC on sham exchanges, send BTC to
| Coinbase, sell for USDC.
|
| You would expect them to increase in lock step if this is
| happening. If it were legitimate flows, you would actually
| expect USDC to far outpace USDT given the much greater ease of
| conversion and trust in the sponsors.
| jcfrei wrote:
| > print USDT, buy BTC on sham exchanges, send BTC to
| Coinbase, sell for USDC.
|
| The steps you described don't result in new USDC being
| minted. That happens only when people send dollars to
| Coinbase and change them to USDC.
|
| > If it were legitimate flows, you would actually expect USDC
| to far outpace USDT given the much greater ease of conversion
| and trust in the sponsors.
|
| No, USDT has been around for a lot longer and lots of very
| liquid trading pairs are based on it. So if you need to buy
| lots of crypto currency you might need tethers so you can buy
| on an exchange with a liquid trading pair (BTC/USDT on
| Binance being the most liquid trading pair).
| qeternity wrote:
| I should have added an implicit step: sell for USD, convert
| to USDC. It's a lot easier to launder and move illicit USDC
| funds than it is USD.
| cameldrv wrote:
| I think it does. People send USD to Coinbase to buy
| Bitcoin. Coinbase maintains the stable value of USDC by
| creating new USDC and selling it to people for BTC. The
| cash to back USDC comes from people depositing USD to buy
| BTC.
|
| You can think of it virtually as three balanced flows:
|
| USD -> USDC -> BTC (Retail BTC Investors)
|
| BTC -> USDC (Tether refugees)
|
| USDC -> USD (Coinbase)
| jcfrei wrote:
| > Coinbase maintains the stable value of USDC by creating
| new USDC and selling it to people for BTC.
|
| If tou want USDC you can simply change your dollars on
| coinbase. No need for them to use their own funds to
| maintain a stable price - there's no usdc/usd market on
| coinbase.
| quickthrower2 wrote:
| He should definitely send tether a Christmas card this year.
| not2b wrote:
| It seems that this guy decided to go heavily into Bitcoin because
| of a mistaken belief that seems all too common: "At the time, I
| saw a market dislocation and the likelihood of significant dollar
| inflation due to the US Government's likely response to the
| unfolding pandemic."
|
| He thought that government responses to severe crises that inject
| lots of money into the economy will cause "significant dollar
| inflation". In the real world, over the full year of 2020
| inflation was 1.4% in the US (food costs went up a bit more,
| energy costs went down). Failure to inject money into a failing
| economy results in massive _deflation_. That 's because money was
| rapidly disappearing from the economy. Money isn't created
| primarily because governments print it; whenever a bank creates a
| loan money is created, and when they call in loans money
| disappears. Central banks control the money supply by regulating
| banks, and their goal is to keep things stable.
|
| Source: https://www.bls.gov/news.release/cpi.nr0.htm
| mac01021 wrote:
| CPI may not have gone up, but it sure seems like the prices of
| a lot of corporate stocks are pretty inflated...
|
| I don't know if that is related to a change in money supply.
| dnp100 wrote:
| Deflation is a wonderful thing. It means more people can buy
| more stuff. It should be one of the primary goals of our
| civilization.
| mlthoughts2018 wrote:
| Those inflation figures, much like unemployment figures, are
| not really representative. If you take a basket of good that
| includes consumer discretion items like cheap tech gadgets,
| subscription music, staple foods, then these "balance out" the
| much worse inflation in housing, college costs and medical
| care, things which have a much higher quality of life impact.
|
| I'n not making any claim on how this dichotomy relates to
| cryptocurrency speculation, but I do think in general nobody
| should be using CPI-based figures or traditional BLS figures at
| all, and anyone seriously talking about US inflation needs to
| be starting from the given baseline fact that "real" inflation
| (ie, excluding discretionary consumer toys, subscription
| services, staple foods) is much higher than 2%, and has been
| for a long time.
| [deleted]
| Infinitesimus wrote:
| CPI is a very distorted view of actual living costs over time.
| House prices aren't included and we've seen prices balloon over
| the last decade. Sure, your apples cost the same but good luck
| trying to buy property _.
|
| _ Yes we have the usual supply constraints, etc.
| jlmorton wrote:
| House prices are absolutely included and are the single
| largest item in CPI. It's Owner's Equivalent Rent. Overall,
| shelter represents 33% of CPI.
| dragonwriter wrote:
| To the extent that purchase prices vary independently of
| rental prices in the same market, the CPI inclusion of
| equivalent rents will not reflect home _purchase_ prices.
|
| Then again, I don't see why it should, unless it is some
| measure based on the lower of rents (actual or equivalent)
| or amortized purchase and ownership costs (as you need
| shelter one way or the other), but that could only drive
| the CPI _down_ compared to just considering rents as is
| done now.
| [deleted]
| SilasX wrote:
| Yep, the new money has flowed into capital assets rather than
| consumption goods. But inflated, prices have.
|
| It would be like saying there's no inflation because milk
| prices are steady, ignoring that cows cost three times as
| much.
| dragonwriter wrote:
| > Yep, the new money has flowed into capital assets rather
| than consumption goods.
|
| Yes, because the wealth has flowed to people who primarily
| relate to the economy as capitalists, rather than
| laborer/consumers.
|
| > It would be like saying there's no inflation because milk
| prices are steady, ignoring that cows cost three times as
| much.
|
| So, it would be true, for the purpose for which we have and
| measure general inflation. It would not be true for certain
| other inflation measures which are also used, but which
| aren't part of (and aren't relevant to the purposes of)
| general inflation measures like the CPI
| SilasX wrote:
| Depends on who the "we" is there. Certain agencies don't
| care that new money is flowing into capital assets but
| probably _should_ care.
| dragonwriter wrote:
| > Depends on who the "we" is there.
|
| I would argue the statement is true for any significant
| government or private use of general inflation measures.
|
| But, sure, if you've got a case where the CPI is actually
| used for a purpose and you think a different measure of
| inflation that incorporated asset prices would be a
| better replacement for the CPI, please feel free to
| present (1) the existing use in question, (2) your
| proposed replacement measure, and (3) your argument for
| why your proposed replacement is better.
| SilasX wrote:
| That was the purpose of comparing to cows and milk. For
| all the same reasons you should worry about cows being
| expensive (even if milk is still cheap), you should worry
| about real estate being expensive (even if rents are
| low).
|
| In the case of a household, those mean that you can't
| take some of your production, and save it for the future
| in capital goods -- the same kind of thing that happens
| when more of your income has to go to the same
| necessities.
|
| In the case of a central bank, those mean that the
| injections of money aren't (currently) effective for
| stimulating economic activity, but are simply causing a
| wealth transfer and rallies in whatever stores of value
| remain. That is the same signal it needs to get back as
| when consumer goods become more expensive: you are not
| relaxing a limiting factor on economic growth.
|
| Edit: toned down
| dragonwriter wrote:
| > For all the same reasons you should worry about cows
| being expensive (even if milk is still cheap), you should
| worry about real estate being expensive (even if rents
| are low).
|
| I would argue that the only reason you should consider
| cows being an expensive an issue if milk is cheap is in
| regard to it making some other bovine product expensive;
| cows aren't important in and of themselves, but as
| instrumentalities in the production of milk and other
| products.
|
| > In the case of a household, those mean that you can't
| take some of your production, and save it for the future
| in capital goods
|
| No, asset inflation absolutely does not mean that.
| Increasing the minimum buy in for asset investments would
| do that, but we've got mature enough financial markets
| that a general increase in asset prices doesn't increase
| the minimum needed to enter productive investments.
|
| > In the case of a central bank, those mean that the
| injections of money aren't (currently) effective for
| stimulating economic activity
|
| No, it doesn't; driving money into productive investments
| and out of cash (which, as an expected side effect,
| produces asset price inflation) is part of the mechanism
| by which loose monetary policy is expected to stimulate
| economic activity. Asset price inflation does not
| indicate that that is not working, it is what you expect
| if it is working.
|
| What would indicate that it is not working is if output
| figures did not exceed what was expected without the
| policy.
| SilasX wrote:
| >No, asset inflation absolutely does not mean that.
| Increasing the minimum buy in for asset investments would
| do that, but we've got mature enough financial markets
| that a general increase in asset prices doesn't increase
| the minimum needed to enter productive investments.
|
| Yes, "can't", taken literally (and uncharitably), is
| incorrect. I was exaggerating. The point is it becomes
| much more difficult with lower yields, just as it becomes
| so with cows. To produce the same X units of milk
| tomorrow, you have to save more milk now (to buy the cow)
| -- the same effect as if you had less to save due to your
| consumption goods being more expensive.
|
| So, no, "mature financial markets" don't really solve
| this.
|
| >No, it doesn't; driving money into productive
| investments and out of cash (which, as an expected side
| effect, produces asset price inflation) is part of the
| mechanism by which loose monetary policy is expected to
| stimulate economic activity. Asset price inflation does
| not indicate that that is not working, it is what you
| expect if it is working.
|
| Money going into productive investments is only good _if
| it also translates into productive economic activity_.
| You can 't just say, "we gave it the old college try, so
| that's a win". We're seeing P/E ratios go up (earnings
| yields down), which means that the higher asset prices
| aren't translating into that productive use of assets.
| And even by your own standard, the flows into gold,
| bitcoin, and idle real estate indicate a failure.
|
| >What would indicate that it is not working is if output
| figures did not exceed what was expected without the
| policy.
|
| So, non-falsifiable, then.
| [deleted]
| huitzitziltzin wrote:
| >House prices aren't included and we've seen prices balloon
| over the last decade
|
| Depending on exactly what you mean, this is not a great
| criticism of the CPI.
|
| _House prices_ are excluded on purpose. _Housing costs_ are
| included (including for housing equivalent to what an owner
| owns).
|
| CPI does include _housing_ expenses: "The CPI represents all
| goods and services purchased for consumption by the reference
| population (U or W). BLS has classified all expenditure items
| into more than 200 categories, arranged into eight major
| groups (food and beverages, *housing*, apparel,
| transportation, medical care, recreation, education and
| communication, and other goods and services)." [1]
|
| Furthermore, it includes housing expenses for _owner-occupied
| housing_ as follows: "The [owners' equivalent rent] index is
| designed to measure the change in the rental value of owner
| occupied housing change. In essence, OER measures the changes
| in the amount a homeowner would pay to rent, or would earn
| from renting, _his or her home in a competitive market_. "
| [see p. 107 of [2]]
|
| As the BLS notes, the primary service provided by houses is
| to shelter the inhabitants. The house itself may be held as
| an investment. See [3]
|
| So the CPI explicitly captures the cost of providing shelter,
| though it excludes the investment value of the property.
|
| [1] https://www.bls.gov/cpi/questions-and-
| answers.htm#:~:text=BL...).
|
| [2] https://www.bls.gov/opub/hom/pdf/cpi-20180214.pdf
|
| [3] https://www.bls.gov/cpi/factsheets/owners-equivalent-
| rent-an...
| Infinitesimus wrote:
| Thanks for the extra context - I should have been more
| clear. CPI does capture OER and rental costs as you show.
|
| I get that mortgage costs and the like aren't considered as
| consumption ( rightly so ) but that makes the measure
| inaccurate when assessing prices people pay to live day to
| day. Rental prices are generally a more applicable
| indicator for most of the population as the BLS says but
| the rising costs of houses and mortgage costs by extension
| imo should be captures because it signals how money is
| flowing.
|
| Is there another metric perhaps that captures both
| consumption costs and housing beyond rent/rent equivalents?
| cryptoanonymous wrote:
| Hi, I'm the author.
|
| > Money isn't created primarily because governments print it;
| whenever a bank creates a loan money is created, and when they
| call in loans money disappears.
|
| Yes this is right, and I am in fact aware of this mechanism. As
| I say in the post: "[...] anticipated high levels of lending
| and consumer spending post-pandemic, seemed likely to fuel
| substantial USD inflation in real terms through the end of
| 2021."
|
| Velocity-of-money and the M2 money supply weren't that relevant
| to the main story I wanted to tell, so I went into no more than
| superficial detail here.
| jerrymiller wrote:
| I recommend that you listen to this:
| https://www.coindesk.com/podcasts/the-breakdown-with-
| nlw/bre...
| blueblisters wrote:
| Even if inflation were to occur at the levels you
| anticipated, I would find it hard to justify crypto being a
| safe hedge against the dollar. Dollar backed productive
| assets are largely much safer.
| mountainb wrote:
| People often don't understand the implications of an elastic
| monetary system that is also decentralized because of the way
| that the Fed and member banks are structured.
|
| There are things the Fed or the government could do to
| frogmarch devaluation (like, for example, encouraging banks to
| pay people to carry credit card balances through negative
| interest rate policy or encouraging no-doc/no-credit check
| loans of all kinds) but that is not their prerogative.
| qeternity wrote:
| People also don't realize that moderate inflation is a good
| thing. You want a gentle inbuilt mechanism to encourage
| consumption. And we have good tools to combat inflation
| whereas we don't really have any tools to combat deflation.
|
| There's a reason nobody spends Bitcoin and it's mostly not
| about fees or block size.
| TomSwirly wrote:
| > You want a gentle inbuilt mechanism to encourage
| consumption.
|
| This kills the planet.
| drusklo wrote:
| This kills the environment, planet doesn't care, after we
| are gone, it starts over
| jasonhoch wrote:
| Why do you want a gentle inbuilt mechanism to encourage
| consumption?
| georgeecollins wrote:
| Because if you made a better return by hoarding cash then
| by investing -- holding bonds, buying apartment
| buildings-- investment would stop and people would stuff
| cash into mattresses.
| SilasX wrote:
| That's a different argument from the GP, who was
| justifying it on the grounds of encouraging extra
| consumption, not investment.
| mlthoughts2018 wrote:
| And in turn pollution might decrease, frivolous consumer
| waste might decrease, frivolous ad waste might decrease,
| people might turn to crafting and making their own home
| goods, and feel more pride and accomplishment, and the
| standard of return on investment to actually draw cash
| out of the mattresses would be higher, rather than
| building in a mechanism that stresses people into giving
| their cash over for hollow waste, and entrenching false
| "market demand" narratives around the whole destructive
| charade.
| fuzzer37 wrote:
| Is that necessarily a bad thing? Growth at the cost of
| everything doesn't seem to bode well long term. What
| would the potential consequences of an economy not based
| on continuous growth? Genuine question, not trying to be
| inflammatory.
| whatshisface wrote:
| The proceeds from whatever growth there is should go to
| the people involved in growing it, not uninvolved
| previously-wealthy bystanders. With deflationary
| currencies, any growth in the total amount of stuff leads
| to one dollar corresponding to more stuff, which is like
| a tax on all of the people making stuff paid to the
| people holding mattress money. That's the most powerful
| argument against the gold standard, for example. People
| who spend gold to do actually useful things are punished
| and people who pile it up are rewarded.
| bananabreakfast wrote:
| Yes, that's a bad thing.
|
| This is the primary mechanism that has stagnated Japan's
| economy since their asset bubble burst in the 80's.
|
| If you want to start a business you need investment and
| customers. You will get neither if everyone is hoarding
| cash. Investors will not stomach your risk when they can
| just safely sit on their balance. Customers will hesitate
| to buy your product because they will always expect your
| prices to go down the longer they wait.
| causalmodels wrote:
| It depends on the type of growth. Growth through
| efficiency gains extends the productivity runway of
| economies reliant on finite resource consumption.
|
| I think consequences of a no growth economy are pretty
| bad. It would mean much more of the world becoming zero
| sum. The pie would be fixed.
| flyinglizard wrote:
| To create employment and growth.
| dragonwriter wrote:
| > People also don't realize that moderate inflation is a
| good thing.
|
| Price stability is a good thing, and moderate deflation
| (which discourages productive investment) is worse than
| moderate inflation, so policy targeting moderate inflation
| is a good thing. This isn't because moderate inflation is a
| good thing in and of itself, its because you can't
| perfectly target price level outcomes with policy, so you
| want to bias missing on the less harmful side.
|
| > You want a gentle inbuilt mechanism to encourage
| consumption.
|
| The utility of consumption encourages consumption. To the
| extent that inflation is good its more as gentle inbuilt
| mechanism to discourage nonproductive saving of cash in
| favor of productive investment.
|
| > There's a reason nobody spends Bitcoin
|
| Right. You definitely don't want _deflation_ , which
| encourages hoarding currency that is surplus to immediate
| consumption desires and thereby sucks money out of
| productive investment.
| garmaine wrote:
| Distributed, not decentralized.
| saurik wrote:
| To verify, though: in fact, the M2 is skyrocketing in 2020,
| right?
| findthewords wrote:
| Yes, but velocity of money is plummeting.
| dlubarov wrote:
| Is there reason to think that velocity will remain low in
| the long term, though? If it's just temporary economic
| effects caused by COVID (e.g. less physical commerce), then
| surely we will see higher inflation as those effects go
| away?
| ad31mar wrote:
| > In the real world, over the full year of 2020 inflation was
| 1.4% in the US (food costs went up a bit more, energy costs
| went down).
|
| Are you sure about that? https://chapwoodindex.com
| wcoenen wrote:
| The Chapwood index looks a bit weird. It's based on only 500
| items (compare to CPI which uses 94,000 according to [1]).
| And those 500 items[2] include things like "cat grooming",
| "horseback riding lessons" and "first class airfare" (but not
| economy class airfare?). Tennis is apparently very important
| because there's "tennis lessons", "tennis racquet" and
| "tennis ball" in there separately. Something similar is going
| on for golf: we find "golf shoe", "round of golf" and "golf
| lessons". I could not find information on how these items are
| weighted.
|
| [1] https://www.bls.gov/opub/hom/cpi/pdf/cpi.pdf
|
| [2] https://chapwoodindex.com/chapwood-index-items/
| Majromax wrote:
| On the other hand, the billion prices project
| (http://www.thebillionpricesproject.com/) is generally well-
| correlated with the CPI.
| chomper wrote:
| I am afraid of Bitcoin because of Tether.
|
| However, there is one part of this argument that I don't quite
| understand:
|
| If we woke up tomorrow to find out that Tether caused a
| disruptive event overnight and BTC/USD fell from $30,000 to
| $10,000 or $3,000.....
|
| Wouldn't there be a gigantic line of people who have been
| experiencing FOMO for the last 6 months ready to jump in at the
| new attractive price level, driving the price straight back up?
|
| Or is the side of people who could lose out on Tether just so
| huge that the newcomers would not be able to cover them all?
| DSingularity wrote:
| If tether crashed I would expect bitcoins price to go up not
| down. It would suck for people holding tether because nobody
| would want their tether.
| dragonwriter wrote:
| > If tether crashed I would expect bitcoins price to go up
| not down.
|
| Bitcoin's price _in what reference currency_? USDT? Clearly.
|
| USDC? Actual USD (probably measured indirectly via
| intermediary currencies)? Something else? For anything but
| USDT, the reason for such an expectation could use some
| explanation.
| ric2b wrote:
| All of the above if most of the demand from people fleeing
| from USDT goes into Bitcoin, which is likely.
|
| More people chasing the same thing -> price goes up.
|
| But obviously the BTC/USDT price would go up a lot more
| because USDT would be going down at the same time.
| TacticalCoder wrote:
| What many people believe is that there's not anywhere near
| the demand to justify a 35 K USD price and that's it's tether
| printing which pumped the price of BTC to these levels.
|
| So if the tether printing press stops, the price would crash
| back to 3K USD or something in a hurry.
|
| Crypto investors/gamblers concerned about tether/USDT already
| own zero USDT. What they're concerned about is that it would
| take the entire crypto market down.
|
| Now on the very short term it may cause a BTC price spike:
| should it be true and USDT going down a lot, people hodling
| them may desperately try to get out and buy any BTC they can,
| shortly raising BTC's price.
|
| But if tether is the reason the BTC price is so high, it
| won't take long before "zero new issuance of USDT to pump the
| price" would totally crash the market.
|
| In any case it's an interesting story to follow...
| Yizahi wrote:
| Of course Tethers are backed up, it's done in a novel and modern
| way of driving a garbage trucks full of small denomination
| dollars to a back alley in Bangkok by institutional investors.
| atemerev wrote:
| It is not "doomsday machine", it is "Tuesday". Yes, Bitcoin is
| volatile, and crypto markets are manipulated (just like all other
| markets, e.g. tech stocks with Softbank-originated program
| trading right now).
|
| If tomorrow Bitcoin will cost $10000, nobody will be surprised.
| Neither if it will be $70000. We are not building crypto systems
| for speculation.
| ur-whale wrote:
| This.
|
| If you're really interested in Bitcoin and the crypto space,
| paying attention to the price should only be relevant because
| it is volatile and slows down adoption.
|
| Its absolute value is essentially boring.
| DSingularity wrote:
| If tether started crashing people would buy Bitcoin/eth like
| crazy to avoid holding tether. What would that do to the price of
| tether?
| qeternity wrote:
| You would likely see crypto on unbanked exchanges skyrocket as
| the USDT denominator to most pairs goes to zero. This crypto
| would presumably be moved off exchange and sold elsewhere. So
| on legit exchanges, crypto crashes and on sham exchanges it
| moons.
| DSingularity wrote:
| Thanks. Seems obvious now that you write it.
| leppr wrote:
| Related: Tether's bank Deltec says it invests customer funds in
| Bitcoin
|
| https://www.deltecbank.com/2021/01/14/a-covid-year-in-review...
|
| https://www.coindesk.com/tethers-bank-says-it-invests-custom...
|
| https://twitter.com/patio11/status/1349873798078558209
|
| The next weeks/months are going to be fascinating to watch, as US
| regulators and invested institutions fight to both regulate and
| protect their crypto investments. Maintaining the inflated
| cryptocurrency valuations propped up by Tether while
| simultaneously removing it from the game before too many eyes set
| on it, will surely require subtle maneuvering.
|
| Ultimately I do suspect OP indeed, sold early, as the game theory
| mechanics strongly favor just participating in the Ponzi rather
| than trying to bring it down, especially when this has the
| potential to be the one last great bubble before a major
| recession.
| qeternity wrote:
| US equities are the one last great bubble. But crypto are a
| symptom of the same disease.
| azeirah wrote:
| The OP said that he got out 100% right? Why not get out with
| something along the lines of 96% of your portfolio if you made
| over 600% profit anyway?
|
| Eh, I would never bet 100% of my investment in a market based
| on knowledge I obtained myself, there's no no noo way I can see
| the entire picture.
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