Bitcoin crash coming?

[ShopCat]

Not gonna lie, I bought more this morning. It has begun recovering since, but either way, 1BTC = 1BTC.

AD might be the best show ever written.

Volatility of BTC has steadily been reducing over time and will continue to reduce until it is no longer "too volatile." But the volatility is the reward for early adopters.

[Wayne 962]

I'm reading the articles on Bitcoin today. One thing that occurred to me is that this is a classic chicken / egg issue. So, the speculators (nearly everyone in Bitcoin these days) want to get in on the "next big thing" and capitalize on appreciation. But these speculators will eventually need the "mainstream" to jump on board (banks, car companies, regular businesses, etc.). But the "regular" businesses won't get on board until the volatility issue is solved. But the volatility is what is driving the speculators into the market (i.e. you wouldn't invest in Bitcoin if you didn't think that it was going to appreciate in the volatile future). Also, the environmental issue will keep the "regular" businesses away. I speak specifically of Bitcoin, for which again, I think is version 1.0.0 and is most likely to be replaced by some better crypto in the near future. I really want to figure out what that might be - I think to the crypto community, it might be obvious when it finally arrives. It might be the Facebook thing, it might be something else, who knows...

-Wayne

[McLovin]

My guess is the “next big thing” will be Ethereum 2.0

[ShopCat]

Libra? god we would all be screwed if the pivot goes from trusting banks to trusting facebook... I dont see any centralized form being the winner especially if tied to a company with a track record like facebook... There are a lot of possible winners out there. Look at Algorand as a front runner if they succeed but it will be years before it is fully decentralized.

[Zeke]

Bitcoin bit the dust yesterday.

[Brando]

Not to mention that there was something like 380k miners that went offline earlier this week. Looking at where the majority of the mining pools are located, there is great concern for how many are in China.

[Wayne 962]

I didn't see a lot of discussion on this particular bit of news:

https://www.forbes.com/sites/jonathanponciano/2021/05/18/china-bans-banks-from-crypto-business-saying-speculative-trading-seriously-infringing-on-financial-order/?sh=1be3d2fd7898

China Cracks Down On Crypto Business, Saying ‘Speculative’ Trading ‘Seriously Infringing’ On Financial Order

Chinese financial officials announced Tuesday that the country would crack down on financial institutions conducting cryptocurrency business or offering related services in light of the market's recent volatility, marking another blow to the nascent market reeling from one of its biggest sell-offs ever after booming institutional adoption helped lift it to meteoric highs during the pandemic.

In a joint statement Tuesday, three Chinese industry groups overseeing the financial sector announced that bank and payment institutions can not conduct business related to cryptocurrencies, specifically banning a slew of activities including cryptocurrency registration, trading, clearing and settlement.

The guidelines, which reiterate a previous ban from 2017, also bar financial institutions from accepting or using cryptocurrencies in payments or settlements, developing digital currency exchange services and offering any such services to clients.

The announcement was released by three organizations authorized by Chinese regulators to oversee their respective industry segments: the National Internet Finance Association of China, the China Banking Association and the Payment and Clearing Association of China.

The group specifically laid into the cryptocurrency's market massive volatility, saying digital tokens have "no real support value" and prices that are "extremely easy" to manipulate.

The move prohibits Chinese financial institutions, many of which had already shied away from offering crypto services amid the nation's past crackdown, from issuing cryptocurrency products or services, but it doesn't ban consumers from owning cryptocurrencies.

The value of the world's cryptocurrencies dropped about $50 billion, or 2.5% immediately after the announcement, pushing the week's staggering losses to roughly $500 billion from a Wednesday high above $2.5 trillion.

Crucial Quote

“Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order,” the Tuesday statement read. "Judging from the current judicial practice in my country, virtual currency transaction contracts are not protected by law."

Key Background

A wave of early regulatory crackdowns beginning in 2017 sparked a nearly 80% correction in cryptocurrency prices and a yearslong bull market that lasted until inflationary concerns and institutional adoption lifted the market to new highs during the pandemic. In March, Morgan Stanley became the first big bank in the U.S. to give wealthy clients access to cryptocurrency investments, and Goldman Sachs quickly followed suit with its own crypto offerings in April. JPMorgan and a slew of other smaller financial institutions have also reportedly indicated they may be next.

Surprising Fact

Cryptocurrencies soared nearly 500% over the past year as companies like Square, MicroStrategy and Tesla, in particular, started making big cryptocurrency investments, but in a testament to the market's extreme volatility, prices have plunged by about 30% since Elon Musk said Tesla would stop investing in bitcoin last month.

What To Watch For

Regulation in the U.S. Gensler and Yellen. Earlier this month, new Securities and Exchange Commission Chair Gary Gensler suggested that the agency may be gearing up for a long-awaited crypto crackdown in light of the market’s recent boom, telling CNBC: “To the extent that something is a security, the SEC has a lot of authority, and a lot of crypto tokens—I won’t call them ‘cryptocurrencies’ for this moment—are indeed securities.”

Further Reading

China bans financial, payment institutions from cryptocurrency business (Reuters)
https://www.reuters.com/technology/chinese-financial-payment-bodies-barred-cryptocurrency-business-2021-05-18/

[ShopCat]

The China story was the reason for the big drop imo, but this exact thing seems to happen at some point every run up. China has banned crypto in 2013, 2017, now 2021. Yet here we are.

Your linked article makes it sound like the China ban caused the 80% downturn in 17 (actually 18, incorrect simple facts) but it went up over 6x after the China ban dip in 2017 over the following 2 months, and has never seen that dip price since.

[Wayne 962]

Originally Posted by ShopCat

The China story was the reason for the big drop imo, but this exact thing seems to happen at some point every run up. China has banned crypto in 2013, 2017, now 2021. Yet here we are.

Maybe? Most people I've spoken with who are not crypto owners are saying, "Wow, if Elon thinks it's bad for the environment, then it doesn't have much chance with anyone else." Or something like that...

-Wayne

[jyl]

Also it was disclosed that only 5% of Tether’s assets are actually cash or equivalents. Tether plays a key role in crypto.

[ShopCat]

Originally Posted by jyl

Also it was disclosed that only 5% of Tether’s assets are actually cash or equivalents. Tether plays a key role in crypto.

Your facts are incorrect, cash and cash equivalents are about 76% per their quarterly release for the NYAG.

But Tether will be an interesting one to watch, it could always fall apart and bring a lot of people with it if they are indeed hiding mismanagement and fraud. They are complying with the NYAG but still vague with terms like "commercial paper" making up a large portion of their cash equivalents. I think this has been discussed for about 5 years now so eventually its gotta happen or people gotta move on to something new to worry about.

[jyl]

Originally Posted by ShopCat

Your facts are incorrect, cash and cash equivalents are about 76% per their quarterly release for the NYAG.

But Tether will be an interesting one to watch, it could always fall apart and bring a lot of people with it if they are indeed hiding mismanagement and fraud. They are complying with the NYAG but still vague with terms like "commercial paper" making up a large portion of their cash equivalents. I think this has been discussed for about 5 years now so eventually its gotta happen or people gotta move on to something new to worry about.

Sorry, wasn’t clear. Cash and US Govt securities (UST) are only 5%. Most of “cash equivalents” is commercial paper and other assets that are not treated like cash and UST by risk managers.

[ShopCat]

Hard to determine the risk level without knowing the details of the commercial paper. But it is still short term so it turns over often right? Meaning they have access to at least some of that in cash off and on. Will be interesting to see if their next quarter report looks much different.

[Wayne 962]

https://coingeek.com/tether-reaches-new-lows-in-quest-to-avoid-being-audited/

Tether reaches new lows in quest to avoid being audited

Never forget that Tether used to tell you that it was 100% backed by U.S. currency, and it was only after an investigation by the New York Attorney General (NYAG) forced its hand that it ever admitted that this wasn’t the case.

With that in mind: last week, Tether apparently released the first of its AG-mandated reserves reports to the world. This is required by Tether’s settlement with the NYAG, the company must submit one each quarter for the next two years. I say apparently because what Tether actually released is a one-page document containing two pie charts: one which shows the makeup of Tether’s reserves as being 74.85% “cash & cash equivalents,” and another which further breaks down what ‘cash and cash equivalents’ means.

The breakdown is provided without context and without any note as to how the figures were calculated, as you might expect from something prepared by a third-party accountant. There’s also nothing explicit to say that this is what Tether submitted to the AG as part of the settlement. As presented, the numbers tell us virtually nothing concrete about the actual breakdown of Tether’s reserves.

With that in mind, what is Tether trying to tell us with these figures?

The 75.85% figure is in line with the 74% given by Tether general counsel Stuart Hoegner in his affidavit to the New York Attorney General’s office. However, the breakdown of “cash and cash equivalents” represents another surreptitious walk-back of representations previously made by the company: only 3.87% of this category is constituted by cash, meaning cash accounts for a measly 2.94% of Tether’s entire reserves:

This is a far cry from the days when Tether was trying to convince us that every tether in circulation was backed by a matching U.S. dollar.

The other items listed in the breakdown, such as the 65.39% worth of “commercial paper,” are next to meaningless in this context (what little there is to speculate about isn’t encouraging). Had Tether released a third-party audit of its reserves—as critics have consistently asked for – we would be able to tell from disclosures made in the report and the accounting standards used exactly what these items constitute. As this is no more than two barely annotated pie charts, we cannot guess. There is so much room for interpretation within a phrase like ‘commercial paper’ that without a definition, it is meaningless.

So, while the statement “Tether is 100% backed” may be trivially true in that Tether issues USDT and also holds assets of some kind, this is not what Tether means when it calls itself a ‘stablecoin.’ When a digital asset holds itself out as a ‘stablecoin,’ what matters is exactly what that coin is being backed by. If that backing only amounts to less than 4% cash, with the rest of the backing still practically unknowable, in what sense can tether ever be considered ‘stable’?

It appears that the only purpose this publication (and Tether’s prior attempts at transparency) is meant to serve is providing Tether’s uncritical supporters a headline from which to argue on Twitter, distracting from the truth: that we still know almost nothing about Tether’s reserves.

Tether knows what it’s doing

General counsel Stuart Hoegner has become the de-facto spokesperson for Tether, particularly when the question of its backing is concerned. In one way, this makes sense. As their general counsel, it’s only natural that Hoegner would take point in conversations with regulators and law enforcement. On the other hand, is it appropriate for Tether, via their in-house lawyer, to not only refuse to acknowledge the true details of the settlement with the NYAG, but actively misrepresent it? Almost every representation Tether has made as to its reserves has been misleading if not an outright lie, and that includes those which have come directly from Hoegner.

Hoegner’s public statements on Tether follow a clear pattern. Whenever the company is backed into a corner or when skepticism as to tether backing reaches a peak, Hoegner will pop up on a podcast or release a statement assuring everybody that everything is okay and that any implication that Tether is being dishonest is nothing but FUD. He’ll do this even when publicly available evidence directly contradicts his assurances.

This exact pattern has already played out with Tether’s pie chart document. Less than a day after it was published, Hoegner wrote a 1,400-word Medium post entitled ‘Tether is Setting a New Standard for Transparency – and Responding to Criticism That is Untethered From Facts’. In it, he complains that sceptics of Tether’s so-called “proof” of backing are “moving the goalposts” and “spreading patently false and misleading misinformation and outlandish conspiracy theories.”

This is a rich position for Hoegner to take, considering that same Medium post also says this:

“After an extensive investigation for more than two years and reviewing more than 2.5M documents provided by Tether and Bitfinex, the New York Attorney General’s Office made no negative findings whatsoever that tethers were not fully backed, nor were ever issued without backing.”

This is an outright lie. The settlement agreement between Tether and the Attorney General’s office, signed by Tether and Bitfinex, is explicit:

“Because of Tether’s inability to conduct significant banking activity during this time, it could not itself hold dollars sufficient to back the hundreds of millions of new tethers that had entered the market. Until September 15, 2017, the only U.S. dollars held by Tether ostensibly backing the approximately 442 million tethers in circulation was the approximately $61 million on deposit at the Bank of Montreal.”

As for after 2017:

“As of November 2, 2018, tethers were again no longer backed 1-to-1 by U.S. dollars in a Tether bank account, because a substantial portion of the backing… had been transferred to Bitfinex to make up for the funds taken by Crypto Capital.”

It was only after this period—and after the opening of the NYAG investigation—that Tether would surreptitiously walk back its promise to be fully backed by fiat. Its website was quietly changed in February 2019 from saying that “every tether is always backed 1-to-1, by traditional currency held in our reserves” to “traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties.” The change was not announced by Tether despite being a significant departure from the position it had been insisting upon to that point. Instead, shortly after the change, Hoegner submitted an affidavit to the NYAG in which he admits that tethers are only 74% backed by currency or cash equivalents.

Hoegner told The Block after the charts’ release that “readers should not confuse items not in ‘actual cash’ with a lack of liquidity”—but just two years ago Tether was claiming that each token was 100% backed by currency. The goalposts are indeed being moved, but it isn’t by Tether’s critics, as Hoegner would have you believe. They’re being moved by Tether and Hoegner every time their claims about tether backing can no longer be reasonably believed.

Tether’s motivations for this are obvious. It only needs to continue giving its supporters enough evidence for them to carry on believing that each tether has real world value. It never needs to prove this practically, as despite there still being no record of anybody being able to redeem their tethers for currency, people are still buying tethers.

But what’s in it for Hoegner? It must be exhausting having to perpetually contradict your previous statements on the subject, especially when those prior misrepresentations draw the ire of the authorities, as they did with Tether in New York. Perhaps Hoegner is the unwitting patsy, forced into being the public face of Tether’s continually shifting goal posts to draw attention away from the people in charge.

[Wayne 962]

Continued...

To paint him entirely as a lightning rod for Tether brass wouldn’t be doing Hoegner justice, however.

Tether has at various points attempted to claim tens of millions of dollars as part of its backing reserve, which, in reality, were held in an account Hoegner’s name, not Tether’s. This was reported by Bloomberg in 2018 and was confirmed by the NYAG investigation, and took place in the era when each tether was supposed to be being backed 1:1 by U.S. currency.

Then there’s Hoegner’s own professional history, which includes a role as deputy general counsel and director of compliance for Excapsa, founders of online casino UltimateBet. Excapsa sold UltimateBet in 2006, but the site collapsed in 2008 when it was revealed that Excapsa employees were cheating on the platform, both pre-sale and post-sale. Excapsa’s general counsel, presumably Hoegner’s boss, was Daniel Freidberg. Friedberg has been implicated in the cheating scandal, and despite working on behalf of UltimateBet in the company’s sale, began working for the buyer almost immediately post-transaction, which seems to be a highly unsatisfactory conflict of interest. Nonetheless, nothing came of this.

There’s also Hoegner’s Medium post, which brazenly mischaracterizes the outcome of the NYAG investigation in much the same way that Tether’s press release at the time of the settlement did. Like his bosses, Hoegner knows that those who have supported Tether to this point will believe more or less whatever he tells them. This is why it’s possible for Hoegner to feel comfortable writing 1,400 words on Medium without acknowledging that the NYAG’s investigation found that tether has not always been backed, or Tether’s continued failure to provide a third-party audit of its reserves.

While it’s interesting to ponder Hoegner’s motivations, it ultimately doesn’t matter. The fact is that Tether regularly uses Hoegner to put a more credible gloss on the company’s ongoing campaign of deception and obfuscation regarding its reserves. Thanks to the likes of the New York Attorney General’s Office, Tether is rapidly running out of room to lie as the excuses become more and more feeble, as shown by Hoegner’s laughable attempt to spin the NYAG’s investigation and Tether’s latest non-proof into something that Twitter can grab a hold of.

What will be interesting to see is whether these pie charts are what Tether actually submitted to the NYAG in compliance with February’s settlement and if not, whether the real reserves breakdown will be ever see the light of day.

[Wayne 962]

The first post in this thread was indeed specific on it's thoughts on this topic - that Tether was a digital ponzi scheme that had little or no reserves, and that it was being used along with leverage to inflate the value of other assets, namely Bitcoin. Bottom line, I believe that if one is a legit company that wants people to trust it, then one should release copious amounts of information detailing the assets, where they are, and will have a top-rate accounting / auditing firm come in and verify. That has not happened here, and in my opinion, the clues that have been discovered so far seem to point to very suspect activity.

-Wayne

[ShopCat]

Originally Posted by Wayne 962

The first post in this thread was indeed specific on it's thoughts on this topic - that Tether was a digital ponzi scheme that had little or no reserves, and that it was being used along with leverage to inflate the value of other assets, namely Bitcoin. Bottom line, I believe that if one is a legit company that wants people to trust it, then one should release copious amounts of information detailing the assets, where they are, and will have a top-rate accounting / auditing firm come in and verify. That has not happened here, and in my opinion, the clues that have been discovered so far seem to point to very suspect activity.

-Wayne

One point for Tether is that they just were listed in coinbase, which means they satisfied the criteria coinbase puts their listings through which is known to be the most stringent of the exchanges.

Also worth noting Tether is about half the total market of stablecoins.

Side note, I made a purchase today using BCH. Now I own some .crypto domains

[Wayne 962]

Originally Posted by ShopCat

Side note, I made a purchase today using BCH. Now I own some .crypto domains

Huh?

-Wayne

[Brando]

This bit 'o news just dropped. This is the issue with any one actor having a majority stake in the mining of cryptocurrency. It is antithetical to de-fi and puts the network at risk.

Bitcoin Crashes 12% as China Reiterates Mining Crackdown

Bitcoin was hit by its second piece of bearish news out of China in under a week.

This time, China's financial committee has added Bitcoin mining as a key sector to monitor in an attempt to "resolutely prevent and control financial risks."

The meeting was overseen by Liu He, the vice-premier of the State Council of the People's Republic of China. Of the four vice-premiers who report to the premier of the State Council, Liu He is the lowest-ranked. He is also the director of the Central Financial and Economic Affairs Commission to the Chinese Communist Party.

The report includes a laundry list of other activities beyond Bitcoin mining, including the reform of small- and medium-sized financial institutions, dull the effects of illegal securities activities, and "effectively respond to imported inflation."

This is the first time that the State Council has explicitly spoken out on Bitcoin mining.

Despite the broad nature of the report, Bitcoin plummeted by 12%. The cryptocurrency's price has since recovered to around $37,800, a loss of nearly 8% in the last 24 hours.

On Wednesday, a similar piece of news dragged the leading cryptocurrency down to $30,000. At that time, a group of three payments and financial associations reiterated the central bank's initial ban from 2017. The three associations were the National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China.

Sources suggest that the latest crackdown on Bitcoin mining will be limited to operations that are not using hydroelectric power.

The number of coal-powered mining outfits in China is significant. A flooded coal mine in the Xinjiang region last month triggered a steep drop in Bitcoin's hash rate, the metric used to determine how much processing power the Bitcoin network uses.

[ShopCat]

I'd argue this is good for the long term of BTC. China crackdown hopefully leads to a more decentralized mining network. USA needs to get it together. I think there is a big rig in TX coming.