Bitcoin crash coming?

[ShopCat]

The risk use to be asymmetric, not as much now, though still could be seen that way if the whole project is successful and crypto becomes even half as commonplace as fiat. I mean what, maybe 5% of people have even heard of bitcoin other than in passing right now? In 2013 I was broke and in college, tried to convince my dad to buy $10,000 in Bitcoin as it was about $400 at the time. I even told him I would cover any of this losses, could not convince him.

[Wayne 962]

So, some qualities I would imagine in a "good" currency:

1- Has to be widely accepted (not for Bitcoin)

2- Has to be relatively stable (nope)

3- Has to be able to expand as use increases (tied into #2, if it can't expand, then it will suffer from inflation)

4- Has to have "some" type of intrinsic value. Gold has intrinsic value, the US dollar has the backing of the US government, Bitcoin has only the willingness of others to accept it.

5- Has an established track record as a reliable storehouse of value.

Again, I think the technology behind Bitcoin is brilliant, I think that this technology is the wave of the future. I think that something in the future based upon this type of technology will take off. I do not think that Bitcoin is it - it's version 1.0.0 of the blockchain and has a bunch of issues that need solving. Unfortunately, due to the "distributed computing model" of the blockchain, it's very difficult to make changes to a running system. You basically have to have agreement on everything from everyone (which is impossible). That is why there are all of these "forks" out there (which cause adopters to question the longevity).

Figuring out what Version 2 is and getting in early, I think that will be key.

-Wayne

[ShopCat]

Originally Posted by Wayne 962

So, some qualities I would imagine in a "good" currency:

1- Has to be widely accepted (not for Bitcoin)

2- Has to be relatively stable (nope)

3- Has to be able to expand as use increases (tied into #2, if it can't expand, then it will suffer from inflation)

4- Has to have "some" type of intrinsic value. Gold has intrinsic value, the US dollar has the backing of the US government, Bitcoin has only the willingness of others to accept it.

5- Has an established track record as a reliable storehouse of value.

Again, I think the technology behind Bitcoin is brilliant, I think that this technology is the wave of the future. I think that something in the future based upon this type of technology will take off. I do not think that Bitcoin is it - it's version 1.0.0 of the blockchain and has a bunch of issues that need solving. Unfortunately, due to the "distributed computing model" of the blockchain, it's very difficult to make changes to a running system. You basically have to have agreement on everything from everyone (which is impossible). That is why there are all of these "forks" out there (which cause adopters to question the longevity).

Figuring out what Version 2 is and getting in early, I think that will be key.

-Wayne

There are already many other versions improving on the blockchain, none perfect but some with promise. All with relatively low market caps. Nano is fee-less and instant, but pre-mined. Iota is probably the best bet if they can actually pull it off, which is a big task. Their aim is infinitely scalable, fast, fee-less transactions on a decentralized network. We will see. The fact that things like Tether, Binance Coin and Doge can be easily pushed into the top 10 by market cap tells me this thing is still in its infancy. It's going to be a rough ride but IF crypto can become truly widespread and legitimized the special coins that succeed will dwarf todays market caps.

[cstreit]

Originally Posted by Wayne 962

Right - sorry, I didn't mean to simplify the cost of mining, although to most people they don't know what's involved. I guess in some ways, the analogies to actual physical gold mining are similar. In the "old days", when the gold veins were near the surface, one might have thought that mining gold was easier than today. Today's gold veins are further down in the Earth and harder to reach (I imagine). However, the mining equipment has gotten more advanced so that you can mine more gold for less investment in equipment. Pretty close to the Bitcoin formula.

I think perhaps from a climate change and energy usage perspective, once someone who actually knows anything or has any power to do anything in politics realizes all of the energy being wasted on mining Bitcoin (and other crypto currencies), there will be some type of legislation put in place to stop their use.

But Chris, I think you agree it's on a path to get more and more expensive and at some point, the system will fall apart?

-Wayne

Good analogy and I agree with your correlation to gold mining.

That said, the result of the increasing complexity and cost of mining would be limiting the total amount available. Compared to fiat currency where you can print more, and it devalues it when you do, once the cost of mining becomes untenable, you’ve set the maximum available until tech improves.

Shouldnt Limited supply of new coins lead to increased valuation rather than a crash?

It could crash though.... just like the dollar, if we all lose faith in its value.

We get two things out of this though. Blockchain (which has great implications to data lineage and traceability) and compute efficiency.

[Wayne 962]

Originally Posted by cstreit

Shouldnt Limited supply of new coins lead to increased valuation rather than a crash?

The law of supply and demand would indeed hint at that - *if* the demand is there. This is a fake product that has no useful purpose except to (occasionally) facilitate illicit and illegal commerce. Everyone else investing in it is just hoping to "ride the bandwagon" to make a quick buck. I have not met a single person who thinks that Bitcoin will be the "currency of the future" - there are too many inherent flaws with version 1.0.0.

If Bitcoin is looked at as a giant ponzi scheme, then I suppose there is not much limit to how high it can go. One only needs to find someone else to pass it on to at a higher price. It will keep going higher, until it doesn't. It could reach a million dollars per coin! Or it could collapse tomorrow. Again, it's a fake product with no intrinsic value, so it's 100% dependent upon the human psyche and what story the next person will believe or "hope". Frankly, *that* should be the real question for discussion, I would think...

-Wayne

[ShopCat]

Originally Posted by Wayne 962

This is a fake product that has no useful purpose except to (occasionally) facilitate illicit and illegal commerce.

-Wayne

No offense, but I feel like this sentiment is extremely out of touch. I'm not saying Bitcoin will end up the currency of the future, but there are MANY places you can spend it directly if you wish, and many more places that are accepting things like flexa which allows you to pay with crypto currency through an app. I know people who have been spending it on legitimate items for 7+ years. I agree Bitcoin itself probably wont be the one, unless the devs work out the issues, fees have already been cut significantly with native segwit, but the real issue is transaction limit is currently 400,000 per day. That is a problem some other coins have solved though.

Also, the gold analogy is the whole idea behind the halving and mining, some of the original devs first published ideas about a "bit gold" before Bitcoin ever came along. Maybe Bitcoin as the original and most recognizable crypto doesnt become the actual digital currency, but the digital gold standard.

[ShopCat]

Originally Posted by brainz01

That said, I got this article (below) from a friend that recently/coincidentally cashed out his BTC position. I've not fully vetted all the claims in the article, but if I did own BTC, I would want to investigate this immediately. It's an incredibly well-written and thought provoking article, and unusually for anything about crypto, it's actually relatively easy to understand (but I'm still not sure I follow everything).

In summary, the article asserts that the BTC markets (and prices) have been driven excessively up over the past year through the buying of Tether, a supposedly fixed-value coin that may be fraudulent and NOT backed by the dollar reserves the currency claims to have.

An unwind of a potentially fraudulent Tether coin would have multiple crypto market impacts including:
1) Tether coins (with supposed value in the billions of dollars) would likely become immediately worthless
2) The elimination of buying by Tether would reduce BTC trading liquidity by 70%, which would be assumed to have significant negative impact on BTC price, particularly whilst market participants were trying to establish the "real" price of BTC and/or impacts on trading exchanges
3) Investors that bought leveraged BTC positions backed by Tether would potentially be really screwed, though I'm not sure what the margin/collateral requirement for such are.

Anyway, here's the article for your reading pleasure:

https://crypto-anonymous-2021.medium.com/the-bit-short-inside-cryptos-doomsday-machine-f8dcf78a64d3

To come back to the op, Tether settlement agreement announced.
https://www.theblockcrypto.com/post/95207/bitfinex-tether-new-york-ag-settlement-lawsuit?

Looks like there were times in the past when Tether was not in fact represented 1 to 1 by USD as presented. Part of the agreement is now Tether has to supply quarterly updates on USDT reserves backing.

One big issue I have with this article is how the author claims shock that no USD is being used to buy on exchanges that literally either do not service the United States, or do not yet have Tether listed... How is that shocking at all? Coinbase still doesn't even have ADA listed.

So now that it is shown that Tether did not have their 1 to 1 reserves at times in the past, but does have a 1 to 1 reserve now, and will have to prove it quarterly going forward, what changes?

[coldstart]

A client gave me a gift of 2.1 Bitcoins over ten years ago. I tried to cash it in last week. Very difficult. Not many retailers take it either. Not a very useful currency. The wallet/exchange people told me to go to a convenience store to collect my money which at the time was about $150K CAD. Funny.

[ShopCat]

Originally Posted by coldstart

A client gave me a gift of 2.1 Bitcoins over ten years ago. I tried to cash it in last week. Very difficult. Not many retailers take it either. Not a very useful currency. The wallet/exchange people told me to go to a convenience store to collect my money which at the time was about $150K CAD. Funny.

Lol what? You can just exchange for USD on the exchange website and ACH to your bank account.

[Wayne 962]

Originally Posted by ShopCat

No offense, but I feel like this sentiment is extremely out of touch. I'm not saying Bitcoin will end up the currency of the future, but there are MANY places you can spend it directly if you wish, and many more places that are accepting things like flexa which allows you to pay with crypto currency through an app. I know people who have been spending it on legitimate items for 7+ years. I agree Bitcoin itself probably wont be the one, unless the devs work out the issues, fees have already been cut significantly with native segwit, but the real issue is transaction limit is currently 400,000 per day. That is a problem some other coins have solved though.

You said you disagreed with me, but then you reiterated my entire point about Bitcoin. Anecdotal evidence is fun to hear about (example: "my friends use Bitcoin all the time"), but the current facts just don't support it.

https://economictimes.indiatimes.com/markets/stocks/news/what-can-you-actually-buy-with-bitcoin/articleshow/80830177.cms?from=mdr

I'm happy to listen if anyone wants to post links of people using Bitcoin to buy things at McDonalds or even Best Buy. Right now, the data seems to point to it's use in illicit trade and also people just buying it as a storehouse for wealth.

Originally Posted by ShopCat

Also, the gold analogy is the whole idea behind the halving and mining, some of the original devs first published ideas about a "bit gold" before Bitcoin ever came along. Maybe Bitcoin as the original and most recognizable crypto doesnt become the actual digital currency, but the digital gold standard.

I think there's been almost unanimous agreement on this thread (very unusual) that Bitcoin is an excellent first version of the technology, but not terribly practical for too much of anything (except for gambling on how high it will eventually go).

-Wayne

[Wayne 962]

Originally Posted by ShopCat

To come back to the op, Tether settlement agreement announced.
https://www.theblockcrypto.com/post/95207/bitfinex-tether-new-york-ag-settlement-lawsuit?

Looks like there were times in the past when Tether was not in fact represented 1 to 1 by USD as presented. Part of the agreement is now Tether has to supply quarterly updates on USDT reserves backing.

One big issue I have with this article is how the author claims shock that no USD is being used to buy on exchanges that literally either do not service the United States, or do not yet have Tether listed... How is that shocking at all? Coinbase still doesn't even have ADA listed.

So now that it is shown that Tether did not have their 1 to 1 reserves at times in the past, but does have a 1 to 1 reserve now, and will have to prove it quarterly going forward, what changes?

Indeed. This appears as shady as it gets. I'll say it again, if there is to be widespread adoption of a digital currency, it has to start out better than all this. That's why I thought that Facebook's initial announcement that it was entering the fray (Libra) seemed like a good idea. Building a "stablecoin" off of a basket of currencies seems like the only real way to go. We'll see if they can accomplish this in 2021!

-Wayne

[ShopCat]

Originally Posted by Wayne 962

Indeed. This appears as shady as it gets. I'll say it again, if there is to be widespread adoption of a digital currency, it has to start out better than all this. That's why I thought that Facebook's initial announcement that it was entering the fray (Libra) seemed like a good idea. Building a "stablecoin" off of a basket of currencies seems like the only real way to go. We'll see if they can accomplish this in 2021!

-Wayne

We have seen entire exchanges collapse under the weight of their own fraud, Mt Gox once upon a time was the largest exchange in an early bitcoin world. Google it and youll brush Tether off. I don't think the Tether issue will be the last time we'll see frauds try to scam a new market, but it won't stop crypto's march forward either. Stablecoin completely defeats the decentralized purpose though right?

[ShopCat]

Originally Posted by Wayne 962

You said you disagreed with me, but then you reiterated my entire point about Bitcoin.

I just disagree that its fake and only use is occasional illegal purchases. I agree though that it is trending more and more toward "store of value" and as the main exchange tool for valuing and moving between cryptocurrencies. But still has one of the best dev teams working on problems that once solved, would benefit crypto as a whole.

[Wayne 962]

Originally Posted by ShopCat

Stablecoin completely defeats the decentralized purpose though right?

Well, that is an interesting question. I'm not really sure what you mean when you mention "decentralized", because I think one can have it pegged and also decentralized. To me decentralized is the ethos of the blockchain.

So, what is a stablecoin then? By definition, it can't theoretically exist in the premise of a blockchain currency? Tether is supposed to be pegged to the dollar. It's supposed to be freely exchangeable for a dollar. Yet, the peg to the dollar means that it's potentially inherently unstable because the dollar is likely to decline in the future (pretty much as stable as the dollar, which I guess is more stable than something like Bitcoin). If Tether's reserves (if they actually exist) are actual dollars, then they are just a placeholder for a dollar, so that one can then trade and exchange back and forth online.

There's another "currency" out there just like this, it's called "PayPal". Funds in PayPal's accounts are denominated in US dollars. PayPal is not a bank, and is not governed by typical banking laws (although they have been moving more and more in that direction in the past decade). PayPal does actually call it's "PayPal bucks" dollars, so on the surface there's little distinction to the user. But deep inside "the machine", PayPal is not a bank and if PayPal went out of business, people would lose a lot of money. When I ran Pelican, I used to sweep the PayPal account balances every night into our bank account - sometimes the float over a few days was several hundred thousand dollars. That made me a bit nervous. Then eBay bought PayPal, and I felt better about it.

But on the surface, there doesn't seem to be a lot of difference between Tether and PayPal. Also, what is Tether doing with the US dollar balances it's supposed to have? They are supposedly in a Bahamas bank - another pillar of security. Banks make money lending funds out, therefore, just because the "money is in the bank" doesn't mean it's actually in the bank. It means the bank owes Tether the funds when they come to collect them. Not sure that any bank in the Bahamas is just sitting there, holding $35 billion in $100 US currency waiting for Tether to maybe someday come asking for it back. If Tether were smart, they would take those US dollars and invest them in something safe that would generate a return (although nothing exists like that today).

Also, how does Tether make money? Other than potentially stealing the funds that are on deposit, I fail to see the overall business model.

I think there's a real opportunity for some type of coin that fixes a lot of Bitcoin's problems. Perhaps a stablecoin that is indexed / based upon a basket of currencies (perhaps in ratios to their actual deposits?). Don't know what the future holds...

-Wayne

[Wayne 962]

Originally Posted by ShopCat

I just disagree that its fake and only use is occasional illegal purchases. I agree though that it is trending more and more toward "store of value" and as the main exchange tool for valuing and moving between cryptocurrencies. But still has one of the best dev teams working on problems that once solved, would benefit crypto as a whole.

I'm open minded, but my open mind requires facts and data. Where is the data on who is using Bitcoin for "real" (non-illegal, and non-storehouse) transactions. Also, who are the "best dev teams" you're referring to? I followed the Bitcoin Cash Fork discussions and debates - didn't seem to instill much confidence.

Post some links so that we can all learn...

thx,

Wayne

[cstreit]

Originally Posted by Wayne 962

The law of supply and demand would indeed hint at that - *if* the demand is there. This is a fake product that has no useful purpose except to (occasionally) facilitate illicit and illegal commerce. Everyone else investing in it is just hoping to "ride the bandwagon" to make a quick buck.

I agree with everything here...

...but isn’t the US dollar the same thing? Since we went off the gold standard, it only has value because we all agree it does.

I don’t see BTC ever becoming a daily currency because the cost of validation is so high....

[Wayne 962]

Originally Posted by cstreit

...but isn’t the US dollar the same thing? Since we went off the gold standard, it only has value because we all agree it does.

Well, I would say there are some striking similarities between the two, but I wouldn't call them the same thing. The US dollar is the world's reserve currency, a role it may lose in the not-so-distant future. But having that role today means that the dollar is more useful than gold (can't buy a Big Mac with gold, or anything but US dollars for that matter).

I suppose you're right about the principle, but the difference in scope and scale is not comparable. I can piss in the ocean and I will technically be raising the level of the ocean. Or, an ice shelf can melt and raise the level of the ocean too. We're both right - we're both raising the ocean levels, but the scope and scale of the two are incomparable. I think that's probably where we're at with Bitcoin versus the dollar.

And how would Bitcoin achieve that level? First of all, I imagine it would have to become much more stable...

-Wayne

[ShopCat]

Originally Posted by Wayne 962

I'm open minded, but my open mind requires facts and data. Where is the data on who is using Bitcoin for "real" (non-illegal, and non-storehouse) transactions. Also, who are the "best dev teams" you're referring to? I followed the Bitcoin Cash Fork discussions and debates - didn't seem to instill much confidence.

Post some links so that we can all learn...

thx,

Wayne

Isn't the burden of proof on you to provide data to back up your claim that Bitcoin is ONLY used as store of value or for illegal purchases? Its easy to see there are other transactions taking place since there are retailers like microsoft and overstock that accept it. And the whole point is that there is no "who" with cryptocurrency anyway. But this is beside the point because overall I agree with you that store of value is becoming more and more the prominent use of Bitcoin specifically. BCH wants to stop that trend and move more toward currency use, which requires the block size to increase and allow for more transactions, that was the big split, but BCH started off with a couple of devs that are generally hated by the community, so it was a rough fork. You can go to any of the official websites such as bitcoin.org and look at the prominent contributors, or even contribute yourself.

[ShopCat]

Originally Posted by Wayne 962

Well, that is an interesting question. I'm not really sure what you mean when you mention "decentralized", because I think one can have it pegged and also decentralized. To me decentralized is the ethos of the blockchain.

So, what is a stablecoin then? By definition, it can't theoretically exist in the premise of a blockchain currency? Tether is supposed to be pegged to the dollar. It's supposed to be freely exchangeable for a dollar. Yet, the peg to the dollar means that it's potentially inherently unstable because the dollar is likely to decline in the future (pretty much as stable as the dollar, which I guess is more stable than something like Bitcoin). If Tether's reserves (if they actually exist) are actual dollars, then they are just a placeholder for a dollar, so that one can then trade and exchange back and forth online.

There's another "currency" out there just like this, it's called "PayPal". Funds in PayPal's accounts are denominated in US dollars. PayPal is not a bank, and is not governed by typical banking laws (although they have been moving more and more in that direction in the past decade). PayPal does actually call it's "PayPal bucks" dollars, so on the surface there's little distinction to the user. But deep inside "the machine", PayPal is not a bank and if PayPal went out of business, people would lose a lot of money. When I ran Pelican, I used to sweep the PayPal account balances every night into our bank account - sometimes the float over a few days was several hundred thousand dollars. That made me a bit nervous. Then eBay bought PayPal, and I felt better about it.

But on the surface, there doesn't seem to be a lot of difference between Tether and PayPal. Also, what is Tether doing with the US dollar balances it's supposed to have? They are supposedly in a Bahamas bank - another pillar of security. Banks make money lending funds out, therefore, just because the "money is in the bank" doesn't mean it's actually in the bank. It means the bank owes Tether the funds when they come to collect them. Not sure that any bank in the Bahamas is just sitting there, holding $35 billion in $100 US currency waiting for Tether to maybe someday come asking for it back. If Tether were smart, they would take those US dollars and invest them in something safe that would generate a return (although nothing exists like that today).

Also, how does Tether make money? Other than potentially stealing the funds that are on deposit, I fail to see the overall business model.

I think there's a real opportunity for some type of coin that fixes a lot of Bitcoin's problems. Perhaps a stablecoin that is indexed / based upon a basket of currencies (perhaps in ratios to their actual deposits?). Don't know what the future holds...

-Wayne

Stablecoins can be decentralized, but are not decentralized due to being cryptocurrency alone. Same goes for exchanges (binance). The argument is that Tether is not truly decentralized because one company owns, mints and manages the supply, with basically no transparency, instead of the chain. So far I only see it used to avoid exchanging back into fiat from other coins and arbitrage. Tether is widely disliked in the community. Basically here is the recap.

Bitfinex (tether) "lost" $850m

Tether lent (embezzled) almost a billion dollars to bail out bitfinex (tether)

Tether tells no one.

About half a year later, tether updates their TOS so that USDT is backed by "assets" The total "value" of the assets as measured in USD is supposed to be equal to the supply in USDT.

Tether is publicly called out by the NYAG for fraud and misuse of funds.

Tether admits that each USDT is only (at best) 74% backed.

We then discover that tether lends USDT and counts the loan as it's own backing. Tether refuses to ignore requests to verify holdings, only admitting they are insolvent when called out.

Now they get a slap on the wrist and have to provide public quarterly reserve statements. Maybe the scam is over, but people still dislike tether.

There are other stablecoins that claim to be decentralized, there is still a lot to figure out, but Dai is one example, here is the whitepaper on how it works. https://makerdao.com/whitepaper/DaiDec17WP.pdf In short: Dai is just like tether but the collateral is on chain and therefore fully transparent, verifiable in real time, and can be redeemed without needing to ask anyone for permission. The most important point of the stablecoin as I understand it, is to help smart contracts bridge the gap to USD while volatility is high. Maybe one day ETH would be stable enough on it own to not need this. As far as business model for Tether specifically, well, its owned by an exchange, tether doesn't have to necessarily make money as long as it furthers the overall goal of the exchange, which in general is just to increase crypto holdings and transactions. The exchange is paid in fees correlated to those. There are already many smart contract coins that are working b2b and have real revenues. This thing still a long shot per coin, but an inevitability as a whole, I think every sane, honest person into crypto agrees with that.

I typed way to mush s**t here, which I freely admit I am still learning and a novice in understanding, so forgive me if some of it is incoherent.

[Skillet83]

Originally Posted by Wayne 962

I'm open minded, but my open mind requires facts and data. Where is the data on who is using Bitcoin for "real" (non-illegal, and non-storehouse) transactions. Also, who are the "best dev teams" you're referring to? I followed the Bitcoin Cash Fork discussions and debates - didn't seem to instill much confidence.

Post some links so that we can all learn...

thx,

Wayne

Wayne, BTC is not near the best token for transactions, it is a store of value. I had mentioned XLM, Stellar.org earlier. Have you taken a look? I do not know where this is headed, but this is going to happen. The Gov. may shut it down for their own version, who knows. But, this is where it is going. Even as an old dude myself, I can see it.
I Put my own cash into BTC monthly along with several other crypto projects. I am in, just about 10% of total assets. The gains are unbelievable, just take a look at the tech. It is OK to be a no coiner, but at least take a look at what is actually happening in the sphere. You have major investments coming from main stream investment houses jumping in.
The dollar is chit, just another hedge. Nothing wrong with throwing money at something that has given 10x gain in the last year.
The crypto market is some volatile chit, not for the faint of heart if you are worried about 10% swings. All I can say is my swings have put me in 6 figure territory. I put put the majority of monthly investing into equities, but like some cypto.