Bitcoin crash coming?

[Wayne 962]

We haven't seen any posts from ShopCat trying to convince everyone that crypto was the ultimate future, since last August now. I wonder how he managed through last week's turmoil.

Having studied all aspects of crypto now for a few years, I still have yet to find a definitive use case for it. I don't believe I'm biased - I'm actually trying to find a cool, and unique use case where it actually does something better than in the real world. Here's a brief summary of what I've found so far:

- Store of Value. Not working too well for Bitcoin with all of the volatility and the 50%+ decline from it's six months' high. Gold has been fairly stable during this period.

- Inflation hedge. An inflation hedge is supposed to appreciate at the rate of inflation at the very minimum. None of the crypto coins are doing that.

- Ease of use for transactions. Nearly everyone I speak with indicates it's really difficult to do anything reasonable (like buy a pizza) with any type of crypto. In fact, the whole point of the rise of these "stablecoins" is that they exist only because it's so difficult to move crypto in and out of the dollar. So these "stablecoins" exist as this temporary patch, with no real purpose except to account for this shortcoming. In addition, the transactions are slow, and sometimes have huge "gas" or expenses associated with each transaction. These rates and speeds vary with network congestion, but can be as little as a few cents to hundreds of dollars per transaction. There's some wide volatility there.

- Cross-border payments. This is one I hear a lot. So, I used to make a lot of wire transfers when I was buying European car parts from Europe. Yes, the banks charge large exchange rate spreads, but if you do a lot of volume, you can "move to the next tier" and get these lowered way below the "retail rate". However, if you're in the US, and you're buying something from Europe, you would have to 1) convert USD to crypto, 2) send the crypto, 3) the receiver would have to then convert the crypto back into Euro - all of which tack on transaction fees and are a multistep process. I agree, five years ago, sending a wire to the UK took three days or so. Banks don't do that any more - maybe crypto has put the spotlight on them. When I send a wire to Europe, it's receieved pretty much the same day, or the next day (depending upon the time zones, etc.). The delay just isn't there any more.

- NFTs. There might be a case to be made for the registration and sale of digital assets. Ignoring the ridiculous sums of money (real and fake) paid for some recent NFT offerings, the concept of a digital registry for ownership is not a terrible idea. Trouble is, that one can use a central clearing house (like Sotheby's or a Swiss bank) to accomplish the same thing. Having centralized management in this case may be a net positive, as the authorities can help prevent fraud and "errors"

- Terra / Luna. Genius ponzi scheme here. Start a coin, accept dollars and euros for the coin, use a small portion of those proceeds to pay 20% returns on "new" investors, and then run off to Singapore with the proceeds. It really is as simple as that. I fail to see how people didn't see the obvious? My friends who are a bit smarter in this area than I were talking about shorting Terra about a month ago. That was a no brainer - Terra will never go above a buck, and it has a likelihood to crash. Not possible to lose! (yes, you'd have to borrow in Terra and then pay interest on that, but that's the same as a regular loan). It's like borrowing from the bank, and then betting that the currency you borrowed in would go to zero, so you can pay them back in pennies. Super genius to take advantage of the ponzi!

- Tether. Nearly every person I speak with thinks this stablecoin is a scam and is not backed by enough reserves. I still fail to understand why a single human being on the planet would hold it any more? It seems like a high risk asset with no upside? This post here seems to hint that at least some people agree with my sentiment: https://www.reddit.com/r/CryptoCurrency/comments/upuach/discussion_about_usdt_crashing_behind_the_scenes/?utm_source=share&utm_medium=ios_app&utm_name=iossmf The post claims that $6.6B of Tehter has been redeemed in the past week or so. That is still a long way from the $80B market cap, but it’s a start. The same shorting strategy that worked with Terra will work with Tether. And to top it off, none of these "stablecoins" should exist because the only reason they exist is because the crypto "universe" is fairly walled off from the fiat currency system!

- Sale of virtual "land" in meta lands. This is another one that just seems unwise. First of all, has anyone spent any large amount of time in one of these places with an Oculous headset on? I have, and it's just a place to go play video games. Unless you're a hardcore gamer, you're not going to like any incarnation of any of these any time soon. On top of that, the winner of this battle for eyeballs is undetermined. No one knows who is going to be the next Facebook or Google in this arena. I would frankly bet on Facebook, as they currently have all of the eyeballs and can introduce people into a platform like this. Instead of buying "virtual land", if you are firm believer, I would bet with Zuckerberg and buy Facebook (Meta) stock.

- Distributed finance. Everyone keeps talking about this one as well. Borrowing money electronically with electronic contracts. This is a cool concept, but in it's current implementation, it's really only useful for one thing - borrowing on margin to bet on more crypto. See, you go and get some crypto (which is not that easy), say $100 worth (translated into fiat of course because that's a measure everyone understands). Then you use that crypto as collateral to borrow more crypto. At a margin loan of 50%, that means you can borrow $50 more crypto. This is nearly identical to margin loans at stock brokerages. Nothing new really invented here, and margin loans at brokerage houses are electronic, instant, and easy. The problem with the crypto loans (which is also a problem with stock margin loans) is that you need to have cypto as collateral - you can't use anything else. So, you have to have a currency as collaterol for a loan that you will borrow in that currency. Yes, it's that confusing - it's as if the bank will tell you, "we'll loan you $50, but you need to deposit $100 in our bank first and keep it there". Almost no one in their right mind would do that - the only reason why the crypto world does it is because crypto is not a currency, but a *speculative* asset that sometimes goes up in value. DeFi is an interesting concept, but it has no practical purpose in today's world (except for speculators).

Add to all of this the problems with fraud, hacks, energy usage, and

Which leads me to the two areas where I think crypto is "useful":

- Illegal activities. The semi-anonymous nature of crypto means that funds could be send without any intermediary. But, the fact that the whole blockchain is public means that the coins can be tracked - unless they go into an exchange, where they are comingled, but once they go into the exchange, the exchange itself should have the user's information (know your customer). Crypto is great for criminal payments. Bitcoin will never go away because it has utility in this manner.

- Speculative "ponzi" schemes. Terra / Luna are *exactly* like what happened in 1920 with Charles Ponzi: https://en.wikipedia.org/wiki/Charles_Ponzi He paid his investors outsized returns, attracting more investors whose money he used to pay everyone else. It's 100% the same thing that happened. Shocking that people didn't see this coming a mile away. Tether may be the next shoe to drop - there has been so much warning about it that anyone who has a dollar in Tether pretty much shouldn't complain if it finally breaks its peg. However, if you're on the front end of one of these "waves", then it's a good place to be. Spot the wave, ride it until it's real close to shore, and then break off. One needs to understand that they are on a "wave" and not redefining the ocean - understand it for what it is, and there is probably some money to be made.

Well, there you have it. The results of my watching the market over the past year or so. Crypto evangelists will surely flame me, but I'm fairly certain my viewpoint is fairly unbiased. I really want to find a really good use case for crypto and the blockchain, but there just isn't really a "groundbreaking" use case that would / could qualify as a killer app (except for the two nefarious ones I posted above).

Thoughts?

-Wayne

[McLovin]

My view on crypto was a lot simpler.
Future uses and value of any given cryptocurrency is completely unknown. (I.e., even if crypto some day becomes widely used, it may (and likely imo) be in none of the currently existing forms).
I never bought it until right after PayPal announced that it could be bought and sold through them.
That opened it up to hundreds of millions of buyers who previously had no real ability to do so, or interest (they weren’t interested in buying through some complicated platform they’d never heard of).
It was trading at around $17k at that time.
It was a no brainer to me that it was going to go up from there.
I’m out of it now. I don’t see myself jumping back in. IMO it’s only real value is as a pure gamble - if the masses believe it will go up they will buy, and Vice versa.

[Por_sha911]

Originally Posted by Wayne 962

Well, in fairness, he may have been right, but the cycle time is so long it may not matter. The sun will eventually burn out but it's so far into the future that it's somewhat irrelevant to our current existence. That's how I've seen it for years now...
-Wayne

Look at the debt and how much money it takes just to pay the interest on the debt. (At the risk of sounding like Tabs) our economy has heard the toilet flush and debt it swirling faster with each passing year. Our future generations are hosed. Dad was absolutely right when you look at today's numbers. The difference is we are juggling everything to avoid as long as possible the ultimate crash that is coming. If we had fiscal responsibility in the 60's we wouldn't be in the mess we are in today.

[Paul T]

Originally Posted by Wayne 962

We haven't seen any posts from ShopCat trying to convince everyone that crypto was the ultimate future, since last August now. I wonder how he managed through last week's turmoil.

Having studied all aspects of crypto now for a few years, I still have yet to find a definitive use case for it. I don't believe I'm biased - I'm actually trying to find a cool, and unique use case where it actually does something better than in the real world. Here's a brief summary of what I've found so far:

-
-Wayne

I 100% agree Wayne. I've been looking at it for quite awhile as well (not nearly as intently as you, I imagine) and I keep coming back to "what problem does it solve?". I still can't answer that. Until I can, I'd never buy any, unless just a small $ as a flyer just in case I'm wrong.

[sc_rufctr]

Published Mar 3, 2022 - Michael Saylor explaining the benefits of Bitcoin.

[Wayne 962]

He’s pretty much spot on until 6:00 min in. Except that he’s also making his point based upon crappy currencies and extreme edge cases. He also points out every single negative on other investments and none of the negatives on Bitcoin. He’s not incorrect on what he says, except there is no tangible value to Bitcoin - it’s only dependent on others perceiving value.

I think that there may be a future for crypto, but I think that Bitcoin is version 1.0.0 and has a number of issues that have yet to be solved (energy usage, speed, cost / fees, etc. )

Wayne

[ShopCat]

just been very busy lately, new little one arrived in august, still same points apply. been in crypto 9 years, seen these arguments play out many times, seen the grand standing when it drops, its volatile and early so it happens, i just leave everything in cold storage. so far its always up and to the right for me. I don't have any reason to believe otherwise for the future, no one really knows, so I dont worry about it, ive placed my bets a long time ago. I really dont see a big deal in a 50% drop off when tech stocks have seen even worse, I was actually pleasantly surprised btc held on as long as it did.

[RobFrost]

You have to remember these channels are financed by billionaires at the top of the scheme's pyramid. They keep banging the drum about "digital gold" like a bunch of Roman emissaries and as long as there are gullible people to lap it up, or even worse, repeat it, they have somebody to sell their dream (and their Bitcoin) to.

When people appear proselytising about crypto, or anything, you instantly know they're people who are simply VESTED IN that thing and who WANT TO MAKE IT SUCCESSFUL because its success would benefit them. The ones at the bottom of the pyramid you can't reason with, because they haven't worked that out yet. The ones at the top of the pyramid you can't reason with, because they realise that but won't admit what they're doing to the suckers at the bottom.

Bitcoin doesn't have an army, or police, or courts. So unlike fiat currency, it has no power to force us to stop using dollars and other fiat currency.

Sent from my SM-G988B using Tapatalk

[svandamme]

The only reason I can think off, that it's not made illegal yet, is that those in governement are pulling money out at the top like you mention.

I've said from the beginning when people were raving bout BTC profits, that it's a ponzi schem.. it has to be.

If nothing is produced
And only consumed in massive amounts (energy to mine)
How the hell could there be any profit anywhere??

If it looks too good to be true, it probably is

[Wayne 962]

The more I investigate, the even crazier stuff gets. This whole Luna debacle was a ponzi from day one - paying 19% interest. Sheesh. That's obvious, as there's no income earned on the opposite side of the ledger to compensate for that large return. You can sometimes get interest rates like that in third world countries, but the risk of the currency blowing up is high (as was the case with Luna). Now, the founder / creator of Luna has created a new Luna 2.0 to try to dupe everyone once again, and low and behold, there are people who are falling for it again!

Maybe I'm in the wrong business.

Interestingly enough, the same type of talk I hear about these cryptos is in the same "flavor" of discussions that very religious people tend to sound like. I don't think that's a mere coincidence.

-Wayne

[KFC911]

"In Bit We Trust"

[Wayne 962]

Okay, so I mentioned this a long time ago (years ago). I think it may start happening now. The intersection of the cost of mining and the value of Bitcoin cannot cross, otherwise the system will collapse. I.E. if the miners earn $22K per Bitcoin, and it costs $22K per Bitcoin, they will unplug and go back to their jobs at the insurance company. Bitcoin as I write this is $27,300. According to this article, the cost of mining one Bitcoin is currently $22K: https://cointelegraph.com/news/30k-btc-price-has-severe-impact-on-bitcoin-miner-pr

The next Bitcoin halving is in two years from now, where the cost of mining will presumably double. If the cost is $44K and Bitcoin is worth less than that, then the system will inevitably collapse?

-Wayne

[svandamme]

I wonder how far their mining cost is in fact driving energy prices up.
in Europe electricitiy is all time high , in part due to nuke plant shutdowns after fukushima and in part due to high gas prices due to Ukraine and I believe in part due to increased usage from all the mining.

So if the price and costs cross and they all shut down their mines.
how much capacity will release and thus reduce pressure on energy market, thus dropping the cost again?



I'de expect some yoyo effect...

imho they should just ban mining just like the Chinese already have. Keep in mind much mining is also done with illegal power taps and the general public pays for all that crap.
Those who do it illegally its all profit and thus non incentive to stop from high prices.

[red-beard]

Originally Posted by Wayne 962

Okay, so I mentioned this a long time ago (years ago). I think it may start happening now. The intersection of the cost of mining and the value of Bitcoin cannot cross, otherwise the system will collapse. I.E. if the miners earn $22K per Bitcoin, and it costs $22K per Bitcoin, they will unplug and go back to their jobs at the insurance company. Bitcoin as I write this is $27,300. According to this article, the cost of mining one Bitcoin is currently $22K: https://cointelegraph.com/news/30k-btc-price-has-severe-impact-on-bitcoin-miner-pr

The next Bitcoin halving is in two years from now, where the cost of mining will presumably double. If the cost is $44K and Bitcoin is worth less than that, then the system will inevitably collapse?

-Wayne

Wayne, it should depend on your price of electricity. My power plant makes power at about 5 cents per kWh, including a 1.3 cent royalty to the landfill. What is the $/kWh assumption? The linked article is 404.

[McLovin]

Originally Posted by Wayne 962

Okay, so I mentioned this a long time ago (years ago). I think it may start happening now. The intersection of the cost of mining and the value of Bitcoin cannot cross, otherwise the system will collapse. I.E. if the miners earn $22K per Bitcoin, and it costs $22K per Bitcoin, they will unplug and go back to their jobs at the insurance company. Bitcoin as I write this is $27,300. According to this article, the cost of mining one Bitcoin is currently $22K: https://cointelegraph.com/news/30k-btc-price-has-severe-impact-on-bitcoin-miner-pr

The next Bitcoin halving is in two years from now, where the cost of mining will presumably double. If the cost is $44K and Bitcoin is worth less than that, then the system will inevitably collapse?

-Wayne

No, I don’t think that is what would cause a crash.
I’m assuming the price of electricity has been fairly stable the last 5 years.
The price of Bitcoin had been well under 10k (even 5k) for much of that time, and mining continued.
I’m not saying I think it won’t crash in price (I think it will, as it has many times in the past 10 years), just that it won’t be caused by mining costs. It’s simpler than that. It crashes (and rises) for the same reason Beanie Baby prices rose and crashed.

[KFC911]

Yep... Beanie Babies, Tulips, and Enron .

I bought a bunch of Enron at .66 (knowing it was worthless)... should've sold when it skyrocketed back up to .99 .... and shoulda listened to myself too .

As Billy Preston used to sing....

"Nuthin' from nuthin' leaves nuthin'...."

There is just no value there.... just like Enron was when I rolled the dice.

[red-beard]

Here is a chart showing the cost per bitcoin depending on the cost of electricity.

https://powercompare.co.uk/bitcoin-electricity-cost/#:~:text=List%20of%20Electricity%20Cost%20Of%20Min ing%20One%20Bitcoin,%20%20%243%2C627.78%20%2074%20 more%20rows%20

At 5 cents per kWh, my cost would be similar to Uzbekistan at $4,245.28 per bitcoin. I'm not sure if this includes the cost of the equipment. And more modern equipment will produce bitcoin more efficiently than older equipment. Not sure if that is properly factored in.

I think the $22K per bitcoin is off.

Towards this point, I was approached to help build mining buildings for use in Canada. There is associated gas that is flared because it is impossible at this time to get it to market (no gas pipelines). This was also going on in the Permian, but they have now built pipelines since gas is over $7 MMBTU.

The cost to make electricity with "free" associated gas is about 3.5 cents per kWh. The cost of a remanufactured genset (1.6MW) is under $500K. The bitcoin system to use ~1.6 MW dwarfs the genset.

An Antminer S19 XP is 140 TH/s and uses 3kW. There are about 100 kW of parasitic load on the genset and the AC for the miner building. So each genset can support 500 Antiminers. Total hash rate 70,000 TH/s or 24.75 peta hash per second. The cost for 500 of these miners is $4.3M. Figure about $1M for the "building" for the miners, lets call is $6M for the setup per Genset.

Bitcoin Mining Calculator

Using the above calculator, this system should generate $62,406.22 per day. Availability is about 97% for the gensets. It should generate $22,094,922 per year. At $6M for the rig, it should pay for itself in about 125 days

[sugarwood]

Originally Posted by Wayne 962

Bitcoin is worth less than that, then the system will inevitably collapse?
-Wayne

Why do you think miners stopping would cause a crash?
Selling causes a crash. Or if the exchanges vanish like Gox.
Crypto Beenie credibility is now over.
It will crash when there is a "bank run" and the exchanges have no liquidity and go bust.

[Bill Douglas]

I don't think it will completely crash. The international drug rings, money launders and scammers are such big users of the system; they will keep it going well.

[manbridge 74]

Anybody get out with major USD profit?

I think you had to get in and out with great luck. Guy in our hometown bought $15K worth in 2013 and sold just last year right before the crash. Story below….

https://krdo.com/news/2022/05/19/too-late-to-get-bitcoin-rich-a-woodland-park-bitcoin-millionaire-and-gov-polis-may-foretell-the-future/